Dear Grace

Public (or external user) confidence is financial statements is measured by the 'reliability' and 'value-relevance' of the information contained in financial statements which is generally referred to as financial reporting quality or accounting quality.

By saying 'public confidence in financial statements' I think you mean 'the quality of financial reporting' or 'financial reporting quality' or more broadly 'accounting quality' 

And yes, these corporate governance factors can affect financial reporting quality. 

Directors' direct equity holding only captures directors' ownership structure reflecting where directors have conflict of interest in their governance of the firm while board composition cover independence and other issues. You can be more specific rather than using the term ;corporate governance' which is widely broad in itself. For example, using the information you provided above, I could see a research title for the study as: Does Board of Directors' Ownership Structure and Composition affect Financial Reporting Quality"

Hope this helps!

Regards

Ozili

Dear Grace Ofoegbu ,

All good corporate governance practices create & increase public confidence in a firm & hence in the reliability of its financial statements too. Regarding the specific CG indicators you mentioned namely, the board size, composition & shareholding of directors, they all influence the public confidence in a firm & consequently its share price too. CG factors like minimum number of independent directors & higher shareholdings of promoters & directors signal transparency & directly increase investor confidence & firm market value. Please refer to the following link for a paper on the subject: 

http://repository.law.umich.edu/cgi/viewcontent.cgi?article=1069&context=law_econ_archive

However, other indicators like transparency & disclosure, responsibility, decision making power, shareholdings & ownership etc. have also to be included for a complete assessment. Hope it helps.

Hemlata

Dear Grace,

I suggest these papers for your research:

Botosan, C. A. (1997). Disclosure level and the cost of equity capital. Accounting review, 323-349.

Chen, S., DeFond, M. L., & Park, C. W. (2002). Voluntary disclosure of balance sheet information in quarterly earnings announcements. Journal of Accounting and Economics, 33(2), 229-251.

Francis, J. R., Khurana, I. K., & Pereira, R. (2005). Disclosure incentives and effects on cost of capital around the world. The Accounting Review, 80(4), 1125-1162.

Lopes, A. B., & de Alencar, R. C. (2010). Disclosure and cost of equity capital in emerging markets: The Brazilian case. The International Journal of Accounting, 45(4), 443-464.

Souissi, M., & Khlif, H. (2012). Meta-analytic review of disclosure level and cost of equity capital. International Journal of Accounting & Information Management, 20(1), 49-62.

Botosan, C. A. (2006). Disclosure and the cost of capital: what do we know?. Accounting and business research, 36(sup1), 31-40.

Poshakwale, S., & Courtis, J. K. (2005). Disclosure level and cost of equity capital: evidence from the banking industry. Managerial and Decision Economics, 26(7), 431-444.

Bravo Urquiza, F., Abad Navarro, M. C., & Trombetta, M. (2012). Disclosure strategies and cost of capital. Managerial and decision economics, 33(7-8), 501-509.

Best wishes

Anna