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Article
Publication date: 24 January 2020

Tesfaye Taddese Lemma, Ayalew Lulseged, Mthokozisi Mlilo and Minga Negash

This study aims to examine the impact of political stability and political rights on firm-level earnings (both accrual-based and real) management.

Abstract

Purpose

This study aims to examine the impact of political stability and political rights on firm-level earnings (both accrual-based and real) management.

Design/methodology/approach

The authors develop models that link political stability, political rights, and the interplay between the two and earnings (both accrual-based and real) management. The authors analyze 63,872 firm-year observations of publicly listed, non-financial, firms drawn from 39 countries, for the period 1995 to 2016.

Findings

The authors find that political stability (political rights) attenuates (accentuates) accrual-based earnings management; political rights (political stability) accentuates (have no effect on) real earnings management; and the association between political rights and real earnings management is more pronounced in countries with better political stability.

Practical implications

The findings imply that users of financial statements should take cognizance of a country’s ambient political environment in assessing the potential for earnings management by firms.

Originality/value

No prior research examined the role of political forces in shaping firm-level earnings management behavior in a cross-country setting.

Details

Accounting Research Journal, vol. 33 no. 1
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 16 April 2020

Tesfaye Taddese Lemma, Mehrzad Azmi Shabestari, Martin Freedman, Ayalew Lulseged and Mthokozisi Mlilo

This study aims to investigate the association between corporate carbon risk and debt maturity and the moderating role of voluntary disclosure, within the context of South Africa…

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Abstract

Purpose

This study aims to investigate the association between corporate carbon risk and debt maturity and the moderating role of voluntary disclosure, within the context of South Africa, an emerging player in the climate policy debate.

Design/methodology/approach

Based on the insights drawn from agency as well as information asymmetry theories, the authors develop models that link debt maturity with corporate carbon risk and voluntary disclosure and examine data obtained from companies listed on the Johannesburg Securities Exchange (JSE), for the period 2011-2015.

Findings

The findings document that, other things being equal, debt maturity is significantly higher, both statistically and economically, for companies with lower carbon intensity (risk). In addition, high-quality carbon disclosure accentuates the positive association between debt maturity and the inverse of carbon intensity. The results are robust to alternative measures of corporate carbon risk and issues of endogeneity. The findings are consistent with the view that lenders in South Africa use debt maturity as a non-price mechanism to address borrower risk and grant lower carbon risk companies that voluntarily provide higher quality carbon disclosures an even higher access to longer maturity debts; JSE-listed companies could use voluntary carbon disclosure to ease their access to debt with longer maturity.

Practical implications

The findings of this study have important implications to borrowers, pressure groups, policymakers and other stakeholders.

Originality/value

To the best of the authors’ knowledge, this study is the first to document evidence suggesting that lenders in South Africa use debt maturity as a non-price mechanism to address borrower risk.

Details

International Journal of Accounting & Information Management, vol. 28 no. 4
Type: Research Article
ISSN: 1834-7649

Keywords

Open Access
Article
Publication date: 25 November 2024

Kofi Bondzie Afful, Tendai Gwatidzo and Mthokozisi Mlilo

This study investigates the influence of capital controls on financial market structure in Sub-Saharan Africa (SSA). This is especially relevant as the former restrictions are…

Abstract

Purpose

This study investigates the influence of capital controls on financial market structure in Sub-Saharan Africa (SSA). This is especially relevant as the former restrictions are relatively common on the sub-continent. At the same time, the sub-region’s financial markets are highly bank-based and focused on the short term, with stock markets being illiquid and stunted.

Design/methodology/approach

To achieve its research objectives, the study posits an original model and uses comparative statics to analyze the relation between the aforestated phenomena in a representative SSA economy. Key hypothesized conclusions derived therefrom are tested using panel econometrics.

Findings

The comparative static analysis illustrates that capital controls favor banks, making them monopolistic and inefficient. This is confirmed by the empirical investigation, as the said market restriction skews financial market structure towards a bank-dominated system.

Research limitations/implications

The study limits itself to capital controls and their effects on financial market structure. It does not particularly investigate the influence of different types of these restrictions. Specifically, it dichotomizes the influence of the examined controls on bank and stock markets.

Practical implications

The dissimilar influence of capital controls on banks relative to stock markets is critical for decision and policymakers. This paper highlights that capital controls may have unintended adverse effects on domestic financial markets. Also, they may not be the most appropriate policy to deepen markets and enhance domestic resource retention. There is, consequently, a need to determine fitting policies that attract rather than repel financial flows. Furthermore, capital controls may engender rather than address macroeconomic misalignment.

Social implications

As a social imperative, it is necessary to analyze SSA’s framework of capital restrictions to better understand how they distort market incentives and mechanisms. This would help identify adverse effects that retard social development.

Originality/value

This study extends existing literature by developing a novel analytical framework incorporating key characteristics of SSA economies. This helps to better understand the nature of the capital controls–financial market structure relation in imperfect market conditions.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2054-6238

Keywords

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