Bryan K. Church, Karie Davis-Nozemack, L. Dhooge, Shankar Venkataraman
The US Tax Code allows defendants to treat punitive damages as an ordinary and necessary business expense, thereby reducing their taxable income. Legal scholars posit that jurors are unaware that punitive damages are tax-deductible. Consequently, they claim that there is an under-punishment problem because defendants are penalized at lower damages amounts than they would be if jurors were instructed about tax-deductibility. We conduct an experiment to test this claim. We provide mock jurors with information about tax-deductibility as well as information about the defendant’s (historical) effective tax rate (ETR) to provide some context to jurors to adjust their awards, if they choose to. We find that jurors who are explicitly instructed that punitive damages are tax-deductible award higher damages, but only when the defendant’s ETR is low. When the defendant’s ETR is high, instructing jurors about tax-deductibility does not result in significantly higher punitive damages awards. This result is surprising because defendants with a high ETR are likely to benefit more from tax-deductibility compared to defendants with a low ETR. Our results suggests that jurors evaluate tax-deductibility jointly with other elements of a defendant’s tax situation when that information is provided. Therefore, jury instructions about tax-deductibility of punitive damages should carefully consider the implications of providing additional information about the defendant’s tax situation. Our result should be of interest to regulators and scholars in law, accounting, and public policy.
{"title":"The Impact of Juror Knowledge of Deductibility and Defendants’ Tax Rates on Punitive Damages Awards: Experimental Evidence","authors":"Bryan K. Church, Karie Davis-Nozemack, L. Dhooge, Shankar Venkataraman","doi":"10.2139/ssrn.3336758","DOIUrl":"https://doi.org/10.2139/ssrn.3336758","url":null,"abstract":"The US Tax Code allows defendants to treat punitive damages as an ordinary and necessary business expense, thereby reducing their taxable income. Legal scholars posit that jurors are unaware that punitive damages are tax-deductible. Consequently, they claim that there is an under-punishment problem because defendants are penalized at lower damages amounts than they would be if jurors were instructed about tax-deductibility. We conduct an experiment to test this claim. We provide mock jurors with information about tax-deductibility as well as information about the defendant’s (historical) effective tax rate (ETR) to provide some context to jurors to adjust their awards, if they choose to. We find that jurors who are explicitly instructed that punitive damages are tax-deductible award higher damages, but only when the defendant’s ETR is low. When the defendant’s ETR is high, instructing jurors about tax-deductibility does not result in significantly higher punitive damages awards. This result is surprising because defendants with a high ETR are likely to benefit more from tax-deductibility compared to defendants with a low ETR. Our results suggests that jurors evaluate tax-deductibility jointly with other elements of a defendant’s tax situation when that information is provided. Therefore, jury instructions about tax-deductibility of punitive damages should carefully consider the implications of providing additional information about the defendant’s tax situation. Our result should be of interest to regulators and scholars in law, accounting, and public policy.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80900896","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}
The journey of Ready-Made Garment (RMG) was started in Bangladesh in the late 1970s and still it’s become one of the major earning source in Bangladesh. More than 76% of the total income is generating from RMG. The availability of cheap labor and the export-quotas system are the main reason behind the success in this sector in Bangladesh. After getting independence in 1971, many observers of the newly country took a negative view or opinion about the development prospect of Bangladesh. They thought the country will remain permanently under the poverty line. But the scenery has changed; today more than 90 percent women are connected to the RMG sector for Economic development in Bangladesh. The RMG plays a pivotal role in the economic development in Bangladesh. 4.2 million Of Bangladeshis are employed in RMG sector and 13% of total GDP of nation comes from the RMG sector. To accelerate this RMG sector in Bangladesh, our government provide some facility which help the RMG industrialist to expand the market and contributing more to the economic development. Actually there are three types of facility provided to the RMG exported goods which are; bonded warehouse, duty drawback and cash incentive. To get this type of subsidy from the government some rules and regulation have to maintain. In case of textile sector there are three independent Associations are responsible. Those are Bangladesh Textile Manufacturing Associations (BTMA), where the core responsibility of this association are concentrate on Woven fabrics manufacturing, spinners and dying units; the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) which represent on Cutting and sewing units and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) which represent on Knitwear cutting and sewing, knitwear manufacturer and the fabric dying units.
{"title":"The Procedure of Cash Incentive and Its Role in the RMG Sector in Bangladesh: Evidence from Bangladesh","authors":"M. Hossain","doi":"10.2139/ssrn.3334383","DOIUrl":"https://doi.org/10.2139/ssrn.3334383","url":null,"abstract":"The journey of Ready-Made Garment (RMG) was started in Bangladesh in the late 1970s and still it’s become one of the major earning source in Bangladesh. More than 76% of the total income is generating from RMG. The availability of cheap labor and the export-quotas system are the main reason behind the success in this sector in Bangladesh. After getting independence in 1971, many observers of the newly country took a negative view or opinion about the development prospect of Bangladesh. They thought the country will remain permanently under the poverty line. But the scenery has changed; today more than 90 percent women are connected to the RMG sector for Economic development in Bangladesh. The RMG plays a pivotal role in the economic development in Bangladesh. 4.2 million Of Bangladeshis are employed in RMG sector and 13% of total GDP of nation comes from the RMG sector. To accelerate this RMG sector in Bangladesh, our government provide some facility which help the RMG industrialist to expand the market and contributing more to the economic development. Actually there are three types of facility provided to the RMG exported goods which are; bonded warehouse, duty drawback and cash incentive. To get this type of subsidy from the government some rules and regulation have to maintain. In case of textile sector there are three independent Associations are responsible. Those are Bangladesh Textile Manufacturing Associations (BTMA), where the core responsibility of this association are concentrate on Woven fabrics manufacturing, spinners and dying units; the Bangladesh Garments Manufacturers and Exporters Association (BGMEA) which represent on Cutting and sewing units and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) which represent on Knitwear cutting and sewing, knitwear manufacturer and the fabric dying units.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-02-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75065924","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}
We identify analysts’ information acquisition patterns by linking EDGAR (Electronic Data Gathering, Analysis, and Retrieval) server activity to analysts’ brokerage houses. Analysts rely on EDGAR in 24% of their estimate updates with an average of eight filings viewed. We document that analysts’ attention to public information is driven by the demand for information and the analysts’ incentives and career concerns. We find that information acquisition via EDGAR is associated with a significant reduction in analysts’ forecasting error relative to their peers. This relationship is likewise present when we focus on the intensity of analyst research. Attention to public information further enables analysts to provide forecasts for more time periods and more financial metrics. Informed recommendation updates are associated with substantial and persistent abnormal returns, even when the analyst accesses historical filings. Analysts’ use of EDGAR is associated with longer and more informative analysis within recommendation reports. This paper was accepted by Shiva Rajgopal, accounting.
{"title":"Analyst Information Acquisition via EDGAR","authors":"Brian Gibbons, P. Iliev, J. Kalodimos","doi":"10.2139/ssrn.3112761","DOIUrl":"https://doi.org/10.2139/ssrn.3112761","url":null,"abstract":"We identify analysts’ information acquisition patterns by linking EDGAR (Electronic Data Gathering, Analysis, and Retrieval) server activity to analysts’ brokerage houses. Analysts rely on EDGAR in 24% of their estimate updates with an average of eight filings viewed. We document that analysts’ attention to public information is driven by the demand for information and the analysts’ incentives and career concerns. We find that information acquisition via EDGAR is associated with a significant reduction in analysts’ forecasting error relative to their peers. This relationship is likewise present when we focus on the intensity of analyst research. Attention to public information further enables analysts to provide forecasts for more time periods and more financial metrics. Informed recommendation updates are associated with substantial and persistent abnormal returns, even when the analyst accesses historical filings. Analysts’ use of EDGAR is associated with longer and more informative analysis within recommendation reports. This paper was accepted by Shiva Rajgopal, accounting.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84691019","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}
While much has been written about the investment criteria of business angels, few studies explore why these particular criteria are important to them. The Australian context has a diverse range of actors along with complex jurisdictional arrangements, making for an interesting background for investigation of the angel finance phenomenon. We examine 12 business angels in the rapidly changing Australian context and use nine corroborating participants to validate responses and identify four key drivers – personal experience, trust, the need to contribute and realistic expectations – that influence business angels during the initial investment process.
{"title":"The Angel Investment Decision: Insights from Australian Business Angels","authors":"B. A. White, John Dumay","doi":"10.1111/acfi.12427","DOIUrl":"https://doi.org/10.1111/acfi.12427","url":null,"abstract":"While much has been written about the investment criteria of business angels, few studies explore why these particular criteria are important to them. The Australian context has a diverse range of actors along with complex jurisdictional arrangements, making for an interesting background for investigation of the angel finance phenomenon. We examine 12 business angels in the rapidly changing Australian context and use nine corroborating participants to validate responses and identify four key drivers – personal experience, trust, the need to contribute and realistic expectations – that influence business angels during the initial investment process.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77116935","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}
Increasingly, public sector organisations are being encouraged or required to provide service performance information in addition to financial statements. Yet, reporting is often inferior, as shown by this example of local governments in New Zealand. Poor quality reporting has led to different initiatives to improve service performance reporting quality, and this study investigates the effectiveness of three initiatives undertaken by the Auditor-General. Drawing on contemporary institutional and legitimacy theories, we find that normative pressure in tandem with threats to legitimacy is influential in improving service performance reporting. However, despite mimetic examples also being used, the analysis shows it is an ineffective tool in the New Zealand local government context.
{"title":"How Might Normative and Mimetic Pressures Improve Local Government Service Performance Reporting?","authors":"Prae Keerasuntonpong, C. Cordery","doi":"10.1111/acfi.12252","DOIUrl":"https://doi.org/10.1111/acfi.12252","url":null,"abstract":"Increasingly, public sector organisations are being encouraged or required to provide service performance information in addition to financial statements. Yet, reporting is often inferior, as shown by this example of local governments in New Zealand. Poor quality reporting has led to different initiatives to improve service performance reporting quality, and this study investigates the effectiveness of three initiatives undertaken by the Auditor-General. Drawing on contemporary institutional and legitimacy theories, we find that normative pressure in tandem with threats to legitimacy is influential in improving service performance reporting. However, despite mimetic examples also being used, the analysis shows it is an ineffective tool in the New Zealand local government context.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91157280","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}
The Rentier State Hypothesis states that taxation promotes government accountability. The argument is that citizens demand more accountability for spending of tax revenue than for spending of windfall revenue (e.g., natural resource revenue). This paper presents evidence from a between-subject experiment that tests the effect of taxation on demand for accountability and the underlying mechanisms explaining this effect. The design focuses on two main features that distinguish tax from windfall revenue: Tax revenue is produced by citizens' work and has been in their possession before being collected as tax. These features are theorized to increase the salience of fairness considerations in public service provision, and this increased salience of fairness is in turn hypothesized to increase demand for accountability. The main finding is that taxation causes a higher demand for accountability when both features of taxation are present. This result is evidence in support of the Rentier State Hypothesis.
{"title":"Accountability and Taxation: Experimental Evidence","authors":"Ingrid Hoem Sjursen","doi":"10.2139/ssrn.3288516","DOIUrl":"https://doi.org/10.2139/ssrn.3288516","url":null,"abstract":"The Rentier State Hypothesis states that taxation promotes government accountability. The argument is that citizens demand more accountability for spending of tax revenue than for spending of windfall revenue (e.g., natural resource revenue). This paper presents evidence from a between-subject experiment that tests the effect of taxation on demand for accountability and the underlying mechanisms explaining this effect. The design focuses on two main features that distinguish tax from windfall revenue: Tax revenue is produced by citizens' work and has been in their possession before being collected as tax. These features are theorized to increase the salience of fairness considerations in public service provision, and this increased salience of fairness is in turn hypothesized to increase demand for accountability. The main finding is that taxation causes a higher demand for accountability when both features of taxation are present. This result is evidence in support of the Rentier State Hypothesis.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80468388","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 : 2018-10-11DOI: 10.5296/IJAFR.V8I4.14137
S. Anandasayanan
This study attempts to investigate financial ratios’ predictive power, using the yearly time series data during the period of 2012-2017 for 33 listed manufacturing companies in Colombo Stock Exchange. This study specifically identifies the financial ratios, which are acknowledged as the predictors of stock returns in the share market, to test the stock return predictability. The financial ratios include the ratio of dividend yield, earnings per share, and earnings yield which are most useful and effective on stock return predictability in order to cover a wide range of predictions which have been used by all most all the previous researches. The stock return predictability is analyzed by regressing the dividend yield, earning per share and earning yield respectively on the yearly stock returns from 2012 to 2017. The results show high predictability power, since the R2-value is high and the coefficients are very significant and autocorrelation corrected standard errors. The results reveal that the three ratios hold a somehow predictive power regarding stock returns of the Listed Manufacturing Companies in Colombo Stock Exchange.
{"title":"Stock Return Predictability With Financial Ratios: An Empirical Study of Listed Manufacturing Companies in Sri Lanka","authors":"S. Anandasayanan","doi":"10.5296/IJAFR.V8I4.14137","DOIUrl":"https://doi.org/10.5296/IJAFR.V8I4.14137","url":null,"abstract":"This study attempts to investigate financial ratios’ predictive power, using the yearly time series data during the period of 2012-2017 for 33 listed manufacturing companies in Colombo Stock Exchange. This study specifically identifies the financial ratios, which are acknowledged as the predictors of stock returns in the share market, to test the stock return predictability. The financial ratios include the ratio of dividend yield, earnings per share, and earnings yield which are most useful and effective on stock return predictability in order to cover a wide range of predictions which have been used by all most all the previous researches. The stock return predictability is analyzed by regressing the dividend yield, earning per share and earning yield respectively on the yearly stock returns from 2012 to 2017. The results show high predictability power, since the R2-value is high and the coefficients are very significant and autocorrelation corrected standard errors. The results reveal that the three ratios hold a somehow predictive power regarding stock returns of the Listed Manufacturing Companies in Colombo Stock Exchange.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84418608","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}
Coletti, Sedatole, and Towry (2005) provide seminal evidence that controls can increase trust and cooperation. Garrett, Livingston, and Tayler (2018) replicate and extend Coletti et al. (2005), providing evidence that the results extend to different tasks and to individuals in non-interactive settings. We discuss the contribution of Garrett et al. (2018) against the backdrop of the current state of the literature on internal controls, trust, and cooperation, and provide a number of possible extensions researchers might pursue to learn more about the boundaries of controls.
{"title":"Understanding the Relations Between Internal Controls, Trust, and Cooperation Within an Organization","authors":"Nicole L. Cade, Sarah E. McVay","doi":"10.2139/ssrn.3327520","DOIUrl":"https://doi.org/10.2139/ssrn.3327520","url":null,"abstract":"Coletti, Sedatole, and Towry (2005) provide seminal evidence that controls can increase trust and cooperation. Garrett, Livingston, and Tayler (2018) replicate and extend Coletti et al. (2005), providing evidence that the results extend to different tasks and to individuals in non-interactive settings. We discuss the contribution of Garrett et al. (2018) against the backdrop of the current state of the literature on internal controls, trust, and cooperation, and provide a number of possible extensions researchers might pursue to learn more about the boundaries of controls.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87251058","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}
A recent focus within the management control literature has been the recognition of the need to consider how packages of controls interact to influence employee behavior. This study extends recent research on the interaction of formal and informal controls. We use a sequence of two experiments to expand upon research by Kachelmeier, Thornock, and Williamson (2016) who find that a value statement focused on quality can moderate productivity associated with incentive schemes. Experiment 1 replicates Kachelmeier et al., but substitutes a general organizational value statement in place of a quality specific statement and finds that the same basic interactive effect occurs—a value statement increases (decreases) productivity associated with fixed pay (piece-rate) incentives. Experiment 2 further extends the work on value statements by considering the espoused management best practices of broadly reinforcing the value statement to increase the statement’s saliency with employees. The results of the second experiment confirm that enhancing the saliency of the organizational value statement through active delivery, as opposed to the passive delivery used in previous studies, increases the moderation effect. These results contribute to the growing stream of research that is beginning to explore the interactive effects of packages of controls.
{"title":"Wording and Saliency Matter: The Impact of Incentive System and Organizational Value Statement on Employees’ Performance","authors":"Kazeem O. Akinyele, V. Arnold, S. Sutton","doi":"10.2139/ssrn.3232935","DOIUrl":"https://doi.org/10.2139/ssrn.3232935","url":null,"abstract":"A recent focus within the management control literature has been the recognition of the need to consider how packages of controls interact to influence employee behavior. This study extends recent research on the interaction of formal and informal controls. We use a sequence of two experiments to expand upon research by Kachelmeier, Thornock, and Williamson (2016) who find that a value statement focused on quality can moderate productivity associated with incentive schemes. Experiment 1 replicates Kachelmeier et al., but substitutes a general organizational value statement in place of a quality specific statement and finds that the same basic interactive effect occurs—a value statement increases (decreases) productivity associated with fixed pay (piece-rate) incentives. Experiment 2 further extends the work on value statements by considering the espoused management best practices of broadly reinforcing the value statement to increase the statement’s saliency with employees. The results of the second experiment confirm that enhancing the saliency of the organizational value statement through active delivery, as opposed to the passive delivery used in previous studies, increases the moderation effect. These results contribute to the growing stream of research that is beginning to explore the interactive effects of packages of controls.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78673700","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}
Accounting for compound financial instruments, that is those with characteristics of both debt and equity, has challenged accounting standard setters for decades. The principles developed to distinguish liabilities and equity and the application of these principles in IAS 32 have been widely criticised. In 2016–2017, the IASB was engaged in a project to improve IAS 32. Our study presents research that is relevant to the issues faced by standard setters, related to improving the definitions and enhancing presentation and disclosure of liabilities and equity. We discuss studies investigating the effects of the accounting classification requirements on firms’ financing choices and on users’ decision‐making, to examine the question, ‘Does the distinction matter?’ We then explore various approaches that may be pursued by the standard setters to improve accounting in this area and identify areas for future research.
{"title":"Accounting for Financial Instruments with Characteristics of Debt and Equity: Finding a Way Forward","authors":"N. Fargher, Baljit K. Sidhu, A. Tarca, W. van Zyl","doi":"10.1111/acfi.12280","DOIUrl":"https://doi.org/10.1111/acfi.12280","url":null,"abstract":"Accounting for compound financial instruments, that is those with characteristics of both debt and equity, has challenged accounting standard setters for decades. The principles developed to distinguish liabilities and equity and the application of these principles in IAS 32 have been widely criticised. In 2016–2017, the IASB was engaged in a project to improve IAS 32. Our study presents research that is relevant to the issues faced by standard setters, related to improving the definitions and enhancing presentation and disclosure of liabilities and equity. We discuss studies investigating the effects of the accounting classification requirements on firms’ financing choices and on users’ decision‐making, to examine the question, ‘Does the distinction matter?’ We then explore various approaches that may be pursued by the standard setters to improve accounting in this area and identify areas for future research.","PeriodicalId":8737,"journal":{"name":"Behavioral & Experimental Accounting eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2018-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83549237","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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