British Accounting Review最新文献

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.

Most literature on the antecedents of misreporting in the public sector focuses on the propensity to report financial breakeven, with limited attention to the regulatory and normative incentives that may alter such propensity. This study provides novel explanations for public sector organisations' deviation from breakeven. Its underlying assumption is that misreporting may be shaped by mimetic pressures encouraging conformity as well as regulatory pressures conveyed through soft budget constraints. The empirical analysis includes all Italian public healthcare organisations over 17 years. The findings suggest that public healthcare organisations may manipulate accruals not only to achieve financial breakeven, but also to conform with peers’ financial performance or to worsen reported financial performance in anticipation of a bailout.

We examine the role of legal regime in the use and usefulness of management disclosures relating to firm strategy and the business model (SBM disclosures). We conduct our analysis in the bijural Canadian setting, where firms operate under either common law (CL) or French Civil law (FCL), depending on where they are headquartered. We find that SBM disclosures vary in length and usefulness across legal regimes. Quebec firms operating under a FCL legal regime produce less extensive SBM disclosures, but such disclosures have a more pronounced information asymmetry-reducing effect, as compared to those of firms operating in CL jurisdictions. Our analysis introduces legal liability risk related to the legal regime as an additional factor that shapes SBM disclosures in the annual reports. Our findings can be of interest to the IASB and the national accounting standard setters as they develop SBM disclosure-related implementation guidance across various jurisdictions.

Prior literature has examined 10-K narrative thematic bias and financial graph distortion as two independent outcomes that might arise from managements' efforts at impression management. Largely unexplored is an analysis of narrative thematic bias and financial graph distortion as joint and interrelated outcomes that would arise if management coordinates both in the same 10-K report as part of an impression management strategy. We fill this void in the literature by using a simultaneous equation system to examine the joint relationship between narrative thematic bias and graph distortion in the 10-K filings of S&P 500 firms from 2014 to 2018. We draw upon Paivio's (1986) dual coding theory to predict a positive association between narrative thematic bias and financial graph distortion based on the insight that graph distortion helps reinforce the effects of thematic bias, and vice versa. Consistently, we find a simultaneous and positive relationship between thematic bias and graph distortion. Further, we find that this complementary relationship is more pronounced in firms with weak corporate governance and weak external monitoring. Our findings suggest that management may exploit the reinforcing effects of thematic bias and graph distortion to leave financial statement users with a more favorable impression of firm performance.

We examine the impact of poor corporate social responsibility engagement signalled through negative environmental and social (E&S) incidents on equity financing via seasoned equity offerings (SEOs) across 25 countries. The results show that negative E&S incidents significantly aggravate SEO underpricing, thereby increasing the cost of raising equity capital. Managers appear to take the adverse effects into consideration as reflected in the reduced likelihood of issuing equity following the experience of negative E&S incidents. Further analysis shows that such adverse pricing effects are stronger for firms that are subject to significant social and regulatory penalties for their E&S misconducts, suggesting that negative E&S incidents increase corporate reputational losses and elevate regulatory risk. Finally, there are rich cross-country variations in the SEO pricing effects of E&S risks with legal investor protection and national culture playing an important role in influencing the pricing of E&S risk.

To better understand how the practice of auditing can be more effectively enrolled in the fight against fraud and corruption, this study (1) examines how these problems are viewed and defined by the public and (2) contrasts this view and definition with that of professional auditors. The examination is informed by the dispositive theory of Foucault and an inductive analysis of a large (90,000+) multi-year sample of news stories related to fraud and corruption in the Italian health sector. While auditors define these problems in relatively narrow terms and consign them to ‘a form of risk, a threat to reputation and revenue, and a cost of doing business,’ the study finds that the public has a broader definition and a greater concern with problematic acts and actors ‘in and of themselves’. These findings have important implications for the audit expectations gap and how it might be addressed. The study also provides a useful analytical method for locating and better understanding fraud and corruption in other large, institutional settings.