Search results

1 – 10 of over 2000
To view the access options for this content please click here
Book part
Publication date: 16 October 2014

Martin Stuebs and Li Sun

This chapter examines the association between corporate governance and environmental performance. The purpose of governance mechanisms is to build trust by ensuring that…

Abstract

This chapter examines the association between corporate governance and environmental performance. The purpose of governance mechanisms is to build trust by ensuring that corporate responsibilities, including environmental responsibilities, are met. We obtain corporate governance data from the Investor Responsibility Research Center, Inc’s (IRRC’s) governance and director database and additional corporate governance and environmental performance data from Kinder, Lydenberg, and Domini’s (KLD’s) database. Our analyses document a significant positive association between corporate governance and environmental performance. Moreover, we find that corporate governance is positively related to environmental strengths, and negatively related to environmental concerns. Our findings contribute to and extend our understanding of the relationship between governance and performance and have important implications for policy makers, managers, investors, and others.

Details

Accounting for the Environment: More Talk and Little Progress
Type: Book
ISBN: 978-1-78190-303-2

Keywords

To view the access options for this content please click here
Article
Publication date: 2 February 2015

Feras M Salama and Karl Putnam

The purpose of this paper is to investigate the effect of accounting conservatism (as a proxy for financial reporting quality) on the degree of financial leverage. In…

Downloads
1838

Abstract

Purpose

The purpose of this paper is to investigate the effect of accounting conservatism (as a proxy for financial reporting quality) on the degree of financial leverage. In addition, this paper examines the impact of global diversification (as a proxy for operational complexity) on the relationship between conservatism and financial leverage.

Design/methodology/approach

A panel data regression analysis is conducted for the period 2000-2006. The authors utilized a two-way fixed-effects model to control for unobservable firm characteristics and time effects that may influence the firm’s decision to report conservatively.

Findings

This paper provides empirical evidence that conservatism is positively associated with the degree of financial leverage, and the influence of conservatism on financial leverage is enhanced by the degree of global diversification.

Originality/value

A major issue in corporate finance is the identification of variables that influence corporate capital structure choices. The evidence presented in this paper reveals that more conservative financial reporting is associated with a higher degree of financial leverage in the firm’s capital structure. This effect increases with the extent of global diversification, indicating that bondholders place a higher value on conservatism when there is more information asymmetry between stakeholders and managers caused by global diversification.

Details

Pacific Accounting Review, vol. 27 no. 1
Type: Research Article
ISSN: 0114-0582

Keywords

To view the access options for this content please click here
Article
Publication date: 14 August 2017

Nana Y. Amoah, Anthony Anderson, Isaac Bonaparte and Susan Muzorewa

This study aims to examine the use of real activities manipulation by firms implicated in the stock option backdating scandal.

Abstract

Purpose

This study aims to examine the use of real activities manipulation by firms implicated in the stock option backdating scandal.

Design/methodology/approach

The real activity manipulation measures are as follows: abnormal R&D expense, abnormal SG&A expense, abnormal production cost and abnormal cash flow from operations. Using a sample of firms alleged to have backdated options during the period 1998-2006 and non-backdating one-on-one matched firms, a separate regression is run for each of the real activity manipulation measures (dependent variables) on backdating and other variables.

Findings

The authors report unusually low R&D and unusually low SG&A expenses among the backdating firms. They also find evidence of unusually high production costs among backdating firms compared to the matched firms.

Research limitations/implications

The findings imply that backdating firms are more aggressive in the use of real activities to manipulate earnings and the use of real activities appears to be opportunistic.

Originality/value

The study contributes to the literature by providing evidence of the use of real activities manipulation by firms under investigation for fraud. The authors also add to the debate on whether the use of stock options as part of compensation aligns the interest of management with the interest of shareholders.

Details

Review of Accounting and Finance, vol. 16 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

To view the access options for this content please click here
Article
Publication date: 18 September 2007

Rani Hoitash, Ariel Markelevich and Charles A. Barragato

The paper aims to examine the relation between fees paid to auditors and audit quality during the period of 2000‐2003.

Downloads
22303

Abstract

Purpose

The paper aims to examine the relation between fees paid to auditors and audit quality during the period of 2000‐2003.

Design/methodology/approach

The paper constructs a measure of auditor profitability that is used as a proxy for auditor independence. The methodology is grounded in the notion that auditor independence is influenced by effort and risk‐adjusted fees, rather than the level of fees received from clients. Since, risk and effort are unobservable, the paper uses proxies based on client size, complexity and risk to estimate abnormal fees. Abnormal fees are derived using a fee estimation model drawn from prior literature. The paper employs two metrics to assess audit quality – the standard deviation of residuals from regressions relating current accruals to cash flows and the absolute value of performance‐adjusted discretionary accruals.

Findings

The paper documents a statistically significant negative association between total fees and both audit quality proxies over all years. These findings are robust to a variety of additional tests and several alternative design specifications. The results (pre‐ and post‐SOX) are consistent with economic bonding being a determinant of auditor behavior rather than auditor reputational concerns.

Research limitations/implications

The possibility that the empirical tests do not completely capture the impact of unobserved risk cannot be ruled out, though the paper attempts to do so by employing alternative specifications and sensitivity tests.

Practical implications

Policy makers should note that current restrictions on the provision of non‐audit services may not sufficiently resolve the issue of economic bonding and its impact on auditor independence.

Originality/value

In contrast to previous studies whose results are ambiguous, the paper finds a statistically significant positive association between several measures of total fees (it uses size‐adjusted and abnormal fees) and two metrics of accruals quality in all years (2000‐2003), consistent with economic bonding being a determinant of auditor behavior rather then auditor reputation concerns.

Details

Managerial Auditing Journal, vol. 22 no. 8
Type: Research Article
ISSN: 0268-6902

Keywords

To view the access options for this content please click here
Article
Publication date: 29 October 2021

Yanchao Rao and Ken Huijin Guo

The US Securities and Exchange Commission (SEC) requires public companies to file structured data in eXtensible Business Reporting Language (XBRL). One of the key…

Abstract

Purpose

The US Securities and Exchange Commission (SEC) requires public companies to file structured data in eXtensible Business Reporting Language (XBRL). One of the key arguments behind the XBRL mandate is that the technical standard can help improve processing efficiency for data aggregators. This paper aims to empirically test the data processing efficiency hypothesis.

Design/methodology/approach

To test the data processing efficiency hypothesis, the authors adopt a two-sample research design by using data from Compustat: a pooled sample (N = 61,898) and a quasi-experimental sample (N = 564). The authors measure data processing efficiency as the time lag between the dates of 10-K filings on the SEC’s EDGAR system and the dates of related data finalized in the Compustat database.

Findings

The statistical results show that after controlling for potential effects of firm size, age, fiscal year and industry, XBRL has a non-significant impact on data efficiency. It suggests that the data processing efficiency benefit may have been overestimated.

Originality/value

This study provides some timely empirical evidence to the debate as to whether XBRL can improve data processing efficiency. The non-significant results suggest that it may be necessary to revisit the mandate of XBRL reporting in the USA and many other countries.

Details

International Journal of Accounting & Information Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1834-7649

Keywords

To view the access options for this content please click here
Book part
Publication date: 16 July 2019

Ahmet C. Kurt and Nancy Chun Feng

Many argue that the design of compensation contracts for public company chief executive officers (CEOs) is often not guided by a goal of value maximization. Yet, there is…

Abstract

Many argue that the design of compensation contracts for public company chief executive officers (CEOs) is often not guided by a goal of value maximization. Yet, there is limited direct empirical evidence on the negative consequences of the proposed inefficient contracting between shareholders and CEOs. Using data on CEO bonus contracts of the S&P 500 firms, we investigate potential firm performance implications of the use of qualitative criteria such as leadership and mentoring in those contracts. We maintain that unlike quantitative criteria, qualitative criteria are difficult to define and measure on an objective basis, possibly resulting in an inefficient and biased incentive structure. Twenty-five percent of the sample observations have CEO bonus contracts that include a qualitative criterion for bonus payment determination. Our results show that employee productivity, asset productivity, capital expenditures, and future abnormal stock returns are lower for firms that use a qualitative criterion in CEO bonus contracts than those that do not. Further, contrary to the argument in prior literature that earnings management decreases with the use of subjective performance indicators in incentive contracts, we find that income-increasing accruals are actually higher when the CEO bonus contract includes a qualitative criterion. We recommend that compensation committees set concrete, measurable performance goals for CEOs, providing CEOs with better guidance and helping improve their corporate decision making.

To view the access options for this content please click here
Book part
Publication date: 27 August 2014

James S. Ang and Gregory L. Nagel

Our chapter raises serious questions about the long-term efficiency of stock prices in relation to the realized returns of the underlying corporate real assets. In our…

Abstract

Our chapter raises serious questions about the long-term efficiency of stock prices in relation to the realized returns of the underlying corporate real assets. In our large-scale calculations that cover horizons of 10, 20, 30, 40, and 50 years, returns on corporate real assets suffer a long-term decline, and have been below the yields of 10-year Treasury bonds since 1973. Real assets that received more external financing from capital markets and institutions actually report even lower realized long-term returns. The decline in realized returns cannot be attributed to declining risks as the volatilities of realized returns have been increasing over time. These surprising results may stimulate fresh debate on the roles and long-term performance of capital markets and institutions.

Details

Research in Finance
Type: Book
ISBN: 978-1-78190-759-7

To view the access options for this content please click here

Abstract

Details

Advances in Accounting Education Teaching and Curriculum Innovations
Type: Book
ISBN: 978-1-84950-872-8

To view the access options for this content please click here
Book part
Publication date: 6 September 2018

Van Son Lai, Duc Khuong Nguyen, William Sodjahin and Issouf Soumaré

We identify a novel concept of discretionary idiosyncratic volatility proxied by the idiosyncratic volatility component not related to the non-systematic industry…

Abstract

We identify a novel concept of discretionary idiosyncratic volatility proxied by the idiosyncratic volatility component not related to the non-systematic industry volatility as a source of agency problems that have implications for firms’ cash holdings and their investment decisions. We find that firms with low discretionary idiosyncratic volatility, which likely captures discretionary effort and risk-taking by managers, have smaller cash reserves. Moreover, while high discretionary idiosyncratic volatility firms spend cash internally (internal capital building), low discretionary idiosyncratic volatility firms use it for external acquisitions, consistent with the “quiet life” hypothesis. Our findings thus indicate a need for reinforcement of existing regulations and corporate laws to control for agency costs, which could in turn reduce firm risk and the probability of financial meltdown at the aggregate level.

To view the access options for this content please click here
Article
Publication date: 14 July 2020

Stephen Gray and Arjan Premti

This study examines how lenders modify their behavior and their use of traditional, transaction-based lending models in credit decisions when faced with low earnings quality.

Abstract

Purpose

This study examines how lenders modify their behavior and their use of traditional, transaction-based lending models in credit decisions when faced with low earnings quality.

Design/methodology/approach

To measure the earnings quality, following Bharath, Sunder and Sunder (2008), the authors use three measures of accrual quality and combine them into a simple parsimonious measure of accrual quality. Subsequently, the authors apply the incremental R-square approach used by Kim and Kross (2005) to determine the degree to which lenders modify their reliance on financial statement ratios when faced with low accrual quality.

Findings

Consistent with prior literature, this study shows that the cost of debt is higher when accrual quality is low. In addition, this study extends prior literature by showing that lenders decrease their reliance on income statement data to make credit decisions as accrual quality decreases.

Originality/value

This paper broadens existing literature on the pricing of information risk in capital markets by being the first to show that lenders modify their reliance on financial statement data when faced with low-quality accruals. In addition, this paper extends the findings of Billings and Morton (2002) and demonstrates to managers the futility of using accrual manipulations to obtain more favorable credit terms. Lastly, this paper aids regulators and standard setters who seek to improve the usefulness of financial statements by showing that creditors do not appear to be misled by reporting choices that lower the quality of accruals.

Details

Managerial Finance, vol. 47 no. 1
Type: Research Article
ISSN: 0307-4358

Keywords

1 – 10 of over 2000