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The purpose of this paper is to analyse the relationship between financial statement informativeness (FSI) and intellectual capital disclosure (ICD).

While FSI was measured as the explanatory power of financial information in explaining market value, ICD was collected through content analysis of annual reports. A sample of 126 US companies, divided into two groups – high-tech and low-tech companies – were used in this study. Empirical analysis was carried out using the Poisson regression method.

The results show a negative (substitutive) relationship between FSI and ICD, especially in high-tech companies. This indicates that companies with low FSI disclose more information about their IC in annual reports.

This study confirms the role of voluntary ICD as a solution towards mitigating the problem of the distortion of financial information due to the lack of accounting recognition of IC as an asset in the financial statements.

This is the first empirical study to analyse the relationship between FSI and ICD. Therefore, it serves as feedback to the regulators and standard-setters that recently published recommendations on voluntarily disclosing IC.

The purpose of this paper is to examine the effects of IFRS adoption on financial statement data and their usefulness in Greece. Additionally, the authors examine the effect on the informativeness/usefulness of financial statement data for stock prices in Greece and the effect of the Greek Financial Crisis.

This study examine the effects of IFRS adoption on financial statement data and their usefulness in Greece. Additionally, the authors examine the effect on the informativeness/usefulness of financial statement data for stock prices in Greece and the effect of the Greek Financial Crisis.

The results indicate that several financial ratios were dramatically affected by IFRS adoption in Greece. In contrast to other countries, IFRS has not resulted in improved statistical behavior of these ratios in Greece: the ratios are highly skewed and the normality of their distribution is not improved. Additionally, when examining the usefulness of financial statement data for stock prices in Greece, results indicate that IFRS adoption did not necessarily improve the usefulness of the financial statements. However, the authors do find that since the financial crisis in Greece these IFRS financial statement measures are significant when regressed on stock prices.

The authors are not able to necessarily rule out other causal factors that may have occurred in Greece during the sample period. The authors do look at the financial crisis as a potential confounding factor, but other factors such as political or macroeconomic factors have not necessarily been ruled out. Also, this study only examines the Greek situation.

This study may have implications for other countries in similar situations as that found in Greece – IFRS adoption and severe economic crisis.

To date only the impact of IFRS on earnings, stockholders’ equity, and some financial ratios has been investigated in prior Greek research studies (Hellenic Capital Market Commission, 2006; Grant Thornton, 2006). However, no academic research has been developed in this area. In addition, the authors examine the impact of IFRS on stock prices emphasizing the mandatory financial disclosure and IFRS adoption in a financially and politically distressed country – Greece.

This study aims to measure the magnitude of information asymmetry between insiders and outsiders in Indian equity market. The study also investigates the effect of major information sources that affect information asymmetry namely, the informativeness of financial statements, news reports about the company and analyst follow-up.

Six-month profitability of insider trade was used as the proxy to measure information asymmetry. Fama-MacBeth two-stage regression was used to analyse the effect of information sources upon information asymmetry.

The results of the analysis demonstrate that in comparison with findings of similar studies the level of information asymmetry is comparatively high in India. On an average, profitable insider traders in India earn 19.28 per cent return than outside investors. Purchase transactions are more profitable than sales transactions, while the size of company and information asymmetry is associated inversely. Further, news and analyst follow-up are inversely associated with information asymmetry whereas informativeness of financial statements has little effect on information asymmetry.

The study have important insights for corporates in insider information management and legal compliance of insiders’ market activities. Results pointing to the requirements of a deeper Regulatory monitoring and stringent legal framework.

The result validates the concerns of investor protection against informed trade.

The measurement of information asymmetry using profitability of insider trade is novel in Indian context even though the methodology is often used in the literature.

The purpose of this study is to investigate the implementation of International Financial Reporting Standard (IFRS) 16 in developing countries to enhance asset pronouncements or the quality of opaque accounting information for listed firms’ leasing transactions.

This study designed ordinary least square (OLS) regression models to examine the hypotheses in two ordered tests. The first-order test ascertained the association between fundamental accounting information and earnings or stock prices. Then, the second-order test was nested to add the instrument variable to the first-order one. In addition, the researchers selected 17 Asia-Pacific countries.

First, this study contributes to the fair value of firms’ asset measurements, and the accounting discipline requires adaptive scalability to produce future potential cash flows. Second, it reduces literature gaps between the pros and cons of the opaqueness of assets. In addition, these research arguments would be the referee for reducing information’s opacity. Finally, this study demonstrates the impact of IFRS 16’s implementation on firms’ conservatism levels and entropy’s information quality, requiring the regulators to accommodate these issues.

Due to the implementation of IFRS 16, the authors are neutral about the impacted financial statements and political consequences for these Asia-Pacific listed firms and countries. First, we propose the uniqueness of problematic elaboration since implementing IFRS 16 results in a more pronounced or opaque information quality due to vulnerable complexities in the financial statements. Second, this implementation is associated with hierarchical information and conservatism, producing accounting information entropy or negentropy. However, the hierarchy theory suggests various levels of conservatism that could increase or decrease the information’s quality.

Anecdotal concerns expressed regarding developed capital markets suggest that the information provided in financial statements has lost its value relevance to equity holders over time. The purpose of this paper is to investigate the issue from the perspective of Kuwait, which is a frontier market.

Consistent with prior research, the design employs the price regression model. A total of 2,490 observations were collected from all firms listed on the Kuwait Stock Exchange (KSE) over a period of 21 years (1994-2014).

Although this study documents a notable decline in both the value relevance of earnings and book value for equity holders over this period, the results suggest that the decline in the value relevance of earnings was deeper and more pronounced than that of book value.

Because a fundamental prerequisite for the value relevance of accounting information is the quality of the financial reporting environment, the results are useful for regulators because they provide an assessment of the effectiveness of the current financial reporting environment. The results highlight the need for improvements because higher-quality information helps equity holders to determine value more precisely. As the timely dissemination of financial statements is an essential ingredient contributing to the relevance of financial statements, a direct implication of the study’s findings for the management of KSE companies is that timely reporting of financial statements may mitigate the observed decline of the value relevance of financial statements produced by KSE companies.

This study contributes to the capital market research regarding changes in the value relevance of financial statement information through an empirical examination of a frontier capital market.

Accounting comparability has been the subject of significant interest in empirical financial accounting research. Recent literature, particularly that following De Franco et al.’s (2011) influential study, has focused on utilizing the output of the financial reporting process to measure accounting comparability. In this paper, we conduct an early survey of studies using output-based measures of comparability. We provide two distinct contributions to the literature. First, we describe and comment on four important measurement concepts as well as the studies that introduced them. With this methodological contribution, we aim to facilitate the measurement choice for empirical accounting researchers engaged in comparability research. Second, we classify the sub-streams of literature and related studies. In providing this content-related contribution, we sum up what has already been achieved in output-based accounting comparability research and highlight potential areas for prospective research. As a whole, our study attempts to guide empirical researchers who (plan to) undertake studies on accounting comparability in selecting relevant topics and choosing adequate approaches to measurement.

This paper aims to analyse the determinants of the proportion of quantitative data in financial statement footnote disclosures. Quantitative data represents “hard” information and has been considered to be more persuasive than qualitative data. The primary focus is on income tax footnotes because revenue agents use them as a reference in tax audits, and citizen groups use them to analyse tax inequalities. This study posits that firms with lower effective tax rates (“tax aggressive” firms) disclose less quantitative data in their income tax footnotes.

The multivariate analysis uses data from the contents of income tax footnotes extracted from 10-K filings in eXtensible Business Reporting Language (XBRL). It uses the alphanumeric characters identified in the income tax footnotes to calculate the proportion of quantitative data relative to the entire footnote disclosure as the dependent variable in a multivariate regression analysis.

The findings show that firms which avoid more taxes disclose less quantitative data in income tax footnotes after controlling for the readability of the income tax footnotes and the entire annual report. Therefore, firms seem to reduce the publication of measurable data accessible to revenue agencies and citizen groups.

This analysis provides evidence that firms weigh the financial reporting requirements and tax audit risks when they disclose quantitative income tax data. Also, it supports the Financial Accounting Standards Board’s (FASB’s) proposal to require more disaggregated income tax disclosure. To the researcher’s knowledge, this is the first analysis that focuses on the determinants of disclosing quantitative data in income tax footnotes.

This study aims to investigate whether research and development (R & D) expenditures drive future innovation in the chemical industry.

This study examines the relation between R & D expenditures for the period of 2000-2002 and the innovation effect measured by the Malmquist Productivity Index (MPI) for the period of 2003-2005. Under the MPI, the innovation effect is measured as the “shift” in a firm’s production frontier between two periods (2003-2005).

Results indicate that there is a significant and positive relation between R & D expenditures and future innovation among chemical firms.

This study should be of interest to financial accounting policy makers, R & D-intensive companies and investors. To policy makers, they may consider the possibility of permitting R & D-intensive companies to recognize R & D expenditures as assets. In other words, R & D-intensive companies can capitalize and amortize their R & D expenditures, as R & D expenditures can bring them future economic benefits. To R & D-intensive companies, the results may encourage them to keep up their R & D activities. Moreover, this study can increase individual investors’ confidence in investing companies with high-level R & D activities in an R & D-intense industry.

Financial blogs provide an online platform whereby retail investors effortlessly gain access to an abundant array of investment guidance. Prior studies find that the market reacts to financial blogs and similar online venues but results are inconsistent and financial blogs, a growing area in new media and distinct from other online venues, have received little attention. The purpose of this paper is to examine the particular conditions in which financial blogs serve an infomediary role in capital markets; when information asymmetry is high, earnings quality is low, and during economic uncertainty. These are conditions in which retail investors may seek easily accessible advice for their investment decisions.

Abnormal returns for firms mentioned in blog posts on the SeekingAlpha.com financial blog are examined using a multivariate regression to determine whether or not the market reaction associated with these posts is related to information asymmetry, earnings quality, and economic uncertainty.

Results indicate that abnormal returns are associated with the SeekingAlpha.com financial blog when information asymmetry is high and during bearish market conditions, and in particular when buy recommendations are posted on the blog for firms with high information asymmetry. This association is strengthened for firms with low institutional ownership, a proxy for unsophisticated or retail investors.

Results are based on a sample collected during a specific time period in order to detect whether financial blogs serve an infomediary role during uncertain market conditions.

Results of this study can be useful to company executives who may want to monitor investment advice posted about their firm on financial blogs. Financial blogs and other forms of social media such as Twitter and Facebook are becoming the “new normal” in the investor information environment, a trend that is likely to continue.

Financial blogs provide an abundance of supplemental information demanded by investors. Financial blogs represent a form of “new media,” now considered a key component of firms’ information environment (Saxton, 2012). In contrast to prior studies which primarily investigate only whether the market reacts to financial blogs or similar online platforms such as stock message boards, this study attempts to understand the specific conditions in which the market reacts to financial blogs. The results provide a rationale as to when and why investors rely on financial blogs and whether financial blogs serve an infomediary role in capital markets.

Several studies, especially in Asian economies, have investigated the antecedents, implications and consequences of related-party transactions (RPTs). This paper aims to review this literature to collate, gauge and critically discuss understandings of the relationship between RPTs and risk, with a particular focus on audit risk.

The paper discusses RPTs and how they have been associated with corporate scandals and the expropriation of shareholders’ wealth. RPTs are defined as per accounting standards and the main types of RPTs are described based on the extant literature. Two key research design issues are discussed: measures used to operationalize RPTs and observable variations in sample size across RPT studies. Evidence is presented on the negative effects of RPTs and the role of regulation, corporate governance and auditing in reducing risks.

Prior studies have associated RPTs with the expropriation of shareholders’ wealth, declining firm valuations, lower-quality financial reporting, increased risk of material misstatements and decreases in long-term firm performance. Further, the evidence suggests that regulation, corporate governance and auditing can mitigate the negative effects of RPTs.

This paper provides insights for regulators on the effects of enforcement, corporate governance and external audits on reducing the negative effects of RPTs, and highlights the increased risk of material misstatements in financial statements when RPTs are conducted. Moreover, it reveals how RPTs affect risk assessments for auditors.

This paper represents the first comprehensive review of the empirical RPT literature. It provides a starting point for future investigations of RPTs, not least because it reveals important limitations with the extant body of research in this domain. It also offers salient insights and implications for practitioners and policy makers.