Review of Accounting and Finance最新文献

Purpose

Climate change poses effect on banking sector’s risks and profitability through adaptation of green technology. This study aims to incorporates green technology adaptation in three sectors: green banking, green entrepreneurial innovation (EI) and green human resource (HR), in a model of bank’s performance. And determines the impact of climate change on bank risk and profitability.

Design/methodology/approach

An assessment of profitability and risk profile of commercial banks is done for 27 European countries for 2013–2022, employing a two-step difference system-generalized method of moments estimation technique with a moderate effect of climate change by including interaction between climate change and green technology adaptation.

Findings

The results indicate that green banking increases profitability, reduces credit risk and increases liquidity risk. The results also show that green human resource increases profitability and becomes a source of credit and liquidity risks for the banks. Green EI increases credit risk and liquidity risk, while the effects of green EI on profitability vary with the use of two proxies: Green patents increase profitability and environment, social and corporate governance (ESG) scores decrease profitability.

Practical implications

Supportive government initiatives, including subsidies and tax rebates to green borrowers, may take the burden of green transition off the banking sector.

Originality/value

This paper observes the impact of green technology adaptation in three sectors: banks, EI and HR, moderated by climate change, adding substantially to the existing literature in conceptual framework and methodology.

Purpose

This study proposes a novel measure for management’s horizon (short-termism or myopia vs long-termism or hyperopia) derived from easily obtainable firm-level accounting and stock market performance data. The authors use the measure to explore the impact of managements’ horizon on firms’ investment efficiency.

Design/methodology/approach

The authors rely on two commonly used but uncorrelated measures of management performance: accounting performance (return on capital employed, ROCE) and stock market performance (average abnormal return, AAR). The authors combine these measures to develop a multidimensional framework for performance, which classifies firms into four groups: efficient (high accounting and high market performance), poor (low accounting and low market performance), myopic (high accounting and low market performance) and hyperopic (low accounting and high market performance). The authors validate this framework and deploy it to explore the relationship between horizon and firms’ investment efficiency.

Findings

In validation tests, the authors show that management myopia (hyperopia) explains firms’ decision to cut (grow) research and development investments. Further, as expected, myopic (hyperopic) firms are associated with significantly more (less) accrual and real earnings management. The empirical tests on the link between horizon and investment efficiency suggest that myopic managers cut new investments while their hyperopic counterparts grow the same. Ultimately, the authors find that myopia (hyperopia) exacerbates(mitigates) the over-investment of free cash flow problem.

Originality/value

The authors introduce a framework for assessing management’s horizon using easily obtainable measures of performance. The framework explains inconsistencies in prior empirical research using different measures of performance (accounting versus market). The authors demonstrate its utility by showing that the measure explains decisions around research and development investment, earnings management and firm investments.

Purpose

This study aims to provide further insights into the connection between corporate social responsibility (CSR) and companies’ credit ratings, while also exploring the role of corporate governance as a moderating factor. The hypotheses for this relationship are rooted in both legitimacy and stakeholder theories.

Design/methodology/approach

Using a sample of French non-financial listed firms from 2007 to 2020, this paper uses the ordered probit model introduced by Greene (2000). The issue of endogeneity has also been addressed.

Findings

The study reveals that CSR practices positively impact companies’ credit ratings by enhancing solvency and financial performance. Specifically, firms that prioritize CSR, particularly in the social and environmental dimensions (such as community relations, diversity, employee relations, environmental performance and product characteristics), tend to have higher credit ratings and a reduced risk of default. This suggests that credit rating agencies likely incorporate CSR performance when assigning credit ratings. Furthermore, the quality of corporate governance acts as a moderator, strengthening the relationship between CSR and credit ratings. The findings remain robust even after accounting for key firm attributes and addressing potential endogeneity between CSR and credit ratings.

Practical implications

This research provides valuable guidance for policymakers, corporate managers, investors and other stakeholders, as it offers insights into the influence of CSR activities on risk premiums and financing costs. For financial institutions, expanding credit decisions to encompass non-financial factors such as CSR can result in more accurate predictions of firm credit quality compared to relying solely on financial indicators.

Originality/value

To the best of the authors’ knowledge, this study stands out as the first to systematically examine the relationship between CSR and credit ratings within the French context. Moreover, it distinguishes itself by investigating the moderating influence of corporate governance on this relationship, setting it apart from prior research.

Purpose

This study aims to identify the effect of soft skills as a driver of audit quality and their moderating role in the relationship between stress and the propensity for auditors to engage in reduced audit quality practices (RAQP).

Design/methodology/approach

This study uses a sample of 130 auditors, whose data were collected through an electronic questionnaire. The results were derived from the partial least squares-structural equation modelling method.

Findings

The findings show that the propensity to incur RAQP increases when auditors are under job stressors but decreases when individuals have resilience and time management skills. Moreover, the results suggest that the moderating effect of these two soft skills can effectively reduce the auditors’ propensity to engage in dysfunctional actions and judgments in auditing. Emotional intelligence and self-efficacy skills are shown not to affect RAQP.

Originality/value

This study adds to previous research on auditors’ drivers for supplying audit quality, by providing evidence of auditor characteristics as a critical input to audit quality. The results emphasize the importance of researchers including in models the moderating effect of soft skills on the relationship between audit quality and determinants associated with audit firms, clients or the regulatory framework.

Purpose

This study aims to exploit Tobin’s Q model of investment to examine the relationship between corporate governance and green innovation.

Design/methodology/approach

The study is based on a sample of 3,896 firms from 2002 to 2021, covering 45 countries worldwide. The authors adopt Tobin’s Q model to conceptualize the relationship between corporate governance and investment in green research and development (R&D). The authors argue that agency costs and financial market frictions affect corporate investment and are fundamental factors in R&D activities. By limiting agency conflicts, effective governance favors efficiency, facilitates access to external financing and encourages green innovation. The authors analyzed the causal effect by using the system-generalized method of moments (system-GMM).

Findings

The results reveal that the better the corporate governance, the more the firm invests in green R&D. A 1%-point increase in the corporate governance ratings leads to an increase in green R&D expenses to the total asset ratio of about 0.77 percentage points. In addition, an increase in the score of each dimension (strategy, management and shareholder) of corporate governance results in an increase in the probability of green product innovation. Finally, green innovation is positively related to firm environmental performance, including emission reduction and resource use efficiency.

Practical implications

The findings provide implications to support managers and policymakers on how to improve sustainability through corporate governance. Governance mechanisms will help resolve agency problems and, in turn, encourage green innovation.

Social implications

Understanding the impact of corporate governance on green innovation may help firms combat climate change, a crucial societal concern. The present study helps achieve one of the precious UN’s sustainable development goals: Goal 13 on climate action.

Originality/value

This study goes beyond previous research by adopting Tobin’s Q model to examine the relationship between corporate governance and green R&D investment. Overall, the results suggest that effective corporate governance is necessary for environmental efficiency.

Purpose

The purpose of this paper is to bridge the gap between the existing theoretical and empirical studies by examining the asymmetric return–volume relationship. Indeed, the authors aim to shed light on the return–volume linkages for French-listed small and medium-sized enterprises (SMEs) compared to blue chips across different market regimes.

Design/methodology/approach

This study includes both large capitalizations included in the CAC 40 index and listed SMEs included in the Euronext Growth All Share index. The Markov-switching (MS) approach is applied to understand the asymmetric relationship between trading volume and stock returns. The study investigates also the causal impact between stock returns and trading volume using regime-dependent Granger causality tests.

Findings

Asymmetric contemporaneous and lagged relationships between stock returns and trading volume are found for both large capitalizations and listed SMEs. However, the causality investigation reveals some differences between large capitalizations and SMEs. Indeed, causal relationships depend on market conditions and the size of the market.

Research limitations/implications

This paper explains the asymmetric return–volume relationship for both large capitalizations and listed SMEs by incorporating several psychological biases, such as the disposition effect, investor overconfidence and self-attribution bias. Future research needs to deepen the analysis especially for SMEs as most of the literature focuses on large capitalizations.

Practical implications

This empirical study has fundamental implications for portfolio management. The findings provide a deeper understanding of how trading activity impact current returns and vice versa. The authors’ results constitute an important input to build and control trading strategies.

Originality/value

This paper fills the literature gap on the asymmetric return–volume relationship across different regimes. To the best of the authors’ knowledge, the present study is the first empirical attempt to test the asymmetric return–volume relationship for listed SMEs by using an accurate MS framework.

Purpose

In the last two decades, risk reporting has followed a normative and calculative culture rather than the “materiality” of data. Although integrated reporting (IR) has become flooded with extra information, it does not adequately disseminate material information to stakeholders. In addition, the poor tone from the top diminishes creativity. This study aims to investigate how companies creatively address issues of the materiality of risk information in IR and how IR can be aligned with enterprise risk management.

Design/methodology/approach

Qualitative research was conducted via interviews with 50 chief risk officers and senior management executives in the Indian and UK insurance markets.

Findings

Overall, five institutions were observed to exhibit elements of being early adopters of institutional creativity. This confirmed the present study’s theoretical contribution of five divergent types of early adopters. The motivations for creativity are reflected in the resources available to these institutions.

Originality/value

To the best of the authors’ knowledge, this study provides a new insight into IR from internal mechanisms to deal with issue of materiality.