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1 – 10 of 10Nimisha Kapoor and Sandeep Goel
The purpose of this paper is to explore the role of independent directors’ diligence in restraining earnings management practices in the Indian context.
Abstract
Purpose
The purpose of this paper is to explore the role of independent directors’ diligence in restraining earnings management practices in the Indian context.
Design/methodology/approach
It employs a panel data analysis to test the association of earnings management with the diligence of independent directors.
Findings
The results suggest that the diligence of independent directors has a significant impact on earnings management. The findings support the agency theory and provide evidence of the role played by the board processes in restricting earnings management.
Originality/value
This study is important for the regulators as it highlights the significance of independent directors’ diligence in producing higher quality financial statements, thereby creating the real economic value of companies. This is the first article that explores the impact of independent directors’ diligence on earnings management practices particularly in the context of an emerging economy, like India in the light of new Companies Act 2013 and revised Clause 49 of the Listing Agreement, 2014 by Securities and Exchange Board of India.
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Guqiang Luo, Kun Tracy Wang and Yue Wu
Using a sample of 9,898 firm-year observations from 1,821 unique Chinese listed firms over the period from 2004 to 2019, this study aims to investigate whether the market rewards…
Abstract
Purpose
Using a sample of 9,898 firm-year observations from 1,821 unique Chinese listed firms over the period from 2004 to 2019, this study aims to investigate whether the market rewards meeting or beating analyst earnings expectations (MBE).
Design/methodology/approach
The authors use an event study methodology to capture market reactions to MBE.
Findings
The authors document a stock return premium for beating analyst forecasts by a wide margin. However, there is no stock return premium for firms that meet or just beat analyst forecasts, suggesting that the market is skeptical of earnings management by these firms. This market underreaction is more pronounced for firms with weak external monitoring. Further analysis shows that meeting or just beating analyst forecasts is indicative of superior future financial performance. The authors do not find firms using earnings management to meet or just beat analyst forecasts.
Research limitations/implications
The authors provide evidence of market underreaction to meeting or just beating analyst forecasts, with the market's over-skepticism of earnings management being a plausible mechanism for this phenomenon.
Practical implications
The findings of this study are informative to researchers, market participants and regulators concerned about the impact of analysts and earnings management and interested in detecting and constraining managers' earnings management.
Originality/value
The authors provide new insights into how the market reacts to MBE by showing that the market appears to focus on using meeting or just beating analyst forecasts as an indicator of earnings management, while it does not detect managed MBE. Meeting or just beating analyst forecasts is commonly used as a proxy for earnings management in the literature. However, the findings suggest that it is a noisy proxy for earnings management.
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Deli Dotse Gli, Ernest Yaw Tweneboah-Koduah, Raphael Odoom and Prince Kodua
Customer loyalty is of growing interest to many service firms due to the many tangible and intangible benefits it offers them. However, building customer loyalty is challenging…
Abstract
Purpose
Customer loyalty is of growing interest to many service firms due to the many tangible and intangible benefits it offers them. However, building customer loyalty is challenging for many service firms. This study aims to examine the impact of corporate reputation on customer loyalty. It also assesses the moderating role of the firm's country of origin in this relationship.
Design/methodology/approach
Survey research design was used to collect data from 367 universal banks' customers. Data were analysed using structural equation modelling.
Findings
The findings shed light on several crucial aspects of corporate reputation that influence customer loyalty. Specifically, signals of corporate social responsibility, corporate credibility, product attributes and relationship marketing were found to have a substantial impact on customer loyalty. Additionally, the study uncovers a noteworthy insight that the firm's country of origin plays a moderating role in the relationship between corporate reputation and customer loyalty, particularly in the context of the banking sector.
Originality/value
This research stands out due to its utilisation of signalling theory, making it one of the pioneering works in the bank brand management literature. It presents a comprehensive corporate reputation framework and its profound implications for customer loyalty. Furthermore, the study underscores the significance of considering the strength of the country-of-origin effect in shaping customer loyalty relationships.
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Tim Breitbarth, Stefan Walzel, Christos Anagnostopoulos and Frank van Eekeren
Ivan Soukal, Jan Mačí, Gabriela Trnková, Libuse Svobodova, Martina Hedvičáková, Eva Hamplova, Petra Maresova and Frank Lefley
The primary purpose of this paper is to identify the so-called core authors and their publications according to pre-defined criteria and thereby direct the users to the fastest…
Abstract
Purpose
The primary purpose of this paper is to identify the so-called core authors and their publications according to pre-defined criteria and thereby direct the users to the fastest and easiest way to get a picture of the otherwise pervasive field of bankruptcy prediction models. The authors aim to present state-of-the-art bankruptcy prediction models assembled by the field's core authors and critically examine the approaches and methods adopted.
Design/methodology/approach
The authors conducted a literature search in November 2022 through scientific databases Scopus, ScienceDirect and the Web of Science, focussing on a publication period from 2010 to 2022. The database search query was formulated as “Bankruptcy Prediction” and “Model or Tool”. However, the authors intentionally did not specify any model or tool to make the search non-discriminatory. The authors reviewed over 7,300 articles.
Findings
This paper has addressed the research questions: (1) What are the most important publications of the core authors in terms of the target country, size of the sample, sector of the economy and specialization in SME? (2) What are the most used methods for deriving or adjusting models appearing in the articles of the core authors? (3) To what extent do the core authors include accounting-based variables, non-financial or macroeconomic indicators, in their prediction models? Despite the advantages of new-age methods, based on the information in the articles analyzed, it can be deduced that conventional methods will continue to be beneficial, mainly due to the higher degree of ease of use and the transferability of the derived model.
Research limitations/implications
The authors identify several gaps in the literature which this research does not address but could be the focus of future research.
Practical implications
The authors provide practitioners and academics with an extract from a wide range of studies, available in scientific databases, on bankruptcy prediction models or tools, resulting in a large number of records being reviewed. This research will interest shareholders, corporations, and financial institutions interested in models of financial distress prediction or bankruptcy prediction to help identify troubled firms in the early stages of distress.
Social implications
Bankruptcy is a major concern for society in general, especially in today's economic environment. Therefore, being able to predict possible business failure at an early stage will give an organization time to address the issue and maybe avoid bankruptcy.
Originality/value
To the authors' knowledge, this is the first paper to identify the core authors in the bankruptcy prediction model and methods field. The primary value of the study is the current overview and analysis of the theoretical and practical development of knowledge in this field in the form of the construction of new models using classical or new-age methods. Also, the paper adds value by critically examining existing models and their modifications, including a discussion of the benefits of non-accounting variables usage.
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Sharmina Afrin and Md. Mominur Rahman
The purpose of the paper is to investigate the association between corporate social responsibility (CSR) and investment efficiency (INE) in Bangladeshi pharmaceutical companies…
Abstract
Purpose
The purpose of the paper is to investigate the association between corporate social responsibility (CSR) and investment efficiency (INE) in Bangladeshi pharmaceutical companies and to explore the moderating role of corporate reputation in this relationship.
Design/methodology/approach
The paper employs a two-step method, with stage 1 involving the development of a theoretical model using the literature's strategic framework and stage 2 using structural equation modelling (SEM) to investigate the relationships between variables. The data set used in the analysis includes 296 responses from senior executives/managers and subordinates at Bangladeshi pharmaceutical firms.
Findings
The study finds that CSR activities that focus on customers, employees and the community significantly affect INE, as well as the extended stakeholders, and that company reputation moderates this relationship. The effect of CSR on INE differs between well-established companies and business firms with favourable reputations.
Practical implications
The paper contributes to understanding the relationship between CSR and INE in a developing country context and highlights the importance of corporate reputation in this relationship. The findings suggest that companies can enhance their INE through CSR initiatives and that a positive reputation can strengthen this relationship further.
Originality/value
The study adds to the limited literature on CSR and INE in developing countries and provides new insights into the moderating role of corporate reputation in this relationship.
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The purpose of this study is to provide the conditions for governance effectiveness and explain why the same rules often result in not the same norms.
Abstract
Purpose
The purpose of this study is to provide the conditions for governance effectiveness and explain why the same rules often result in not the same norms.
Design/methodology/approach
The author proposes a “corporate governance culture” concept explaining the differences within corporate governance institutions and making it possible to measure their effectiveness. Based on a literature review that included 186 research studies published in the corporate governance field, the author found that most (160) concern structural numerical variables. Only 26 refer to behavioural and cultural issues, and they support the idea of an interdisciplinary approach to governance problems.
Findings
A significant contribution of this paper is that it proposes an integrative framework that operationalises psychological, sociological and philosophical issues that influence corporate governance mechanisms. The proposed concept can reanimate the debate about the need for tight governance regulations or leaving room for a loose governance regime.
Originality/value
The idea of “corporate governance culture” explains the divergences identified in studies on corporate governance mechanisms, pointing out behavioural and cultural issues as crucial aspects of governance bodies.
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Mahdi Salehi, Hossein Tarighi and Tahereh Alidoust Shahri
The purpose of this paper is to investigate the relationship between auditor characteristics and the level of tax avoidance in an emerging market.
Abstract
Purpose
The purpose of this paper is to investigate the relationship between auditor characteristics and the level of tax avoidance in an emerging market.
Design/methodology/approach
In this regard, the effect of various factors such as auditor tenure, auditor industry specialization, audit reports and audit fees on tax avoidance was examined. The study sample includes listed companies in the Tehran Stock Exchange. The time period of study is six years from 2011 to 2016. Also in this study, firm size, leverage, firm age and auditor size were controlled.
Findings
The results of this research were determined in four hypotheses. First and second hypotheses that explore the relationship between auditor tenure and auditor industry specialization with tax avoidance were not confirmed. But the results showed a significant relationship between the type of audit opinions and audit fees with tax avoidance.
Originality/value
The current study investigates the auditor characteristics on tax avoidance in a developing nation of Iran and the results may helpful the developing countries.
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This study investigates the relationship between the Chief Executive Officer's (CEO) overconfidence and financial reporting complexity in Iran, a context characterized by weak…
Abstract
Purpose
This study investigates the relationship between the Chief Executive Officer's (CEO) overconfidence and financial reporting complexity in Iran, a context characterized by weak corporate governance and heightened managerial discretion.
Design/methodology/approach
The sample consists of 1,445 firm-year observations from 2010 to 2021. CEO overconfidence (CEOOC) is evaluated using an investment-based index, specifically capital expenditures. Financial reporting complexity (Complexity) is measured through textual features, particularly three readability measures (Fog, SMOG and ARI) extracted from annual financial statements. The ordinary least squares (OLS) regression is employed to test the research hypothesis.
Findings
Results suggest that CEOOC is positively related to Complexity, leading to reduced readability. Additionally, robustness analyses demonstrate that the relationship between CEOOC and Complexity is more distinct and significant for firms with lower profitability than those with higher profitability. This implies that overconfident CEOs in underperforming firms tend to increase complexity. Also, firms with better financial performance present a more positive tone in their annual financial statements, reflecting their superior performance. The findings remain robust to alternative measures of CEOOC and Complexity and are consistent after accounting for endogeneity issues using firm fixed-effects, propensity score matching (PSM), entropy balancing approach and instrumental variables method.
Research limitations/implications
This study adds to the literature by delving into the effect of CEOs' overconfidence on financial reporting complexity, a facet not thoroughly investigated in prior studies. The paper pioneers the use of textual analysis techniques on Persian texts, marking a unique approach in financial reporting and a first for the Persian language. However, due to the inherent challenges of text mining and feature extraction, the results should be approached with caution.
Practical implications
The insights from this study can guide investors in understanding the potential repercussions of CEOOC on financial reporting complexity. This will assist them in making informed investment decisions and monitoring the financial reporting practices of their invested companies. Policymakers and regulators can also reference this research when formulating policies to enhance financial reporting quality and ensure capital market transparency. The innovative application of textual analysis in this study might spur further research in other languages and contexts.
Originality/value
This research stands as the inaugural study to explore the relationship between CEOs' overconfidence and financial reporting complexity in both developed and developing capital markets. It thereby broadens the extant literature to include diverse capital market environments.
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