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The purpose of this paper is to offer an alternative approach to measure the cost-benefit tradeoff, by analyzing stockholders’ reactions to the announcement and vote on the proposed rule. More specifically, the authors use event study methodology to investigate the stock price reaction on two key dates; that is, the announcement date and the voting date of the proposed short-term borrowing disclosure regulation, and argue that positive abnormal stock returns indicate that the expected benefits of the regulation outweigh the compliance costs. A negative reaction would indicate that, in the eyes of investors, the costs of compliance exceed the expected benefits.

The authors use event study analysis and apply the market model to equal-weighted portfolios of 2,450 financial and 3,985 non-financial US firms to calculate mean cumulative abnormal stock returns (MCARs, hereafter) on the announcement and voting dates. Then, the authors conduct mean difference tests on firm-level MCARs across three event windows, that is, (−30,−1), (0,+1) and (+2,+30), to confirm if the MCARs of financial firms are different from those of non-financial firms on both the announcement and the voting dates. Finally, robustness tests are performed with alternate benchmark, using value-weighted portfolios, for the market.

The authors find that the market reaction is positive and significant at the announcement date and negative and significant at the voting date of the proposed regulation of short-term borrowing disclosure regulation. Overall, the paper documents a positive market reaction, indicating the usefulness of the disclosure from the vantage point of users. Examining and comparing the results for various subsets, including commercial banks and saving institutions, bank holding companies, size quartiles, and exchange listed and OTC registrants, the authors find that a “one-size-fits-all” approach to regulation is undesirable.

This is first empirical study, to best of the authors’ knowledge, to explore stockholder reaction to a proposed, rather than an enforced, Securities and Exchange Commission (SEC) regulation and may contribute to the SEC’s final decision on the rule. Second, given a dissimilar reaction from investors of different firms, the results suggest that the SEC needs to reconsider its one-size-fit-all approach for the proposed rule. Finally, because the proposed disclosure would affect all SEC registrants, the economic implications of the findings are important not only for stockholders, but also for regulators, as they attempt to manage systematic risk and optimize the level of market intervention.

Financial manipulation means the modification made knowingly and willfully by businesses in accounting records and transactions, in financial statements, through addition and subtraction, for the purpose of misleading financial information users. Financial manipulations are expected to have an effect on the decisions of financial information users. The present study was established on the basis of two main objectives. The first objective is to determine whether banks, which are Public Interest Entities (PIE), manipulate their financial statements. As for the second objective, it is to reveal whether the detected financial manipulations have an effect on investor decisions. The research conducted to achieve the first objective is based on the examination of independent audit reports for the periods between 2009 and 2017, pertaining to 45 banks registered to the Banks Association of Turkey, in terms of presented opinions. Data acquired from examined reports were subjected to content analysis via the Microsoft Excel program. In line with the second objective of the study, investor numbers for the periods between 2010 and 2017, of 13 banks, which are within the scope of BIST BANK, were included in the analysis, according to data acquired from the Central Registry Agency. Financial statements of banks, with audit reports in which a qualified opinion is expressed, were considered to have been manipulated. SPSS 22.0 statistics pack software was used to analyze whether investment demands toward these banks had an effect on decisions of domestic and foreign investors. In the analysis, frequency and One-Way ANOVA tests were used. In consequence of the analyses conducted, it was determined that, around one fifth of financial statements of PIE banks, pertaining to the periods between 2009 and 2017, were manipulated; it was mostly committed by private banks, and majority of the manipulations were committed due to free provisions made. It was also observed that manipulations did not have an effect on decisions of neither domestic nor foreign investors. The reason behind the latter is the fact that while the level of manipulations in financial statements is significant, it is not a widespread occurrence.

This study aims to investigate window dressing as practiced by commercial banks in Kuwait, using monthly aggregate balance sheet data covering the period January 1993 to December 2017.

This study applies the structural time series model to decompose an observed time series into unobserved components based on monthly data covering January 1993 to December 2017 on the consolidated balance sheet of commercial banks in Kuwait.

The empirical results indicate that Kuwaiti commercial banks indulge in upward window dressing to boost size and liquidity. This kind of behaviour is indicated by a statistically significant rise in assets under the control of banks in December, followed by a statistically significant decline in January. The operation is funded by borrowing, leading to a December rise and a January fall in foreign and other liabilities, which are also under the control of commercial banks.

This study uses a novel methodology to detect window dressing based on the seasonal behaviour of balance sheet items. This study suggests a unified framework for the motives, targets, types and consequences of window dressing and how they are related.

The focus of this paper is to provide an understanding to the economics of accounting crime. The accounting crime is considered to be part of the white-collar crime, where economists believe that white-collar criminals are rational men. Thus, this paper assumes that a person commits an accounting crime is a rational man. In making choices, the criminal managers take account of expected gains and costs from various available actions. If they estimate that there is a net gain from their actions, they do commit an accounting crime. External pressures, internal pressures, capital requirements, and compensation pressures are the circumstances that may lead managers to commit an accounting crime. The paper concludes by arguing that if white-collar criminals know that costs of their action are more than the benefits of the action, as a rational man they will not take that action. Thus, the most important step to prevent white-collar crime is to make the cost of the crime so high that it will never generate an estimated net gain for white-collar criminals.

This study seeks to examine the influence of the gamut of changes that have taken place in the past 15 years in the world of international football that have permanently transformed football from a game into a real business, while also considering some specific events that have affected Italian football in terms of the valuation of players' registration rights in the financial statements of the leading Italian football clubs throughout the period 1996‐2009.

The research was conducted taking into account the leading Italian clubs. The clubs considered were those that, in the period examined, qualified at least five times for a place in the Italian Serie A championship which is instrumental to their direct participation, or through the qualifying round, in the Champions League.

The research shows that questionable window dressing policies, consisting of artificially overestimated values of players' registration rights, aggravated the Italian football crisis that exploded during the 2001/2002 season. However, the origins of this crisis must be ascribed to the inability of Italian teams to control players' wages.

The study concerns only the leading clubs and examines the value of players' registration rights as an aggregate, as it is not always possible to extrapolate from financial statements the values attributed to individual players.

The Italian legal system, unlike others, establishes for corporations, the obligation to recapitalize if losses exceed a certain level. Based on this particular regulation, this research, suggesting a different interpretation of events, identifies the window dressing policies implemented by Italian football clubs during the period in question as behavior designed to evade the obligation to cover losses, and highlights the real purpose of the exceptional measures undertaken by the Italian legislator to save the entire industry.

Debate is growing around the expansion of risk-based regulation. The regulation scholarship provides evidence of regulatory failure of the risk-based approach in different domains, including financial regulation. Therefore, this paper aims to provide cautionary evidence about the risk of regulatory failure of risk-based strategy in the financial regulation while using enterprise risk management (ERM) as a meta-regulatory toolkit.

Based on interview data gathered from 30 risk managers of banks and five regulatory personnel, combined with secondary data, this study mainly explores the challenges for meaningful use of ERM based self-regulation in regulated banks. The evidence helps to assess the risk of regulatory failure of the risk-based regulation while using ERM.

The evidence reflects that regulated banks face diverse challenges arising from both peripheral and internal environments that limit the true internalization of ERM-based self-regulation. Despite this, the regulator uses this self-regulation as a meta-regulatory toolkit under the risk-based regulation to achieve the regulatory aims. However, the lack of true internalization of ERM based self-regulation is likely to raise the risk of regulatory failure of risk-based regulation to achieve the regulatory goals. Risk-based regulation is an evolving strategy in the regulatory regime. Therefore, care should be taken while using ERM as a regulatory toolkit before relying on it substantially.

The paper provides empirical insights about the challenges for effective use of ERM as a meta regulatory toolkit that might be useful practically both to the regulators and regulated firms.

Accounts manipulation has been the subject of research, discussion and even controversy in several countries including the USA, Canada, the U.K., Australia, Finland and France. The objective of this paper is to provide a comprehensive review of the literature and propose a conceptual framework for accounts manipulation. This framework is based on the possibility of wealth transfer between the different stake‐holders, and in practice, the target of the manipulation appears generally to be the earnings per share and the debt/equity ratio. The paper also describes the different actors involved and their potential gains and losses. We review the literature on the various techniques of accounts manipulation: earnings management, income smoothing, big bath accounting, creative accounting, and window‐dressing. The various definitions of all these, the main motivations behind their application and the research methodologies used are all examined. This study reveals that all the above techniques have common elements, but there are also important differences between them.

In our overview of the issues involved in inflation accounting we concentrated on two major problems, fixed assets and stock (which were analysed in depth in chapter two). We explicitly omitted any analysis of the other significant group of items in most balance sheets, monetary items; they are the liquid or near liquid assets and liabilities which a firm possesses such as cash, debtors, creditors, loan capital and so on. Agreement amongst accountants on how inflation affects monetary items is even more remote than agreement on fixed assets and stock. We have seen that the reformers of historical cost support one or other of two rival methods, current purchasing power or current cost accounting. Although the issues surrounding the treatment of monetary units are affected by whichever method is selected for the conversion of the main accounts (CPP or CCA), one cannot really polarise the discussion on monetary items so easily because, of the methods proposed so far for dealing with them, there has been a considerable element of overlap between the various treatments. This essay attempts to set down the main strands of the argument—it avoids deliberately the more esoteric topics of the debate which are explored by a few of the later contributors.

This study attempts to analyze the role of governance mechanisms in municipal bankruptcy, which appears to be a neglected area of research. The analysis considers both the organizational level (micro) and the regulatory system (macro).

We use a relevant case of municipal bankruptcy in Italy to discuss the influence of governance characteristics, such as the political and management structure, interaction, and behaviors. The issues related to the accounting system and external audits are also considered. The data for this study are obtained from secondary sources such as audited budgetary reports, public documents, and reports from the Supreme Audit Institution.

The study indicates that the spoils system can favor the politicians’ exercise of power over public managers and undermine the capacity to prevent and manage financial distress. Poor accounting and weak control systems may facilitate this process. The high turnover of top management throughout a mayor’s term in office may reflect political pressure to force accounting rules and achieve flexibility to obtain the expected results or to correct poor financial performance.

To avert municipal bankruptcies, regulations should consider enforcing ex ante control by external oversight bodies, forbidding risky operations and limiting the spoils system for financial management positions and internal auditors.

Municipal defaults around the world have indicated that regulations and audits are ineffective to prevent local governments from failing. A full understanding of complex mutual interactions between the mechanisms of governance and the behaviors of politicians and managers can provide valuable insights to prevent local governments from failing.