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Article
Publication date: 18 March 2024

Isaac S. Awuye and Daniel Taylor

In 2018, the International Financial Reporting Standard 9-Financial Instruments became mandatory, effectively changing the underlying accounting principles of financial…

Abstract

Purpose

In 2018, the International Financial Reporting Standard 9-Financial Instruments became mandatory, effectively changing the underlying accounting principles of financial instruments. This paper systematically reviews the academic literature on the implementation effects of IFRS 9, providing a coherent picture of the state of the empirical literature on IFRS 9.

Design/methodology/approach

The study thrives on a systematic review approach by analyzing existing academic studies along the following three broad categories: adoption and implementation, impact on financial reporting, and risk management and provisioning. The study concludes by providing research prospects to fill the identified gaps.

Findings

We document data-related issues, forecasting uncertainties and the interaction of IFRS 9 with other regulatory standards as implementation challenges encountered. Also, we observe cross-country heterogeneity in reporting quality. Furthermore, contrary to pre-implementation expectations, we find improvement in risk management. This suggests that despite the complexities of the new regulatory standard on financial instruments, it appears to be more successful in achieving the intended objective of enhancing better market discipline and transparency rather than being a regulatory overreach.

Originality/value

As the literature on IFRS 9 is burgeoning, we provide state-of-the-art guidance and direction for researchers with a keen interest in the economic significance and implications of IFRS 9 adoption. The study identifies gaps in the literature that require further research, specifically, IFRS 9 adoption and firm’s hedging activities, IFRS 9 implications on non-financial firms. Lastly, existing studies are mostly focused on Europe and underscore the need for more research in under-researched jurisdictions, particularly in Asia and Africa. Also, to standard setters, policymakers and practitioners, we provide some insight to aid the formulation and application of standards.

Details

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

Keywords

Article
Publication date: 1 June 2023

Sirajo Aliyu, Ahmed Rufai Mohammad and Norazlina Abd. Wahab

This study aims to empirically investigate the impact of political instability on the banking stability of the dual banking system in the Middle East and North African (MENA…

Abstract

Purpose

This study aims to empirically investigate the impact of political instability on the banking stability of the dual banking system in the Middle East and North African (MENA) countries.

Design/methodology/approach

The study measures banking stability with probability of default (PD) and Zscore by employing the generalised method of moment (GMM) between 2007 and 2021 on the dual banking system in the region. The authors further estimate short-long-run situations coupled with a robustness test using a generalised least square (GLS) model.

Findings

The authors' findings indicate that institutional factors of political stability, crisis period, high-crisis countries, law and order and macroeconomic indicators influence the two types of banking stability in the region. The authors found the consistency of the factors explaining stability in the region in both short-and long-run situations. Consequently, the study also reveals the adverse effects of crisis periods and high-crisis countries on banking stability.

Practical implications

The results of this study explicitly identify the critical need for sustaining political stability and abiding by laws and order to achieve dual banking stability in the region. Therefore, policymakers may consider allowing the region's banks to operate beyond retail banking since diversification enhances banking stability.

Originality/value

The authors' study balances by employing dual stability measurement in predicting the impact of political instability, law and order and other indicators on the MENA region's two banking models. This study uncovers the effect of the global crisis period on banking stability and high-crisis countries in the region and verifies the models' robustness.

Details

Managerial Finance, vol. 50 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 13 April 2023

Mohammad Delwar Hussain and Iftekhar Ahmed

This study aims to examine the impact of governance on the double-bottom-line performance of microfinance institutions (MFIs) in Bangladesh.

Abstract

Purpose

This study aims to examine the impact of governance on the double-bottom-line performance of microfinance institutions (MFIs) in Bangladesh.

Design/methodology/approach

This study relies on three dimensions of corporate governance (CG) practices, that is, functions of the board of directors (BoD), top-level management activities and external governance mechanisms. This study uses panel data econometrics, particularly pooled OLS, fixed effects and two-stage system generalized method of moments to deal with potential endogeneity concerns. The panel data set covers 1,200 MFI year observations from Bangladesh for the period between 2005 and 2019.

Findings

The findings show that the presence of stakeholders on boards plays a critical role in MFIs. The dual goals of MFIs are influenced by board size, board independence and CEO duality. Internal management activities, risk perceptions and external governance also impact MFIs’ performance. Women on board have an inverse association with outreach. The activities of female managers have a significant impact on depth of outreach.

Research limitations/implications

Like many others, this study also admits the data constraint issues in microfinance research. CG data for MFI are mostly unavailable in the public domain; therefore, this study must rely on third-party data sources. This study only includes MFIs that has data for all variables of interest.

Practical implications

Governance attributes in hybrid organizations are constituted differently. To warrant multistakeholder engagement, there is a need to develop a distinctive governance manual for hybrid organizations like MFIs.

Social implications

This study proposes adopting a Social Director on the BoD to ensure the scope of outreach depth, given the importance of social goals in MFIs.

Originality/value

This study contributes to the ongoing debate on microfinance governance, addresses the issue based on different theoretical aspects using a country-specific data set and uses dynamic panel models to deal with potential endogeneity concerns.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 31 March 2023

Khoutem Ben Jedidia and Hichem Hamza

Bank lending is the major source of monetary expansion. Bank-led money creation is a key issue in both conventional and Islamic financial systems. The purpose of this paper is to…

Abstract

Purpose

Bank lending is the major source of monetary expansion. Bank-led money creation is a key issue in both conventional and Islamic financial systems. The purpose of this paper is to examine the issues related to Islamic banking money creation. In this conceptual paper, the authors investigate the involvement of profit and loss sharing (PLS) in money creation and especially how can PLS limit money creation “out of nothing.” In this regard, the authors examine the potential of the PLS principle in tackling the excessive money creation phenomenon.

Design/methodology/approach

This study uses a normative approach regarding Islamic bank money creation that fits Sharia directives. In fact, this study discusses “what ought to be,” that is, the values and norms of PLS money creation that impede excessive money creation.

Findings

Overall, Islamic banks create money differently compared to conventional ones. Especially, by avoiding a purely financial intermediary, money creation under the PLS principle sustains a strong relationship with the real economy and leads to a lower money multiplier. Therefore, PLS mechanisms allow financing through real assets and not credit assets “out of nothing.” This could prevent excessive money creation from causing harmful effects on indebtedness and financial instability.

Practical implications

PLS offers a valuable resolution for banking system money creation through the optimization of Islamic bank financing by facilitating the separation of the monetary function from the credit one. This reform thought reinforces the stability value of money allowing it to fully perform its functions with reference to the directives of Sharia. This especially allows the integrity and purchasing power of money, the reduction of the gap between the evolution of both real and financial economies and, consequently, the indebtedness and crisis. It is recommended to promote PLS financing by reforming institutional and regulatory constraints.

Originality/value

This study addresses the contemporary issue of money creation by Islamic banks through the PLS approach. The conceptual framework of this paper highlights the reformist role of PLS in limiting money creation through Mudarabah approach within fractional reserve banking.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 3 November 2023

Kriengkrai Boonlert-u-thai, Pattanaporn Chatjuthamard, Suwongrat Papangkorn and Pornsit Jiraporn

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is…

Abstract

Purpose

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is influenced by the discipline of the takeover market. External auditors and the takeover market both function as important instruments of external corporate governance.

Design/methodology/approach

The authors execute a standard regression analysis and run a variety of robustness checks to minimize endogeneity, namely, propensity score matching (PSM), entropy balancing, an instrumental-variable analysis, Generalized method of moment (GMM) dynamic panel data analysis and Lewbel's (2012) heteroscedastic identification.

Findings

The authors’ immense sample spans half a century, encompassing nearly 180,000 observations and 17 takeover-related state legislations, one of the largest samples in the literature in this area. The authors’ results suggest that firms with more takeover exposure are significantly less likely to use Big N auditors. Therefore, a more active takeover market results in poorer external audit quality, corroborating the substitution hypothesis. The discipline of the takeover market substitutes for the necessity for a high-quality external auditor. Specifically, a rise in takeover susceptibility by one standard deviation lowers the probability of using a Big N auditor by 4.29%.

Originality/value

The authors’ study is the first to examine the effect of the takeover over market on audit quality using a novel measure of hostile takeover susceptibility mainly based on the staggered implementation of state legislation. Because the enactment of state legislation is beyond the control of any firm individually, it is plausibly exogenous. The authors’ results therefore probably reflect a causal influence rather than merely a correlation.

Details

Managerial Finance, vol. 50 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 6 February 2024

Abdelmoneim Bahyeldin Mohamed Metwally and Ahmed Diab

In developing countries, how risk management technologies influence management accounting and control (MAC) practices is under-researched. By drawing on insights from…

Abstract

Purpose

In developing countries, how risk management technologies influence management accounting and control (MAC) practices is under-researched. By drawing on insights from institutional studies, this study aims to examine the multiple institutional pressures surrounding an entity and influencing its risk-based management control (RBC) system – that is, how RBC appears in an emerging market attributed to institutional multiplicity.

Design/methodology/approach

The authors used qualitative case study research methods to collect empirical evidence from a privately owned Egyptian insurance company.

Findings

The authors observed that in the transformation to risk-based controls, especially in socio-political settings such as Egypt, changes in MAC systems were consistent with the shifts in the institutional context. Along with changes in the institutional environment, the case company sought to configure its MAC system to be more risk-based to achieve its strategic goals effectively and maintain its sustainability.

Originality/value

This research provides a fuller view of risk-based management controls based on the social, professional and political perspectives central to the examined institutional environment. Moreover, unlike early studies that reported resistance to RBC, this case reveals the institutional dynamics contributing to the successful implementation of RBC in an emerging market.

Details

Qualitative Research in Accounting & Management, vol. 21 no. 2
Type: Research Article
ISSN: 1176-6093

Keywords

Article
Publication date: 28 February 2024

Maryam Javed, Kashif Mehmood, Abdul Ghafoor and Asma Parveen

The board structure (BS) is pivotal in modern corporate governance (CG). This study aims to investigate BS variables (BSIZE, BIND and chief executive officer [CEO] duality) and…

Abstract

Purpose

The board structure (BS) is pivotal in modern corporate governance (CG). This study aims to investigate BS variables (BSIZE, BIND and chief executive officer [CEO] duality) and their correlation with risk-taking behavior indicators, enriching the understanding of how CG shapes financial institutions’ (FIs) decision-making in Pakistan.

Design/methodology/approach

By scrutinizing data from 67 financial entities listed on the Stock Exchange of Pakistan spanning from 2011 to 2022 through panel data regression techniques, the research emphasizes that BS holds a substantial influence over the risk tendencies exhibited by these firms.

Findings

Key findings suggest that board size has a positive influence, aligned with previous CG research. Smaller boards perform better and avoid excessive risk-taking, contrasting some negative relationship claims. More independent directors are recommended to curtail risk and financial disruption. Holding both CEO and chair roles reduces risk exposure, resonating with reputational and employment risk theory. It is essential to recognize that BS’s impact on risk-taking is nuanced and context-dependent.

Practical implications

Policymakers, scholars, practitioners and investors working in the market for financial companies might greatly benefit from the empirical findings of this study. Imposing mandates on FIs to uphold adequate capital reserves functions as a safeguard against unforeseen losses, thereby diminishing the probability of unwarranted risk-taking.

Originality/value

Prior studies in this domain predominantly focus on nonfinancial sectors. In addition, existing research often explores the relationship between BS and firm risk-taking solely within the banking sector, overlooking other FIs. This study contributes by using a comprehensive data set encompassing all types of FIs, thus extending the existing literature.

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: 12 January 2024

Sarit Biswas, Sharad Nath Bhattacharya, Justin Y. Jin, Mousumi Bhattacharya and Pradip H. Sadarangani

This paper empirically investigates whether trade openness (TO) in Brazil, Russia, India, China and South Africa (BRICS) countries affects how banks might employ loan loss…

Abstract

Purpose

This paper empirically investigates whether trade openness (TO) in Brazil, Russia, India, China and South Africa (BRICS) countries affects how banks might employ loan loss provisions (LLPs) to smooth out their earnings and how adopting the International Financial Reporting Standards (IFRS) can mitigate it.

Design/methodology/approach

The analysis includes 78 commercial banks from five BRICS nations and spans 2014 through 2020. To test these hypotheses, the authors utilized a fixed-effect and two-step system panel generalized methods of moments (GMM) estimator.

Findings

TO positively affects income smoothing (earnings management) across BRICS commercial banks. The effect is clearer in banks that make financial reports under the IFRS. Path analysis reveals that the effect of TO is driven by nonperforming loans (NPLs). Additionally, the IFRS restricts earnings management in the BRICS banking sector when a better institutional environment is present. The authors found that accounting rules (IFRS) and enforcement (better institutional settings) interact to enhance earnings’ quality.

Practical implications

The relationship between TO and bank earnings management practices is important for understanding the complex interplay between trade and finance and ensuring financial stability, investor confidence and regulatory compliance. This study recommends better regulations and governance mechanisms for financial reports in emerging nations like BRICS. Additionally, macro-prudential regulators and banking supervisors should work closely to ensure transparent TO decisions with improved discipline, institutional quality and regulatory support to enhance bank stability.

Originality/value

The study finds evidence of bank income smoothing in the BRICS and introduces TO as a determinant. It also identifies the evolving role of IFRS in the presence of higher institutional quality and TO, thereby expanding the financial reporting literature.

Details

China Accounting and Finance Review, vol. 26 no. 1
Type: Research Article
ISSN: 1029-807X

Keywords

Book part
Publication date: 8 April 2024

Jan Černohorský, Liběna Černohorská and Petr Teplý

The aim of this chapter is to describe the purpose of the introduction of the exchange rate commitment by the Czech National Bank (CNB) in the period from November 2013 to April…

Abstract

The aim of this chapter is to describe the purpose of the introduction of the exchange rate commitment by the Czech National Bank (CNB) in the period from November 2013 to April 2017 and its effects on the real economy. The main reason for introducing the exchange rate commitment was concern about the possibility of a prolonged deflationary period in Czechia. Given that the standard monetary policy instruments had already been exhausted on easing the monetary policy conditions, the CNB Bank Board opted for an exchange rate commitment. The secondary objective of the exchange rate commitment was to boost the economy through the positive effect of a weaker koruna on exports. Next, we focus in more detail on the effect of the exchange rate commitment in the economy and the course of the foreign exchange interventions. Overall, we can summarize that the CNB's foreign exchange interventions were an extraordinary monetary policy instrument – in a market economy with inflation targeting and a flexible exchange rate – used in extraordinary times.

Details

Modeling Economic Growth in Contemporary Czechia
Type: Book
ISBN: 978-1-83753-841-6

Keywords

Article
Publication date: 18 September 2023

Hafez Abdo, Freeman Brobbey Owusu and Musa Mangena

The purpose of this study is to provide a harmonisation framework for the diverse accounting practices by extractive industries.

Abstract

Purpose

The purpose of this study is to provide a harmonisation framework for the diverse accounting practices by extractive industries.

Design/methodology/approach

The study takes a three-stage approach. The first involves a comprehensive literature review of the historical evolution of accounting regulations by extractive industries. The second involves constructing an accounting practice index for extractive industries. The third involves constructing a harmonisation framework.

Findings

The accounting practice index provides empirical evidence of the wide diversity of accounting practices by extractive industries. Analysis of the literature review addresses the several attempts by accounting and regulatory bodies to standardise the diverse practices of accounting by extractive industries and reasons for the lack of successful standardisations. The authors extract lessons from these previous attempts and propose a harmonisation framework.

Research limitations/implications

The proposed harmonisation framework can be used to align together the diverse accounting practices by extractive industries and enhance comparability and consistency of accounting figures and statements produced by these industries. Harmonising the diverse accounting practices is crucial for investment decision-making.

Originality/value

The harmonisation framework is the first of its kind that could enhance the comparability of accounts of extractive industries’ firms and be used to harmonise diverse accounting practices by other industries.

Details

Journal of Financial Reporting and Accounting, vol. 22 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

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