Research in Accounting in Emerging Economies: Volume 10

Accounting research in emerging economies has been growing significantly over the past two decades due to the increasing recognition of the roles that accounting systems play in these environments. Globalization of capital markets, competition, the emergence of international accounting standards and structural adjustment programs have all brought accounting issues in emerging economies to the fore. Research papers in the current volume have highlighted the implications of the aforementioned issues. The papers have examined various issues including the adoption of International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASs), management accounting change in the context of public sector reforms, corporate reporting disclosures, and auditing.

Purpose – This article highlights the unintended consequences that resulted from the (abuse/use) use of management accounting information in a large automobile corporation in Zimbabwe.

Methodology – The article uses a case study and draws on Giddens’ structuration theory to help us understand how management accounting practices are produced and reproduced through interactions in organizations.

Findings – It reveals how the use of management accounting information can lead to the domination of other employees in organizations and result in unintended consequences such as redundancies.

Originality – The article lays emphasis on the unintended consequences resulting from actions of different players in the motor industry and their impact on workers and wider society. It also brings to the fore the dialectic of control which allows subordinates to mobilize resources and act otherwise. It concludes that management accounting practices are “situated practices” which reflect the dominant discourses and can be harnessed to liberate or enslave other players in organizations. The article suggests that adopting structuration theory helps us analyze the role(s) of accounting information and illuminate possible unintended consequences associated with accounting-based decisions.

Practical implications – Accountants should guard against misuse of accounting information, to justify political decisions made by managers.

Research limitations – The political and economic volatility of the environment obscured the interactions between engineers and accountants because the central focus shifted to survival beyond the crisis.

Purpose – This article examines a detailed case study of the symbolic use of International Financial Reporting Standards (IFRSs) in an Egyptian state-owned company (AQF Co.) that is partially privatized by drawing on new institutional sociology (NIS) and its extensions. It explains how the ceremonial use of IFRSs is shaped by the interplay between institutionalized accounting practices, conflicting institutions, power relations, and the role of information technology (IT) in institutionalizing accounting rules and routines.

Methodology/approach – The research methodology is based on an intensive case study informed by NIS, especially the interplay between conflicting institutions, power relations, and IT role in institutionalizing accounting practice. Data were collected from multiple sources, including interviews, discussions, and documentary analysis.

Findings – The findings revealed that the company faced conflicting institutional demands from outside. The Central Agency for Accountability required the company to use the Uniform Accounting System (as a state-owned enterprise) and the Egyptian Capital Market Authority (CMA) required the company to use IFRSs (as a partially private sector company registered in the stock exchange). To meet these conflicting institutional demands, the company adopted loosely coupled accounting rules and routines and IT was used in institutionalizing existing Uniform Accounting System and preserving the status quo.

Research limitations – This study has limitations associated with its use of the case study method, including the inability to generalize from the findings of a single case study and the subjective interpretation by the researcher of the empirical data.

Practical implications – This article identifies that the interplay between institutional pressures, institutionalized accounting practices, intra-organizational power relations, and the role of IT in institutionalizing accounting routines contributed to the ceremonial use of IFRSs in an Egyptian state-owned enterprise. Understanding such relationships can help other organizations to become more aware of the factors affecting successful implementation and internalization of IFRSs and provide a better basis for planning the introduction of IFRSs into other organizations worldwide.

Originality/value of article – This article draws on recent research and thinking in sociology, especially the development and application of NIS. In addition, this article is concerned with the symbolic use of IFRSs in a transitional developing economy, Egypt, and hence contributes to debate about exporting Western accounting practices and other technologies to countries with different cultures and different stages of economic and political development.

Purpose – This study examines the relationship between Big Four audit firm country-level market shares and audit fees across a sample of nine emerging economies: Argentina, Brazil, Chile, Hong Kong, Israel, Korea, Mexico, South Africa, and Taiwan.

Design/methodology/approach – First, auditor market share is calculated as a percentage of client sales based on all publicly traded companies in each of the sample countries during the period 2002–2005. Next, Audit Analytics is used to obtain audit fee data for a set of foreign companies listed on a primary U.S. exchange. A final sample of 483 client-year observations is included in the audit fee regression analysis.

Findings – After controlling for other factors related to audit pricing, Big Four auditors with dominant country-level market shares earn a fee premium of approximately 27% over competitor firms.

Originality/value – These results suggest that individual Big Four firm reputations, as measured by fee premiums, are not homogeneous across countries. Rather, it appears the largest audit firms are associated with quality-differentiated services and thus earn higher fees. Although accounting research tends to classify large international accounting firms into a pool of the “Big Four,” these findings indicate that it is important to consider each firm's market share in specific geographic locations when examining questions related to auditor reputation and pricing.

Purpose – This study examines the factors influencing Corporate disclosure transparency as measured by the level of voluntary disclosure (VD) in the annual reports of the active share trading firms in Egypt.

Design/methodology/approach – The design and research method are empirical using archival data to collect information on the dependent variable (VD) and independent variables (corporate governance characteristics and company characteristics). A transformed multiple ordinary least squares (OLS) regression model was used to test the association between the dependent variable of VD and the independent variables.

Findings – The findings indicate that the extent of VD is affected by the highly secretive Egyptian culture. This implies that the introduction of a new corporate governance code has not improved information symmetry as the overall level of VD is very low at just 19.38%. In addition, several corporate governance and company characteristics variables were found significant in explaining levels of VD by the sample companies.

Research limitations – The findings have generalizability limitations as the study focuses only on the actively traded companies operating in the Egyptian stock market.

Practical implications – The results of this study should alarm the regulators and financial investors from the quality of financial information being provided in the Egyptian market. These results are more alarming since the investigated companies are the top 30 actively traded companies on the Egyptian Stock Exchange (EGX). It is logically expected that the status of disclosure would be lower in the other less actively traded companies on EGX.

Originality/value – This study provides evidence regarding three variables, for the first time in Egypt, namely “ownership structure” and “number of independent directors on the board” and “existence of audit committees” as explanatory variables of the level of VD. This research study will stimulate further research in understanding the importance of the role of corporate governance in promoting more transparency in other emerging economies and the need to build models that include country level factors to explain the level of VD.

Purpose – This study's purpose is twofold. First, we assess the extent of corporate social responsibility disclosure. Second, we investigate the determinants of the decision to disclose social responsibility information.

Methodology/approach – This research focuses on analyzing corporate social responsibility disclosure through the annual reports of 23 Tunisian listed firms over a four-year period from 2001 to 2004. A multivariate analysis of social responsibility disclosure is employed to test the factors influencing this type of disclosure.

Findings – The findings in this study suggest that corporate social responsibility disclosure did increase from 2001 to 2004 and disclosure was primarily literal and regarding products. Results also suggest that a firm's internationalization degree, their debt level, and the degree of their political visibility are the significant factors influencing the decision of corporate social responsibility disclosure.

Research limitations and implications – This study is subject to the usual limits of the content analysis method use. The small size of the sample, its composition, and its choice in a nonrandom way may make it suffer from selectivity bias.

Originality/value – This study contributes to the analysis of corporate social responsibility disclosure practices in an emerging country context by analyzing the nature of the trends in social responsibility disclosure practices and examining the impact of certain firm characteristics on such practices.

Purpose – In this article, we examine the nature and the extent of corporate environmental and climate change disclosures in Bangladesh.

Design/methodology/approach – For this purpose, we have undertaken a content analysis of annual reports related to the year 2008 and websites of the 100 largest companies (according to market capitalization) listed on the Dhaka Stock Exchange. We have used 24 content analysis categories to capture the relevant disclosures related to climate change and other environmental issues.

Findings – Key findings of our analysis suggest that the level of environmental and climate change disclosures is very low in Bangladesh. Although 91% of companies made disclosures in at least one category, most companies disclosed information only on the “energy usage” category, which is a mandatory requirement. Even fewer companies made disclosures in the specific areas of climate change. No disclosure was made in the significant categories such as GHG emissions. The second most popular category related to climate change was adaptation measures. Among the other environmental disclosures, a significant finding is that only 5% of (website 6%) companies disclosed that they had an effluent treatment plant. Closer examination of the nature of disclosures suggests that most of the disclosures are positive and descriptive in nature.

Originality/value – As far as we are aware, this is the first study of its kind in Bangladesh which systematically examines corporate climate change disclosures as a particular focus of research.

Purpose – This empirical article aims at studying whether, how, and to what extent the South Asian countries have or are planning to move in the International Public Sector Accounting Standards (IPSASs) direction.

Design/methodology/approach – By applying the institutional perspectives, the article seeks to explore the roles and contributions of international financial institutions in the dissemination of public sector accounting reform ideas, particularly IPSASs ideas in South Asia. Document search represents the major method of collecting data for this study.

Findings – The present article demonstrates that the majority of the South Asian countries have envisaged the adoption of the cash basis IPSAS as a way forward in order to implement accrual accounting. International financial institutions have seemingly created a myth in the region that accrual accounting cannot be introduced without first complying with the cash basis IPSAS. However, the countries’ efforts are to a large extent directed at adapting rather than adopting IPSASs in all material respects. In relation to this, the article suggests that the acceptance of IPSASs in South Asia is better understood in terms of legitimacy.

Research limitations/implications – It is beyond the scope of this article to cover the ongoing public sector accounting reforms in South Asia other than IPSASs reforms as well as to reveal accounting changes at other levels than central government level.

Practical implications – The article raises doubts as to whether and to what extent the cash basis IPSAS will help public sector management reforms in South Asia.

Originality/value – Given the paucity of consistent research efforts on the topic in Western English language literature, the present article strives to bring ongoing IPSASs reforms in South Asia into the international arena. The article also contributes to the growing body of the comparative public sector accounting research by presenting the similarities and differences in government accounting reforms, particularly IPSASs reforms, in South Asia.

Aim – This empirical study explores the association between competition, business strategy, and the uses of a multiple performance measurement system in Bangladesh manufacturing firms.

Design/methodology – The study uses a questionnaire survey of 50 manufacturing companies. Data were analyzed using multiple regression analysis and other descriptive statistics.

Findings – The results suggest that greater emphasis on multiple measures for performance evaluation is associated with businesses that are facing high competition. The practices of multiple performance measures are also significantly related to the types of business strategy being followed. Specifically, firms pursuing a prospector strategy have relied more on multiple performance measures to rate business performance than the firms pursuing a defender strategy.

Practical implications – The article notes that the designers of performance measurement systems need to consider contingent factors that affect an organizations’ control system.

Originality/value – Substantiating the connection between contingent variables and the use of multiple performance measures in manufacturing firms facilitate a better acceptance of firms’ tendency toward new measurement tools. The study contributes to the performance measurement and contingency literature since it presents empirical evidence of the state of multiple performance measures with organizational contingent variables using a developing country's manufacturing sector data.

Purpose – The purpose of this article is to examine the contextual variables that influence the pace of public sector reforms through the adoption of accrual accounting for the Indonesian public sector.

Design/methodology/approach – The study employs a historically informed study based on a modified version of the Luder's (1992) Contingency Model (LCM). The data are drawn from official documents issued by the Indonesian government about reporting system for the public sector in the country and interviews with the key figures involved in the public sector accounting reforms in Indonesia. The study also uses publicly available information addressing the recent progress in the implementation of the accrual accounting system in the Indonesian public sector.

Key findings – The adoption of accrual accounting in the Indonesian public sector was stimulated by the economic crisis, prodemocratic movements, and international pressures for the reform of the public sector. However, the public sector accounting reforms in the country are confronted with significant implementation barriers which include legal issues, the lack of political supports, and skilled human resources. These barriers in turn threaten the intended purposes to be achieved through the greater economic and public sector reforms in the newly democratic Indonesia.

Research limitations/implications – The arguments of the study should be understood in the context of the institutional setting of Indonesia as a developing country. Nonetheless, the findings of this study show an example of the complexity faced through the use of the private sector accounting practice in the public sector context.

Originality/value – The findings of the study support the notion that the nature of legal system, political support, and human resource capacity influence the extent to which an accounting system is adopted in the public sector.

Purpose – The purpose of this article is to investigate whether underlying firm-level incentives influence firms’ compliance with International Financial Reporting Standards (IFRS) convergence practices and whether this adoption impacts firms’ cost of equity capital and market liquidity in Brazil, a setting with a poor institutional environment but high growth opportunities.

Methodology/approach – Using a sample of 54 companies from the São Paulo Stock Exchange, this article employs three measures of accounting convergence based on: (i) compliance to a 37-item index, called the International Accounting Standards Convergence Index (IASCI), (ii) increase in annual reports disclosure, and (iii) increase in accounting earnings quality. Furthermore, the article employs statistical analysis to test the influence of firm-level incentives on IFRS compliance and its economic consequences for the capital market.

Findings – The results indicate that firm-level incentives are important drivers of compliance with IFRS convergence practices. The results suggest that firms that (i) are larger, (ii) are more exposed to international markets, and (iii) have greater financing needs are more likely to adopt IFRS practices by implementing material changes in their accounting policies. The economic consequence analysis shows that cost of capital does not seem to be related to any of the convergence measures used. However, there is a statistically significant relationship between all the market liquidity variables and the IASCI, indicating that companies that best meet the convergence requirements have lower trading costs and greater liquidity, and their share price is less susceptible to the influence of individual investors.

Research limitations and implications – The scope of the study is limited to a relatively small sample of listed Brazilian companies, and they may not represent all listed companies. The sample restriction is due to information availability, since the study requires earnings estimates from the Thomson ONE Analytics database.

Originality/value – The study extends the work of Barth (2008) considering Ball's (2006) observation that superior accounting standards do not necessarily translate into higher quality reporting, since reporting quality may be largely shaped not only by accounting standards, but also by economic/political forces and firm-level economic incentives.