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Article
Publication date: 22 May 2023

Marwa Elnahass, Muhammad Tahir, Noora Abdul Rahman Ahmed and Aly Salama

This study examines the association between internal corporate governance mechanisms (i.e. board of directors and audit committee) and the information value of bank earnings. The…

Abstract

Purpose

This study examines the association between internal corporate governance mechanisms (i.e. board of directors and audit committee) and the information value of bank earnings. The authors comparatively assess this association across different bank types, Islamic versus conventional banks. The authors also investigate the mediating effect of Shariah governance.

Design/methodology/approach

The authors utilize a unique and an international sample of 723 bank-year observations representing 100 listed banks from 16 countries during the period 2007–2015. The authors investigate the characteristics of the board of directors and audit committee (i.e. size and independence) and employ three core analyses for earnings informativeness (i.e. earnings persistence, cash flow predictability and reliability of loan loss provisions). Additional analyses address Shariah supervisory boards’ (SSBs’) size, financial expertise and multiple outside directorships. The authors use the random-effect Generalised Least Squares (GLS) estimation technique and provide several robustness checks and sensitivities.

Findings

The authors find that, on average, having large and independent boards (and audit committees) increases the informativeness of reported earnings for banks. Conditional on bank type, our results report strong evidence for differential effects across the two alternative banking systems. In Islamic banks, large and independent board of directors (and audit committees) is positively associated with all measures of information value. There is insignificant evidence for conventional banks. However, SSBs show no significant effect on the reported earnings’ informativeness.

Originality/value

This is the first study, to the best of our knowledge, that empirically and comparatively assesses the information value of reported earnings in association with effective internal governance while recognizing the institutional characteristics of different bank types. The authors offer new insights to policymakers, investors and other stakeholders located within countries operating on a dual banking system. The results could help regulators to improve their rules/guidance related to double-layer governance and financial reporting quality.

Details

Journal of Accounting in Emerging Economies, vol. 14 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

Book part
Publication date: 19 February 2024

Quoc Trung Tran

This chapter analyzes how firms conduct their dividend policy around the world. In principles, firms are free to pay or not to pay dividends and choose dividend levels. However…

Abstract

This chapter analyzes how firms conduct their dividend policy around the world. In principles, firms are free to pay or not to pay dividends and choose dividend levels. However, in some countries, the government requires firms to pay dividends annually in order to protect minority shareholders. Brazil, Chile, Colombia, Greece, and Venezuela are five countries of mandatory dividend payments. In addition, using the Compustat database, we investigate how nonfinancial firms pay dividends over the period 2001–2020. The percentage of payers tends to decrease across four time periods including 2001–2005, 2006–2010, 2011–2015, and 2016–2020. Newly listed firms are less likely to distribute dividends than old firms. “Payers,” “Always payers,” and “Former payers” have positive earnings while “Nonpayers” and “Never payers” experience negative earnings. “Never payers” have the highest level of cash while “Always payers” and “Former payers” have the smallest cash reserves. Moreover, Asia-Pacific has the largest proportion of payers but it tends to decrease. America has the lowest proportion of dividend payers, but it tends to increase. Firms in developing countries are more likely to pay dividends. Both the proportion of payers and the average payout ratio of civil law countries are much higher than those of common law countries. The United States has the lowest percentage of paying firms and dividend payouts. Furthermore, construction and wholesale trade industries have the highest proportions of payers and payout ratios. Mineral and services industries are less likely to pay dividends. Tax rates for dividends and capital gains are diverse across countries.

Details

Dividend Policy
Type: Book
ISBN: 978-1-83797-988-2

Keywords

Article
Publication date: 4 April 2023

Shannon Jemiolo and Curtis Farnsel

This review analyzes the existing theoretical and empirical research on the relation between corporate taxation and corporate social responsibility (CSR). By synthesizing the…

Abstract

Purpose

This review analyzes the existing theoretical and empirical research on the relation between corporate taxation and corporate social responsibility (CSR). By synthesizing the current literature regarding the directional relation between tax avoidance and CSR, the authors are able to identify areas where further research on this relation should be targeted to maximize the public interest.

Design/methodology/approach

The authors conduct a literature review of articles published in leading journals in the fields of accounting, finance and management. Reputable working papers are included to support emerging trends in the research and suggest meaningful paths forward.

Findings

The literature reveals a complex relation between corporate tax avoidance and CSR. The published research offers theoretical and empirical support for both a substitutive and a complementary directional relation. An actionable takeaway from this review is that corporate taxation must be considered jointly with CSR when seeking to maximize the public interest.

Originality/value

The authors find a rapid influx of research over the past decade that explores the complex directional relation between corporate tax avoidance and CSR. This review will be useful to researchers that are interested in moving beyond a directional characterization of this relation. By synthesizing both established and emerging literature, the authors provide a foundation and direction for future research to examine issues that may directly inform tax or firm policies to increase overall stakeholder welfare.

Details

Journal of Accounting Literature, vol. 45 no. 3
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 13 February 2024

Md Shamim Hossain, Md.Sobhan Ali, Md Zahidul Islam, Chui Ching Ling and Chorng Yuan Fung

This study examines the impact of profitability, firm size and leverage on corporate tax avoidance in Bangladesh, an emerging South Asian economy.

Abstract

Purpose

This study examines the impact of profitability, firm size and leverage on corporate tax avoidance in Bangladesh, an emerging South Asian economy.

Design/methodology/approach

A balanced panel data of 62 firms from Dhaka and Chittagong stock exchanges in Bangladesh from 2009 to 2020 were used to run the regression. This study employed the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) to examine the hypotheses.

Findings

The findings show that large firms positively impact corporate tax avoidance. Similarly, profitability and leverage are positively associated with tax avoidance, and the results are significant. Furthermore, the study conducts robustness tests that confirm the findings.

Research limitations/implications

The use of cash effective tax rate (ETR) to investigate firms’ tax avoidance practices poses some limitations, and the results should be interpreted cautiously.

Practical implications

The current study may help policymakers better enhance tax collection from business firms. The findings could serve as a valuable input for effectively monitoring tax collection from large profit-earning firms.

Originality/value

To the authors' best knowledge, this is the first historical attempt in Bangladesh to use panel data to examine the relationship between the firm’s level characteristics and corporate tax avoidance. Panel data often provides greater flexibility with large data, simplifying calculation and statistical analysis.

Details

Asian Review of Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 2 October 2023

Alba Gómez-Ortega, Ana Licerán-Gutiérrez and Maria de la Paz Horno-Bueno

The “public interest” of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International…

Abstract

Purpose

The “public interest” of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International Accounting Standard (henceforth IAS) 39 and the Spanish banking sector had become one of the most provisioned in Europe. This makes it an interesting case study of the relationship between provisioning and income smoothing. The 2008 financial crisis revealed that provisions were insufficient and a reinforcement regulation process began in 2012. This paper aims to examine whether, since 2012, the Bank of Spain's regulatory effort on impairment accounting standards has induced less income smoothing, correcting its countercyclical effect.

Design/methodology/approach

A regression model is applied during the period 2005–2020, to test whether there is a trend change in the correlation between the level of provisions and annual earnings in 2012.

Findings

The results show that from 2012 onwards (when the Bank of Spain reinforced the regulation on provisioning), there was a correction in income smoothing behaviour.

Originality/value

This study provides empirical evidence that reinforces the claim that accounting policy can affect decision-making accounting practices, in this particular case, at the Bank of Spain.

Details

The Journal of Risk Finance, vol. 24 no. 5
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 6 April 2023

Marcelo Battesini and Jair Carlos Koppe

This study aims to propose an approach to assess the security of supply (SS) in a coal-fired electricity generation supply chain subject to public price regulation in Brazil. This…

Abstract

Purpose

This study aims to propose an approach to assess the security of supply (SS) in a coal-fired electricity generation supply chain subject to public price regulation in Brazil. This study characterizes the Brazilian scenario of coal-fired electricity generation, which represents less than 3.5% of the energy sources.

Design/methodology/approach

Data from six mining companies that supply a coal plant were analyzed in a case study. The risks were characterized and objectively estimated through a synthetic multidimensional index. Structural changes in the earnings before interest, taxes, depreciation, amortization and exploration indicator time series of coal companies (CC) were statistically detected.

Findings

Empirical evidence demonstrates that the supply chain has a low disruption risk (SS index equal to 0.74). However, when suppliers are individually analyzed, 48.64% of all coal shows moderated disruption risk, and 2.51% is under high risk. In addition, this study finds a drop in the financial results of CC related to public regulation of coal prices. This impacts the security of coal supply.

Research limitations/implications

This study discusses the influence of legal and regulatory policy risks in a coal power generation supply chain and the implications of the SS index as a management tool.

Originality/value

A novel SS index is presented and empirically operationalized, and its dimensions – environmental, occupational, operational, economic-financial and supply capacity – are analyzed.

Details

International Journal of Energy Sector Management, vol. 18 no. 2
Type: Research Article
ISSN: 1750-6220

Keywords

Article
Publication date: 10 November 2023

Sattar Khan and Yasir Kamal

This paper aims to investigate the impact of the revised Code of Corporate Governance 2017 (CCG-2017) clauses pertaining to board independence, mandatory inclusion of female…

Abstract

Purpose

This paper aims to investigate the impact of the revised Code of Corporate Governance 2017 (CCG-2017) clauses pertaining to board independence, mandatory inclusion of female directors, audit committee (AC) chair independence and directors’ expertise on earnings manipulation.

Design/methodology/approach

Using an unbalanced panel of 323 listed companies from 2015 to 2019, this study uses panel data regression models with a robust methodology called difference-in-differences to tackle the potential endogeneity.

Findings

This study’s findings show that, as compared to the pre-CCG-2017 period, board- and AC-related variables increased significantly in the post-CCG-2017 period. Furthermore, financial experts on the board and board independence have a negative effect on discretionary accruals (DAs), whereas female directors and DAs are positively related, as is real activity manipulation. The AC-related variables, such as AC independence, expertise in AC, and AC chair independence, are significantly different from the preperiod to the postperiod, whereas their relationship is not according to the hypotheses of the study. Moreover, these results are robust to additional analysis of the alternative proxies for female directorship and the endogeneity problem.

Practical implications

The findings of this study have implications for regulators and practitioners who are concerned with the functions of the board of directors (BOD). The findings of this research study show that earnings management (EM) may be reduced by independent and expert directors. However, board gender diversity is not reducing the EM. Therefore, the decision to appoint female directors to the board should be based on their business and professional attributes rather than simply filling quotas or blindly adhering to regulations. Moreover, the findings of this research may assist the regulator in encouraging listed firms to enhance board governance via independence, diversity and competency, which are useful for effective monitoring.

Originality/value

This study fills a gap in the literature by providing the first evidence of country-specific regulation (CCG-2017), concerning the BOD and AC-related clauses on EM in Pakistan, which is missing in the relevant literature general and in Pakistan in particular.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

Open Access
Article
Publication date: 9 November 2023

Islam Ibrahim and Heidi Falkenbach

This study aims to investigate the impact of international diversification on the value and operating efficiency of European real estate firms.

Abstract

Purpose

This study aims to investigate the impact of international diversification on the value and operating efficiency of European real estate firms.

Design/methodology/approach

The study is conducted using a panel fixed effects regression model to estimate the relationship of international diversification with firm value and operating efficiency. International diversification is mainly measured via the negative of the Herfindahl–Hirschman Index (HHI) using property-level data. Firm value and operating efficiency are proxied by financial ratios observed annually from 2002 to 2021 at the firm level.

Findings

The results demonstrate that international diversification has a negative effect on firm value. Additionally, it lowers operating efficiency by weakening a firm's ability to generate operating earnings from its assets. By examining whether the reduction in operating efficiency is due to the rental income channel or the capital gains channel, the authors find strong statistical evidence that international diversification negatively impacts capital gains. International diversification is negatively associated with net gains from property valuations (unrealized capital gains) and net profits from property disposals (realized capital gains).

Research limitations/implications

The empirical analysis is limited to Europe.

Originality/value

This paper extends the geographical diversification literature. While existing literature focuses on domestic diversification within the United States, this paper explores the effects of international diversification on European real estate firms. To the extent of the authors' knowledge, this is the first paper to examine the impact of geographical diversification on capital gains.

Details

Journal of European Real Estate Research, vol. 16 no. 3
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 19 May 2023

Jae-Woo Park, Saeyeon Roh, Hyunmi Jang and Young-Joon Seo

This study aims to provide a meaningful comparison of airports’ performance and better understand the differences observed in the analysed airport performance by presenting a…

Abstract

Purpose

This study aims to provide a meaningful comparison of airports’ performance and better understand the differences observed in the analysed airport performance by presenting a model to analyse the relationship between operational and financial performance and airport characteristics.

Design/methodology/approach

This study uses a quantitative analysis approach. The Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and entropy weight were utilised to analyse 17 airports in three Airports Council International regions: Asia, Europe and North America. Through operational and financial factors, these sample airports identified the most efficiently operated airports from 2016 to 2019.

Findings

Overall, Asian airports were superior in operational and financial efficiency. Unlike operating performance, the sample airport’s financial and total performance results show a similar trend. There were no noticeable changes in operational factors. Therefore, differences in financial variables for each airport may affect the total performance.

Practical implications

This study provides insightful implications for airport policymakers to establish a standardised information disclosure foundation for consistent analysis and encourage airports to provide this information.

Originality/value

The adoption of Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) to debt ratio and EBITDA per passenger, which had previously been underutilised in the previous study as financial factors, demonstrated differences between airports for airport stakeholders. In addition, the study presented a model that facilitates producing more intuitive results using TOPSIS, which was relatively underutilised compared to other methodologies such as date envelopment analysis.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 35 no. 11
Type: Research Article
ISSN: 1355-5855

Keywords

Article
Publication date: 16 October 2023

Andrew Dymock, Peter Wells and Brett Govendir

This paper aims to consider the relevance of asset impairments when evaluating stewardship by management.

Abstract

Purpose

This paper aims to consider the relevance of asset impairments when evaluating stewardship by management.

Design/methodology/approach

This paper considers association of earnings (including and excluding asset impairments) with contemporaneous stock returns which are used as a measure of management performance and demonstration of stewardship.

Findings

Evidence is provided of earnings including asset impairments (an accounting measure of current measure firm performance) having a higher explanatory power for contemporaneous stock returns (an objective evaluation of current period firm performance) than earnings exclusive of asset impairments. Consistent with this, recognized asset impairments are significantly associated with contemporaneous stock returns. These results occur across firm years generally, as well as for firm years exhibiting indicators of impairment and firm years recognizing asset impairments.

Research limitations/implications

This paper adds to the literature providing evidence of asset impairments not being recognised on a timely basis. Additionally, challenges are identified in evaluating the relevance of accounting information for so-called growth firms.

Practical implications

These findings support continued recognition of asset impairments in the Statement of Profit or Loss if stewardship is accepted as an objective for financial reporting. It also suggests issues with the recognition of asset impairments that might be addressed by enhanced disclosure.

Originality/value

This paper is distinctive in that it considers the relevance of accounting information for evaluating stewardship, as distinct from decision-making. It also considers alternate measure of performance (earnings including and excluding asset impairments) for all firms rather than only those disclosing an alternate measure (i.e. a fair horse race)

Details

Pacific Accounting Review, vol. 35 no. 5
Type: Research Article
ISSN: 0114-0582

Keywords

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