Search results

Extant studies propose music sentiment as a novel measure of individuals’ sentiment. These studies argue that individuals’ choice of music reflects their emotional condition in real time and influences their cognitive ability, making it a powerful tool for assessing their mood. This study aims to use music sentiment as a proxy for auditors’ mood and explore its impact on audit quality.

A sample of the US firms from 2017 to 2020 is used in the study. The authors apply the ordinary least squares regressions and the logit regressions to the audit quality models. The authors use absolute discretionary accruals and the propensity to meet or beat earnings forecasts as proxies for audit quality and calculate a stream-weighted average sentiment measure for Spotify’s Top-200 songs of each day during the audit period of a client firm to capture the sentiment of auditors.

The authors find that music sentiment is positively associated with audit quality. The result is consistent with the mood maintenance hypothesis, which suggests that a positive mood can induce auditors to be more careful in risky situations. Furthermore, the result is robust to various sensitivity analyses.

The study contributes to the scarce literature that focuses on auditors’ emotional state and highlights the importance of monitoring auditor mindset during the audit period.

This study aims to inform prospective listing firms, investors and regulators of the unique drivers of Chinese initial public offering (IPO) pricing on the Hong Kong Exchange.

Using a hand-collected IPO dataset, we investigate whether information uncertainty or investor exuberance drives underpricing and Chinese IPOs’ performance from 2002 to 2015, including 114 state-owned enterprises (SOEs).

Contrasting with the “listing bubble” in the China domestic stock market, generated by the overoptimism of retail investors, we highlight a “placing bubble” among Chinese firms listed in Hong Kong. This is driven by institutional investors’ buoyant demand for Chinese IPO shares, particularly those of SOEs. Chinese listing firms employ discreet earnings management strategies with their working capital accounts to smooth pre-IPO earnings, which becomes apparent to the market only in the long term.

This study is the first to examine the pricing of sought-after Chinese IPOs among international investors, who face various restrictions when investing in the Chinese domestic stock market. Additionally, it is the first study to measure earnings management using hand-collected pre-IPO data in IPO underpricing studies.

Financial statement fraud has become a global concern, and auditors are increasingly focused on identifying and investigating it. Auditors may play a crucial role in investigating and reducing financial statement fraud, and this is particularly important in developing countries where fraudulent practices are more prevalent due to the lack of strict regulations and oversight. This study investigates whether enhanced audit quality has an impact on reducing financial statement fraud. The primary aim is to recognize whether a higher level of audit quality relates with a decrease in fraudulent activities in Indonesia, which is one such country that has not yet adopted IFRS.

This study investigates the effect of audit quality, as measured by audit tenure, audit fee, and audit size, on the dependent variable of financial statement fraud, as indicated by Dechow F-value. The sample for this study comprises 951 observations from 2015 to 2020, and the research design utilizes a panel data approach. To test the main hypothesis, OLS, and GMM estimation techniques are employed.

The analyses reveal a negative relationship between audit tenure and financial statement fraud. This suggests that shorter audit tenure may be associated with an increased risk of financial statement fraud. This heightened risk could stem from auditors having limited time to thoroughly understand the company's operations and internal controls, potentially making it more challenging to detect and prevent fraudulent activities perpetrated by the client. Conversely, a positive relationship is identified between audit fees and financial statement fraud, suggesting that companies paying higher fees may be engaging auditors less adept at detecting fraudulent activities. Furthermore, a negative relationship is observed between Big-5 and financial statement fraud, which may be due to the greater resources, expertise, quality control, scrutiny, reputation, and ethical conduct of Big-5 audit companies.

This study only focused on listed companies in Indonesia, therefore, caution should be exercised when generalizing the findings to other developing and Muslim countries such as Malaysia. The findings may differ due to the adoption of IFRS in Malaysia. As such, it is important for future studies to include Malaysia as a sample and compare the results with those of Indonesia. This comparison would demonstrate the impact of IFRS adoption on the relationship between audit quality and financial statement fraud and provide insights for policy makers in Indonesia.

The findings of this study have important implications for developing countries that have been shown to be more susceptible to fraud than developed countries. This study contributes to the existing research on the role of audit quality in reducing financial statement fraud and emphasizes the need for auditors and accountants to take a proactive approach in detecting and investigating financial fraud.

This study is a new study because it investigates the relationship between audit quality and financial statement fraud in Indonesia, a developing Muslim country that has not yet adopted International Financial Reporting Standards (IFRS). The study provides valuable evidence on the unique factors that influence fraud in Indonesia and fills a gap in the literature as previous studies on this topic have largely focused on developed countries. Additionally, the study recommends that policymakers in Indonesia consider implementing IFRS to improve the reliability of financial reporting and strengthen the effectiveness of the auditing process, thus reducing the incidence of fraud.

The research aims to provide empirical evidence on the relationship between financial statement comparability (FSC) and cost of equity (COE) in an emerging market.

Specifically, this study examines the relationship between FSC and COE of Vietnamese listed firms. The research uses the System Generalized Method of Moments regression techniques for a panel data set of 454 companies for the period 2015–2022.

The authors find that firms with high comparability of financial statements have lower COE. To confirm the research findings, the authors conduct the robustness test by using different proxies for the cost of equity. Consistent results are found.

The study contributes to the overall understanding of the relationship between FSC and COE, and suggests policy implications for relevant stakeholders such as managers, regulatory bodies and investors. Especially, regarding policymakers, this study could provide more insight into how the accounting convergence process impacts the effectiveness of a firm’s capital allocation.

This study examines the relationship between financial reporting quality, Industrial Revolution 4.0 and social well-being of stakeholders among public companies in Malaysia.

The sample of the study includes 232 firm-year observations of Malaysian publicly listed companies from 2013 to 2017. Social well-being is measured using social pillar scores from the Environmental, Social and Governance (ESG) data provided by Refinitiv. The study identified companies as an adopter of IR 4.0 based on their disclosure on the use of autonomous robots, simulation, cloud, horizontal and vertical system integration, cybersecurity, additive manufacturing, augmented reality and big data analytics in their financial reports. Financial reporting quality is measured using discretionary accruals.

This study found that financial reporting quality and IR 4.0 are related to social well-being, particularly the workforce. These results imply that companies with higher adoption of IR 4.0 are more likely to provide more information concerning job satisfaction, a healthy and safe workplace, maintaining diversity, equal and development opportunities for its workforce. Furthermore, the results show that firms with lower discretionary accruals (i.e. higher quality of financial reporting) are more likely to provide more information about social well-being. The results are robust even after addressing endogeneity issues.

This research contributes new insights into the role of financial reporting quality and IR 4.0 in enhancing social well-being in Malaysia. These findings offer valuable input for regulators striving to advance the United Nations' 2030 Agenda for Sustainable Development.

This study carries substantial practical implications for policymakers and businesses alike. It underscores the importance of embracing IR 4.0 technologies and integrating them into strategic planning to foster social well-being. These insights can guide policymakers in shaping economic strategies and assist businesses in prioritizing financial reporting quality while engaging stakeholders to promote social well-being.

This is the first study to investigate the combined relationship of financial reporting quality and IR4.0 on social well-being, which provides valuable evidence in this novel domain. While previous studies have primarily explored the relationship of IR4.0 on sustainability from an environmental and human resource perspective, this study sheds light on the specific dimension of social well-being, hence promoting sustainable development goals by the United Nations in 2030.

Despite the increasing interest in the role of supply chain concentration (SCC) in improving performance, its influence on firms' sustainability performance remains unexplored, as do the underlying mechanisms of this relationship. Drawing on resource dependence theory, the authors investigate the relationship between SCC and manufacturing firms' sustainability performance and the moderating roles of operational slack and information transparency.

The authors use secondary data from 3,581 manufacturing firms listed on the Shanghai and Shenzhen A-share stock markets from 2006 to 2020 to conduct an empirical analysis using panel data regression models.

Manufacturing firms' SCC is negatively related to sustainability performance until it reaches a certain point, where SCC positively affects sustainability performance, presenting a U-shaped relationship. In addition, operational slack represented by a quick ratio moderates the relationship between SCC and sustainability performance by flattening the curve. Operational slack represented by receivable turnover ratio moderates the relationship between SCC and sustainability performance by steepening the curve and shifting the turning point left. Information transparency strengthens the effect of SCC on the sustainability performance by steepening the curve.

This investigation provides a comprehensive view of the SCC– sustainability performance relationship.

This study aims to explore the auditors’ responses to the COVID-19 pandemic in Egypt, with a focus on how their demographic characteristics – specifically gender, work experience and audit firm size – affect their ability to identify key audit matters (KAMs).

The study used exploratory factor analysis to develop an index for evaluating auditors’ proficiency in distinguishing KAMs from non-KAMs, followed by multivariate regression analysis to analyze the impact of auditors’ demographics on this ability.

The study’s findings are significant as they highlight the influence of auditors’ gender and work experience on their capability to correctly classify KAMs. However, the size of the audit firm showed no significant effect on the auditors’ decision-making efficacy in identifying KAMs.

While the study illuminates critical aspects of audit judgment during unprecedented times, it acknowledges limitations, including its geographical focus on Egypt and reliance on self-reported data. The implications stress the need for audit firms and regulators to consider auditors’ demographic characteristics when formulating policies to enhance audit quality and reliability during crises.

This research breaks new ground in the auditing literature by shedding light on the distinct role of auditor demographics in shaping audit opinion during crises. It is one of the pioneering studies to quantitatively assess the impact of auditors’ gender, experience and firm size on KAM identification in a global health crisis. It provides a unique perspective on audit practices in emerging economies.

The present research conducts a thorough review of published literature relevant to earnings management (EM) practices in family firms (FFs), utilizing the Scopus database, intending to identify potential directions for future research.

Through a systematic review, this study focuses on identifying and summarizing trends in publications over the years, the journal outlets, geographical contexts, research methodologies, the temporal evolution of theories and the specific constructs under investigation.

Earlier empirical studies suggest that corporate governance enhances integrity and transparency in FFs, thereby reducing EM practices. Contrarily, compliance with International Financial Reporting Standards (IFRS) seems to offer managers more opportunities for convenient EM rather than restricting such practices. Notably, corporate social responsibility (CSR) practices do not appear to mitigate EM practices consistently. The literature, however, reveals inclusive results and areas requiring deeper exploration for more definitive results. For instance, certain corporate governance mechanisms, such as family-specific social and cultural business characteristics, subjective measures of family businesses, behavioral approaches to family owners' decision-making and directors' personal, psychological and social factors, remain largely untested. Additionally, there is a notable research gap concerning the relationship between IFRS, capital structure and EM.

This study’s contributions lie in its comprehensive literature review, identification of research trends and gaps, and its potential to guide future research endeavors in the domain of EM practices in FFs.

This paper aims to examine the consequences of board diversity (BD) in Kuwait. In particular, it examines the impact of BD (gender, age and nationality) on earnings management (EM).

The research uses data from 103 non-financial Kuwaiti-listed companies from 2010 to 2017. The data is collected from the companies’ data from secondary sources such as their annual reports. The data analysis methods are correlation, multi-regression and robust regression. EM is measured using the modified Jones model (1995) and Kothari et al. (2005).

The findings show a negative association between gender diversity (GD) and EM. It also found a positive relationship between age diversity (AD) and EM and no relationship between national diversity (ND) and EM.

This study’s results have significant implications for investors. The practical empirical findings indicate that GD on the board did not impact on EM. Also, it is more important to have senior directors on the board than AD to reduce EM. There is no need to employ any foreigners because they do not affect EM.

It contributes to the growing body of literature on BD by investigating its effect on EM. Furthermore, building on the broader literature on gender, age and ND by highlighting the critical role that women, young people and foreign directors play in improving boards' monitoring role on EM. More specifically, it contributes to existing knowledge, provides a theoretical contribution and makes a methodological contribution.

There are variations in religious social norms and legal environments around the world. In this paper, we aim to examine the interaction between variations in religious social norms and legal environments on real activities manipulations and expense misclassification using a global sample of 63 countries. Our inquiry is motivated by a paucity of research on the interaction between legal environment and religion on earnings management practices in an international setting.

This study draws on a global sample of 63 countries to examine the effect of variations in religious social norms and legal environments on the trade-off between expense misclassification and real activities earnings management practices. Firm-specific financial data come from Global Compustat. Religion data are obtained from World Values Surveys of the World Bank. We obtain legal environment scores from the International Country Risk Guide.

Findings suggest that the interaction between law and religion serves as constraints on both classification shifting and real activities manipulation around the world. We find that religion strengthens the weak legal environment and the strong legal environment strengthens the weak religious environment to decrease both real activities manipulation and classification shifting when law and religion interact in an international setting. Therefore, our results contradict Zang's (2012) earnings management trade-off evidence. Again, our results contradict Malikov et al.’s (2018) evidence that mandatory International Financial Reporting Standards (IFRS) adoption is associated with increased real activities manipulation.

The study is limited to 63 countries limiting the generalizability of the findings.

This study provides novel evidence and shows that there is a link between law and religion. The interaction between law and religion decreases expense misclassification and real activities manipulation. We contribute that the interaction between religion and law benefits firms and increases shareholder value as real activities manipulation decreases. Therefore, strengthening the legal environment will complement religion, IFRS and other monitoring mechanisms put in place to mitigate unethical expense misclassification and real activities earnings manipulation around the world.