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Open Access
Article
Publication date: 8 December 2022

Minna Martikainen, Antti Miihkinen and Luke Watson

Negative disclosure tone in 10-K annual reports has economic consequences, yet relatively little is known about how it is generated. Boards of directors play an important…

3266

Abstract

Purpose

Negative disclosure tone in 10-K annual reports has economic consequences, yet relatively little is known about how it is generated. Boards of directors play an important governance role with respect to mandatory disclosures and personally sign off on Form 10-K, leading us to expect directors to influence financial reporting narratives. This study investigates whether the negative tone of firms' narrative annual report disclosures is associated with the human and social capital of its board of directors.

Design/methodology/approach

Multivariate regression analyses of negative disclosure tone (Loughran and McDonald, 2011) on board members' average age, gender, education, financial expertise and turnover is performed. A host of supplemental tests to corroborate our primary analysis, including using Sarbanes-Oxley's financial expert mandate as an exogenous shock to board composition, impact threshold for a confounding variable, placebo analysis, portfolio tests of more and less negative disclosing firms and portfolio tests of “loud” versus “quiet” boards are conducted.

Findings

Evidence that directors' gender, education, financial expertise and board turnover are associated with more negative disclosure tone, while directors' age is associated with less negative disclosure tone is found. The study also looked within the board to differentiate whether these findings are driven by characteristics of inside directors or outside directors serving on the audit committee, or both, as these are the specific groups of directors we would expect to play a role in disclosure. It was found that negative disclosure tone is associated with a lower bid-ask spread, so this study interpreted more negative tone as containing more descriptive information.

Originality/value

This study helps decode the “black box” of annual report disclosure tone, which Loughran and McDonald (2011) show has important economic implications. The results help inform stakeholders such as policymakers, executives and capital market participants as to how board member traits are associated with disclosure. The findings are particularly important as this study bears witness to the increasing prominence of gender/diversity mandates (e.g. Israel, Norway, California) and financial expertise mandates (e.g. Sarbanes-Oxley).

Details

Journal of Accounting Literature, vol. 45 no. 1
Type: Research Article
ISSN: 0737-4607

Keywords

Open Access
Article
Publication date: 30 September 2019

Joseph F. Hair Jr. and Luiz Paulo Fávero

This paper aims to discuss multilevel modeling for longitudinal data, clarifying the circumstances in which they can be used.

18082

Abstract

Purpose

This paper aims to discuss multilevel modeling for longitudinal data, clarifying the circumstances in which they can be used.

Design/methodology/approach

The authors estimate three-level models with repeated measures, offering conditions for their correct interpretation.

Findings

From the concepts and techniques presented, the authors can propose models, in which it is possible to identify the fixed and random effects on the dependent variable, understand the variance decomposition of multilevel random effects, test alternative covariance structures to account for heteroskedasticity and calculate and interpret the intraclass correlations of each analysis level.

Originality/value

Understanding how nested data structures and data with repeated measures work enables researchers and managers to define several types of constructs from which multilevel models can be used.

Details

RAUSP Management Journal, vol. 54 no. 4
Type: Research Article
ISSN: 2531-0488

Keywords

Open Access
Article
Publication date: 13 October 2017

Eileen Taylor and Jennifer Riley

The purpose of this paper is to explore how non-professional investors (NPIs) with varying levels of financial sophistication interpret and perceive corporate disclosures and…

1478

Abstract

Purpose

The purpose of this paper is to explore how non-professional investors (NPIs) with varying levels of financial sophistication interpret and perceive corporate disclosures and management credibility, specifically risk factors, when those disclosures are presented in readable and less-readable formats.

Design/methodology/approach

The paper uses an online experiment to test hypotheses related to the effects of financial sophistication (measured) and readability (manipulated) on NPIs’ equity valuations and perceptions of management credibility (competence and trustworthiness).

Findings

Increased readability appears to counteract less-sophisticated NPIs’ conservatism in equity valuations, such that they are not statistically significantly different from more-sophisticated NPIs’ equity valuations. Further, less-sophisticated NPIs judge management as less competent when disclosures are less readable, while more-sophisticated NPIs judge management as more competent when disclosures are less readable.

Research limitations/implications

The paper has important implications for the SEC’s regulations related to plain English requirements for risk factor and other corporate disclosures. Financial sophistication varies among NPIs, and readability appears to influence these individuals in different ways.

Practical implications

The SEC’s Concept Release (April 13, 2016) acknowledges the need to update and improve risk factor disclosure regulations. This study provides evidence that contributes to those decisions.

Originality/value

The paper extends the research on processing fluency, by examining readability of disclosures with a consistent tone (negative). The NPIs surveyed are directly representative of the population of interest for risk factor disclosure regulations.

Details

Journal of Capital Markets Studies, vol. 1 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 20 March 2020

Ritu Gandhi Arora

To deal with highly energetic younger generation patiently, need academicians who can spread happiness while teaching/mentoring are needed. This is possible when an academician…

3279

Abstract

Purpose

To deal with highly energetic younger generation patiently, need academicians who can spread happiness while teaching/mentoring are needed. This is possible when an academician himself is a happy person. This paper aims to explore the factors that generate happiness among academicians, studies the impact of demographic variables on academicians’ happiness and examines the relationship between academicians’ happiness and their performance.

Design/methodology/approach

Convenience purposive sampling method was used to obtain data through self-administered survey questionnaire based on a five-point Likert scale, delineating the research purpose and assurance of confidentiality. For data analysis, statistical techniques like mean, percentage method, Levene’s test, t-test and analysis of variance were used. To study the relationship between performance and happiness, the attitude, motivation and outcome theory was applied and happiness index was developed.

Findings

After analyzing the various factors impacting academicians’ happiness, this study found that except for work–life balance, research activities and working environment, all other factors are available to academicians according to their ranked importance assigned to them. This study also obtained a happiness index using matrix and has developed an equation which can be applied to find out the relationship between happiness and performance in future.

Research limitations/implications

This study has certain limitations, first, this study has been conducted on academicians working in higher education institutes situated in Delhi/NCR and thus entails a specific socio-cultural environment that may limit the potential level of generalization.

Practical implications

The results of this research might help institutes/higher education bodies to make rules and policies which may further augment academicians’ happiness to accomplish their desired goals.

Social implications

An academician who is happy, satisfied and motivated can easily deal with today's enthusiastic younger generation and can spread happiness amongst them. so it is very much necessary for an academician to be happy and energetic all the time.

Originality/value

This study found the factors impacting higher education academicians’ happiness and its impact on their teaching performance.

Details

Rajagiri Management Journal, vol. 14 no. 1
Type: Research Article
ISSN: 0972-9968

Keywords

Open Access
Article
Publication date: 22 May 2023

Jack Field and A. Can Inci

As cryptocurrencies continue to gain viability as an asset class, institutional investors and publicly traded firms have started taking investment positions in digital currencies…

2855

Abstract

Purpose

As cryptocurrencies continue to gain viability as an asset class, institutional investors and publicly traded firms have started taking investment positions in digital currencies. What firms may not be considering, however, is the effect these assets may have on their risk profiles. This study aims to (1) measure the effect of cryptocurrencies on the risk and return characteristics of publicly traded companies; (2) decipher the motives behind holding cryptocurrencies as an asset class; and (3) determine whether one reason for holding is more effective than another. To conduct this research, the four largest publicly traded holders of cryptocurrency as well as four of the most prominent cryptocurrencies are explored.

Design/methodology/approach

The cross-sectional analysis approach has been used to analyze the daily returns, volatility, betas and Sharpe Ratios of firms during periods without cryptocurrency strategies and during periods with cryptocurrency strategies.

Findings

The impact of the cryptocurrency asset class on common stock performance and corporate disclosures are documented. The importance of risk disclosures on cryptocurrency holdings is emphasized: Firms must better inform their stakeholders through comprehensive disclosures in financial statements. Firms utilize cryptocurrencies for various reasons such as treasury management tools or as direct sources of income. Consequently, the impact on returns and risks varies substantially.

Originality/value

To the best of the authors’ knowledge, this is one of the first studies on cryptocurrency investments in the treasury departments of publicly traded companies. The study contributes to the literature by extracting relevant information regarding company risk reporting and cryptocurrency risk at firms. The conclusions also promote firm transparency with detailed reporting of cryptocurrency holding risks.

Details

Journal of Capital Markets Studies, vol. 7 no. 1
Type: Research Article
ISSN: 2514-4774

Keywords

Open Access
Article
Publication date: 10 July 2019

Yao Cheng

The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model…

1757

Abstract

Purpose

The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model in which full merger benefits cannot be consumed at the instant of a merger, but rather after a pre-specified post-merger integration period.

Design/methodology/approach

This paper presents a dynamic model and empirical tests that describe the impact of the post-merger integration period on the capital structure dynamics of the acquiring and target firms prior to a merger and during the post-merger integration period. By incorporating costs associated with the post-merger integration period, the model can provide new implications for the leverage behavior around the merger.

Findings

Empirical tests support the model implications by showing that the longer the expected post-merger integration process, the less likely the acquirer will structure the financing of the combined firm in a manner that increases firm leverage. Since integration takes time to complete, an acquirer tends to retain financial flexibility during the integration process by assuming lower levels of debt when determining the capital structure of the merged entity.

Originality/value

The model generates new implications related to acquiring firms’ leverage dynamics along with the method of payment choice. The analysis of the duration of the post-merger integration period extends both the theoretical and empirical literature that tacitly assumes that the merger-related synergy is realized immediately at the merger date. This is the first model in the literature that assumes that both the acquiring and the target firms can change their capital structure overtime, which allows us to analyze both the financing structure and the merger timing. Previous empirical studies also ignore the integration period in the analysis of the method of payment choice and leverage behavior around mergers. The model in this paper can be extended along a number of dimensions.

Details

Managerial Finance, vol. 45 no. 10/11
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 31 May 2022

Bennet Simon von Skarczinski, Arne Dreißigacker and Frank Teuteberg

Literature repeatedly complains about the lack of empirical data on the costs of cyber incidents within organizations. Simultaneously, managers urgently require transparent and…

Abstract

Purpose

Literature repeatedly complains about the lack of empirical data on the costs of cyber incidents within organizations. Simultaneously, managers urgently require transparent and reliable data in order to make well-informed and cost-benefit optimized decisions. The purpose of this paper is to (1) provide managers with differentiated empirical data on costs, and (2) derive an activity plan for organizations, the government and academia to improve the information base on the costs of cyber incidents.

Design/methodology/approach

The authors analyze the benchmark potential of costs within existing literature and conduct a large-scale interview survey with 5,000 German organizations. These costs are directly assignable to the most severe incident within the last 12 months, further categorized into attack types, cost items, employee classes and industry types. Based on previous literature, expert interviews and the empirical results, the authors draft an activity plan containing further research questions and action items.

Findings

The findings indicate that the majority of organizations suffer little to no costs, whereas only a small proportion suffers high costs. However, organizations are not affected equally since prevalence rates and costs according to attack types, employee classes, and other variables tend to vary. Moreover, the findings indicate that board members and IS/IT-managers show partly different response behaviors.

Originality/value

The authors present differentiated insights into the direct costs of cyber incidents, based on the authors' knowledge, this is the largest empirical survey in continental Europe and one of the first surveys providing in-depth cost information on German organizations.

Details

Organizational Cybersecurity Journal: Practice, Process and People, vol. 2 no. 2
Type: Research Article
ISSN: 2635-0270

Keywords

Open Access
Article
Publication date: 4 April 2023

Norazian Hussin, Mohd Fairuz Md Salleh, Azlina Ahmad and Mohd Mohid Rahmat

This study aims to examine the relationship between the attributes of audit firms (Big 4, audit fees, busy season, audit firm tenure and audit partner gender) and the impact of…

3050

Abstract

Purpose

This study aims to examine the relationship between the attributes of audit firms (Big 4, audit fees, busy season, audit firm tenure and audit partner gender) and the impact of these attributes on key audit matters (KAM) readability in Malaysia.

Design/methodology/approach

The auditor's reports and financial data were analysed from a sample of FTSE 100 Malaysia-listed companies for the fiscal years 2017–2019, consisting of 258 observations. Panel regression analyses were conducted to evaluate the possible associations between audit firm attributes and KAM readability. The Flesch reading ease score and Coleman–Liau index were applied to measure KAM readability.

Findings

The findings show that female audit partners significantly impact KAM readability; further analysis also revealed that companies audited by Big 4 audit firms and higher audit fees tend to report a more readable KAM disclosure in the FTSE 100 in Malaysia.

Originality/value

The regression results provide empirical evidence of the influence of audit firm attributes on KAM readability. This study also examined important corporate governance players, such as external auditors and those charged with governance, who form the audit committee's qualities when analysing the determinants of KAM reporting variations in Malaysia.

Details

Asian Journal of Accounting Research, vol. 8 no. 4
Type: Research Article
ISSN: 2459-9700

Keywords

Open Access
Article
Publication date: 18 August 2022

Hong Fan and Liqiang Chen

The purpose of this paper is to investigate the effects of political connections on the association between firms' business strategy and their tax aggressiveness in an emerging…

1721

Abstract

Purpose

The purpose of this paper is to investigate the effects of political connections on the association between firms' business strategy and their tax aggressiveness in an emerging economy such as China.

Design/methodology/approach

The authors study a large sample of Chinese public firms from 2011 to 2017 using a panel regression model. In addition, a change analysis, an instrument variable test and alternative measures/samples are implemented as robustness tests.

Findings

Firms adopting innovative business strategy are more tax aggressive overall. However, innovative firms with political connections are less tax aggressive compared to those without political connections.

Originality/value

This paper contributes to the understanding of firms' tax behaviors in an emerging economy setting. It suggests that there are costs associated with political connections, such as foregone tax saving opportunities, which are understudies in the prior literature.

Details

China Accounting and Finance Review, vol. 25 no. 2
Type: Research Article
ISSN: 1029-807X

Keywords

Open Access
Article
Publication date: 27 June 2022

Hsiao-Lun Lin and Ai-Ru Yen

This study investigates the association between interim audits and final audits. The authors focus on whether interim audits affect the audit time lag and the risk of restatement…

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Abstract

Purpose

This study investigates the association between interim audits and final audits. The authors focus on whether interim audits affect the audit time lag and the risk of restatement associated with final audits.

Design/methodology/approach

Two regression models are established to empirically test if an interim audit helps to reduce the audit time lag and the restatement risk on annual reports based on a sample of Chinese listed firms.

Findings

The authors find that performing interim audits helps to reduce the audit time lag. This result suggests that final audits can be completed more efficiently when interim audits are performed during the same period. The authors also find that the decision to audit interim reports is associated with a lower risk of restating annual reports. The lower risk of restatement in turn suggests more effective final audit results.

Originality/value

Together, the results from this study demonstrate that interim audits could benefit final audits, which highlight the value and importance of the continuous auditing.

Details

Asian Journal of Accounting Research, vol. 8 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

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