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This study aims to provide insights into US and Australian analysts' views regarding the relative importance of disclosing the direct method (DM) or indirect method (IM) statement of cash flows and forecasting firm performance.

Evidence is collected from responses to 104 surveys and 52 interviews completed by US and Australian analysts from 2017 to 2022. The survey and interview questions are developed with reference to the literature.

US and Australian analysts believe that the DM format provides incremental benefits compared to the IM for (1) confirming the reliability of earnings; (2) improving earnings confidence; (3) more accurate ex ante forecasts of operating cash flow and earnings; and (4) identifying opportunistic accruals manipulation. Analysts view that DM disclosure can lower firm-level cost of equity, although US interviewees more uniformly expect lower costs of equity under DM disclosure when firms yield low earnings quality. DM disclosure is also more important during unstable economic periods, as proxied by COVID-19.

Limited research currently exists regarding disclosure of the DM or IM and its impact on analysts' forecasting accuracy, earnings quality, economic uncertainty and cost of equity. Previous research has relied on archival research to examine differences between the DM and IM methods and are limited by data availability. Our findings are particularly relevant to the US market with few US firms reporting the DM format.

This study aims to investigate whether the cash flow forecasts (CFF) of analysts can disseminate valuable information to the information environments of companies.

The author uses empirical archival methodology to conduct differences-in-difference analyses.

It is found that information asymmetry decreases in the treatment group following the initiation of CFF during the postperiod, which is consistent with the hypothesis of this paper.

To the best of the author’s knowledge, this study is the first among the cash flow forecast studies to demonstrate the usefulness of CFF in the mitigation of information asymmetry, a friction that is widespread in capital markets.

The study examines the influence of a firm's life cycle on the cash flow classification of Indian firms.

The study employs Dickinson's (2011) cash flow patterns to classify firm years under various life-cycle stages. Cash flow classification is employed to measure a firm's classification shifting (CS) practices. The study includes Indian firms listed on the Bombay Stock Exchange during 2012–2020, an ordinary least squares regression model, a fixed-effect model and a panel corrected with standard error regression method.

Firms face different opportunities and challenges at different stages of the firm's life cycle and therefore adopt cash flow CS. The results show that firms adopt cash flow CS during introduction, growth and decline stage of life cycle either to boost or to reduce operating cash flows.

This study is one of its kind to study the influence of a firm's life cycle on the cash flow classification of Indian firms.

The authors examine whether internal corporate governance mechanisms are effective in curbing cash flow manipulation through real activities, misclassification, and timing.

The sample comprises of firms from an emerging market, India with data for years 2004 through 2015. The authors use the methodology given in Roychowdhury (2006).

The authors find that corporate boards in India play an active role in curbing cash flow manipulation through real activities but fail to control cash flow manipulation through misclassification and timing.

The study suggests that corporate boards should pay more attention to the reported cash flow numbers. Regulators can reduce the opportunities available for cash flow misclassification by fixing relevant accounting and governance norms. Auditors can also help by critically focusing on the cash flow classifications presented by management.

This study, to the authors’ knowledge, is the first study that talks about the role of internal governance in a trade-off between different cash flow manipulation techniques.

This paper aims to study the impact of tax avoidance on corporate risk. It also examines the moderating impact of tax risk on the relationship between tax avoidance and firm risk.

Based on available information in the DATASTREAM database about a sample of French firms listed in the CAC 40 from 2010 to 2022, the study uses the feasible generalized least squares method to investigate the impact of tax avoidance on firm risk and the moderating impact of tax risk. To check the robustness of our results, the authors changed the measurement of variables to identify potential biases and they significantly mitigated the endogeneity concerns using instrumental variable regression. Additional estimations were performed, first by using book-tax differences (BTD) and its components, i.e. temporary and permanent, and second by retesting hypotheses of years before the outbreak of the corona virus disease 2019 (COVID-19) pandemic.

The results show that tax avoidance negatively affects the firm risk while tax risk has a positive effect on firm risk. More importantly, tax risk moderates the negative impact of tax avoidance on the firm risk. When tax avoidance is associated with a high level of tax risk, it leads to a high firm risk. Accordingly, tax avoidance should be considered in conjunction with tax risk when studying the effect put on the firm risk. Further analyses indicate that tax risk moderates the negative relationship between permanent BTD and firm risk.

The major limitation of this study is that it focuses only on French-listed firms, which make it difficult to generalize the results. Furthermore, the authors did not introduce governance variables into our models. An effective governance system and transparent information can reduce some of the perverse effects of risky tax avoidance by reducing the tax avoidance costs. The obtained results are of great interest to researchers who need to include the tax risk concept in their examination of the tax avoidance impacts.

The results are useful for investors wishing to make sound decisions regarding risky tax avoidance practices. Furthermore, the results may signal the need for French policymakers to make more efforts to reduce risky tax avoidance activities that are harmful to investors. They must enforce the existence and the reporting of a tax risk management strategy by firms.

This study contributes to the growing body of literature on the tax avoidance effects with a special focus on firm risk. This study provides the first French evidence of the role of tax risk in the relationship between tax avoidance and firm risk.

Prior studies suggest that, in an industry in which several public firms operate (i.e. greater public firm presence), uncertainty about business operations within the industry is reduced due to greater analyst coverage and quality of information disclosure. In this study, the authors examine how UK private firms respond to investment opportunities in fixed intangible assets (FIAs) in an environment characterised by greater public firm presence (PFP).

Using data from 61,278 (1,358) private (public) UK firms operating in ten sectors spanning from 2006 to 2016, the authors conduct this analysis by using panel econometric techniques.

The authors observe that private firms are more responsive to their FIA investment opportunities when they operate in industries with more PFP. Also, the authors find that firms in industries with better information quality use more debt and have longer debt maturity security but less internal cash flow. Overall, the findings indicate that PFP generates positive externalities for private firms by lessening industry uncertainty and enhancing more efficient FIA investment. The results are robust to endogeneity concerns.

A key limitation of the study is that it focuses on a single country (the UK) and therefore there is a likelihood that the results found are specific to this setting but not others, particularly developing and emerging economies. Thus, future studies could explore these ideas from the viewpoint of multiple countries.

Overall, the study demonstrates the importance of information disclosure in driving investment decisions of firms.

While this paper builds on the information disclosure and corporate investment literature, it is one of the first attempts, to the best of the authors’ knowledge, to explore how private UK firms respond to investment in FIAs in an environment characterised by greater PFP.

Business rescue, as a mechanism to aid financially distressed companies in South Africa, has received considerable academic and practical recognition. However, the business rescue plan is an overlooked and, perhaps, underdeveloped aspect of the regime. For stakeholders, this is the ultimate decision-making document. Creditors are the most influential stakeholders in business rescue proceedings owing to their voting rights. For creditors to make informed decisions and exercise their votes meaningfully, the business rescue plan should be transparent and adequately disclose relevant and reliable information. This study aims to identify creditors’ primary information needs to enhance the sufficiency and decision-usefulness of business rescue plans, not only to entice the vote of creditors but to enforce accountability from practitioners.

Using a qualitative research design, semi-structured interviews were conducted with 14 executives from 10 South African financial institutions.

The findings reveal that comprehensive disclosure of financial, commercial and legal information in business rescue plans was a critical antecedent for stakeholder decision-making. Additionally, leadership and social impact information were influential determinants. This study advances academic knowledge and, for practitioners, adds value to the development of business rescue plans. This can enhance creditors' confidence in supporting the rescue effort and approving the plan.

This study advances academic knowledge and, for practitioners, adds value to the development of business rescue plans. This can enhance creditors' confidence in supporting the rescue effort and approving the plan.

The originality of this article lies in its investigation of how creditors assess the information in BR plans as a precursor to supporting the company’s reorganisation in a creditor-friendly business rescue system such as South Africa. This study provides novel insights into the decision-making process, particularly how creditors assess BR plans, address information asymmetry and vote on the plan.

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.

Enterprise resource planning (ERP) systems that are equipped with numerous features and functionalities help to improve the profitability of construction corporations around the world through enhancing the efficiency of the functions related to cost management. Thus, the purpose of this study was to investigate the applicability of ERP systems for cost management of building construction projects in Sri Lanka.

A qualitative technique was used in this study, which comprised two-round Delphi-based semistructured interviews. Purposive sampling was used to determine the interviewees. Content analysis was used to evaluate the collected data.

The findings of this study identified the ERP system as a strategic tool for gaining a competitive advantage for an organization while confirming 14 uses of ERP systems and 16 stages of the cost management process. Eighteen issues were finalized at the end of the interview rounds while categorizing the suitable ERP applications at each stage of the cost management process.

Even though there are numerous distinct studies conducted on cost management and ERP systems, there has been a lack of studies conducted on the synergy between these two areas that can be adapted for the building projects in the Sri Lankan context. Therefore, the findings of this study can bring a new paradigm to the Sri Lankan construction sector by influencing the adaption of correct ERP systems at numerous project stages by providing a competitive edge.

This study aims to examine whether the newly available auditor tenure information is associated with non-GAAP earnings, as the recent requirement to disclose the initial year of auditor-client relationship in audit reports may give the impression that longer auditor tenure may be related to lower audit quality.

Using a sample of firm-quarters from 2017 to 2020, the authors conduct both univariate and regression analyses. We use hand-collected data for auditor tenure, SEC comment letters, and non-GAAP variables.

First, the authors find that the likelihood of disclosing non-GAAP earnings monotonically increases with auditor tenure on a univariate basis. Second, auditor tenure is negatively associated with aggressive non-GAAP reporting. Third, the authors document evidence of aggressive reporting in general; that is, items excluded in calculating non-GAAP earnings are associated with future performance. However, the association declines with longer auditor tenure. Finally, the authors report evidence that the likelihood of receiving an SEC comment letter that contains non-GAAP comments decreases with longer auditor tenure.

The results show that regulators need to consider both GAAP and non-GAAP disclosures’ costs and benefits when enacting auditor tenure regulation. Investors can benefit from the findings in evaluating the quality of non-GAAP earnings. The findings are also relevant to the SEC when allocating limited resources in monitoring non-GAAP reporting.

To the best of the authors’ knowledge, this is the first study showing that auditor tenure is associated with the quality of non-GAAP earnings. Given that financial reporting quality should be understood as a comprehensive system comprising both mandatory and voluntary disclosures, this study complements the literature that examines the effect of auditor tenure on financial reporting quality using GAAP reporting.