British Accounting Review最新文献

This study examines whether and how a strong corporate culture influences stakeholder violations. Using a longitudinal sample of monetary penalties imposed on US-listed firms for stakeholder violations, I find evidence that a strong corporate culture is significantly and negatively associated with such violations. This outcome remains robust to a series of robustness and endogeneity tests, including the application of the generalized method of moments (GMM), entropy balancing, and propensity score matching (PSM) estimation. The channel analysis evidence implies that information asymmetry is a possible mechanism through which a strong corporate culture is associated with stakeholder violations. A cross-sectional analysis demonstrates that the documented association between strong corporate culture and stakeholder violations is stronger for companies with weak external monitoring. Additionally, the negative association between strong corporate culture and stakeholder violations varies across violation types and cultural dimensions. This study contributes to the ongoing discourse on the role of informal corporate governance mechanisms (corporate culture) in mitigating corporate stakeholder violations. Finally, it has important implications for stakeholders, including policymakers, regulators, and practitioners, intending to promote responsible business practices.

This study investigates the impact of real earnings smoothing on labour investment efficiency. Our results show that real earnings smoothing is significantly associated with higher labour investment efficiency, supporting the private information signalling view of earnings smoothing. We also fine information asymmetry as a plausible channel through which real earnings smoothing improves labour investment efficiency. Further analyses find that the positive impact of real earnings smoothing on labour investment efficiency is primarily driven by the informational component rather than the garbling component of earnings smoothness, and is more pronounced for financially constrained firms with equity-based financing incentives and loss-making firms. Our paper advances the understanding of corporate labour investment and the benefits of real earnings smoothing.

By using unique hand-collected project-level investment data on Chinese private investments in public equity (PIPE) issuances, we show that the length of the regulatory approval process for equity issuance is positively related to the probability of subsequent changes in equity-financed projects and a deterioration in project returns. The effects are more pronounced for firms in a highly competitive industry and with a comparative disadvantage. Furthermore, we show that this relationship is causal by exploiting the exogenous shock to approval delay caused by changes in the Chairman of the China Securities Regulation Commission. In response, equity issuers mitigate the delay impact by temporarily increasing debt financing.

From the perspective of internal capital markets, we investigate the causes of zombie firms and propose possible governance measures. Based on Chinese A-share listed firms, we find that internal capital market subsidies promote the zombification of firms. This impact is stronger when the liquidity of the external capital market is higher or when there is a finance firm in the internal capital market. Additionally, there is a “pecking order” of the subsidies that contribute to the zombification of firms: government subsidies take the lead, followed by internal capital market subsidies, and then bank loans. The motivations for internal capital markets to subsidize zombie firms include avoiding risk contagion, avoiding losing control rights, being socially responsible, and maintaining rent-seeking opportunities for managers. The sources of internal capital market subsidies are mainly parent firms and brother firms. Constraining agency problems and engaging in related major asset restructuring play important role in the governance of zombie firms. Overall, our study reveals internal capital markets to be a “blood transfusion” channel and it provides guidance for tackling the problem of zombie firms.

This study examines how the equity market responds to the mandated disclosures made under the Canadian Extractive Sector Transparency Measures Act (ESTMA). We studied a sample of 1,559 company-year-country disclosures from 937 extractive firms listed, or conducting business, in Canada between 2016 and 2018, and controlled for corruption perception and bribe indices in the host country. We found that ESTMA disclosures are associated with a negative market reaction, implying that the market perceives a net loss to firms as a result of the costs of compliance and risks associated with ESTMA. It appears that the reaction is stronger and more negative for ESTMA reports that provide more information, as well as for firms that report higher payments than expected. Furthermore, we have found that the ESTMA disclosures garner a stronger market reaction for firms that are more prone to corruption or have weak governance. This study contributes to the important discussion regarding the use of transparency measures to address the issues related to human rights in the business environment. Our results confirm that transparency is costly for shareholders, and it is, therefore, important for policymakers to consider the costs, benefits, and potential unintended consequences of their measures.

Lowball guidance is the practice of firm managers issuing overly cautious guidance that is later exceeded by a large margin upon earnings announcement. In this study, we examine this practice at the episode level, where a firm engages in it over multiple consecutive quarters. Using a control sample of firms that exhibited episodes of meet or small beats, we draw inferences specific to lowball guidance episodes. We assess their prevalence in a broad sample of firms and provide evidence related to two explanations of lowball guidance episodes: firms' earnings uncertainty, and to a lesser extent, firms’ attempt to appease sell-side analysts and institutional investors. Stock return tests suggest that there are short-term capital market benefits to lowball guidance episodes, but the benefits dissipate eventually. Our results indicate that episodes of lowball guidance likely appeal to certain types of market participants in the short term, but they are not sustainable.

While scholars in business, management, accounting and finance frequently use data on the ownership and control structure of companies in their research, we show that determining this structure for a UK public limited company using publicly available information can be fraught with a number of difficulties. The latest changes to the UK Listing rules following the Hill Review (2021) may further exacerbate these difficulties via the potential increase in listed companies with dual-class shares. With the help of case studies and further empirical work, we demonstrate some of the methodological challenges faced by researchers. We provide guidance on how to tackle these challenges.

Using the imposition of annual on-site inspections of publicly listed firms by local China Securities Regulatory Commission (CSRC) offices as a quasi-natural experiment, we examine how the threat of potential enforcement of financial regulations affects firms' implied cost of equity in weak institutional environments. In a staggered difference-in-differences (DID) framework, we show that compared with firms subject to the lottery of prospective on-site inspections, firms that are exempt from on-site inspections for three consecutive years display an average increase of 210 basis points in the cost of equity. This effect is more pronounced for firms with regulatory penalty records, firms domiciled in jurisdictions with more actions imposed on listed firms as a result of on-site inspections in the past, firms located closer to their respective local CSRC offices and state-owned firms (SOEs). Further analysis suggests that the exemption from on-site inspections increases firms' cost of equity through the channels of increased tunnelling activities from controlling shareholders, reduced financial reporting quality and more severe information asymmetry faced by external investors. Thus, the valuation of exempt firms decreases. Our findings suggest that in weak institutional environments, the threat of financial regulators' enforcement ex ante increases firm value by reducing external investors' estimation of firms’ long-term risks.