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Following the adoption of International Financial Reporting Standards (IFRS), firms are required to recognize gains or losses from investment property revaluation in the income statement, instead of equity in the balance sheet. This results in both a “materiality effect” (as auditors set a higher materiality level and require lower audit efforts) and a “cushion effect” (as revaluation gains serve as a cushion and reduce earnings manipulation incentives). Utilizing this unique setting, this study investigates whether the use of fair value measurement for investment property affects audit pricing before and after IFRS convergence in the Hong Kong real estate industry.

Using a sample of 78 real estate companies listed on the Hong Kong Stock Exchange in the pre-IFRS period (2001–2004) and the post-IFRS period (2005–2008), this study employs multivariate regression analyses to test the research hypotheses with respect to the association between investment property revaluation and audit fees and the role of corporate governance structures in the context of family control.

The empirical results suggest that audit fees decrease with revaluation gains or losses from investment property revaluation after IFRS convergence, but not before. Furthermore, the negative association is stronger in companies controlled by founders, with proportionally more independent directors on the board and with a smaller board size. This is consistent with the moderating effect of corporate governance.

The findings shed more light on the consequences of fair value accounting for non-financial assets and are of interest to regulators for assessing the benefits of the wide use of fair value measurement under IFRS in emerging markets, especially where the corporate ownership structure is typically controlled by founding families. This study also provides recommendations for the audit community to fully consider the impact of asset revaluation on audit procedures and audit pricing.

This study aims to investigate the impact of earnings predictability and truthfulness on nonprofessional investors’ investment willingness.

Earnings predictability is captured by quarterly earnings autocorrelation, and earnings truthfulness is indicated by real earnings management (REM). The average of investment attractiveness and willingness measures investment willingness. The authors use experiments to isolate the impact of quarterly earnings autocorrelation and REM on investors’ investment behaviors.

From the 2 × 2 design, the authors observe that investors weight more on earnings predictability than earnings truthfulness.

The generalization of the findings may be constrained for the following reasons. First, the authors use only one proxy, REM, to measure earnings truthfulness. In addition, the authors provide the participants, Amazon Mechanical Turk, with earnings predictability. Results may no longer hold if each participant has different understanding and analysis of earnings predictability.

In periods of unprecedented and severe financial uncertainty (i.e. the COVID-19 pandemic), investors rely more on earnings predictability than on earnings truthfulness. The study assists managers to strategically emphasize the predictability of earnings to attract investors, especially when firms face financial challenges or uncertainty.

This study contributes to understanding investor behavior and the critical role of earnings predictability and truthfulness in shaping investment decisions.

This paper contributes to the literature of earnings properties in financial reporting, particularly by shedding light on the nuanced interplay between earnings predictability and earnings truthfulness. The research also demonstrates that elevated earnings autocorrelation indirectly stimulates investment willingness by enhancing the investors’ perception of earnings persistence of targeted firms.

This study explores whether hard regulatory control decreases the level of earnings management in local governments. The implementation of a new regulatory approach by Norwegian authorities provides the opportunity for an empirical study.

The authors adopt a two-stage strategy to investigate the existence of earnings management, using the Jones (1991) and modified Jones (Dechow et al., 1995) models to construct a random-effects model.

The authors test the hypothesis that, given decentralisation of control, there will be an increase in opportunistic financial reporting. This study's findings suggest that this is not the case, thereby indicating that a soft control regime does not diminish discipline in municipalities.

This study has practical implications for policymaking in the public sector. Its findings suggest that municipalities do not engage in more earnings management under a soft regulatory regime. Hence, other authorities should consider adopting a soft regulatory approach to controlling local governments and their financial reporting systems.

This study contributes to a growing body of literature regarding earnings management by local governments. The authors investigate a hypothesis previously untested in the literature by comparing the degree of earnings management under different regulatory control regimes.

The purpose of this paper is to investigate the relationship between tax avoidance and earnings persistence in the light of a developing economy, with the main focus on China.

In the analysis, the author conducts a survey on the tax avoidance situation of Chinese listed companies from 2012 to 2020. Then, a multivariate regression analysis is performed in order to analyse the relationship between corporate tax avoidance and earnings persistence.

The findings of the present study show that tax avoidance has a significant positive effect on earnings persistence. However, when the degree of tax avoidance is high, the “risk effect” of tax avoidance exceeds the “value effect”, and tax avoidance will reduce the persistence of earnings. This conclusion is even more prominent when the company is non-state-owned. Further research shows the increase of institutional investors’ shareholding ratio can improve “value effect” of tax avoidance, lessen “risk effect” of tax avoidance, and positively affect the relationship between tax avoidance and earnings persistence.

This study provides evidence for investors to understand the dual effect of tax avoidance on earnings persistence. The results may have implications for regulatory bodies. They can provide a better understanding of the corporate governance role of institutional investors in curbing opportunistic tax avoidance.

This study enriches the research on tax avoidance effects by analysing the impact of tax avoidance on earnings persistence. This study also compensates for the shortcomings of analysing earnings persistence mainly from the perspective of tax differences in the past, and promotes the study of the corporate governance effects of institutional investors under different levels of tax avoidance.

This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors also investigate whether investor protection moderates the relationship between PMC and forecast attributes.

The sample covers 49,578 firm-year observations from 38 countries. This study uses an ordinary least squares regression, a Heckman two-stage regression and an instrumental two-stage least squares regression.

This study finds that PMC is associated with higher forecast accuracy and lower dispersion. The results also show that investor protection enhances the effect of PMC on forecast accuracy and dispersion. These findings imply that countries with strong investor protection have a better information environment, as exhibited by the stronger relationship between PMC and analysts’ forecast properties.

The findings highlight the importance of strong governance mechanisms in both the country and industry environments. Policymakers, including government agencies and financial regulators, can leverage these insights to formulate regulations that promote competition, ensure investor protection and facilitate informed investment decisions.

This study advances our understanding of how PMC affects analysts’ earnings forecast attributes. In addition, it pioneers evidence of the moderating role of investor protection in the relationship between PMC and forecast attributes.

Both the SEC (Securities and Exchange Commission) and the popular press have routinely criticized firms for the complexity of their financial disclosures. This study aims to investigate how financial analysts respond to the tone complexity of firm disclosures.

Using approximately 20,000 earnings conference call transcripts of S&P 1,500 firms between 2005 and 2015, the authors first calculate the abnormal negative tone, the measure of tone complexity; then use such tone measure in econometric models to examine analyst forecast behavior. The authors also test the robustness of the results under different model specifications, tone word lists and alternative tone measure calculations.

Consistent with the notion that analysts respond to the information demand from investors and incur more costs and effort to analyze firm disclosure when the tone is more complex, the authors find that higher tone complexity is positively and significantly associated with more analyst following, longer report duration, more forecast revisions, larger forecast error and larger forecast dispersion. In addition, the authors find that tone complexity has a long-term impact on analyst following but has a limited long-term impact on analyst report duration, analyst revision, forecast error and dispersion.

This study complements existing literature by highlighting the information role of financial analysts and by providing evidence that analysts incorporate the management tone disclosed during conference calls to adjust their forecasting behaviors. The results can be used by policymakers as evidence and support for further improving firm communication from a new dimension of disclosure tone.

This study aims to study the impact of earnings quality on firms’ financial performance.

An unbalanced panel data of 237 small- and medium-sized Portuguese companies from the mold industry, using 2010–2018 yearly data was analyzed. While most studies focus only on earnings management when assessing earnings quality, in this study six proxies for earnings quality are used, namely, accruals quality (a proxy for earnings management), earnings persistence, earnings predictability, earnings smoothness, earnings timeliness and earnings conservatism. Moreover, two proxies of financial performance are considered, the return on assets and the economic value added. An econometric model was estimated using either a fixed-effects or a random-effects specification to account for the individual firm-specific effects and ensure heteroscedasticity corrected estimates.

The results show that managers must be concerned with the quality of reported earnings, as it can affect positively firms’ financial performance, especially regarding accruals quality. Persistence, predictability, smoothness, timeliness and conservatism are shown not to exert significant influence on financial performance in the sample.

This work contributes not only as a literature review on these thematic but also to firms’ managers and stakeholders, who have information that helps them select strategies that guarantee earnings quality and improve firms’ financial performance.

This study proposed an econometric model that studies the relationship between earnings quality (using several proxies for it) and financial performance that can be applied to all companies.

This paper aims to examine whether firms meeting or just beating an earnings benchmark engage in tone management in earnings conference calls to complement earnings management in the UK context. It also investigates whether the audience tone in beating or just meeting earnings fails to predict future performance.

This study was performed using a sample of non-financial UK firms listed in the FTSE 350 index over the period 2010–2015.

The findings show that firms that exercise more earnings management to meet or just beat earnings are positively associated with the abnormal tone during earnings conference calls. The outcomes also reveal that the audience’s tone of firms meeting or just beating an earnings benchmark fails to predict future performance. This confirms the effectiveness of the tone management in managing the perception of audience.

This study highlights the need for increased accountability by firms on earnings conference call. It also supports academics and practitioners in understanding the management discretion used in reporting and communication during the earnings conference call. Overall, the results of this study are beneficial for regulators, policymakers and professionals, regarding confirming the need for the earnings conference calls to be regulated.

To the best of the authors’ knowledge, this is the first study that examines the association between earnings management and tone management in the UK earnings conference calls. It adds to the existing literature by examining the self-serving behaviour of managerial tone during earnings conference calls within a sitting in which meeting or just beating a benchmark is used. Unlike several studies that explain the behaviour of tone as a signalling strategy, this study reveals that the tendency of impression management behaviour can explain the tone management.

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.

The authors examine the effect of climate risk on accounting conservatism for a sample of listed companies operating in 26 developing countries.

The authors employ the Climate Risk Index (CRI) developed by Germanwatch to capture the severity of losses due to extreme weather events at the country level. The authors use different approaches to measure firm-level accounting conservatism.

The authors find that greater climate risk leads to a lower level of accounting conservatism. The results hold even after using different estimation methods.

Although the authors' analysis is limited to the period 2007–2016, it could be helpful for standard setters such as International Accounting Standards Board (IASB) and International Sustainable Standards Board (ISSB) as they may consider the potential effect of climate risk in their international standards.

The negative impacts of climate risk on the quality of financial reporting as proxied by accounting conservatism could trigger regulators and standard setters to require disclosure of information relating to climate risks and to incorporate climate-related risks in their risk management systems. In addition, for policymakers, incorporating accounting conservatism as a financial quality reporting standard could help promote greater transparency, accuracy and reliability in financial reporting in the context of climate risk.

The authors add to the literature on international differences in accounting conservatism by showing that climate risk significantly affects unconditional and conditional conservatism. The authors' results provide fresh evidence of the dark side of climate change. That is, climate risk is shown to decrease financial reporting quality.