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The paper aims to discuss the management of financial market scandals using two different approaches – regulatory and values‐based.
Abstract
Purpose
The paper aims to discuss the management of financial market scandals using two different approaches – regulatory and values‐based.
Design/methodology/approach
The paper discusses the motivations behind financial scandals to occur and then explains in detail both the approaches. The paper first presents the elements of the regulatory approach. Using the teachings of Bhagavan Sri Sathya Sai Baba, the values‐based approach are delineated. The paper also compares the two approaches and identifies their respective utilities.
Findings
While both the regulatory and values based approaches have their own utilities; stressing the values‐based approach helps with preventing financial scandals on a sustainable basis.
Practical implications
The practical implication is that it is necessary to stress the evocation of human values among investors and capital market intermediaries so that scandals can be avoided.
Social implications
The social implication of the paper is that values evocation is very important to tackle the behavioural motivations behind financial scandals. Unless values are evoked, the root causes of financial scandals will not be removed. In such cases, regulation will have only a limited effect.
Originality/value
The paper uses the philosophy and teachings of Bhagavan Sri Sathya Sai Baba to develop value guidelines to prevent financial scandals.
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Marco Bellucci, Diletta Acuti, Lorenzo Simoni and Giacomo Manetti
This study contributes to the literature on hypocrisy in corporate social responsibility by investigating how organizations adapt their nonfinancial disclosure after a social…
Abstract
Purpose
This study contributes to the literature on hypocrisy in corporate social responsibility by investigating how organizations adapt their nonfinancial disclosure after a social, environmental or governance scandal.
Design/methodology/approach
The present research employs content analysis of nonfinancial disclosures by 11 organizations during a 3-year timespan to investigate how they responded to major scandals in terms of social, environmental and sustainability reporting and a content analysis of independent counter accounts to detect the presence of views that contrast with the corporate disclosure and suggest hypocritical behaviors.
Findings
Four patterns in the adaptation of reporting – genuine, allusive, evasive, indifferent – emerge from information collected on scandals and socially responsible actions. The type of scandal and cultural factors can influence the response to a scandal, as environmental and social scandal can attract more scrutiny than financial scandals. Companies exposed to environmental and social scandals are more likely to disclose information about the scandal and receive more coverage by external parties in the form of counter accounts.
Originality/value
Using a theoretical framework based on legitimacy theory and organizational hypocrisy, the present research contributes to the investigation of the adaptation of reporting when a scandal occurs and during its aftermath.
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Fernanda Leão and Delfina Gomes
In the context of Portugal, this study examines the stereotypes of accountants held by laypeople and how they are influenced by financial crises and accounting scandals.
Abstract
Purpose
In the context of Portugal, this study examines the stereotypes of accountants held by laypeople and how they are influenced by financial crises and accounting scandals.
Design/methodology/approach
To better understand the social images of accountants, the authors adopt a structural approach based on the big five model (BFM) of personality. The authors test this approach on a Portuguese community sample (N = 727) using a questionnaire survey. The results are analyzed considering the socioanalytic theory.
Findings
The results suggest the existence of a stereotype dominated by features of conscientiousness, which is related to the superior performance of work tasks across job types. This feature comprises the core characteristics of the traditional accountant stereotype, which survives in a context challenged by financial scandals and crises. The findings highlight the social acceptance of accountants as an occupational group but do not suggest the possibility of accountants benefiting from the highest levels of social status when considered in relation to the traditional accountant stereotype.
Originality/value
By combining the BFM and the socioanalytic theory, this study provides a unique theoretical approach to better understand the social images of accountants. The findings demonstrate the suitability of using the BFM to study the social perceptions of accountants. They also indicate a paradox based on the survival of the traditional stereotype. This stereotype appears to be resistant to scandals and financial crisis, instead of being impaired, giving rise to another prototype with concerns about integrity.
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Daniel W. Richards, Sarath Lal Ukwatte Jalathge and Prem W. Senarath Yapa
This paper researches the professionalization of financial planning in Australia. The authors investigate how the institutional logic of major institutions inhibits this…
Abstract
Purpose
This paper researches the professionalization of financial planning in Australia. The authors investigate how the institutional logic of major institutions inhibits this occupation from moving toward a professional status.
Design/methodology/approach
The study uses documentary analysis of government inquiries into Australian financial services from 1997 to 2017 to ascertain the various institutional logics relating to the professionalization of financial planning. The method involves generating ideas from the data and applying an institutional logic framework to make sense of impediments to the professionalization of financial planning in Australia.
Findings
The regulator adopted a self-regulation logic that empowered financial institutions to govern financial advice. These financial institutions have a logic of profit maximization that creates conflicts of interest in financial planning. The financial planning professional bodies adopted a logic of attracting and retaining members due to a competitive professional environment. Thus, financial planners have not been defined as fiduciaries, professional standards have not increased and an ineffective disciplinary resolution system exists.
Research limitations/implications
This research illustrates the various institutional logics that need to be addressed to professionalize financial planning in Australia. However, the data used is limited to that drawn from the parliamentary inquiries.
Originality/value
Prior research on the emergence of professions such as accounting has shown that financial institutions are sites of professionalization. This research shows that financial institutions impede professionalization in financial planning. Also, where the state granted legitimacy to other professions, this research indicates that the state regulator's logic of self-regulation has not legitimized financial planning.
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David Brady, Katelin Isaacs, Martha Reeves, Rebekah Burroway and Megan Reynolds
Although women remain substantially underrepresented in the top echelons of large corporations, a non‐trivial presence of female executives has emerged in recent years. The…
Abstract
Purpose
Although women remain substantially underrepresented in the top echelons of large corporations, a non‐trivial presence of female executives has emerged in recent years. The purpose of this paper is to focus on the firm characteristics that predict the sex of the executive office holder, classifying the plausible firm characteristics that could explain the presence of female executives into four explanations: sector, size, stability, and scandal.
Design/methodology/approach
This paper provides perhaps the first large‐sample analyses of the sex of executive officers in Fortune 500 firms by analyzing a sample of 3,691 executives in 444 Fortune 500 companies.
Findings
In the paper's sample, 252 of the executives, or 6.4 percent of the sample, are women. The authors' analyses reveal that women are less likely to be chief executive officers and chief operations officers, but more likely to be chief corporate officers and general counsels. Female executives are somewhat less likely to be present in the construction sector, but there is evidence that they are more likely to be present in retail trade. Firms with greater assets and sales growth are less likely to have female executives. Using originally collected data, it is shown that firms that have experienced a scandal in recent years are more likely to have female executives. However, the nature and quantity of scandals do not have significant effects.
Originality/value
Ultimately, the authors' analyses reveal that key firm characteristics predict whether an executive office is held by a woman.
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Muhammad Rashid, Naimat U. Khan, Umair Riaz and Bruce Burton
Financial shenanigans are the omissions or actions undertaken with the purpose of misrepresenting an organisation's financial statements. Many examples now exist of such behaviour…
Abstract
Purpose
Financial shenanigans are the omissions or actions undertaken with the purpose of misrepresenting an organisation's financial statements. Many examples now exist of such behaviour emerging in the context of a desire to deceive the users of financial reports. In this context, research has illustrated how investors can find themselves impacted by such behaviour, with incorrect decision-making around investment decisions being a major issue. However, auditors' perspectives, of obvious importance in such scenarios, given these individuals' role in attesting to the veracity of financial disclosures, have not been investigated. The aim of this study is to address this gap by seeking the experiences of auditors in the developing nation of Pakistan, an environment in which the significant impact of financial improprieties is well-documented.
Design/methodology/approach
Interviews with 50 Pakistani-based auditors were conducted to gather perceptions about the nature and prevalence of financial shenanigans. The questions posed were structured to address issues relating to both the drivers of and methods used to operationalise financial malfeasance.
Findings
The views expressed by the participants suggest that this type of malpractice is common, with a variety of forms employed and a level of audacity and shamelessness is striking. The results indicate the absence of the three institutional pillars conventionally associated with motivating organisational attempts to legitimise behaviour and maintain social contracts. When considered alongside recent findings that the audit profession in Pakistan may not always play an effective monitoring role, we argue that the evidence suggests the existence of motivations for legitimising strategies are not yet fully understood.
Research limitations/implications
This contention helps address recent calls for investigation of issues around legitimising tendencies where theoretical understanding is incomplete. A full understanding of the embedded practices will provide capital providers with the opportunity to make more informed decisions regarding their investments in Pakistani firms by highlighting the financial shenanigans involved, including the sheer audacity apparently associated with the observed behaviour.
Originality/value
Earnings management and auditing have not been studied widely in Pakistan despite the abundant and persistent nature of corporate scandals across the nation for many decades. Whilst implementation (and enforcement) of some accounting and auditing standards have taken place recently, the financial collapses continue, and understanding regarding the on-going fraud is urgently needed. The extent and shameless nature of the perceived behaviour are striking, suggesting that those closest to financial reporting in Pakistan see fraudulent financial reporting as being close to, if not yet fully representative of, normal practice.
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Thereza Raquel Sales de Aguiar
The purpose of this paper is to explore issues related to the use of financial accounting and reporting by discussing three interrelated areas: the theoretical foundations, the…
Abstract
Purpose
The purpose of this paper is to explore issues related to the use of financial accounting and reporting by discussing three interrelated areas: the theoretical foundations, the framework and practicalities. The paper also discusses participatory and pluralistic approaches to accounting and corporate governance as alternatives to address some of these issues.
Design/methodology/approach
This is a narrative research based on deductive thematic analysis of secondary data. This study provides a general overview of the existing literature of the limits of the use of financial accounting and its impact on business and society.
Findings
In terms of the theoretical foundations, this paper contrasts financial accounting explained by agency theory and a dialogic accounting approach. The findings of this study emphasise the need to establish an accounting framework for the interests of the many (not the few) in conjunction and simultaneously with a participatory and pluralistic approach to corporate governance. Finally, this paper explores accounting for carbon emissions and recent financial accounting scandals to analyse the impact of the inappropriate use of financial accounting and reporting in business and society.
Originality/value
This paper provides an overview of the limits of the use of financial accounting by exploring its theoretical background, framework and practicalities. The paper also discusses the need for new accounting and corporate governance frameworks that allow a pluralistic and participatory approach to the decision-making of companies.
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In light of the recent 1MDB Scandal in Singapore, this research paper aims to examine the deterrent effect of Singapore’s sanctions against money laundering within financial…
Abstract
Purpose
In light of the recent 1MDB Scandal in Singapore, this research paper aims to examine the deterrent effect of Singapore’s sanctions against money laundering within financial institutions.
Design/methodology/approach
Case laws and legislations are examined as are relevant reports by regulators.
Findings
Singapore’s anti-money laundering (AML) regimes may not act as an effective deterrent against money laundering activities within financial institutions. This is due to the overreliance on the theory of deterrence-based thinking, the lack of an “enforcement pyramid” and economic factors which influence regulators to be lenient towards financial institutions.
Research limitations/implications
There are limited data available in relation to regulators in Singapore and the prevalence of money laundering activities within Singapore’s financial institution. Any discussions within this article is based on the impressionistic observations of this author, which may not reflect the true state of affairs in Singapore.
Practical implications
Those who are interested in examining the relationship between money laundering and the deterrent effect of sanctions against financial institutions will have an interest in this topic.
Originality/value
The value of the paper is to demonstrate that Singapore’s AML regimes may not act as an effective deterrence against money laundering activities within financial institutions.
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Keywords
Chad Albrecht, Chad Turnbull, Yingying Zhang and Christopher J. Skousen
In recent years, many of South Korea's most prominent organizations have been involved in large‐scale frauds. These frauds have had a devastating impact on South Korean society…
Abstract
Purpose
In recent years, many of South Korea's most prominent organizations have been involved in large‐scale frauds. These frauds have had a devastating impact on South Korean society and resulted in unnecessary suffering and high levels of unemployment for the middle class. With the aim of understanding the causes of these scandals, this paper takes an in‐depth look at the chaebol organization.
Design/methodology/approach
The paper takes a conceptual approach by first examining chaebols in greater detail. The paper then examines classical fraud theory, including the fraud triangle. The paper then examines chaebol organizations through the lens of the fraud triangle. By doing so, it is possible to understand why chaebols, in particular, are susceptible to fraud and corruption.
Findings
The paper provides evidence to suggest that chaebol organizations have inherent fraud risks. In order to minimize these fraud risks, chaebol organizations must address these issues.
Originality/value
This paper fulfills an important area of research by providing basic information about the relationship between chaebol organizations and fraud.
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The purpose of this paper is to provide enhanced insights on corporate governance failures which contributed to various financial crimes in major banking institutions and whether…
Abstract
Purpose
The purpose of this paper is to provide enhanced insights on corporate governance failures which contributed to various financial crimes in major banking institutions and whether those involved have been held sufficiently accountable in the USA and the UK.
Design/methodology/approach
This interdisciplinary doctrinal research relies on primary and secondary data and is complemented by the case study approach.
Findings
Case insights demonstrate that a few major banks and isolated numbers of bankers at the lower echelons were held accountable in the USA but to a lesser degree in the UK. This contrasts sharply with the earlier Enron-type corporate financial reporting scandals or the much earlier Savings and Loans Crisis; but recent criminal charge practices against mega banks suggest a policy shift.
Research limitations/implications
The paper findings suggest the need for further research in this under-researched area, while the banking communities in the USA and the UK may be prompted to review their corporate governance practices.
Originality/value
This interdisciplinary research uses corporate law and criminological research to provide enhanced insights on financial crimes perpetuated in major banks in the USA and the UK.
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