Pub Date : 2023-09-26DOI: 10.1108/ara-07-2022-0165
Ricky Chung, Lyndie Bayne, Jacqueline Birt
Purpose This study investigates the impact of environmental, social and governance (ESG) disclosure on firm financial performance under a mandatory disclosure regime in Hong Kong. Design/methodology/approach The authors examine the largest 109 firms listed on the Hong Kong Exchange (HKEX) as of the financial year of 2019. The authors use a manually constructed index based on the most current 2019 ESG Reporting Guide launched by HKEX, followed by quantitative statistical methods using a model that follows the valuation framework by Ohlson. Findings The authors find a significant positive association between total ESG disclosure level and firm financial performance in the main tests. However, when the total ESG scores are partitioned into environmental and social subscores, the results show that only social disclosures are value relevant. Moreover, the results demonstrate that environmental and social subscores are both significant when return on assets (ROA) is used as a dependent variable. Furthermore, the robustness tests show that only qualitative ESG information is value relevant to share prices, while both quantitative and qualitative ESG information are relevant to ROA. In addition, the disclosure quality of annual reports alone is good in explaining the firm financial performance in this study. Originality/value This study contributes to existing non-financial reporting literature using hand-collected data as well as examining the firm financial performance of ESG reporting under the mandatory disclosure regime in the Hong Kong context.
{"title":"The impact of environmental, social and governance (ESG) disclosure on firm financial performance: evidence from Hong Kong","authors":"Ricky Chung, Lyndie Bayne, Jacqueline Birt","doi":"10.1108/ara-07-2022-0165","DOIUrl":"https://doi.org/10.1108/ara-07-2022-0165","url":null,"abstract":"Purpose This study investigates the impact of environmental, social and governance (ESG) disclosure on firm financial performance under a mandatory disclosure regime in Hong Kong. Design/methodology/approach The authors examine the largest 109 firms listed on the Hong Kong Exchange (HKEX) as of the financial year of 2019. The authors use a manually constructed index based on the most current 2019 ESG Reporting Guide launched by HKEX, followed by quantitative statistical methods using a model that follows the valuation framework by Ohlson. Findings The authors find a significant positive association between total ESG disclosure level and firm financial performance in the main tests. However, when the total ESG scores are partitioned into environmental and social subscores, the results show that only social disclosures are value relevant. Moreover, the results demonstrate that environmental and social subscores are both significant when return on assets (ROA) is used as a dependent variable. Furthermore, the robustness tests show that only qualitative ESG information is value relevant to share prices, while both quantitative and qualitative ESG information are relevant to ROA. In addition, the disclosure quality of annual reports alone is good in explaining the firm financial performance in this study. Originality/value This study contributes to existing non-financial reporting literature using hand-collected data as well as examining the firm financial performance of ESG reporting under the mandatory disclosure regime in the Hong Kong context.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":"305 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134883318","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 : 2023-09-22DOI: 10.1108/ara-05-2022-0109
Mohamed M.M. Ahmed
Purpose This study aims to investigate the relationship between top manager tenure and the sophistication level of management accounting system (MAS) in extant literature. Design/methodology/approach Cumulating evidence from 31 studies ( N = 12,739), this study meta-analytically examines the central question of whether top managers' tenure is significantly associated with MAS sophistication after correcting individual studies for statistical artifacts. The study also assesses the strength of this association bniy exploring the influence of several moderating factors. Findings The findings show that long-tenured top managers are not significantly related to MAS sophistication. However, the moderator analtgcqyses indicate that the relationship between top manager tenure and MAS sophistication is moderated by tenure measurement type, firm sector and size. The study provides evidence for the significant moderation of tenure measurement type (i.e. position tenure). The results also argue that top manager tenure matters for MAS sophistication in small- and medium-sized enterprises (SMEs) and firms in the private sector. Originality/value The meta-analysis summarizes existing studies quantitatively to expand prior narrative reviews by providing definitive evidence of the overall effect of top manager tenure on MAS sophistication.
{"title":"Does top managers' tenure matter to management accounting system design?","authors":"Mohamed M.M. Ahmed","doi":"10.1108/ara-05-2022-0109","DOIUrl":"https://doi.org/10.1108/ara-05-2022-0109","url":null,"abstract":"Purpose This study aims to investigate the relationship between top manager tenure and the sophistication level of management accounting system (MAS) in extant literature. Design/methodology/approach Cumulating evidence from 31 studies ( N = 12,739), this study meta-analytically examines the central question of whether top managers' tenure is significantly associated with MAS sophistication after correcting individual studies for statistical artifacts. The study also assesses the strength of this association bniy exploring the influence of several moderating factors. Findings The findings show that long-tenured top managers are not significantly related to MAS sophistication. However, the moderator analtgcqyses indicate that the relationship between top manager tenure and MAS sophistication is moderated by tenure measurement type, firm sector and size. The study provides evidence for the significant moderation of tenure measurement type (i.e. position tenure). The results also argue that top manager tenure matters for MAS sophistication in small- and medium-sized enterprises (SMEs) and firms in the private sector. Originality/value The meta-analysis summarizes existing studies quantitatively to expand prior narrative reviews by providing definitive evidence of the overall effect of top manager tenure on MAS sophistication.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":"333 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136010976","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 : 2023-09-22DOI: 10.1108/ara-10-2022-0243
Valerie Li, Yan Luo
Purpose The authors investigate how managers adapt their financial reporting and disclosure practices in response to the COVID-19 pandemic through changes in accounting estimates (CAEs). Design/methodology/approach The authors define the pandemic period as starting on March 1, 2020. The sample consists of 9,575 CAEs disclosed in quarterly (10-Qs) and annual (10-Ks) financial reports by US firms between January 1, 2004 and May 31, 2022. The authors perform multivariate analyses of the impact of the COVID-19 pandemic on the incidence of CAEs and on whether the impact of CAEs on firms' financial performance and reporting quality changes during the pandemic. Findings In the examination of the CAE footnote disclosures in the quarterly (10-Qs) and annual (10-Ks) reports of US companies, the authors find no evidence that the incidence of CAEs in 10-Ks or the number of firms reporting CAEs are significantly different in the pre-pandemic and pandemic periods, but the incidence of CAEs in 10-Qs is significantly higher in the pandemic period than in the pre-pandemic period. The authors also find that the number of CAEs related to revenue recognition increase significantly in the pandemic period, but CAEs in other categories decrease, with the sharpest drop seen in the liabilities category. Further investigation suggests that although the dollar impact of 10-K CAEs on current financial statements is higher during the pandemic period, firms with CAEs, especially positive CAEs, in either 10-Ks or 10-Qs are less likely to use CAEs to boost earnings in the pandemic period. However, the authors find evidence that firms tend to use CAEs to “big bath” current earnings and create reserve for future period. The authors have not observed any significant differences in how the various phases of the pandemic affect the reporting of CAEs. Additionally, there is no evidence to suggest that financially distressed firms report more or fewer CAEs during the pandemic. Practical implications The results are consistent with the notion that, during the pandemic, firms exercise greater caution in their CAE disclosures, refraining from using CAEs as a means of boosting earnings but as a strategy to create reserve for future period. The paper highlights the challenges that various stakeholders face when assessing a company's current and future financial performance based on management's accounting estimates. Originality/value This study captures the impact of the COVID-19 pandemic on the incidence of CAEs and CAEs' impact on the financial performance and financial reporting quality of firms during the pandemic.
{"title":"Changes in accounting estimates during the COVID-19 pandemic in the USA","authors":"Valerie Li, Yan Luo","doi":"10.1108/ara-10-2022-0243","DOIUrl":"https://doi.org/10.1108/ara-10-2022-0243","url":null,"abstract":"Purpose The authors investigate how managers adapt their financial reporting and disclosure practices in response to the COVID-19 pandemic through changes in accounting estimates (CAEs). Design/methodology/approach The authors define the pandemic period as starting on March 1, 2020. The sample consists of 9,575 CAEs disclosed in quarterly (10-Qs) and annual (10-Ks) financial reports by US firms between January 1, 2004 and May 31, 2022. The authors perform multivariate analyses of the impact of the COVID-19 pandemic on the incidence of CAEs and on whether the impact of CAEs on firms' financial performance and reporting quality changes during the pandemic. Findings In the examination of the CAE footnote disclosures in the quarterly (10-Qs) and annual (10-Ks) reports of US companies, the authors find no evidence that the incidence of CAEs in 10-Ks or the number of firms reporting CAEs are significantly different in the pre-pandemic and pandemic periods, but the incidence of CAEs in 10-Qs is significantly higher in the pandemic period than in the pre-pandemic period. The authors also find that the number of CAEs related to revenue recognition increase significantly in the pandemic period, but CAEs in other categories decrease, with the sharpest drop seen in the liabilities category. Further investigation suggests that although the dollar impact of 10-K CAEs on current financial statements is higher during the pandemic period, firms with CAEs, especially positive CAEs, in either 10-Ks or 10-Qs are less likely to use CAEs to boost earnings in the pandemic period. However, the authors find evidence that firms tend to use CAEs to “big bath” current earnings and create reserve for future period. The authors have not observed any significant differences in how the various phases of the pandemic affect the reporting of CAEs. Additionally, there is no evidence to suggest that financially distressed firms report more or fewer CAEs during the pandemic. Practical implications The results are consistent with the notion that, during the pandemic, firms exercise greater caution in their CAE disclosures, refraining from using CAEs as a means of boosting earnings but as a strategy to create reserve for future period. The paper highlights the challenges that various stakeholders face when assessing a company's current and future financial performance based on management's accounting estimates. Originality/value This study captures the impact of the COVID-19 pandemic on the incidence of CAEs and CAEs' impact on the financial performance and financial reporting quality of firms during the pandemic.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136011123","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 : 2023-09-14DOI: 10.1108/ara-01-2023-0019
Rachana Kalelkar, Emeka Nwaeze
Purpose The authors analyze the association between the functional background of the compensation committee chair and CEO compensation. The analysis is motivated by the continuing debate about the reasonableness of executive pay patterns and the growing emphasis on the role of compensation committees. Design/methodology/approach The authors define three expert categories—accounting, finance, and generalist—and collect data on the compensation committee (CC) chairs of the S&P 500 firms from 2008 to 2018. The authors run an ordinary least square model and regress CEO total and cash compensation on the three expert categories. Findings The authors find that firms in which the CC chair has expertise in accounting, finance, and general business favor performance measures that are more aligned with accounting, finance, and general business, respectively. There is little evidence that CC chairs who are CEOs of other firms endorse more generous pay for the host CEO; the authors find some evidence that CC chairs tenure relative to the host CEO's is negatively associated with the level of the CEO's pay. Research limitations/implications This study suggests that firms and regulators should consider the background of the compensation committee chair to understand the variations in top executive. Practical implications Companies desiring to link executive compensation to particular areas of strategy must also consider matching the functional background of the compensation committee chair with the target strategy areas. From regulatory standpoint, requiring compensation committees to operate independent of inside directors can reduce attempts by inside directors to skim the process, but a failure to also consider the impact of compensation committees' discretion over the pay-setting process can distort the executives' pay-performance relation. Originality/value This is the first study to examine the effects of the functional background of the compensation committee chair on CEO compensation.
{"title":"The functional background of the compensation committee chair: the choice and weight of performance measures in CEO compensation","authors":"Rachana Kalelkar, Emeka Nwaeze","doi":"10.1108/ara-01-2023-0019","DOIUrl":"https://doi.org/10.1108/ara-01-2023-0019","url":null,"abstract":"Purpose The authors analyze the association between the functional background of the compensation committee chair and CEO compensation. The analysis is motivated by the continuing debate about the reasonableness of executive pay patterns and the growing emphasis on the role of compensation committees. Design/methodology/approach The authors define three expert categories—accounting, finance, and generalist—and collect data on the compensation committee (CC) chairs of the S&P 500 firms from 2008 to 2018. The authors run an ordinary least square model and regress CEO total and cash compensation on the three expert categories. Findings The authors find that firms in which the CC chair has expertise in accounting, finance, and general business favor performance measures that are more aligned with accounting, finance, and general business, respectively. There is little evidence that CC chairs who are CEOs of other firms endorse more generous pay for the host CEO; the authors find some evidence that CC chairs tenure relative to the host CEO's is negatively associated with the level of the CEO's pay. Research limitations/implications This study suggests that firms and regulators should consider the background of the compensation committee chair to understand the variations in top executive. Practical implications Companies desiring to link executive compensation to particular areas of strategy must also consider matching the functional background of the compensation committee chair with the target strategy areas. From regulatory standpoint, requiring compensation committees to operate independent of inside directors can reduce attempts by inside directors to skim the process, but a failure to also consider the impact of compensation committees' discretion over the pay-setting process can distort the executives' pay-performance relation. Originality/value This is the first study to examine the effects of the functional background of the compensation committee chair on CEO compensation.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135491419","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 : 2023-09-04DOI: 10.1108/ara-03-2023-0070
Memoona Sajid, Hashmat Shabbir, Raheel Safdar
PurposeThe purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.Design/methodology/approachData are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.FindingsThe study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.Practical implicationsThe findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.Originality/valueThe novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.
{"title":"Ownership concentration and cost of equity in Pakistan: the moderating role of disclosure and governance quality","authors":"Memoona Sajid, Hashmat Shabbir, Raheel Safdar","doi":"10.1108/ara-03-2023-0070","DOIUrl":"https://doi.org/10.1108/ara-03-2023-0070","url":null,"abstract":"PurposeThe purpose of this study is to examine the relationship between the ownership concentration and cost of equity of firms in Pakistan context. Moreover, this study also investigates how the presence of disclosure quality and governance quality affects the relationship between ownership concentration and the cost of equity of firms.Design/methodology/approachData are collected from six non-financial sectors listed on Pakistan Stock Exchange during the period of 2015–2019. This study uses pooled ordinary least square (OLS) method to validate the proposed hypothesis in STATA.FindingsThe study found a positive and significant relationship between ownership concentration and cost of equity. The results also show that better disclosure and governance quality negatively moderates the relationship between ownership concentration and cost of equity.Practical implicationsThe findings of this study will help firm managers to implement a high level of disclosure and governance quality in firms to reduce agency problems which will further help a firm in reducing the firm's cost of equity. Furthermore, this study is valuable for practitioners regarding thinking about the process of designing ownership structures to protect minority shareholders' rights, especially in emerging markets.Originality/valueThe novelty of this study is having better disclosure quality and more board independence members helps firms with higher ownership concentration in reducing the cost of equity.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42209939","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 : 2023-08-09DOI: 10.1108/ara-12-2022-0284
M. Safarzadeh, Mohammad Amin Mohammadian
PurposeThis study aims to examine the association between Iranian auditors' narcissism and the auditors' professional skepticism.Design/methodology/approachThe authors' sample is comprised of 355 professional auditors working in the private and public sectors in Iranian firms in 2022. The authors use cross-sectional multivariate regression as the main methodology, along with the structural equation modeling (SEM) technique.FindingsThe authors find that a higher level of narcissism leads to a greater level of professional skepticism among auditors, which ultimately can enhance the quality of the audit process. The results provided via the robustness tests also supported this finding.Originality/valueThe authors' findings further the understanding of the role of narcissistic personality traits in improving professional skepticism among auditors of an Islamic and emerging country. In addition, audit firms and audit partners can also consider the findings of this study and enhance the effectiveness of audit processes by assigning appropriate employees with certain personalities to specific tasks.
{"title":"Auditors' narcissism and their professional skepticism: evidence from Iran","authors":"M. Safarzadeh, Mohammad Amin Mohammadian","doi":"10.1108/ara-12-2022-0284","DOIUrl":"https://doi.org/10.1108/ara-12-2022-0284","url":null,"abstract":"PurposeThis study aims to examine the association between Iranian auditors' narcissism and the auditors' professional skepticism.Design/methodology/approachThe authors' sample is comprised of 355 professional auditors working in the private and public sectors in Iranian firms in 2022. The authors use cross-sectional multivariate regression as the main methodology, along with the structural equation modeling (SEM) technique.FindingsThe authors find that a higher level of narcissism leads to a greater level of professional skepticism among auditors, which ultimately can enhance the quality of the audit process. The results provided via the robustness tests also supported this finding.Originality/valueThe authors' findings further the understanding of the role of narcissistic personality traits in improving professional skepticism among auditors of an Islamic and emerging country. In addition, audit firms and audit partners can also consider the findings of this study and enhance the effectiveness of audit processes by assigning appropriate employees with certain personalities to specific tasks.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":"1 1","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41428790","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}
PurposeThe study intends to determine the environment, social and governance (ESG)'s impact on the firm's value. In addition, how ownership concentration (OC) and transparency and disclosures (TD) influence the impact of firm's ESG on its valuation (firm value).Design/methodology/approachThe relevant panel data with a sample of 78 Indian firms for five years (2016–2020) are gathered. Both linear and nonlinear connections of firm's ESG with its value are tested. In addition, TD and two components of OC (stakes of promoters and institutional investors) are empirically tested as moderators on the connectivity of the firm's ESG with its value.FindingsThe linear association of firm's ESG with its value is found insignificant. ESG is found to have a positive and nonlinear (U-shaped) impact on the value of the firms. TD does not moderate the connectivity of firm's ESG with its valuation (firm value). The higher stakes of promoters positively affect the association of firm's ESG with the valuation. However, the high stakes of institutional investors retard the ESG's influence on the firm value.Research limitations/implicationsThe study is on Indian firms for five years. A sample of more than one nation and a longer duration (10 years) could have helped better determine the associations among the variables. In turn, these limitations can be the present study's future scope. In addition, the authors find a lack of standardisation of the ESG scales, which is a problem in measuring it. Using standardisation scales of ESG for the analysis can also be future scope on the topic.Practical implicationsThe investors would be wary of the level of ESG to influence the firms' value positively. Managers also need to be careful to have sincere efforts for ESG to reap its rich dividends. Policymakers may take cognisance that despite having board seats (in a few cases), institutional investors negatively (instead of positively as expected) influences the ESG's association with the firm's value. They may bring some guidelines or legislative changes to fix responsibility on the part of the institutional investors.Originality/valueNo study reports the linear and nonlinear association of ESG on the firm's value to observe clearer connectivity between the two. Similarly, no study is observed to have promoters and institutional investors as moderators on the association of firm's ESG with the valuation (firm value). Hence, the present study considerably augments the extant literature on the topic and its contribution.
{"title":"Firm's value and ESG: the moderating role of ownership concentration and corporate disclosures","authors":"Shailesh Rastogi, Kuldeep Singh, Jagjeevan Kanoujiya","doi":"10.1108/ara-10-2022-0266","DOIUrl":"https://doi.org/10.1108/ara-10-2022-0266","url":null,"abstract":"PurposeThe study intends to determine the environment, social and governance (ESG)'s impact on the firm's value. In addition, how ownership concentration (OC) and transparency and disclosures (TD) influence the impact of firm's ESG on its valuation (firm value).Design/methodology/approachThe relevant panel data with a sample of 78 Indian firms for five years (2016–2020) are gathered. Both linear and nonlinear connections of firm's ESG with its value are tested. In addition, TD and two components of OC (stakes of promoters and institutional investors) are empirically tested as moderators on the connectivity of the firm's ESG with its value.FindingsThe linear association of firm's ESG with its value is found insignificant. ESG is found to have a positive and nonlinear (U-shaped) impact on the value of the firms. TD does not moderate the connectivity of firm's ESG with its valuation (firm value). The higher stakes of promoters positively affect the association of firm's ESG with the valuation. However, the high stakes of institutional investors retard the ESG's influence on the firm value.Research limitations/implicationsThe study is on Indian firms for five years. A sample of more than one nation and a longer duration (10 years) could have helped better determine the associations among the variables. In turn, these limitations can be the present study's future scope. In addition, the authors find a lack of standardisation of the ESG scales, which is a problem in measuring it. Using standardisation scales of ESG for the analysis can also be future scope on the topic.Practical implicationsThe investors would be wary of the level of ESG to influence the firms' value positively. Managers also need to be careful to have sincere efforts for ESG to reap its rich dividends. Policymakers may take cognisance that despite having board seats (in a few cases), institutional investors negatively (instead of positively as expected) influences the ESG's association with the firm's value. They may bring some guidelines or legislative changes to fix responsibility on the part of the institutional investors.Originality/valueNo study reports the linear and nonlinear association of ESG on the firm's value to observe clearer connectivity between the two. Similarly, no study is observed to have promoters and institutional investors as moderators on the association of firm's ESG with the valuation (firm value). Hence, the present study considerably augments the extant literature on the topic and its contribution.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41889978","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/ara-01-2023-0002
Arash Arianpoor, Somaye Efazati
PurposeThe present study investigates the impact of accounting comparability on chief executive officer (CEO) incentive plans and the moderating role of board independence for companies listed in Tehran Stock Exchange (TSE).Design/methodology/approachThe information about 177 companies in 2014–2021 was examined. In this study, equity-based compensation and cash-based compensation were used as the CEO incentive plans. The equity-based compensation was calculated through the ownership of the CEO shares.FindingsThe results suggest that the higher accounting comparability increases not only CEO equity-based compensation, but also cash-based compensation. Board independence also strengthens the relationship between accounting comparability and CEO compensation. Hypothesis testing based on robustness checks confirmed these results.Originality/valueThe paper is pioneering, to the authors' knowledge, in identifying how board independence moderates the impact of accounting comparability on CEO compensation. The findings provide insights into economic consequences to the firm related to accounting comparability and board monitoring. The results have important practical implications for international investors to evaluate accounting comparability, corporate governance mechanisms and CEO incentives.
{"title":"The impact of accounting comparability on CEO incentive plans in an emerging economy: the moderating role of board independence","authors":"Arash Arianpoor, Somaye Efazati","doi":"10.1108/ara-01-2023-0002","DOIUrl":"https://doi.org/10.1108/ara-01-2023-0002","url":null,"abstract":"PurposeThe present study investigates the impact of accounting comparability on chief executive officer (CEO) incentive plans and the moderating role of board independence for companies listed in Tehran Stock Exchange (TSE).Design/methodology/approachThe information about 177 companies in 2014–2021 was examined. In this study, equity-based compensation and cash-based compensation were used as the CEO incentive plans. The equity-based compensation was calculated through the ownership of the CEO shares.FindingsThe results suggest that the higher accounting comparability increases not only CEO equity-based compensation, but also cash-based compensation. Board independence also strengthens the relationship between accounting comparability and CEO compensation. Hypothesis testing based on robustness checks confirmed these results.Originality/valueThe paper is pioneering, to the authors' knowledge, in identifying how board independence moderates the impact of accounting comparability on CEO compensation. The findings provide insights into economic consequences to the firm related to accounting comparability and board monitoring. The results have important practical implications for international investors to evaluate accounting comparability, corporate governance mechanisms and CEO incentives.","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":" ","pages":""},"PeriodicalIF":2.0,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43800550","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 : 2023-07-13DOI: 10.1108/ara-01-2023-0020
Mani Bansal
PurposeThe study examines the impact of a recent mandate (Section 149 of the Indian Companies Act, 2013, where firms of a certain size are mandated to appoint at least one woman director on the board) on the earnings quality of firms. The study also examines the role of financial expertise and the presence of a woman director in the audit committee on the association between mandate and earnings quality.Design/methodology/approachTaking leverage of a quasi-natural experiment in India, the authors employ the ‘Difference-in-Difference’ (DiD) technique. DiD enables the author to filter out the impact of concurrent exogenous shocks while examining the issue. The propensity score matching and entropy balancing techniques have been employed to overcome the problem of endogeneity and self-selection bias.FindingsBased on the sample of 538 Bombay Stock Exchange (BSE) listed firms, the author finds that magnitude of discretionary accruals has decreased among test firms (firms mandated to comply with Section 149) relative to benchmark marks (firms not mandated to comply with Section 149) during the post-legislation period, indicating the improved earning quality after the mandate. This finding is consistent with the notion of social role theory that women are less likely to be engaged in risky activities such as earnings management. Further, the author find that the financial expertise of the woman and presence of the woman on the audit committee strengthen the positive impact of the mandate on earnings quality. These results are robust to alternative measurements of discretionary accruals.Originality/valueThe study is among the pioneering attempts to make use of a quasi-natural experiment and investigate the impact of a woman director on earnings quality. The study is also one of the few studies to focus on a developing country like India having a culture dominated by men.
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Pub Date : 2023-07-05DOI: 10.1108/ara-04-2022-0096
Javad Rajabalizadeh
PurposeWhile existing research explores the impact of audit market competition on audit fees and audit quality, there is limited investigation into how competition in the audit market influences auditors' writing style. This study examines the relationship between audit market competition and the readability of audit reports in Iran, where competition is particularly intense, especially among private audit firms.Design/methodology/approachThe sample comprises 1,050 firm-year observations in Iran from 2012 to 2018. Readability measures, including the Fog index, Flesch-Reading-Ease (FRE) and Simple Measure of Gobbledygook (SMOG), are employed to assess the readability of auditors' reports. The Herfindahl–Hirschman Index (HHI) is utilized to measure audit market competition, with lower index values indicating higher auditor competition. The concentration measure is multiplied by −1 to obtain the competition measure (AudComp). Alternative readability measures, such as the Flesch–Kincaid (FK) and Automated Readability Index (ARI) are used in additional robustness tests. Data on textual features of audit reports, auditor characteristics and other control variables are manually collected from annual reports of firms listed on the Tehran Stock Exchange (TSE).FindingsThe regression analysis results indicate a significant and positive association between audit market competition and audit report readability. Furthermore, a stronger positive and significant association is observed among private audit firms, where competition is more intense compared to state audit firms. These findings remain robust when using alternative readability measures and other sensitivity checks. Additional analysis reveals that the positive effect of competition on audit report readability is more pronounced in situations where the auditor remains unchanged and the audit market size is small.Originality/valueThis paper expands the existing literature by examining the impact of audit market competition on audit report readability. It focuses on a unique audit market (Iran), where competition among audit firms is more intense than in developed countries due to the liberalization of the Iranian audit market in 2001 and the establishment of numerous private audit firms.
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