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1 – 3 of 3Tesfaye 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.
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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…
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.
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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.
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