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Article
Publication date: 23 November 2020

Ahmed Alhadi, Ahsan Habib, Grantley Taylor, Mostafa Hasan and Khamis Al-Yahyaee

The purpose of this paper is to examine the relation between financial statement comparability and corporate investment efficiency of a large sample of US firms.

Abstract

Purpose

The purpose of this paper is to examine the relation between financial statement comparability and corporate investment efficiency of a large sample of US firms.

Design/methodology/approach

The authors use a large sample of US-listed firms from 1981 to 2013. The authors use several econometric methods including ordinary least square, firms fixed effects and mediation effects regression. Sensitivity tests that include the use of alternative measures of both the dependent and independent variables provide results that are consistent with the authors’ baseline model results.

Findings

The authors find that financial statement comparability mitigates risks associated with both under-investment and over-investment. They also find that product market competition mediates the relation between financial statement comparability and investment efficiency. The authors consider this to be a function of a competitive environment, whereby firms normally disclose less private information. This in turn reduces the effect of financial statement comparability on investment efficiency. Conversely, where there are higher levels of product market competition, it is less likely that firms will under-invest. Their results are consistent with these predictions.

Originality/value

The authors contribute to this growing field of research by providing evidence that financial statement comparability does in fact improve firms’ investment efficiency. Findings enhance our understanding of the relation between investment efficiency and financial statement comparability which is likely to have flow-on effects in terms of financial reporting quality and firm value. This study also contributes to research that links agency theory to financial statement comparability through an analysis of moral hazard and adverse selection tenets, and how it leads to reduced levels of investment inefficiency in a firm.

Details

Meditari Accountancy Research, vol. 29 no. 6
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 7 July 2020

Mostafa Hasan, Dewan Rahman, Grantley Taylor and Barry Oliver

The purpose of this paper is to examine the association between debt maturity structure and stock price crash risk in Australia.

Abstract

Purpose

The purpose of this paper is to examine the association between debt maturity structure and stock price crash risk in Australia.

Design/methodology/approach

The authors employ panel data estimation with industry and year fixed effects. The paper uses a sample of 1,548 publicly listed Australian firms (8,661 firm-year observations) covering the 2000–2015 period.

Findings

Stock price crash risk is positively and significantly associated with the long-term debt maturity structure of firms. In addition, this positive association is more pronounced for firms with a more opaque information environment.

Originality/value

This is the first study to examine stock price crash risk in Australia. The findings are value relevant as it uncovers how debt maturity structure affects shareholders' wealth protection.

Details

International Journal of Managerial Finance, vol. 17 no. 3
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 3 May 2019

Ahsan Habib, Md. Borhan Uddin Bhuiyan and Mostafa Monzur Hasan

This paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality and cost of equity. The paper…

1476

Abstract

Purpose

This paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality and cost of equity. The paper further investigates whether such association varies at different life cycle stages.

Design/methodology/approach

This paper follows the methodologies of DeAngelo et al. (2006) and Dickinson (2011) to develop proxies for the firms’ stages in the life cycle.

Findings

Using both pre- and post-IFRS adoption period for Australian listed companies, the paper finds that financial reporting quality reduced and cost of equity increased because of the adoption of IFRS. The paper further evidences that financial reporting quality in the post-IFRS period increased cost of equity. Finally, the paper finds that mature firms produce a better quality of earnings, which result in lower cost of capital. The results indicate that a mature firm was benefited because of the adoption of IFRS.

Originality/value

The finding of this research is useful to the regulators and practitioners to understand the widespread benefit of IFRS adoption.

Details

Pacific Accounting Review, vol. 31 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Content available
Article
Publication date: 8 February 2022

Reza Monem

706

Abstract

Details

Accounting Research Journal, vol. 35 no. 1
Type: Research Article
ISSN: 1030-9616

Article
Publication date: 12 December 2016

Wael Mostafa

Motivated by the lack of research on the value relevance of accounting information in the emerging markets of Middle Eastern countries, and the unique institutional and…

1903

Abstract

Purpose

Motivated by the lack of research on the value relevance of accounting information in the emerging markets of Middle Eastern countries, and the unique institutional and accounting setting in Egypt, this paper aims to investigate the relation between capital market and accounting information in the emerging market of Egypt. Specifically, based on Egyptian data, this study examines the value relevance of earnings, cash flows from operations and book values.

Design/methodology/approach

To examine the value relevance of the above accounting measures, this study uses statistical associations between accounting information and capital market values: the association between earnings and annual returns; the association between cash flows and accruals, and annual returns; and the association between earnings and book values of equity, and stock prices.

Findings

The results show that, first, earnings have value relevance. However, earnings changes are significantly more successful than earnings levels in explaining security returns. These results suggest that changes in earnings are largely permanent; hence, earnings follow (close to) a random walk model. Second, contrary to what is stated in the literature, cash flows from operations are not successful in explaining stock returns. This result suggests that cash flows are less important and not value relevant in Egypt compared to the USA or the UK. A possible explanation is that cash flows in Egypt are very volatile (high variance) and not persistent, so the market does not rely on them. Third, individually, both earnings and book values significantly explain stock prices; however, jointly, earnings have incremental explanatory power beyond book values for stock prices whereas book values do not. These results suggest that in Egypt the income statement is much more important than the balance sheet for valuation purposes. Overall, these results are interesting because they do not completely replicate the results from other countries.

Practical implications

The existence of value relevance for earnings despite the apparent lack of value relevance for cash flows can be interpreted as indicating that accruals are designed to offset and smooth cash flows’ volatility and low value relevance, so that earnings are relatively more persistent and relevant. These results show that earnings potentially are a much more important and informative measure of a firm’s value than cash flows from operations in Egypt. However, we certainly need the cash flows information as an ex-post validation of the prior earnings. Overall, it appears that the investors in Egypt are looking at the accounting data when evaluating the value of the firm, which is a good sign. However, the empirical findings of this paper are discussed.

Originality/value

This study contributes to the limited research on value relevance of accounting information in the emerging market of Egypt.

Details

Management Research Review, vol. 39 no. 12
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 11 October 2021

Ahmed Diab, Samir Ibrahim Abdelazim and Abdelmoneim Bahyeldin Mohamed Metwally

This paper aims to examine the value relevance (VR) of accounting information (AI) presented by Egyptian listed non-financial companies. Further, the study investigates…

Abstract

Purpose

This paper aims to examine the value relevance (VR) of accounting information (AI) presented by Egyptian listed non-financial companies. Further, the study investigates the influence of institutional ownership on the value relevance of AI in a developing market, namely, the Egyptian market.

Design/methodology/approach

The study uses data from 2014 to 2017 with a total of 248 observations and analyses the data using regression analysis. Data are collected from the nonfinancial companies listed on the Egyptian Stock Exchange.

Findings

The authors found that the AI reported by the Egyptian listed non-financial companies is value relevant. Regarding the influence of institutional ownership, it is found to significantly impact the VR of AI reported by the sample companies. This model investigated the effect of corporate size and financial leverage as controlling variables and found that they have an insignificant influence on the VR of AI.

Originality/value

The current study findings enrich the literature by enhancing the understanding regarding institutional owners’ impact on corporate value. Further, bringing evidence from an emerging market can have implications for accounting researchers interested in addressing other emerging markets with similar contextual and institutional environments.

Details

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

Keywords

Book part
Publication date: 6 September 2019

Rayan Abdul Al and Rania Mostafa

This exploratory research examines the effect of motivational factors on the firm performance of women entrepreneurs in Lebanon. An interview questionnaire was used to…

Abstract

This exploratory research examines the effect of motivational factors on the firm performance of women entrepreneurs in Lebanon. An interview questionnaire was used to collect data from 110 women entrepreneurs. Findings of the multiple regression model indicated three women entrepreneurial motivations (internal locus of control, self-efficacy, and financial success) were positively related to firm performance. Other entrepreneurial motivations that were explored (need for achievement, desire for independence, and passion) appeared to have no significant positive relation with firm performance. Generally, this exploratory research suggests that theories regarding women entrepreneurship derived from developed countries should be examined carefully before being used in developing country settings like Lebanon.

Details

Go-to-Market Strategies for Women Entrepreneurs
Type: Book
ISBN: 978-1-78973-289-4

Keywords

Article
Publication date: 24 December 2021

Mostafa Kamal Hassan, Bassam Abu-Abbas and Hany Kamel

The authors investigate the impact of disclosure tones and financial risk on the readability of annual reports in the banking sector. The authors also examine the…

Abstract

Purpose

The authors investigate the impact of disclosure tones and financial risk on the readability of annual reports in the banking sector. The authors also examine the moderating effect of banks' financial risk on the tone–readability relationship.

Design/methodology/approach

This study relies on the agency theory and the social psychology theory to formulate its testable hypotheses and explain the empirical findings. It uses a sample of 390 bank-year observations from banks listed in the Gulf Cooperation Council (GCC) Stock Exchanges during the period 2014–2019. It also employs random effect regressions to analyze the data and to examine the reverse causality/endogeneity in order to obtain robust findings.

Findings

This study’s results demonstrate that easy (difficult) to read annual reports is significantly associated with positive (negative) tone. Bank managers characterized as “too positive/optimistic” and banks with higher financial risks publish less readable annual reports. The results also show that the interaction between negative tone and a bank's financial risk is inversely associated with reading difficulty, indicating that managers prepare easy text to clarify causes of their banks’ high risks, yet they communicate this easy text with a negative tone that reflects their feelings/emotions towards the financial risks of their banks.

Practical implications

This study’s findings call for the use of a plain English text that bears a neutral tone and urge financial analysts to go beyond the financial aspects of annual reports. They also stimulate policymakers to draft policies, which ensure the presence of audit committee members who possess a broad expertise to uncover the linguistic issues embedded in the annual reports.

Originality/value

To the best of the authors' knowledge, this is the first study dedicated to exploring the tone–readability association in the GCC's banking sector.

Details

Journal of Accounting in Emerging Economies, vol. 12 no. 4
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 22 July 2021

Tamanna Dalwai, Syeeda Shafiya Mohammadi, Gaitri Chugh and Mahdi Salehi

This study examines the impact of intellectual capital efficiency and corporate governance mechanisms on the annual report readability of Oman's financial sector companies.

Abstract

Purpose

This study examines the impact of intellectual capital efficiency and corporate governance mechanisms on the annual report readability of Oman's financial sector companies.

Design/methodology/approach

The study uses a sample of 150 firm-year observations of listed financial sector companies in the Muscat Securities Market, Oman, from 2014 to 2018. Flesch Reading ease and Flesch Kinkaid Index are used as proxies for annual report readability. As part of sensitivity analysis, the study also uses the natural logarithm of annual report pages as alternative readability measures. The investigation is conducted using random effects regression analysis and supported with system GMM estimation for robustness.

Findings

The findings of this study demonstrate a decrease in intellectual capital efficiency associated with better readability of annual reports for the financial sector firms. Alternatively, banks report a positive association of intellectual capital efficiency with the Flesch Reading ease score of the annual report. The structural capital and capital employed efficiency are also found to be negatively associated with annual report readability. Corporate governance mechanisms such as dispersed ownership and audit committee size also result in easy-to-read annual reports that support agency theory.

Research limitations/implications

The research was conducted for financial firms of Oman, and thereby the findings can be generalized to the financial sector of countries with similar settings, such as the Gulf Cooperation Council (GCC) region.

Practical implications

The policy implications arising from this study suggest a strengthening of the intellectual capital efficiency and corporate governance mechanisms to improve the readability of the firms and thereby increase investor confidence.

Originality/value

This paper's uniqueness is in the model used to investigate the impact of intellectual capital efficiency and corporate governance mechanisms on the annual report readability of an emerging market.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 25 February 2014

Houda Arouri, Mohammed Hossain and Mohammad Badrul Muttakin

The purpose of this paper is to examine the effect of ownership structure and board composition on bank performance as measured by Tobin's Q and market to book value in…

2133

Abstract

Purpose

The purpose of this paper is to examine the effect of ownership structure and board composition on bank performance as measured by Tobin's Q and market to book value in Gulf Co-Operation Council (GCC) countries.

Design/methodology/approach

A dataset of 58-listed banks of GCC countries for the period 2010 is used. The methodology is based on multivariate regression analysis.

Findings

The result shows that the extent of family ownership, foreign ownership and institutional ownership has a significant positive association with bank performance. However, government ownership does not have a significant impact on performance. Other governance variables such as CEO duality and board size appear to have an insignificant impact on performance.

Practical implications

Better corporate governance mechanisms are imperative for every company and should be encouraged for the interest of the investors and other stakeholders. The study implies that ownership by corporate governance is more effective for GCC countries. The study also suggests that unlike in western countries, corporate boards may not be an effective corporate governance mechanism in GCC countries.

Originality/value

The paper extends the findings of the corporate governance and bank performance relationship in GCC countries that are neglected in the previous literature.

Details

Journal of Accounting in Emerging Economies, vol. 4 no. 1
Type: Research Article
ISSN: 2042-1168

Keywords

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