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This study aims to explore the intelligibility of communication with stakeholders as a result of accrual accounting adoption. It focuses on changes in the use of visual forms and the readability of text that occurred immediately after the adoption of accrual accounting in performance reports of Italian public universities.

The authors collect the stakeholder section of performance reports published before and after accrual accounting adoption. Then, the authors use manual and computer-assisted textual analysis. Finally, the authors explore the data using principal component analysis and qualitative comparative analysis.

This study demonstrates that switching from cash to accrual accounting provokes immediate changes in communication patterns. It confirms the significant reduction of readability and increase in visual forms after accruals accounting adoption. The results indicate that smaller universities especially put effort into increasing intelligibility while implementing a more complex accounting system. This study also finds a relation between the change in readability and the change in visual forms that are complementary, with the exception of several very large universities.

The findings underline the possibility of neutralising the adverse effects of accounting reform associated with its complexity and difficulties in understanding by the use of visual forms and attention to the document’s readability.

This paper adds a new dimension to the study of public sector accounting from the external stakeholder perspective. It provides further insight into the link between accrual accounting adoption and readability, together with the use of visual forms by universities.

This study asks whether external auditors enable the transfer of policies to the United Nations organizations that they audit and, if so, what types of policies are transferred.

The empirical research is based on a content analysis of 512 external auditor recommendations from 28 pre- and post-accrual reports of 14 UN bodies.

We find that external auditors do enable policy transfer and that such involvements may, at times, veer into non-neutral policy spaces.

We did not analyze all UN organizations with accruals-based accounting. We also did not engage in a longer longitudinal study.

Our findings raise new questions about international organization accountability, the technocratic and policy-specific influences of external auditors, and open a debate about whether attempted policy transfers can be neutral.

The world’s largest group of international organizations is affiliated with the UN. External auditors help ensure that member-state monies are appropriately utilized. Our study is the first to compare pre- and post-accrual external auditor recommendations for 14 UN bodies. It is also the first to notate and study the attempted policy transfers from external auditors to the audited UN bodies.

Recent studies on the securities market’s differential pricing of earnings components have shown that cash flow from operations is more highly valued than total accruals and that moderate cash flow from operations has higher valuation than extreme total accruals. An interesting question that follows is whether these findings hold regarding the differential valuations of cash flow and current accruals. This study aims to extend prior research by addressing this issue in two ways. First, the authors examine the incremental information content of cash flow from operations beyond working capital from operations. Second, the authors assess the effect of extreme working capital from operations on the incremental information content of cash flow from operations. This study aims to extend prior research by addressing this issue in two ways.

This study adopts market-based accounting research to test its hypotheses and to achieve its objectives. Specifically, this study uses statistical associations between accounting data and stock returns to examine the incremental information content (value relevance) of cash flow and working capital from operations and the effect of extreme working capital from operations on the incremental information content of cash flow.

The results show that cash flow from operations is not more highly valued than current accruals (both being valued equivalently). However, moderate cash flow from operations has higher valuation than extreme current accruals (each is valued differently). Overall, these research findings indicate that cash flow becomes more important for valuation as accruals get “extreme”.

As accruals are unlikely to persist to be permanent across the years, these results can be interpreted as indicating that cash flow and accruals information are used jointly by investors, with one being more important than the other depending on the relative “extremeness” of each. Therefore, both are of value to the investor and both should be reported.

The paper contributes to the UK research on determining the preferred level of disaggregation of earnings components, i.e. operating cash flow, current accruals and non-current accruals. This would help investors to improve their investment and credit decisions.

This paper investigates to what extent public sector entities (PSEs) in developing countries (DCs) are compliant with IPSAS and examines the impact of the socioeconomic and politico-administrative environment on this compliance during the period 2015–2018.

This research develops a self-constructed checklist consisting of 116 disclosure items from five accrual-based IPSAS (IPSASs, 1, 2, 3, 14 and 24) and applies panel regressions for a sample of 500 entity-year observations of 125 PSEs.

The study results show a high level of disparity in the degree of compliance with IPSAS amongst DCs' governments, with an overall average level of 61%. They reveal that compliance with IPSAS is positively influenced by the level of citizen wealth, government political culture (degree of government openness) and the quality of public administration, whereas jurisdiction size, government financial condition and political competition are non-significant factors.

This research provides researchers and practitioners with a comprehensive framework for understanding the extent of New Public Management reforms in DCs with a focus on International Public Sector Accounting Standards implementation. It might assist policymakers in their accounting strategies and might be a signal for DCs with low compliance to tap lessons from governments with successful experience of IPSAS adoption.

Focusing on DCs' context, this paper brings new insights into the analysis of socioeconomic and politico-administrative incentives for government compliance with IPSAS. It is the first to investigate the impact of citizen wealth and political competition on IPSAS disclosures.

This study examines whether country-level financial integration affects firms' accounting choices and the quality of financial information.

This study employs Propensity Score Matching (PSM), and panel regressions of a large sample of data from 20 emerging markets over the period 1987–2018.

This study finds evidence that increased level of financial integration is significantly positively associated with firms' accruals earnings management (AEM) and real earnings management (REM).

Findings in the study have implications for standard-setting bodies that aim to enhance the usefulness of financial reporting quality. The study also has implications for various initiatives by governments in emerging markets aimed at raising investor confidence and fostering stock market development through greater financial integration.

Findings in the study have implications for standard-setting bodies that aim to enhance the usefulness and quality of financial reporting. The findings can be of interest to analysts, auditors and other monitoring institutions who play a crucial role in detecting earnings management and reducing information asymmetry. Finally, the study has implications for various initiatives by governments in emerging markets aimed at raising investor confidence and fostering stock market development through greater financial integration.

Findings in the study reveal how country-level financial integration affects accruals and real earnings management in a sample of firms from 20 emerging markets. Further, the study adds to the growing body of literature on emerging markets where capital markets mechanisms, regulatory environment and firm's corporate governance are distinct to developed markets.

This paper aims to examine the relationship between earnings quality and corporate cash holdings in an emerging economy. Existing literature posits that earnings quality is a result of information asymmetry and firms with lower earnings quality increases cash holdings, to shield the firm from future uncertainties. In this paper, the authors propose a ‘private benefits hypothesis’, which suggests that lower earnings quality is an indicator of opportunism and expropriation of resources in the firm, through tunneling or excessive executive compensations. As a result, firms with lower earnings quality increase cash holdings in their control, to increase their private benefits and to avoid the scrutiny of the external stakeholders. The authors further examine the monitoring role played by institutional investors on cash holdings, with varying degrees of earnings quality.

This study uses an unbalanced panel data sourced from Prowessdx, from 2000 to 2019. The analysis employs 20,231 firm-year observations from 2,421 firms. Earnings quality is calculated following Dechow and Dichev (2002).

Empirical analysis confirms that the firms with higher earnings quality reduce cash. Further, institutional investors reduce the cash holdings in firms with higher earnings quality. Institutional investors effectively reduce the cash only in firms with at least 10% of equity shareholding. The results are robust to alternative measures of earnings quality and endogeneity concerns.

This study diverges from the information asymmetry hypothesis in the existing literature on earnings quality and cash holdings and highlights the underlying private benefits hypothesis, that will impact cash holdings. Next, the 10% institutional shareholding is important in the Indian context as it represents the minimum threshold at which block holders can request extraordinary general meetings (Section 100 of the Companies Act 2013) or the involvement of the National Company Law Tribunal (NCLT) (Section 213 of the Companies Act 2013). This study highlights that unlike in Anglo-Saxon economies, institutional investors or other minority shareholders are empowered by the Companies Act 2013 to play a vital role in corporate governance with a mere 10% equity.

The purpose of this study is to examine how lenders alter their behavior when faced with real earnings management.

This study uses the incremental R-square approach as in Kim and Kross (2005) to examine how much lenders rely on income statement and balance sheet ratios as the degree of real earnings management increases.

As real earnings management affects mostly the income statement, the authors find that lenders rely less on income statement ratios in making credit decisions in the presence of real earnings management. The authors also find that lenders do not alter their reliance on balance sheet ratios when faced with real earnings management.

This paper is the first to study how lenders alter their reliance on financial statements in making credit decisions in the presence of real earnings management. The findings of this paper could help the regulators set standards to improve the usefulness of financial statements. The findings of this paper could also help practitioners (borrowers and lenders) understand how real earnings management affects credit decisions.

This study aims to investigate whether auditors compromise their independence for economically important clients in family business settings.

The authors empirically examine the research question based on China for the years 2011 to 2020. The dependent variable is the auditors’ propensity to issue modified audit opinions, which is a proxy for auditor independence. The authors use relative client audit fees as a proxy for client importance. To address endogeneity issues in the selection of family firms, the authors use the two-stage least squares regression model and, subsequently, the propensity score matching and Hausman firm fixed effect modeling.

This study reveals that the propensity to issue modified audit opinions is positively correlated with client importance. Big-N auditors are more likely to issue modified audit opinions for their economically important family firm clients, whereas such evidence is not found for non-Big-N auditors. Results are consistent and robust to endogeneity test and sensitivity analysis.

This study enriches the literature on auditor independence and the effect of family firms’ ownership structure factors on audit reporting behavior for their economically important clients. Findings may prove useful for managers and practitioners interested in family business.

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.

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.

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.

This study suggests that firms and regulators should consider the background of the compensation committee chair to understand the variations in top executive.

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.

This is the first study to examine the effects of the functional background of the compensation committee chair on CEO compensation.

This study aims to investigate whether auditors compromise their independence for economically important clients in countries with a secrecy culture.

The authors empirically examine the research question based on a data set of 33 countries for the period from 1995 to 2018. The dependent variable is the auditors’ propensity to issue modified audit opinions, which is a proxy for auditor independence. The authors use relative client size as a proxy for client importance. The authors adopt the Heckman (1979) two-stage model to mitigate the potential endogeneity issue involved in the selection of Big-N auditors.

Using a large sample of firms and controlling for the firm- and country/region-level factors, this study reveals that both Big-N and non-Big-N auditors are more likely to issue modified audit opinions to clients located in countries with a strong secrecy culture relative to those located in other countries. However, Big-N auditors are more likely to issue modified audit opinions for their economically important clients with a secrecy culture relative to their other clients, while no or weaker evidence is found for non-Big-N auditors. The results are consistent and robust to endogeneity tests and sensitivity analyses.

This study enriches the literature by providing a new perspective on auditor independence that an auditor’s reporting behavior can vary depending on the client’s importance and auditor type, even under the same secrecy culture.