Pub Date : 2025-06-01Epub Date: 2025-03-17DOI: 10.1016/j.adiac.2025.100811
Mohammad Hendijani Zadeh
Using a large sample of publicly traded U.S. firms, we show that high audit quality is negatively related to a client firm's reliance on costly trade credit financing. Further analyses reveal that the relationship between audit quality and trade credit reliance is more pronounced for client firms showing higher information asymmetry, greater cash flow volatility, and lower collateral. We also identify two potential mechanisms through which audit quality diminishes a client firm's reliance on expensive trade credit financing: reduced cost of debt and enhanced access to equity market financing via stock liquidity. Additionally, the analysis shows that client firms with high audit quality tend to make faster payments on their trade credit agreements. Our findings indicate that audit quality can influence a client firm's trade credit policies.
{"title":"Does high audit quality mitigate a client firm's reliance on trade credit financing?","authors":"Mohammad Hendijani Zadeh","doi":"10.1016/j.adiac.2025.100811","DOIUrl":"10.1016/j.adiac.2025.100811","url":null,"abstract":"<div><div>Using a large sample of publicly traded U.S. firms, we show that high audit quality is negatively related to a client firm's reliance on costly trade credit financing. Further analyses reveal that the relationship between audit quality and trade credit reliance is more pronounced for client firms showing higher information asymmetry, greater cash flow volatility, and lower collateral. We also identify two potential mechanisms through which audit quality diminishes a client firm's reliance on expensive trade credit financing: reduced cost of debt and enhanced access to equity market financing via stock liquidity. Additionally, the analysis shows that client firms with high audit quality tend to make faster payments on their trade credit agreements. Our findings indicate that audit quality can influence a client firm's trade credit policies.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100811"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143637523","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 : 2025-06-01Epub Date: 2025-04-17DOI: 10.1016/j.adiac.2025.100814
James N. Cannon
{"title":"Discussion of “balance sheet strength in the oil and gas industry: Saving for a rainy day or making hay while the sun shines”","authors":"James N. Cannon","doi":"10.1016/j.adiac.2025.100814","DOIUrl":"10.1016/j.adiac.2025.100814","url":null,"abstract":"","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100814"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143838536","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 : 2025-06-01Epub Date: 2025-04-19DOI: 10.1016/j.adiac.2025.100815
Ahmad Usman Shahid , Chris Patel , Peipei Pan
We conducted a scenario-based survey and examine whether and how professional accountants and junior business executives' socially responsible investment (SRI) decisions are influenced by their intrinsic Islamic religiosity measured by the Islamic worldview in the context of a profitable firm that is alleged by the media to have employed child labour under hazardous conditions in Pakistan. Our findings show that professionals' Islamic worldview is positively associated with their SRI decisions, and it is mediated by their social consciousness. Our results further show that social consciousness correlates to how they perceive media allegations as relevant in making decisions. We demonstrate that the conventional theory of accounting, which suggests that considerations of risk and return primarily drive investing decisions, does not always hold true. Our findings demonstrate that professionals are guided by their Islamic worldview in making SRI decisions that transcend those with profit-maximizing motives with a focus on a risk-return trade-off.
{"title":"Islamic worldview, social consciousness, and socially responsible investment","authors":"Ahmad Usman Shahid , Chris Patel , Peipei Pan","doi":"10.1016/j.adiac.2025.100815","DOIUrl":"10.1016/j.adiac.2025.100815","url":null,"abstract":"<div><div>We conducted a scenario-based survey and examine whether and how professional accountants and junior business executives' socially responsible investment (SRI) decisions are influenced by their intrinsic Islamic religiosity measured by the Islamic worldview in the context of a profitable firm that is alleged by the media to have employed child labour under hazardous conditions in Pakistan. Our findings show that professionals' Islamic worldview is positively associated with their SRI decisions, and it is mediated by their social consciousness. Our results further show that social consciousness correlates to how they perceive media allegations as relevant in making decisions. We demonstrate that the conventional theory of accounting, which suggests that considerations of risk and return primarily drive investing decisions, does not always hold true. Our findings demonstrate that professionals are guided by their Islamic worldview in making SRI decisions that transcend those with profit-maximizing motives with a focus on a risk-return trade-off.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100815"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143847626","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 : 2025-06-01Epub Date: 2024-11-21DOI: 10.1016/j.adiac.2024.100784
Lei Wang , Lei Dong
This study examines nonprofessional investors' reactions to two important factors underlying the disclosure of corporate social responsibility (CSR) measures: report integration and strategy communication. We find that CSR measures in an integrated report appear to affect nonprofessional investors less than CSR measures in a standalone report. Providing strategy communication that conveys CSR strategic objectives and a causal connection between CSR performance and financial performance promotes investors' incorporation of CSR measures into their judgments and decisions. Together, report integration and CSR strategy communication interact to affect investment judgments and decisions, such that the weakened effect of CSR measures in an integrated report is less pronounced when CSR strategy communication is present than when CSR strategy communication is absent. As the interest in CSR reports continues to grow among investors, preparers, auditors, standard setters, regulators, and researchers, this study highlights the interplay between strategy communication and report integration in CSR disclosures.
{"title":"The interactive effects of strategy communication and report integration on investors' reactions to corporate social responsibility measures","authors":"Lei Wang , Lei Dong","doi":"10.1016/j.adiac.2024.100784","DOIUrl":"10.1016/j.adiac.2024.100784","url":null,"abstract":"<div><div>This study examines nonprofessional investors' reactions to two important factors underlying the disclosure of corporate social responsibility (CSR) measures: report integration and strategy communication. We find that CSR measures in an integrated report appear to affect nonprofessional investors less than CSR measures in a standalone report. Providing strategy communication that conveys CSR strategic objectives and a causal connection between CSR performance and financial performance promotes investors' incorporation of CSR measures into their judgments and decisions. Together, report integration and CSR strategy communication interact to affect investment judgments and decisions, such that the weakened effect of CSR measures in an integrated report is less pronounced when CSR strategy communication is present than when CSR strategy communication is absent. As the interest in CSR reports continues to grow among investors, preparers, auditors, standard setters, regulators, and researchers, this study highlights the interplay between strategy communication and report integration in CSR disclosures.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100784"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142723815","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 : 2025-06-01Epub Date: 2024-09-19DOI: 10.1016/j.adiac.2024.100781
Abhijit Das , Vincent K. Chong , Stijn Masschelein , Isabel Z. Wang , David R. Woodliff
Prior studies in auditing have examined the impact of performance-based profit-sharing schemes (PES) and client pressure in terms of explicit pressure and implicit pressure on auditors' judgments independently, and there is an ex-ante expectation that these two factors will interact in the context of proposed audit adjustments in a prenegotiation setting. Based on the theory of motivated reasoning, this study examines whether explicit pressure by clients will have a smaller effect when auditors' PES is based on a firm-wide scheme as compared to a divisional scheme. We conduct a 2 × 2 between-subject experiment with 95 experienced auditors, predominantly audit managers from the US, that examines how performance-based profit-sharing schemes (i.e., firm-wide vs. divisional) of audit partners and client pressure (i.e., explicit vs. implicit) affect auditors' mindsets on the magnitude of provision for obsolete inventory to be reported in the client's financial statements in an auditor-client pre-negotiation setting. The findings show that auditors' PES and client pressure interact to affect auditors' behaviour in a pre-negotiation setting. Our results exhibit the concessionary (i.e., waiving a material audit adjustment) behaviour of audit partners, directors, and managers from the US. The findings extend contemporary research on auditor-client negotiation by providing evidence to the literature that PES schemes influence the behaviour of auditors in a pre-negotiation setting.
以往的审计研究分别从显性压力和隐性压力两个方面考察了基于业绩的利润分享计划（PES）和客户压力对审计师判断的影响，并预期这两个因素会在谈判前的审计调整建议中相互作用。基于动机推理理论，本研究探讨了当审计师的 PES 基于全公司方案而非部门方案时，客户的显性压力是否会产生较小的影响。我们以 95 名经验丰富的审计师（主要是来自美国的审计经理）为对象，进行了一项 2 × 2 的主体间实验，研究了审计合伙人基于业绩的利润分享计划（即全所计划与分部计划）和客户压力（即显性压力与隐性压力）如何影响审计师在审计师与客户谈判前的环境中，对客户财务报表中陈旧存货的计提规模的心态。研究结果表明，审计师的 PES 和客户压力相互作用，影响了审计师在谈判前环境中的行为。我们的研究结果显示了美国审计合伙人、董事和经理的让步行为（即放弃重大审计调整）。这些研究结果扩展了当代关于审计师与客户谈判的研究，为文献提供了证据，证明在谈判前的环境下，审计师的行为会受到 PES 计划的影响。
{"title":"The effects of performance-based profit-sharing schemes and client pressure on auditors' pre-negotiation judgments","authors":"Abhijit Das , Vincent K. Chong , Stijn Masschelein , Isabel Z. Wang , David R. Woodliff","doi":"10.1016/j.adiac.2024.100781","DOIUrl":"10.1016/j.adiac.2024.100781","url":null,"abstract":"<div><div>Prior studies in auditing have examined the impact of performance-based profit-sharing schemes (PES) and client pressure in terms of explicit pressure and implicit pressure on auditors' judgments independently, and there is an ex-ante expectation that these two factors will interact in the context of proposed audit adjustments in a prenegotiation setting. Based on the theory of motivated reasoning, this study examines whether explicit pressure by clients will have a smaller effect when auditors' PES is based on a firm-wide scheme as compared to a divisional scheme. We conduct a 2 × 2 between-subject experiment with 95 experienced auditors, predominantly audit managers from the US, that examines how performance-based profit-sharing schemes (i.e., firm-wide vs. divisional) of audit partners and client pressure (i.e., explicit vs. implicit) affect auditors' mindsets on the magnitude of provision for obsolete inventory to be reported in the client's financial statements in an auditor-client pre-negotiation setting. The findings show that auditors' PES and client pressure interact to affect auditors' behaviour in a pre-negotiation setting. Our results exhibit the concessionary (i.e., waiving a material audit adjustment) behaviour of audit partners, directors, and managers from the US. The findings extend contemporary research on auditor-client negotiation by providing evidence to the literature that PES schemes influence the behaviour of auditors in a pre-negotiation setting.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100781"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142723819","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01Epub Date: 2025-04-16DOI: 10.1016/j.adiac.2025.100816
Tongxia Li , Chun Lu , Lei Xu
This paper examines the impact of financial constraints on asymmetric cost behavior (i.e., cost stickiness). Specifically, we use a natural experiment — the staggered introduction of the anti-recharacterization laws (ARLs) — to investigate the causal relationship between financial constraints and cost stickiness. Implementing anti-recharacterization state regulation increases the value of a firm's collateral, resulting in lower external financing costs and improved credit market access. We hypothesize that this improves firms' ability to obtain external funding for expansion and allows firms facing sales decreases to retain their resources for a potential rebound. This results in an increase in cost stickiness. Our findings support the hypothesis that cost stickiness increases after the passage of the ARLs. Moreover, the effect of these laws is more pronounced for high-growth firms, firms with more stringent financial constraints, and firms relying on external financing, especially financing through special purpose vehicles (SPVs). These changes in asymmetric cost behavior are driven by economic incentives that improve firm performance.
{"title":"Access to finance and cost stickiness: Evidence from anti-recharacterization laws","authors":"Tongxia Li , Chun Lu , Lei Xu","doi":"10.1016/j.adiac.2025.100816","DOIUrl":"10.1016/j.adiac.2025.100816","url":null,"abstract":"<div><div>This paper examines the impact of financial constraints on asymmetric cost behavior (i.e., cost stickiness). Specifically, we use a natural experiment — the staggered introduction of the anti-recharacterization laws (ARLs) — to investigate the causal relationship between financial constraints and cost stickiness. Implementing anti-recharacterization state regulation increases the value of a firm's collateral, resulting in lower external financing costs and improved credit market access. We hypothesize that this improves firms' ability to obtain external funding for expansion and allows firms facing sales decreases to retain their resources for a potential rebound. This results in an increase in cost stickiness. Our findings support the hypothesis that cost stickiness increases after the passage of the ARLs. Moreover, the effect of these laws is more pronounced for high-growth firms, firms with more stringent financial constraints, and firms relying on external financing, especially financing through special purpose vehicles (SPVs). These changes in asymmetric cost behavior are driven by economic incentives that improve firm performance.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100816"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143833443","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 : 2025-06-01Epub Date: 2024-11-07DOI: 10.1016/j.adiac.2024.100783
Willie D. Reddic , Joshua C. Racca
{"title":"Discussion of using accounting information to identify corporate acquisition motives: Implications on post-acquisition performance","authors":"Willie D. Reddic , Joshua C. Racca","doi":"10.1016/j.adiac.2024.100783","DOIUrl":"10.1016/j.adiac.2024.100783","url":null,"abstract":"","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100783"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142723821","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 : 2025-06-01Epub Date: 2025-03-19DOI: 10.1016/j.adiac.2025.100812
Panagiotis E. Dimitropoulos
Effective 2015, the new Hellenic Accounting Standards (HAS) introduced a principle-based financial reporting environment to the Greek business setting. The scope of this study is to examine the impact of new HAS on the accounting quality (earnings management and income smoothing behaviors) of private hospitality firms in Greece, and the subsequent effect on the granting of government subsidies. The empirical analysis used accounting data from 3928 unique hotel firms operating in Greece, over the period 2003–2018. Panel fixed effects and logit regression analysis indicated that the introduction of the new principle-based HAS contributed to an increase in earnings management and income smoothing behaviors of private hotel firms. Furthermore, the deterioration of accounting quality under the new HAS was more severe for medium and small hotel firms, relative to their larger counterparts. Furthermore, the subsequent increase of earnings management by small and medium sized firms was accompanied by an increase of government subsidies, suggesting that SMEs with reduced accounting quality were rewarded with higher government financing under the new accounting regime.
{"title":"Principle-based accounting standards and earnings management in private hotel firms: The impact on government subsidies","authors":"Panagiotis E. Dimitropoulos","doi":"10.1016/j.adiac.2025.100812","DOIUrl":"10.1016/j.adiac.2025.100812","url":null,"abstract":"<div><div>Effective 2015, the new Hellenic Accounting Standards (HAS) introduced a principle-based financial reporting environment to the Greek business setting. The scope of this study is to examine the impact of new HAS on the accounting quality (earnings management and income smoothing behaviors) of private hospitality firms in Greece, and the subsequent effect on the granting of government subsidies. The empirical analysis used accounting data from 3928 unique hotel firms operating in Greece, over the period 2003–2018. Panel fixed effects and logit regression analysis indicated that the introduction of the new principle-based HAS contributed to an increase in earnings management and income smoothing behaviors of private hotel firms. Furthermore, the deterioration of accounting quality under the new HAS was more severe for medium and small hotel firms, relative to their larger counterparts. Furthermore, the subsequent increase of earnings management by small and medium sized firms was accompanied by an increase of government subsidies, suggesting that SMEs with reduced accounting quality were rewarded with higher government financing under the new accounting regime.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100812"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143681503","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-06-01Epub Date: 2025-02-08DOI: 10.1016/j.adiac.2025.100806
Mark Anderson , Yan Ma , Han-Up Park
We examine how a strategic emphasis on balance sheet strength relates to investment decisions and performance over time for firms operating in a cyclical environment. From a series of discussions with industry insiders and readings of disclosures for prominent oil and gas (O&G) companies in Canada, we identify two groups of upstream O&G firms based on how they match their resources and capabilities with the uncertainties posed by industry economic cycles. One group of firms borrows and invests aggressively when oil prices are strong and funds are available – “making hay while the sun shines”, while the other group grows conservatively to build and maintain balance sheet strength – “saving for a rainy day”. We use average cash flows to debt for each firm over time to measure emphasis on balance sheet strength and separate firms into rainy day and making hay companies. We leverage two steep price declines to observe the behavior of firms over industry cycles: one triggered by the widespread 2008 financial crisis and the other by a distinct and prolonged O&G industry downturn in 2014. While investment declined generally in both cases, we find that the decline in investment was significantly less for rainy day companies than making hay firms after the 2014 downturn. Across time, we find that rainy day companies make shrewder acquisitions and operate more efficiently than making hay companies. Nonetheless, the capital market rewards making hay companies with higher market valuation, but this is reduced in downturns.
{"title":"Balance sheet strength in the oil and gas industry: Saving for a rainy day or making hay while the sun shines","authors":"Mark Anderson , Yan Ma , Han-Up Park","doi":"10.1016/j.adiac.2025.100806","DOIUrl":"10.1016/j.adiac.2025.100806","url":null,"abstract":"<div><div>We examine how a strategic emphasis on balance sheet strength relates to investment decisions and performance over time for firms operating in a cyclical environment. From a series of discussions with industry insiders and readings of disclosures for prominent oil and gas (O&G) companies in Canada, we identify two groups of upstream O&G firms based on how they match their resources and capabilities with the uncertainties posed by industry economic cycles. One group of firms borrows and invests aggressively when oil prices are strong and funds are available – “<em>making hay while the sun shines</em>”, while the other group grows conservatively to build and maintain balance sheet strength – “<em>saving for a rainy day</em>”. We use average cash flows to debt for each firm over time to measure emphasis on balance sheet strength and separate firms into <em>rainy day</em> and <em>making hay</em> companies. We leverage two steep price declines to observe the behavior of firms over industry cycles: one triggered by the widespread 2008 financial crisis and the other by a distinct and prolonged O&G industry downturn in 2014. While investment declined generally in both cases, we find that the decline in investment was significantly less for <em>rainy day</em> companies than <em>making hay</em> firms after the 2014 downturn. Across time, we find that <em>rainy day</em> companies make shrewder acquisitions and operate more efficiently than <em>making hay</em> companies. Nonetheless, the capital market rewards <em>making hay</em> companies with higher market valuation, but this is reduced in downturns.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100806"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143350847","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 : 2025-06-01Epub Date: 2024-11-12DOI: 10.1016/j.adiac.2024.100785
Hanzhong Shi , Kaishu Wu , Kerui Zhai
Taking advantage of a unique financial reporting feature in the Chinese setting, this study examines whether the education level of a firm's rank-and-file employees is associated with its tax outcomes. We provide robust evidence that employee education is associated with reduced tax avoidance. Leveraging path analysis, we show that highly educated employees are related to corporate tax avoidance through a financial reporting channel and a corporate social responsibility (CSR) channel. In addition, we find that the main effect is more pronounced when employees have the right to voice their concerns and when the accounting department accounts for a greater portion of total employees. Finally, we show that employee education is associated with reduced tax risk. Overall, our study extends an emerging body of literature on the association between employee education and firm-related outcomes (e.g., Call, Campbell, Dhaliwal, & Moon Jr., 2017), along with finding another important determinant of corporate tax planning.
{"title":"Employee education and corporate tax outcomes: Evidence from firm-level reporting","authors":"Hanzhong Shi , Kaishu Wu , Kerui Zhai","doi":"10.1016/j.adiac.2024.100785","DOIUrl":"10.1016/j.adiac.2024.100785","url":null,"abstract":"<div><div>Taking advantage of a unique financial reporting feature in the Chinese setting, this study examines whether the education level of a firm's rank-and-file employees is associated with its tax outcomes. We provide robust evidence that employee education is associated with reduced tax avoidance. Leveraging path analysis, we show that highly educated employees are related to corporate tax avoidance through a financial reporting channel and a corporate social responsibility (CSR) channel. In addition, we find that the main effect is more pronounced when employees have the right to voice their concerns and when the accounting department accounts for a greater portion of total employees. Finally, we show that employee education is associated with reduced tax risk. Overall, our study extends an emerging body of literature on the association between employee education and firm-related outcomes (e.g., Call, Campbell, Dhaliwal, & Moon Jr., 2017), along with finding another important determinant of corporate tax planning.</div></div>","PeriodicalId":46906,"journal":{"name":"Advances in Accounting","volume":"68 ","pages":"Article 100785"},"PeriodicalIF":1.2,"publicationDate":"2025-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142723816","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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