The Impact of Corporate Governance Mechanisms on Impression Management in Top 40 JSE-Listed Companies

Abstract

Impression management in corporate reporting, which can obscure a firm’s financial position, has prompted increased focus on corporate governance mechanisms to enhance transparency and accountability. This paper investigates the relationship between corporate governance mechanisms and impression management (IM) practices among the top 40 companies listed on the Johannesburg Stock Exchange (JSE) from 2014 to 2023. Effective governance attributes – such as board independence, board size, gender diversity, and board meeting frequency are essential in countering biases in reporting. The analysis employs a quantitative approach using a panel regression model, specifically the generalised method of moment (GMM) and fully modified least squares (FMOLS), to assess the relationship between governance mechanisms and impression management (IM). The study reveals a significant positive relationship between board independence, board size, active participation, board gender diversity and impression management tactics. These findings highlight the intricate dynamics between corporate governance and corporate communication, offering crucial insights for regulators, investors, and policymakers concerned with transparency, accountability, and ethical governance. The study addresses a gap in the literature by providing empirical evidence from a South African context and contributes to the broader discourse on corporate governance and financial reporting integrity.