Pub Date : 2023-11-28DOI: 10.1108/ijaim-01-2023-0013
C. H. Sundkvist, Tonny Stenheim
Purpose The purpose of this paper is to examine the effect on earnings quality in private firms caused by a negative shock to fundamental performance, while simultaneously addressing methodological challenges measuring fundamental performance present in prior accrual-based earnings management literature. Design/methodology/approach Fundamental performance is unobservable and, therefore, difficult to measure. Existing research has used proxies that are subject to estimation errors and endogeneity concerns (e.g. DeFond and Park, 1997, Balsam et al., 1995). This study attempts to overcome these issues by taking advantage of the exogenous shock in oil price which occurred in 2014 and by using a difference-in-differences approach to investigate the effect on earnings management caused by a negative shift in fundamental performance. Findings The results suggest that a negative shock in fundamental performance, indicated by the oil price shock in 2014, reduces earnings quality. This result holds for various robustness tests such as the use of propensity score matching, and the inclusion of firm fixed effects. Additional analysis suggests that the reduction in earnings quality is driven by an increase in positive discretionary accruals, suggesting that managers of private firms experiencing poor performance manage earnings upwards to conceal true performance. Originality/value This study contributes to the literature by examining the effect of a negative shock to performance in a setting of private firms and by addressing methodological challenges in prior literature. Private firms are fundamentally different from public firms, with the consequence that results from public firms may not be generalizable to private firms (e.g. Hope et al., 2012, Burghstahler et al., 2006, Ball and Shivakumar, 2005).
{"title":"Fundamental performance and earnings quality in private firms","authors":"C. H. Sundkvist, Tonny Stenheim","doi":"10.1108/ijaim-01-2023-0013","DOIUrl":"https://doi.org/10.1108/ijaim-01-2023-0013","url":null,"abstract":"Purpose The purpose of this paper is to examine the effect on earnings quality in private firms caused by a negative shock to fundamental performance, while simultaneously addressing methodological challenges measuring fundamental performance present in prior accrual-based earnings management literature. Design/methodology/approach Fundamental performance is unobservable and, therefore, difficult to measure. Existing research has used proxies that are subject to estimation errors and endogeneity concerns (e.g. DeFond and Park, 1997, Balsam et al., 1995). This study attempts to overcome these issues by taking advantage of the exogenous shock in oil price which occurred in 2014 and by using a difference-in-differences approach to investigate the effect on earnings management caused by a negative shift in fundamental performance. Findings The results suggest that a negative shock in fundamental performance, indicated by the oil price shock in 2014, reduces earnings quality. This result holds for various robustness tests such as the use of propensity score matching, and the inclusion of firm fixed effects. Additional analysis suggests that the reduction in earnings quality is driven by an increase in positive discretionary accruals, suggesting that managers of private firms experiencing poor performance manage earnings upwards to conceal true performance. Originality/value This study contributes to the literature by examining the effect of a negative shock to performance in a setting of private firms and by addressing methodological challenges in prior literature. Private firms are fundamentally different from public firms, with the consequence that results from public firms may not be generalizable to private firms (e.g. Hope et al., 2012, Burghstahler et al., 2006, Ball and Shivakumar, 2005).","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-11-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139225113","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}
Pub Date : 2023-11-24DOI: 10.1108/ijaim-04-2023-0095
Mengjiao Chen, Jinjuan Ren, Jingying Zhao
Purpose This paper aims to investigate the impact of corporate culture on stock price crash risk and explore the underlying mechanisms. Design/methodology/approach This paper uses a novel firm-level culture measure of Li et al. (2020), which evaluates corporate culture from the perspectives of integrity, teamwork, innovation, respect and quality. Using a sample of 4,017 US firms from 2001 to 2018, this paper uses panel data regressions to explore the impact of corporate culture on stock price crash risk. Findings This paper finds that among five cultural dimensions, integrity reduces crash risk and quality increases crash risk. The mitigating effect of integrity culture on crash risk is concentrated among firms with a strong incentive or ability to hoard bad news. The exacerbating effect of quality culture on crash risk is concentrated among firms with low managerial flexibility. Social implications This paper helps investors and regulators to understand the determinants of stock price crash risk, which facilitates investors’ wealth management and stabilizes social welfare. Originality/value To the best of the authors’ knowledge, this is the first study that uses time-varying firm-level measure of corporate culture to investigate its impact on stock price crash risk, contributing to the literature on the determinants of crash risk. Besides, this is the first study that explores the possible mechanism of managerial flexibility in influencing stock price crash risk.
{"title":"The impact of corporate culture on stock price crash risk: a firm-level analysis","authors":"Mengjiao Chen, Jinjuan Ren, Jingying Zhao","doi":"10.1108/ijaim-04-2023-0095","DOIUrl":"https://doi.org/10.1108/ijaim-04-2023-0095","url":null,"abstract":"Purpose This paper aims to investigate the impact of corporate culture on stock price crash risk and explore the underlying mechanisms. Design/methodology/approach This paper uses a novel firm-level culture measure of Li et al. (2020), which evaluates corporate culture from the perspectives of integrity, teamwork, innovation, respect and quality. Using a sample of 4,017 US firms from 2001 to 2018, this paper uses panel data regressions to explore the impact of corporate culture on stock price crash risk. Findings This paper finds that among five cultural dimensions, integrity reduces crash risk and quality increases crash risk. The mitigating effect of integrity culture on crash risk is concentrated among firms with a strong incentive or ability to hoard bad news. The exacerbating effect of quality culture on crash risk is concentrated among firms with low managerial flexibility. Social implications This paper helps investors and regulators to understand the determinants of stock price crash risk, which facilitates investors’ wealth management and stabilizes social welfare. Originality/value To the best of the authors’ knowledge, this is the first study that uses time-varying firm-level measure of corporate culture to investigate its impact on stock price crash risk, contributing to the literature on the determinants of crash risk. Besides, this is the first study that explores the possible mechanism of managerial flexibility in influencing stock price crash risk.","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139240898","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}
Pub Date : 2023-11-24DOI: 10.1108/ijaim-04-2023-0107
Ayman Issa
Purpose This study aims to examine the relationship between carbon reduction initiatives and financial performance. Additionally, it explores potential moderating variables, such as corporate social responsible (CSR) strategy and corporate governance practices, that may strengthen the link between carbon reduction initiatives and financial performance. Design/methodology/approach The empirical analysis is conducted using 1,740 firm-year observations from UK firms listed on the FTSE 350. Data on carbon emissions and firm-specific characteristics are obtained from the Refinitiv Eikon database for the period 2011–2020. Various econometric techniques, including ordinary least squares and system generalized method of moments, are used to examine the relationship between carbon reduction initiatives and financial performance. Additionally, alternative samples are used to further explore this relationship. Findings The author observes a significantly positive association between carbon reduction initiatives and financial performance in this study. Additionally, the significance of this relationship is found to be present specifically after the announcement of the Paris Agreement. Furthermore, a channel analysis reveals that moderating factors like CSR strategy and corporate governance quality influence this relationship. Practical implications The study underscores the importance of carbon reduction initiatives for sustainable business growth and financial performance. Managers can use these insights to prioritize investments in sustainable practices. Policymakers should consider implementing supportive regulations to incentivize companies to adopt carbon reduction strategies. Originality/value This study adds value to the existing body of literature by empirically examining the moderating role of CSR strategy and best corporate governance practices in the relationship between carbon reduction initiatives and financial performance. The findings contribute to a deeper understanding of how these factors interact and influence the outcomes.
{"title":"Do emissions reduction initiatives improve financial performance? Empirical analysis of moderating factors","authors":"Ayman Issa","doi":"10.1108/ijaim-04-2023-0107","DOIUrl":"https://doi.org/10.1108/ijaim-04-2023-0107","url":null,"abstract":"Purpose This study aims to examine the relationship between carbon reduction initiatives and financial performance. Additionally, it explores potential moderating variables, such as corporate social responsible (CSR) strategy and corporate governance practices, that may strengthen the link between carbon reduction initiatives and financial performance. Design/methodology/approach The empirical analysis is conducted using 1,740 firm-year observations from UK firms listed on the FTSE 350. Data on carbon emissions and firm-specific characteristics are obtained from the Refinitiv Eikon database for the period 2011–2020. Various econometric techniques, including ordinary least squares and system generalized method of moments, are used to examine the relationship between carbon reduction initiatives and financial performance. Additionally, alternative samples are used to further explore this relationship. Findings The author observes a significantly positive association between carbon reduction initiatives and financial performance in this study. Additionally, the significance of this relationship is found to be present specifically after the announcement of the Paris Agreement. Furthermore, a channel analysis reveals that moderating factors like CSR strategy and corporate governance quality influence this relationship. Practical implications The study underscores the importance of carbon reduction initiatives for sustainable business growth and financial performance. Managers can use these insights to prioritize investments in sustainable practices. Policymakers should consider implementing supportive regulations to incentivize companies to adopt carbon reduction strategies. Originality/value This study adds value to the existing body of literature by empirically examining the moderating role of CSR strategy and best corporate governance practices in the relationship between carbon reduction initiatives and financial performance. The findings contribute to a deeper understanding of how these factors interact and influence the outcomes.","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"97 4","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139238892","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}
Pub Date : 2023-09-05DOI: 10.1108/ijaim-01-2023-0017
Inas Mahmoud Hassan, Hala M.G. Amin, Diana Mostafa, Ahmed A. Elamer
Purpose This study aims to examine the role of the board of directors in affecting earnings management practices across small- and medium-sized enterprises (SMEs) life cycle. Design/methodology/approach Data is collected from 280 SMEs listed on the London Stock Exchange during the period of 2009–2016. Fixed effects regression analysis is used to test the hypotheses. Findings This study shows that the impact of the board of directors' roles on earnings management practices varies depending on the SMEs life cycle stage. In the introduction, growth and decline stages of SMEs, the wealth creation role of the board is negatively significant with earnings management, while the wealth protection role of the board is positively significant in the growth and maturity phases. Results suggest that the board's responsibility to create wealth deters early-stage earnings management strategies, while protecting shareholder interests, in latter stages, leads to a decrease in earnings management. Practical implications The findings suggest that corporate governance should be customized to the specific stage of the SMEs life cycle. Additionally, different life cycle stages may impose different requirements on corporate boards to shape the effectiveness of these mechanisms and constrain earnings management practices. Originality/value To the best of the authors’ knowledge, this study offers one of the first insights on the UK SMEs to understand how board functions and earnings management practices vary over SMEs life cycles. It will offer important information on the effect of board features on earnings management in SMEs in the UK and is anticipated to be of importance to policymakers, regulators, investors and practitioners.
{"title":"Roles of board of directors and earnings management across SMEs life cycle: evidence from the UK","authors":"Inas Mahmoud Hassan, Hala M.G. Amin, Diana Mostafa, Ahmed A. Elamer","doi":"10.1108/ijaim-01-2023-0017","DOIUrl":"https://doi.org/10.1108/ijaim-01-2023-0017","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the role of the board of directors in affecting earnings management practices across small- and medium-sized enterprises (SMEs) life cycle.\u0000\u0000\u0000Design/methodology/approach\u0000Data is collected from 280 SMEs listed on the London Stock Exchange during the period of 2009–2016. Fixed effects regression analysis is used to test the hypotheses.\u0000\u0000\u0000Findings\u0000This study shows that the impact of the board of directors' roles on earnings management practices varies depending on the SMEs life cycle stage. In the introduction, growth and decline stages of SMEs, the wealth creation role of the board is negatively significant with earnings management, while the wealth protection role of the board is positively significant in the growth and maturity phases. Results suggest that the board's responsibility to create wealth deters early-stage earnings management strategies, while protecting shareholder interests, in latter stages, leads to a decrease in earnings management.\u0000\u0000\u0000Practical implications\u0000The findings suggest that corporate governance should be customized to the specific stage of the SMEs life cycle. Additionally, different life cycle stages may impose different requirements on corporate boards to shape the effectiveness of these mechanisms and constrain earnings management practices.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this study offers one of the first insights on the UK SMEs to understand how board functions and earnings management practices vary over SMEs life cycles. It will offer important information on the effect of board features on earnings management in SMEs in the UK and is anticipated to be of importance to policymakers, regulators, investors and practitioners.\u0000","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116948410","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}
Pub Date : 2023-07-18DOI: 10.1108/ijaim-02-2023-0049
Ajit Dayanandan, Sudershan Kuntluru
Purpose In the post-Enron era around the world, the role of auditor is widely debated. There is an increasing concern that an auditor’s continuous involvement with clients could impair audit quality – the negative view. There is also a positive view that a long auditor tenure leads to accumulation of client-specific knowledge over time, which could lead to high-quality audits. The empirical result with regards to impact of mandatory auditor rotation (MAR) is mixed world-wide. This study aims to examine whether MAR rules implemented in 2017 impact audit quality in India. Design/methodology/approach Using a unique setting in which MAR was required from 2017 to 2018 onwards in India, this study provides empirical evidence of the impact of MAR regulation on audit quality (modified audit opinion). The study uses data for 714 firms (4,284 firms) for six years (three years before MAR and three years after MAR regulation in India). Findings The study found that auditor tenure and MAR had significant negative impacts on audit quality, validating the “positive” view of audit tenure and audit quality. In addition, concentrated ownership had a negative impact on audit quality, implying the control and influence by concentrated ownership on auditors and audit opinion. The analysis shows that MAR regulation has not yielded the intended objective of improving audit quality in India. MAR is not a good template for improving audit quality. Research limitations/implications The findings of the study are useful to policymakers, regulators, managers, investors and users of financial reports. The study calls for public policy on auditor rotation based on objective scientific evidence. In light of the evidence in India that MAR does not lead to better audit quality, the study calls for reset of regulatory policy in India. Practical implications The study provides valuable insights to analysts, regulators and other users of financial accounts about the implications of MAR in India. Originality/value The study is one of the few to report on the impact of MAR, particularly in the context of an emerging market economy such as India.
{"title":"Mandatory auditor rotation and audit quality","authors":"Ajit Dayanandan, Sudershan Kuntluru","doi":"10.1108/ijaim-02-2023-0049","DOIUrl":"https://doi.org/10.1108/ijaim-02-2023-0049","url":null,"abstract":"\u0000Purpose\u0000In the post-Enron era around the world, the role of auditor is widely debated. There is an increasing concern that an auditor’s continuous involvement with clients could impair audit quality – the negative view. There is also a positive view that a long auditor tenure leads to accumulation of client-specific knowledge over time, which could lead to high-quality audits. The empirical result with regards to impact of mandatory auditor rotation (MAR) is mixed world-wide. This study aims to examine whether MAR rules implemented in 2017 impact audit quality in India.\u0000\u0000\u0000Design/methodology/approach\u0000Using a unique setting in which MAR was required from 2017 to 2018 onwards in India, this study provides empirical evidence of the impact of MAR regulation on audit quality (modified audit opinion). The study uses data for 714 firms (4,284 firms) for six years (three years before MAR and three years after MAR regulation in India).\u0000\u0000\u0000Findings\u0000The study found that auditor tenure and MAR had significant negative impacts on audit quality, validating the “positive” view of audit tenure and audit quality. In addition, concentrated ownership had a negative impact on audit quality, implying the control and influence by concentrated ownership on auditors and audit opinion. The analysis shows that MAR regulation has not yielded the intended objective of improving audit quality in India. MAR is not a good template for improving audit quality.\u0000\u0000\u0000Research limitations/implications\u0000The findings of the study are useful to policymakers, regulators, managers, investors and users of financial reports. The study calls for public policy on auditor rotation based on objective scientific evidence. In light of the evidence in India that MAR does not lead to better audit quality, the study calls for reset of regulatory policy in India.\u0000\u0000\u0000Practical implications\u0000The study provides valuable insights to analysts, regulators and other users of financial accounts about the implications of MAR in India.\u0000\u0000\u0000Originality/value\u0000The study is one of the few to report on the impact of MAR, particularly in the context of an emerging market economy such as India.\u0000","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116598120","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}
Pub Date : 2023-07-06DOI: 10.1108/ijaim-02-2023-0025
Mohammad A. A. Zaid
Purpose From an agency theory realm, this study aims to respond to the more recent calls to deeply analyze the indirect influence of professional shareholders, namely, institutional, blockholder and foreign owners, on the extent of compliance with International Financial Reporting Standards (IFRS) mandatory reporting requirements. Design/methodology/approach Multivariate regression analysis was applied. Moreover, quantitative static and dynamic panel data have been used. More plainly, ordinary least squares was run as a baseline estimator. Afterwards, one-step system generalized method of moment and two-stage least squares were conducted to control for the potential endogeneity dilemma. The analysis is based on a sample of nonfinancial listed firms on the Palestine Stock Exchange for the time span of 10 years, from 2010 to 2019. Findings After controlling for the detrimental effect of the endogeneity issue, the findings clearly reveal that the effect of the three types of professional shareholders (institutional, blockholder and foreign) on the extent of compliance with IFRS is more significant under a high proportion of independent nonexecutive directors. Originality/value To the best of the author’s knowledge, prior literature on the nexus between shareholding structure and compliance level with IFRS has restricted solely to analyzing the direct influence without casting the light on the moderation effect of independent nonexecutive directors. Hence, analyzing this sensitive configuration merits attention. In this vein, to ameliorate the compliance level with IFRS, regulators have to devote remarkable effort to updating both enforcement mechanisms and best practices of shareholding structure simultaneously.
{"title":"Do professional shareholders matter for corporate compliance with IFRS reporting requirements: the moderating effect of board independence","authors":"Mohammad A. A. Zaid","doi":"10.1108/ijaim-02-2023-0025","DOIUrl":"https://doi.org/10.1108/ijaim-02-2023-0025","url":null,"abstract":"\u0000Purpose\u0000From an agency theory realm, this study aims to respond to the more recent calls to deeply analyze the indirect influence of professional shareholders, namely, institutional, blockholder and foreign owners, on the extent of compliance with International Financial Reporting Standards (IFRS) mandatory reporting requirements.\u0000\u0000\u0000Design/methodology/approach\u0000Multivariate regression analysis was applied. Moreover, quantitative static and dynamic panel data have been used. More plainly, ordinary least squares was run as a baseline estimator. Afterwards, one-step system generalized method of moment and two-stage least squares were conducted to control for the potential endogeneity dilemma. The analysis is based on a sample of nonfinancial listed firms on the Palestine Stock Exchange for the time span of 10 years, from 2010 to 2019.\u0000\u0000\u0000Findings\u0000After controlling for the detrimental effect of the endogeneity issue, the findings clearly reveal that the effect of the three types of professional shareholders (institutional, blockholder and foreign) on the extent of compliance with IFRS is more significant under a high proportion of independent nonexecutive directors.\u0000\u0000\u0000Originality/value\u0000To the best of the author’s knowledge, prior literature on the nexus between shareholding structure and compliance level with IFRS has restricted solely to analyzing the direct influence without casting the light on the moderation effect of independent nonexecutive directors. Hence, analyzing this sensitive configuration merits attention. In this vein, to ameliorate the compliance level with IFRS, regulators have to devote remarkable effort to updating both enforcement mechanisms and best practices of shareholding structure simultaneously.\u0000","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"294 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-07-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115610546","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}
Pub Date : 2023-06-27DOI: 10.1108/ijaim-03-2023-0053
A. Issa, J. Hanaysha
Purpose This study aims to investigate the relationship between board gender diversity and environmental, social and governance (ESG) controversies and to determine if a critical mass of female directors has a significant impact on ESG performance. Design/methodology/approach The study analyzes a sample of non-financial companies from 13 European countries between 2004 and 2021. The primary method used to reach conclusions was the pooled ordinary least squares regression. Additionally, the study used supplementary techniques such as alternative measurement, sub-sample analysis and two-stage least squares to enhance its reliability. Findings The results indicate that a higher representation of women on boards is correlated with a reduction in the number of ESG controversies, particularly when there are three or more female directors. Furthermore, the relationship between board gender diversity and ESG controversies may be affected by factors such as industry, governance and a company’s environmental performance. Practical implications This study suggests that increasing women’s representation on boards may mitigate ESG controversies and improve firm reputation and performance, especially in industries with high ESG risks. Policymakers can support this through policies, targets, training and inclusive practices. The findings also inform investors and stakeholders of the relationship between board gender diversity and ESG controversies. Originality/value This study expands the understanding of the relationship between board gender diversity and sustainable accounting and finance. It focuses on the effect that having female board members has on corporate policies, which is significant for shaping global policies that promote diversity on boards.
{"title":"Breaking the glass ceiling for a sustainable future: the power of women on corporate boards in reducing ESG controversies","authors":"A. Issa, J. Hanaysha","doi":"10.1108/ijaim-03-2023-0053","DOIUrl":"https://doi.org/10.1108/ijaim-03-2023-0053","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the relationship between board gender diversity and environmental, social and governance (ESG) controversies and to determine if a critical mass of female directors has a significant impact on ESG performance.\u0000\u0000\u0000Design/methodology/approach\u0000The study analyzes a sample of non-financial companies from 13 European countries between 2004 and 2021. The primary method used to reach conclusions was the pooled ordinary least squares regression. Additionally, the study used supplementary techniques such as alternative measurement, sub-sample analysis and two-stage least squares to enhance its reliability.\u0000\u0000\u0000Findings\u0000The results indicate that a higher representation of women on boards is correlated with a reduction in the number of ESG controversies, particularly when there are three or more female directors. Furthermore, the relationship between board gender diversity and ESG controversies may be affected by factors such as industry, governance and a company’s environmental performance.\u0000\u0000\u0000Practical implications\u0000This study suggests that increasing women’s representation on boards may mitigate ESG controversies and improve firm reputation and performance, especially in industries with high ESG risks. Policymakers can support this through policies, targets, training and inclusive practices. The findings also inform investors and stakeholders of the relationship between board gender diversity and ESG controversies.\u0000\u0000\u0000Originality/value\u0000This study expands the understanding of the relationship between board gender diversity and sustainable accounting and finance. It focuses on the effect that having female board members has on corporate policies, which is significant for shaping global policies that promote diversity on boards.\u0000","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"209 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122880095","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}
Pub Date : 2023-06-16DOI: 10.1108/ijaim-03-2023-0055
A. Issa, J. Hanaysha
Purpose The study aims to investigate the relationship between renewable energy use and financial performance in non-financial companies in European countries. Design/methodology/approach This study examines a panel data set consisting of 1,919 firm-year observations of non-financial companies operating in 13 European nations, covering the period from 2014 to 2021. The study uses the ordinary least squares (OLS) and the two-stage least squares method (2SLS) as the baseline models and further enhances robustness with sub-sample analysis. Findings The results demonstrate a positive link between renewable energy use and financial performance, and these results hold up across different measurements, sub-sample analysis and model specifications, demonstrating their robustness. Furthermore, the results indicate that some factors such as the industry nature and environmental, social and governance (ESG) controversies have an impact on this positive association. Practical implications The findings are substantial for both policymakers and companies, highlighting the benefits of incorporating renewable energy into their operations for improved business success. Originality/value This study adds to the existing body of literature on the effect of environmental performance on a company’s success by focusing on a novel aspect – the correlation between renewable energy usage and firm performance. It responds to the recent request from researchers to investigate different aspects of sustainability, with a specific emphasis on renewable energy, which is a vital factor in reducing carbon emissions and improving financial performance.
{"title":"Powering profits: how renewable energy boosts financial performance in European non-financial companies","authors":"A. Issa, J. Hanaysha","doi":"10.1108/ijaim-03-2023-0055","DOIUrl":"https://doi.org/10.1108/ijaim-03-2023-0055","url":null,"abstract":"\u0000Purpose\u0000The study aims to investigate the relationship between renewable energy use and financial performance in non-financial companies in European countries.\u0000\u0000\u0000Design/methodology/approach\u0000This study examines a panel data set consisting of 1,919 firm-year observations of non-financial companies operating in 13 European nations, covering the period from 2014 to 2021. The study uses the ordinary least squares (OLS) and the two-stage least squares method (2SLS) as the baseline models and further enhances robustness with sub-sample analysis.\u0000\u0000\u0000Findings\u0000The results demonstrate a positive link between renewable energy use and financial performance, and these results hold up across different measurements, sub-sample analysis and model specifications, demonstrating their robustness. Furthermore, the results indicate that some factors such as the industry nature and environmental, social and governance (ESG) controversies have an impact on this positive association.\u0000\u0000\u0000Practical implications\u0000The findings are substantial for both policymakers and companies, highlighting the benefits of incorporating renewable energy into their operations for improved business success.\u0000\u0000\u0000Originality/value\u0000This study adds to the existing body of literature on the effect of environmental performance on a company’s success by focusing on a novel aspect – the correlation between renewable energy usage and firm performance. It responds to the recent request from researchers to investigate different aspects of sustainability, with a specific emphasis on renewable energy, which is a vital factor in reducing carbon emissions and improving financial performance.\u0000","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121692593","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}
Pub Date : 2023-06-06DOI: 10.1108/ijaim-01-2023-0012
Mani Bansal
Purpose To report inflated operating performance indicators, such as operating revenue and operating profit, managers vertically reposition revenue and expense items inside the income statement. This study aims to investigate the relationship between credit market incentives and these practices. Design/methodology/approach This study examined a sample of 1,592 Bombay Stock Exchange-listed companies from 2009 to 2021 and tested them using panel data regression models. The propensity score matching method and different measurements of classification shifting practices are used to validate the results. Findings The conclusions drawn from the empirical data show that firms prefer revenue shifting over expense shifting to prevent debt covenant violations. It shows that the firm’s classification-shifting practices are driven by credit market incentives. This finding is consistent with the notion of positive accounting theory that firms engage in classification shifting (earnings management) to avoid violation of debt covenants. Further, the firm’s preference for revenue shifting is in line with the ease-need-advantage-based shifting framework where firms choose the shifting tool based on costs and constraints associated with each tool. Practical implications The finding suggests that if managers heavily rely on revenue shifting to avoid debt covenant violations, the firm may end up breaking these covenants based on its actual operating performance. Managers may use aggressive accounting techniques to prevent covenant violations, which can be a warning indicator of financial difficulties or operational problems. It highlights the necessity for creditors and investors to carefully evaluate a company’s financial stability outside of the financial statements that are publicly disclosed. Authorities should create separate forensic accounting standards for auditors to check revenue items and stop the corporate misfeasance of revenue shifting. Originality/value The study is among the earlier attempts to provide empirical evidence on credit market incentives behind classification shifting practices. It is the first study that documents the substitution relationship between classification shifting forms for avoiding violation of debt covenants.
{"title":"Do credit market incentives drive classification shifting in emerging markets?","authors":"Mani Bansal","doi":"10.1108/ijaim-01-2023-0012","DOIUrl":"https://doi.org/10.1108/ijaim-01-2023-0012","url":null,"abstract":"\u0000Purpose\u0000To report inflated operating performance indicators, such as operating revenue and operating profit, managers vertically reposition revenue and expense items inside the income statement. This study aims to investigate the relationship between credit market incentives and these practices.\u0000\u0000\u0000Design/methodology/approach\u0000This study examined a sample of 1,592 Bombay Stock Exchange-listed companies from 2009 to 2021 and tested them using panel data regression models. The propensity score matching method and different measurements of classification shifting practices are used to validate the results.\u0000\u0000\u0000Findings\u0000The conclusions drawn from the empirical data show that firms prefer revenue shifting over expense shifting to prevent debt covenant violations. It shows that the firm’s classification-shifting practices are driven by credit market incentives. This finding is consistent with the notion of positive accounting theory that firms engage in classification shifting (earnings management) to avoid violation of debt covenants. Further, the firm’s preference for revenue shifting is in line with the ease-need-advantage-based shifting framework where firms choose the shifting tool based on costs and constraints associated with each tool.\u0000\u0000\u0000Practical implications\u0000The finding suggests that if managers heavily rely on revenue shifting to avoid debt covenant violations, the firm may end up breaking these covenants based on its actual operating performance. Managers may use aggressive accounting techniques to prevent covenant violations, which can be a warning indicator of financial difficulties or operational problems. It highlights the necessity for creditors and investors to carefully evaluate a company’s financial stability outside of the financial statements that are publicly disclosed. Authorities should create separate forensic accounting standards for auditors to check revenue items and stop the corporate misfeasance of revenue shifting.\u0000\u0000\u0000Originality/value\u0000The study is among the earlier attempts to provide empirical evidence on credit market incentives behind classification shifting practices. It is the first study that documents the substitution relationship between classification shifting forms for avoiding violation of debt covenants.\u0000","PeriodicalId":229587,"journal":{"name":"International Journal of Accounting & Information Management","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121753683","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}
Pub Date : 2023-05-24DOI: 10.1108/ijaim-02-2023-0035
R. Salem, Musa Ghazwani, A. Gerged, M. Whittington
Purpose Building upon institutional pressures on firms to deal with corruption, this study aims to investigate the association between a firm's engagement with anti-corruption disclosure quality (ACD_Q) and earnings management (EM). Also, this study examines the moderating role of audit quality in the association between ACD_Q and EM. Design/methodology/approach The authors constructed an ACD_Q index based on the 2010 UK Bribery Act and taking into account a wide range of rules on corruption and bribery, including those of the OECD, World Bank, UNCTAD, UNGC, UNCAC and GRI. Generalized method of moments and panel regression were used to examine the association between ACD_Q and EM. Findings Using a sample of 2,695 firm‐year observations of the UK’s FTSE-350 from 2008 to 2018, this study finds ACD_Q is negatively associated with EM. In addition, this negative relationship is contingent on audit committee independence and audit committee expertise. This finding is supported by additional robustness and sensitivity analysis. Practical implications The empirical evidence reiterates the crucial need for more concerted efforts to ensure corporate engagement in anti-corruption practices with a view to reducing earnings manipulations. Originality/value This study contributes to the limited evidence that investigates how ACD Q influences EM in the UK after the introduction of the UK Bribery Act in 2010. Furthermore, by considering the period from 2008 to 2019, this study investigates the potential moderating role of UK corporate governance reforms in EM reduction. In particular, to the best of the authors’ knowledge, this study assesses for the first time the moderating effect of audit committee mechanisms on the ACD Q and EM nexus.
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