British Accounting Review最新文献

This study examines the role of financial statement comparability in mitigating analysts' optimism for accruals. Prior research shows that sell-side analysts do not fully incorporate accrual information in anticipating future earnings and thus tend to issue more optimistic forecasts for firms with a higher level of accruals. We posit that financial statement comparability allows analysts to use industry peers' information in assessing the persistence of accruals, thereby lowering their optimism for accruals. We find that analysts' accrual-related optimism is significantly moderated for firms with a high degree of financial statement comparability. Further, we disaggregate financial statement comparability into accrual comparability and cash flow comparability and find that the inverse relation between comparability and analysts' optimism for accruals is driven by accrual comparability rather than cash flow comparability. Moreover, exploiting the mandatory adoption of IFRS as an exogenous increase in comparability, we find that analysts’ optimism for accruals decreases significantly following the IFRS adoption while it does not show a significant change in non-IFRS-adopting countries during the same period. Collectively, the results suggest that financial statement comparability helps analysts process and interpret accrual information, thereby improving their forecasting activities.

How do tax advisors make themselves comfortable with the tax planning arrangements they recommend to their clients, in the many gray areas that characterize their field of practice? What motivates tax advisors to consult each other in this context? In this field study, we examine the processes that help (re)produce an influential informal norm of peer consultation surrounding the work of tax partners in accounting firms. Based on interviews with 36 tax advisors, most of them partners in accounting firms, our analysis focuses on rationalization processes surrounding the informal consultation norm. Our findings shed light on partners' heavy reliance on this norm, to comfort themselves in exercising interpretive judgment about the meaning of tax rules. Clan monitoring and mutual support both play a significant role in the process. As such, our study illustrates how peer consultation operates as an interpretive practice socially embedded in clan processes. Partners negotiate the shared meaning of the law through clan-based interactions with their peers until a consensus is reached: the tax planning arrangement is then perceived to be robust enough and able to withstand external challenges. Overall, our analysis points to a need to step back from the current tax avoidance debate, to better understand how clan-based interpretive judgments develop and operate in practice, in their social context. We also hope to influence the discipline’s research agenda by encouraging academics to seek a better understanding of tax planning in action.

This study investigates the role of salient events on accrual-based and real earnings management activities. For people using availability heuristics, the salience of an event may temporarily increase perceived risk even though the actual risk does not change, and individuals making decisions by availability heuristics are subsequently more likely to assign a higher probability to unrelated negative future events. I use terrorist attacks and mass shootings as salient events and conjecture that the negative effects of terrorist attacks and mass shootings spill over and lead to pessimistic risk assessments of financial reporting choices. The findings show a decrease in accrual-based and real earnings management for firms located in the impacted regions. The documented effects are driven by firms with high information asymmetry levels and pessimistic annual reports. Additional analysis reveals that affected firms decrease the readability of their annual reports, suggesting affected firms engage in a more complex narrative disclosure. The findings of this paper support the argument that managers exhibit a cognitive bias which affects their financial reporting choices.

This study examines the association between creative corporate culture and corporate tax avoidance. We construct a novel measure of creative corporate culture through the textual analysis of public firms’ 10-K reports. We find that firms with highly creative culture avoid taxes to a greater extent than firms with less creative culture. This effect is incremental to previously documented effects of research and development and intangible (e.g., patents) on tax avoidance. Overall, our study documents a negative outcome of creative corporate culture on corporate behavior in terms of tax avoidance.

This study draws on attribution theory to examine how and by what means the firm's top management team, board members, and owner(s) (i.e., the strategic apex) shape disclosure strategies. Drawing on interviews and archival data spanning six years, we conduct a case study of a financially distressed private family-owned media group. Unique access to these data allowed us to peer into the disclosure strategy formation process that typically takes place behind closed doors in private firms. Our findings show that financial distress preceded the formation of the disclosure strategy and the voluntary disclosure practices designed to satisfy financially powerful stakeholders, and that internal whistleblowers act as a low-cost disclosure tool to inform financially weaker stakeholders. In addition, the development of the disclosure strategy is strongly influenced by the strategic apex, which forms collaborative teams, organises stakeholders and their information needs, and meticulously manages and controls the content and timing of voluntary disclosures. Our findings also suggest that a tightly knit disclosure strategy and voluntary disclosure practices are used to influence rather than inform, to manage stakeholder interactions, and to influence public opinion.

This study examines the impact of corporate tax avoidance on zombie firms in China. Using a sample of 17,717 firm-year observations over the 2010–2019 period, we find a negative and statistically significant association between tax avoidance and zombie firms after controlling for financial constraints. We also divide the zombie firms in our sample into state-owned enterprise (SOE) and non-SOE subsamples and observe that the tax avoidance effect is stronger in the SOE subsample. Our baseline results are robust to endogeneity concerns and alternative measures of zombie firms, tax avoidance, and financial constraints. Moreover, we perform a heterogeneity test to understand better the impact of CEO political connections on the negative association between corporate tax avoidance and zombie firms. We find that CEO political connections magnify this association. Finally, we identify information opacity as a mechanism that explains the negative association between tax avoidance and zombie firms. Overall, the findings of this study improve our understanding of the determinants of zombie firms and the consequences of corporate tax avoidance.