Asset write-down refers to a reduction of an impaired asset’s value on a firm’s balance sheet. Impaired asset management has attracted much attention since the 2008 credit crunch crisis with respect to regulation, corporate and managerial ethics, capital market response and more. The common approach in past studies of write-downs based the decision-making process on agency-related reasoning. This paper presents a quantitative financial analysis of the optimal write-down timing of an impaired asset under different settings as well different managerial attitudes. We applied a conditional time-averaged value of a firm’s stock price to model the manager’s decision-making process and analyzed the optimal timing of write-down with respect to the capital market as well as management’s expectations. Different exogenous settings of the optimal write-down timing such as impairment recovery rate and stock price return were analyzed. Moreover, a rational-type and behavioral type models of managers were also studied. Under most settings, our findings indicate that the common practice among managers, of write-down aversion, is optimal. However, counterintuitively, we found that under specific setting the optimal action is, on the contrary, to write down. Moreover, write-down decision is also dependent on the firm’s stock price daily volatility. Managers of firms having stocks of high price volatility are in a favored position, decision-making wise, in comparison against manager of low volatility stocks.
{"title":"Impaired Asset Management and the Optimal Timing of Write-Down Decisions","authors":"A. Messica, Gali Ingber-Krauthgamer","doi":"10.2139/ssrn.3061376","DOIUrl":"https://doi.org/10.2139/ssrn.3061376","url":null,"abstract":"Asset write-down refers to a reduction of an impaired asset’s value on a firm’s balance sheet. Impaired asset management has attracted much attention since the 2008 credit crunch crisis with respect to regulation, corporate and managerial ethics, capital market response and more. The common approach in past studies of write-downs based the decision-making process on agency-related reasoning. This paper presents a quantitative financial analysis of the optimal write-down timing of an impaired asset under different settings as well different managerial attitudes. We applied a conditional time-averaged value of a firm’s stock price to model the manager’s decision-making process and analyzed the optimal timing of write-down with respect to the capital market as well as management’s expectations. Different exogenous settings of the optimal write-down timing such as impairment recovery rate and stock price return were analyzed. Moreover, a rational-type and behavioral type models of managers were also studied. Under most settings, our findings indicate that the common practice among managers, of write-down aversion, is optimal. However, counterintuitively, we found that under specific setting the optimal action is, on the contrary, to write down. Moreover, write-down decision is also dependent on the firm’s stock price daily volatility. Managers of firms having stocks of high price volatility are in a favored position, decision-making wise, in comparison against manager of low volatility stocks.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115509480","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The literature related to the detection of fraudulent financial reporting exhibited different methods employed to detect fraud. These methods include auditor’s analytical procedures, statistical models, digital, textual and data-mining models. These methods attempt to detect fraudulent financial reporting using financial and non-financial variables as proxies (indicators) for misrepresentation or omission of material facts (amount or disclosure) in the financial reporting. The misrepresentation and omission of material facts or disclosure are the two important indicators of fraudulent financial reporting (Goel & Gangolly, 2012). To detect financial statements fraud, researchers and practitioners employed quantitative, qualitative, and mixed methods for both financial and non- financial variables as proxies/ indicators of fraud (red flags) using statistical analysis, digital, textual and data-mining analysis. The accuracy of a fraud-detection method varies for each method based on the type of variables employed, and the type of analysis applied. In addition to auditor’s Analytical procedures, researchers and practitioners have developed multiple models (based on the quantitative and qualitative components of the company’s financial reporting) to predict financial statement fraud-risk and to classify companies financial reporting to fraudulent or non-fraudulent one. These methods include discriminant analysis models, statistical models (Dechow, 2011), digital analysis (Hsieh & Lin, 2013), data-mining models (Lin, Chiu, Huang, & Yen, 2015; Zhou & Kapoor, 2011), and textual (linguist) mining models (Throckmorton, Mayew, Venkatachalam, & Collins, 2015).
{"title":"Common Fraud Detections Methods","authors":"Ashraf Elsayed","doi":"10.2139/ssrn.3042827","DOIUrl":"https://doi.org/10.2139/ssrn.3042827","url":null,"abstract":"The literature related to the detection of fraudulent financial reporting exhibited different methods employed to detect fraud. These methods include auditor’s analytical procedures, statistical models, digital, textual and data-mining models. These methods attempt to detect fraudulent financial reporting using financial and non-financial variables as proxies (indicators) for misrepresentation or omission of material facts (amount or disclosure) in the financial reporting. The misrepresentation and omission of material facts or disclosure are the two important indicators of fraudulent financial reporting (Goel & Gangolly, 2012). To detect financial statements fraud, researchers and practitioners employed quantitative, qualitative, and mixed methods for both financial and non- financial variables as proxies/ indicators of fraud (red flags) using statistical analysis, digital, textual and data-mining analysis. The accuracy of a fraud-detection method varies for each method based on the type of variables employed, and the type of analysis applied. In addition to auditor’s Analytical procedures, researchers and practitioners have developed multiple models (based on the quantitative and qualitative components of the company’s financial reporting) to predict financial statement fraud-risk and to classify companies financial reporting to fraudulent or non-fraudulent one. These methods include discriminant analysis models, statistical models (Dechow, 2011), digital analysis (Hsieh & Lin, 2013), data-mining models (Lin, Chiu, Huang, & Yen, 2015; Zhou & Kapoor, 2011), and textual (linguist) mining models (Throckmorton, Mayew, Venkatachalam, & Collins, 2015).","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128894677","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The study examined the level of Corporate Accounting Information Disclosure (CEAID) in the Nigeria manufacturing firms on a voluntary basis and if the level of CEAID in Nigeria manufacturing firm is of standard. The specific objectives sought to; ascertain if firms’ size has a significant effect on the level of CEAID, ascertain if firms’ financial performance has a significant effect on the level of CEAID. Ex-post facto and content analysis research designs were adopted. The panel data for 7 year period covering 2008-2014 were collated from the annual reports of the 10 selected firms quoted in the Nigeria Stock Exchange. The Kinder Lydenberg Domini social environmental rating system was used to measure the level of CEAID. The pooled panel data regression model was used to estimate the relationship between the independent and dependent variables. Our results strongly showed that firm size has a significant effect on the level of CEAID and financial performance had no significant effect. The descriptive analysis showed that the highest level of CEAID as examined using the Global Reporting Initiative and IS0 14301 environmental requirement is far below standard at 29%. The study concluded based on the result that CEAID in Nigeria is still ad-hoc and that voluntary CEAID alone would not enhance higher level of CEAID in the manufacturing firms in Nigeria.
{"title":"The Level Corporate Environmental Accounting Information Disclosure in the Manufacturing Sector in Nigeria; a Voluntary Perspective","authors":"Aminoritse Megbuluba","doi":"10.2139/ssrn.3003996","DOIUrl":"https://doi.org/10.2139/ssrn.3003996","url":null,"abstract":"The study examined the level of Corporate Accounting Information Disclosure (CEAID) in the Nigeria manufacturing firms on a voluntary basis and if the level of CEAID in Nigeria manufacturing firm is of standard. The specific objectives sought to; ascertain if firms’ size has a significant effect on the level of CEAID, ascertain if firms’ financial performance has a significant effect on the level of CEAID. Ex-post facto and content analysis research designs were adopted. The panel data for 7 year period covering 2008-2014 were collated from the annual reports of the 10 selected firms quoted in the Nigeria Stock Exchange. The Kinder Lydenberg Domini social environmental rating system was used to measure the level of CEAID. The pooled panel data regression model was used to estimate the relationship between the independent and dependent variables. Our results strongly showed that firm size has a significant effect on the level of CEAID and financial performance had no significant effect. The descriptive analysis showed that the highest level of CEAID as examined using the Global Reporting Initiative and IS0 14301 environmental requirement is far below standard at 29%. The study concluded based on the result that CEAID in Nigeria is still ad-hoc and that voluntary CEAID alone would not enhance higher level of CEAID in the manufacturing firms in Nigeria.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116985765","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Richard A. Cazier, Theodore E. Christensen, Kenneth J. Merkley, J. Treu
The SEC has recently raised renewed concerns about firms’ reporting of adjusted (non-GAAP) earnings metrics. Regulators have significant interest in understanding the factors that help constrain non-GAAP reporting. We first provide evidence on the relation between securities litigation risk and firms’ propensity to report non-GAAP earnings. We then provide evidence on how this relation is moderated by the regulation of non-GAAP disclosure under Reg G. Using a plausibly exogenous litigation shock based on a U.S. circuit court ruling, we find a robust negative relation between litigation risk and non-GAAP reporting prior to the passage of Reg G. This negative relation suggests that, in the absence of rules-based regulation of non-GAAP reporting, litigation risk helps to constrain non-GAAP disclosure. However, our evidence suggests that the subsequent regulation of non-GAAP disclosure has decreased the sensitivity of non-GAAP disclosure to litigation risk. Specifically, we find that differences in non-GAAP reporting across judicial circuits are diminished and the negative association between litigation risk and non-GAAP reporting is significantly attenuated following the implementation of Reg G. Our results are consistent with claims that Reg G has had the unintended consequence of shielding firms’ non-GAAP disclosures from litigation risk by creating a de facto “safe harbor” for non-GAAP disclosure. Finally, we use our quasi-natural-experimental setting to validate a new proxy for circuit-specific litigation risk that future researchers can employ in any setting.
{"title":"Litigation Risk and the Regulation of Non-GAAP Reporting","authors":"Richard A. Cazier, Theodore E. Christensen, Kenneth J. Merkley, J. Treu","doi":"10.2139/ssrn.2928260","DOIUrl":"https://doi.org/10.2139/ssrn.2928260","url":null,"abstract":"The SEC has recently raised renewed concerns about firms’ reporting of adjusted (non-GAAP) earnings metrics. Regulators have significant interest in understanding the factors that help constrain non-GAAP reporting. We first provide evidence on the relation between securities litigation risk and firms’ propensity to report non-GAAP earnings. We then provide evidence on how this relation is moderated by the regulation of non-GAAP disclosure under Reg G. Using a plausibly exogenous litigation shock based on a U.S. circuit court ruling, we find a robust negative relation between litigation risk and non-GAAP reporting prior to the passage of Reg G. This negative relation suggests that, in the absence of rules-based regulation of non-GAAP reporting, litigation risk helps to constrain non-GAAP disclosure. However, our evidence suggests that the subsequent regulation of non-GAAP disclosure has decreased the sensitivity of non-GAAP disclosure to litigation risk. Specifically, we find that differences in non-GAAP reporting across judicial circuits are diminished and the negative association between litigation risk and non-GAAP reporting is significantly attenuated following the implementation of Reg G. Our results are consistent with claims that Reg G has had the unintended consequence of shielding firms’ non-GAAP disclosures from litigation risk by creating a de facto “safe harbor” for non-GAAP disclosure. Finally, we use our quasi-natural-experimental setting to validate a new proxy for circuit-specific litigation risk that future researchers can employ in any setting.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134295592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT We introduce a firm-specific measure of the technological aspect of competition—technological peer pressure—and examine firm-initiated product development-related press releases. We argue ...
{"title":"Technological Peer Pressure and Product Disclosure","authors":"S. Cao, G. Ma, J. Tucker, Chi Wan","doi":"10.2139/ssrn.2741991","DOIUrl":"https://doi.org/10.2139/ssrn.2741991","url":null,"abstract":"ABSTRACT We introduce a firm-specific measure of the technological aspect of competition—technological peer pressure—and examine firm-initiated product development-related press releases. We argue ...","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"119 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128128220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Purpose: The aim of the current paper is to evaluate potential external benefits related to capital markets of the Integrated Reporting Framework on a sample of international voluntary adopters. Design/methodology/approach: Difference-in-difference (DiD) estimators were used to test the hypotheses. A data sample of ‘treated’ and ‘control’ firms was constructed using Propensity Score Matching (PSM). The ‘treated’ data sample is comprised exclusively of firms included in the IIRC’s database as of September 2016.Findings: The results indicate Integrated Reporting is positively associated with market value and expected future cash flows, but not with bid-ask spread or implicit cost of capital. The results suggest that Integrated Reporting enhanced investor’s perception of the firm’s future cash flows but did not improved the firm’s information environment. Additional tests on the parallel assumption, level of Environmental, Social, Governance (ESG) disclosures, percentage of institutional investors, analyst following, and forecast error confirm this conclusion. The results coincide with the findings of Barth et al. (2016), differing only on bid-ask spread. A possible explanation for the discrepancy is provided.Research implications/limitations: The results of the paper could help companies (stock exchanges) in their decision of adopting (endorsing) the Framework. However, the researcher acknowledges a small sample size and the fact that most of the observations are big multinational firms potentially reduces the generalizability of the results.Originality/value: The study complements previous research that up to date has had its focus limited to firms listed on the Johannesburg Stock Exchange (JSE). Furthermore, it isolates the effects of Integrated Reporting from those of Sustainability Reporting by using a DiD approach.
{"title":"Effects of Integrated Reporting on the Firm's Value: Evidence from Voluntary Adopters of the IIRC's Framework","authors":"Carlos. Martinez","doi":"10.2139/ssrn.2876145","DOIUrl":"https://doi.org/10.2139/ssrn.2876145","url":null,"abstract":"Purpose: The aim of the current paper is to evaluate potential external benefits related to capital markets of the Integrated Reporting Framework on a sample of international voluntary adopters. Design/methodology/approach: Difference-in-difference (DiD) estimators were used to test the hypotheses. A data sample of ‘treated’ and ‘control’ firms was constructed using Propensity Score Matching (PSM). The ‘treated’ data sample is comprised exclusively of firms included in the IIRC’s database as of September 2016.Findings: The results indicate Integrated Reporting is positively associated with market value and expected future cash flows, but not with bid-ask spread or implicit cost of capital. The results suggest that Integrated Reporting enhanced investor’s perception of the firm’s future cash flows but did not improved the firm’s information environment. Additional tests on the parallel assumption, level of Environmental, Social, Governance (ESG) disclosures, percentage of institutional investors, analyst following, and forecast error confirm this conclusion. The results coincide with the findings of Barth et al. (2016), differing only on bid-ask spread. A possible explanation for the discrepancy is provided.Research implications/limitations: The results of the paper could help companies (stock exchanges) in their decision of adopting (endorsing) the Framework. However, the researcher acknowledges a small sample size and the fact that most of the observations are big multinational firms potentially reduces the generalizability of the results.Originality/value: The study complements previous research that up to date has had its focus limited to firms listed on the Johannesburg Stock Exchange (JSE). Furthermore, it isolates the effects of Integrated Reporting from those of Sustainability Reporting by using a DiD approach.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"108 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-11-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129649680","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine the impact of Level 3 assets held by nonfinancial companies on credit risk. Specifically, we investigate how the pricing uncertainty of Level 3 assets is reflected in credit ratings, corporate bond yield spreads, and incidences of bond covenants. We find that higher holdings of Level 3 assets are associated with lower credit ratings, higher yield spreads, especially for Level 3 assets sample, and incidences of bondholder-friendly covenants in the bond issues. Our findings are robust to the treatment of sample selection bias and the influence of macroeconomic factors. In addition, our direct test on the relation between the holdings of Level 3 assets and a firm’s distance-to-default shows that higher holdings of Level 3 assets reduce a firm’s distance-to-default. Overall, our findings support the view that Level 3 assets are perceived as increasing credit risk in the bond market.
{"title":"Level 3 Assets and Credit Risk","authors":"May Xiaoyan Bao, Yixin Liu","doi":"10.2139/ssrn.2940416","DOIUrl":"https://doi.org/10.2139/ssrn.2940416","url":null,"abstract":"We examine the impact of Level 3 assets held by nonfinancial companies on credit risk. Specifically, we investigate how the pricing uncertainty of Level 3 assets is reflected in credit ratings, corporate bond yield spreads, and incidences of bond covenants. We find that higher holdings of Level 3 assets are associated with lower credit ratings, higher yield spreads, especially for Level 3 assets sample, and incidences of bondholder-friendly covenants in the bond issues. Our findings are robust to the treatment of sample selection bias and the influence of macroeconomic factors. In addition, our direct test on the relation between the holdings of Level 3 assets and a firm’s distance-to-default shows that higher holdings of Level 3 assets reduce a firm’s distance-to-default. Overall, our findings support the view that Level 3 assets are perceived as increasing credit risk in the bond market.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127661968","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
M. Ahearne, J. Boichuk, C. Chapman, Thomas J. Steenburgh
We surveyed 1,638 sales executives, across 40 countries, regarding their companies’ likelihoods to ask sales to perform real-earnings-management (REM) actions when earnings pressure exists. Using this information, which we refer to as companies’ REM propensities, we study how company characteristics and environmental conditions relate to the responses received. The use of cash-flow incentives for sales personnel and the distribution of interfunctional power in favor of finance rather than sales are both associated with companies’ REM propensities. In addition, we show that sales executives preemptively change their behaviors in anticipation of top management’s REM requests. Sales executives working for public companies and companies in the United States reported higher levels of REM propensity. The data also support an association between REM propensity and finance-sales conflict. These findings and others are compared and contrasted with existing empirical and survey-based research on REM throughout the paper.
{"title":"Real Earnings Management in Sales","authors":"M. Ahearne, J. Boichuk, C. Chapman, Thomas J. Steenburgh","doi":"10.2139/ssrn.2810356","DOIUrl":"https://doi.org/10.2139/ssrn.2810356","url":null,"abstract":"We surveyed 1,638 sales executives, across 40 countries, regarding their companies’ likelihoods to ask sales to perform real-earnings-management (REM) actions when earnings pressure exists. Using this information, which we refer to as companies’ REM propensities, we study how company characteristics and environmental conditions relate to the responses received. The use of cash-flow incentives for sales personnel and the distribution of interfunctional power in favor of finance rather than sales are both associated with companies’ REM propensities. In addition, we show that sales executives preemptively change their behaviors in anticipation of top management’s REM requests. Sales executives working for public companies and companies in the United States reported higher levels of REM propensity. The data also support an association between REM propensity and finance-sales conflict. These findings and others are compared and contrasted with existing empirical and survey-based research on REM throughout the paper.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115679124","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Securities and Exchange Commission has proposed revisions to the disclosure process. See Concept Release, Exchange Act Release No. 77599 (April 13, 2016). Among other things, the Commission requested comments on the disclosure of environmental, social and governance (ESG) matters. The attached letter analyzes the comment letters, concluding that the letters for the most part reflect a consensus on three basic points: (1) The existing reporting regime with respect to ESG disclosure does not adequately meet the needs of shareholders and other investors. While some commenters believe that the problem can be solved through increased guidance and enforcement by the Commission, most do not. Instead, changes to the disclosure regime are needed; (2) In addition to ensuring the disclosure of material information (however defined), SEC requirements should be designed to promote uniformity, reliability and comparability of ESG disclosure; and (3) agreement exists on the need for a more robust regime for the disclosure relating to a company’s sustainability, with such analysis taking into account sustainability over a longer term horizon than is typically the case, address ESG issues where relevant, and include a qualitative analysis of efforts to reduce or remediate threats to sustainability. The letter analyzes the definition of materiality, concluding that the term is not limited to matters that will have a significant effect on earnings or operations in the short term. The letter further notes that the disclosure system is also built around the need for comparability, an approach that is not dependent upon the need to show the materiality of the information. To address the areas of consensus by commenters supporting increased ESG disclosure, the Commission should provide additional guidance on the applicability of existing disclosure obligations to ESG matters, adopt a prescriptive regime that requires disclosure of specific ESG matters that are important to broad segments of the investor community and common to all or most public companies, and add an additional Item to Regulation S-K that specifically addresses sustainability primarily through a principles based disclosure regime.
美国证券交易委员会(Securities and Exchange Commission)已提议修改信息披露程序。参见概念发布，交易所法案发布号77599(2016年4月13日)。除其他事项外，委员会要求就披露环境、社会和治理(ESG)事项发表评论。本文对这些意见书进行了分析，得出结论认为，这些意见书大多反映了三个基本观点的共识:(1)现有的ESG披露报告制度未能充分满足股东和其他投资者的需求。虽然一些评论者认为这个问题可以通过委员会加强指导和执法来解决，但大多数人并不这样认为。相反，我们需要改变信息披露制度;(2)除了确保重大信息(无论如何定义)的披露外，SEC要求的设计应促进ESG披露的一致性、可靠性和可比性;(3)各方一致认为，需要建立一个更健全的公司可持续性披露制度，这种分析应考虑到比通常情况下更长期的可持续性，解决相关的ESG问题，并包括对减少或纠正可持续性威胁的努力的定性分析。该信函分析了重要性的定义，得出结论认为，该术语不仅限于将在短期内对收益或经营产生重大影响的事项。该信进一步指出，披露制度也是围绕可比性的需要建立的，这种方法并不依赖于显示信息重要性的需要。为了解决支持增加ESG披露的评论者的共识领域，委员会应就现有披露义务对ESG事项的适用性提供额外的指导，采用一种规定制度，要求披露对广大投资者群体重要的、对所有或大多数上市公司共同的特定ESG事项。并在法规S-K中增加一个额外的项目，主要通过基于原则的披露制度来具体解决可持续性问题。
{"title":"Comment Letter on the Need for Environmental, Social and Governance Disclosure","authors":"J. Brown","doi":"10.2139/SSRN.2847197","DOIUrl":"https://doi.org/10.2139/SSRN.2847197","url":null,"abstract":"The Securities and Exchange Commission has proposed revisions to the disclosure process. See Concept Release, Exchange Act Release No. 77599 (April 13, 2016). Among other things, the Commission requested comments on the disclosure of environmental, social and governance (ESG) matters. The attached letter analyzes the comment letters, concluding that the letters for the most part reflect a consensus on three basic points: (1) The existing reporting regime with respect to ESG disclosure does not adequately meet the needs of shareholders and other investors. While some commenters believe that the problem can be solved through increased guidance and enforcement by the Commission, most do not. Instead, changes to the disclosure regime are needed; (2) In addition to ensuring the disclosure of material information (however defined), SEC requirements should be designed to promote uniformity, reliability and comparability of ESG disclosure; and (3) agreement exists on the need for a more robust regime for the disclosure relating to a company’s sustainability, with such analysis taking into account sustainability over a longer term horizon than is typically the case, address ESG issues where relevant, and include a qualitative analysis of efforts to reduce or remediate threats to sustainability. The letter analyzes the definition of materiality, concluding that the term is not limited to matters that will have a significant effect on earnings or operations in the short term. The letter further notes that the disclosure system is also built around the need for comparability, an approach that is not dependent upon the need to show the materiality of the information. To address the areas of consensus by commenters supporting increased ESG disclosure, the Commission should provide additional guidance on the applicability of existing disclosure obligations to ESG matters, adopt a prescriptive regime that requires disclosure of specific ESG matters that are important to broad segments of the investor community and common to all or most public companies, and add an additional Item to Regulation S-K that specifically addresses sustainability primarily through a principles based disclosure regime.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123851815","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recently, the SEC’s Division of Corporation Finance (CorpFin) has added an additional guidance to its Financial Reporting Manual (FRM) with respect to the disclosure for goodwill. For firms at a risk of failing the step one of goodwill impairment test, this guidance recommends that firms consider reporting the percentage by which the fair value exceeds carrying values of the reporting unit — slack — when the fair value is not substantially in excess of carrying value. This CorpFin guidance does not specifically identify what is meant by substantially in excess. We examine the consequences of this disclosure guidance and find evidence consistent with the FRM’s perceived goal: investors and analysts seem to be able to better predict future goodwill impairments for firms disclosing lower slack levels. These results suggest that information conveyed through slack disclosures has led to an increase in the quality of information available to investors regarding future impairment of goodwill.
{"title":"Informativeness of Discretionary Disclosures of Goodwill Slack","authors":"N. T. Jenkins, Mikhail Pevzner, Suning Zhang","doi":"10.2139/ssrn.2633635","DOIUrl":"https://doi.org/10.2139/ssrn.2633635","url":null,"abstract":"Recently, the SEC’s Division of Corporation Finance (CorpFin) has added an additional guidance to its Financial Reporting Manual (FRM) with respect to the disclosure for goodwill. For firms at a risk of failing the step one of goodwill impairment test, this guidance recommends that firms consider reporting the percentage by which the fair value exceeds carrying values of the reporting unit — slack — when the fair value is not substantially in excess of carrying value. This CorpFin guidance does not specifically identify what is meant by substantially in excess. We examine the consequences of this disclosure guidance and find evidence consistent with the FRM’s perceived goal: investors and analysts seem to be able to better predict future goodwill impairments for firms disclosing lower slack levels. These results suggest that information conveyed through slack disclosures has led to an increase in the quality of information available to investors regarding future impairment of goodwill.","PeriodicalId":181062,"journal":{"name":"Corporate Governance: Disclosure","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123317448","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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