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Article
Publication date: 20 July 2021

Mercedes Ruiz-Lozano, Marta De Vicente-Lama, Pilar Tirado-Valencia and Magdalena Cordobés-Madueño

This paper aims to assess the disclosure of the materiality process in the preparation of sustainability reports of state-owned enterprises (SOEs). This paper also…

Abstract

Purpose

This paper aims to assess the disclosure of the materiality process in the preparation of sustainability reports of state-owned enterprises (SOEs). This paper also explores the effects of regulation mandating that SOEs prepare sustainability reports. In the specific case of port authorities, the study analyses the influence of a sector guideline that determines what should be included and the structure of the report. Another aim of this paper is to delve into SOE's motivations for disclosing information on materiality assessments, using the assumptions of the different theories to explain their reporting practices.

Design/methodology/approach

Using a sample of SOEs sustainability reports, a content analysis is undertaken. The methodology involves the analysis of the information disclosed by SOEs in Spain and the development of a materiality disclosure index. This index enables sampled entities to be classified on a scale of 0–5, based on the extent of their disclosures of the materiality determination process. This study also identifies several variables that explain differences in these disclosures.

Findings

A low rate of information disclosed about the materiality process can be attributed to the desire of SOEs to create symbolic legitimacy. In a context where the disclosure of sustainability information is mandatory, only few organisations apply the principle of materiality to define the content of their sustainability reports. These results highlight that institutional isomorphism has only had a limited effect on the materiality process.

Research limitations/implications

Limitations associated with the sample size and composition of the sample by sector apply.

Practical implications

This research shows that generally accepted reporting guidelines constitute a reference framework for sustainability reporting but that the principles underpinning these frameworks are not always implemented.

Originality/value

This study extends the literature on the implementation of the principle of materiality and uses disclosure theories to explain the actual reporting by SOEs of their materiality process.

Details

Accounting, Auditing & Accountability Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 11 September 2017

Robert M. Cornell, Anne M. Magro and Rick C. Warne

The purpose of this paper is to examine investors’ propensity to litigate when harmful events occur subsequent to accounting choices. Consistent with Culpable Control…

Abstract

Purpose

The purpose of this paper is to examine investors’ propensity to litigate when harmful events occur subsequent to accounting choices. Consistent with Culpable Control Theory, the authors find that investors are more likely to pursue litigation against management when managers are perceived to have more financial reporting flexibility, such as when they apply imprecise, principles-based accounting guidance. Investors are more likely to pursue litigation when they find management more responsible for harmful events, and they find management more responsible for those events when they perceive management to have more reporting flexibility. To provide additional insight, the authors investigate how the relationship between reporting flexibility and assessed manager responsibility is mediated by investors’ perceptions of management’s self-interested behavior. The authors consider monetary and non-monetary motivations for litigation against management such as recouping financial losses and punishing management. The results suggest that recouping financial losses is not the sole motivation for litigation. The authors provide evidence that punishing management is an important non-monetary component of the litigation decision. The results contribute to the limited literature on investor litigation decisions and inform the debate surrounding the potential effects of more principles-based accounting standards.

Design/methodology/approach

The authors test the hypotheses using an experiment with a 2×1 between-subjects design in which the authors manipulate reporting flexibility at two levels by varying the precision of accounting guidance and measure all other variables of interest. Participants are 82 part-time executive MBA program students at a major public university in the USA. Most participants work full-time (94 percent), own or have owned stocks either directly or through retirement plans (84 percent), indicate general investment knowledge (97 percent), and report high levels of familiarity with corporate financial statements, including balance sheets and income statements (92 percent). Thus, the authors conclude that these executive MBA students are reasonable surrogates for investors.

Findings

Consistent with the predictions, perceived management reporting flexibility affects investors’ propensity to pursue litigation against management. The authors find that the assignment of responsibility to management for harmful events such as investor losses, employee job losses, and economic losses suffered by a community mediates the relationship between reporting flexibility and investors’ intention to litigate. The authors also find that the relationship between reporting flexibility and assignment of responsibility to management for harmful events is not direct but instead works through the effect of reporting flexibility on perceived management self-interested behavior. As predicted, assessed management responsibility for the harmful event is positively related to investors’ propensity to litigate against management, and this relation is only partially mediated by investors’ perceptions that the litigation will be successful. This result suggests that the litigation decision is driven at least in part by corporate governance goals such as the desire for retribution or punishment of management. The second experiment provides additional support for the theory that the desire to punish management is an important component of investors’ litigation decisions.

Research limitations/implications

The research makes important contributions to the literature on investor litigation and to the ongoing debate regarding principles- vs rules-based accounting standards. While some archival research addresses the conditions under which securities litigation occurs, little empirical research has directly addressed the investor decision to litigate. The paper provides additional evidence to address the question of why investors litigate. By doing so, the authors add to the debate on the desirability of shifting from more rules-based to more principles-based accounting standards.

Practical implications

The theory tested in this study could be used to design mechanisms to mitigate the differential propensity for investors to litigate under differing accounting regimes. As standard setters discuss a move to more principles-based standards in the USA, some observers have expressed concern that investor litigation will increase. The theory suggests that if the standard-setting body can control perceptions of management reporting flexibility such that investors believe principles-based standards provide no more flexibility than rules-based standards, they can limit an increase in the amount of investor litigation.

Originality/value

The authors contribute to theory by providing evidence regarding why investors desire to pursue litigation against management. The authors find that the assignment of responsibility to management for harmful events mediates the relationship between reporting flexibility and investors’ intention to litigate. The authors also find that the relationship between reporting flexibility and assignment of responsibility to management for harmful events is not direct but instead works through the effect of reporting flexibility on perceived management self-interested behavior. Furthermore, assessed management responsibility for the harmful event is positively related to investors’ propensity to litigate against management, and this relation is only partially mediated by investors’ perceptions that the litigation will be successful. Those findings provide theoretical contributions to the literature.

Details

Journal of Applied Accounting Research, vol. 18 no. 3
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 11 October 2021

Barry Ackers and Adeyemi Adebayo

This paper aims to establish the extent to which South African state-owned entities (SOEs), where integrated reporting is a quasi-mandatory reporting requirement, have…

Abstract

Purpose

This paper aims to establish the extent to which South African state-owned entities (SOEs), where integrated reporting is a quasi-mandatory reporting requirement, have incorporated the principles of the international integrated reporting framework. These identified South African SOE reporting practices are compared with the ‘integrated reporting’ related disclosures of SOEs in selected countries, where integrated reporting remains voluntary.

Design/methodology/approach

This paper deploys a qualitative research approach, to thematically analyse the content of publicly available annual or integrated reports of South Africa SOEs, as the primary country of analysis, with those of their counterparts in five purposively selected countries. The relative scores for the SOEs of each country is calculated using a disclosure index derived from the international integrated reporting framework principles.

Findings

The paper found that despite being a quasi-mandatory reporting requirement, not all South African SOEs complied with all the international integrated reporting framework principles. Accepting the assertion that integrated reporting enhances organisational transparency and accountability, the accountability disclosure practices of South African SOEs appear more comprehensive than their counterparts in other countries.

Originality/value

Extant research into integrated reporting has primarily focussed on the profit-seeking private sector, with limited research into its applicability in the public sector. This paper attempts to address this paucity by examining aspects of integrated reporting by South African SOEs, which are then compared to accountability reporting practices in other countries.

Details

Social Responsibility Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 23 February 2021

Victoria Wells, Navdeep Athwal, Esterina Nervino and Marylyn Carrigan

By responding to scholarly calls, this study examines the environmental reports of LVMH and Kering. The study extends legitimacy theory to ascertain the credibility of the…

Abstract

Purpose

By responding to scholarly calls, this study examines the environmental reports of LVMH and Kering. The study extends legitimacy theory to ascertain the credibility of the aforementioned luxury conglomerates' commitment to environmental sustainability.

Design/methodology/approach

A corpus-assisted discourse analysis centred upon the Global Reporting Initiative (GRI) guidelines is used to examine the environmental disclosures of LVMH and Kering.

Findings

The findings show inconsistencies due to the lack of brand-level reporting and reporting quality falls short of comparable sustainability reporting within each conglomerate and with one another. Selective and unbalanced reporting along with symbolic management undermines the legitimacy of sustainability efforts by LVMH and Kering.

Originality/value

Despite the increased attention paid to sustainable luxury, few studies critically analyse how luxury brands formally report on sustainability.

Details

Journal of Fashion Marketing and Management: An International Journal, vol. 25 no. 4
Type: Research Article
ISSN: 1361-2026

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Article
Publication date: 2 October 2017

Alessandro Lai, Gaia Melloni and Riccardo Stacchezzini

This paper aims to understand how the principle of materiality gets implemented in integrated reporting (IR) contexts.

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1643

Abstract

Purpose

This paper aims to understand how the principle of materiality gets implemented in integrated reporting (IR) contexts.

Design/methodology/approach

Drawing on an interpretation of materiality as a social construction, this research explores the meaning that practitioners attach to the principle during their implementation of it. Following an existing framework for exploring materiality in corporate reporting, this study investigates the meaning by focusing on who participates in determining IR materiality and to whom the IR is addressed. This analysis benefits from in-depth interviews with persons involved in the preparation of IR for a firm that pioneered this form of reporting.

Findings

In IR preparers’ view, the meaning of materiality corresponds with the company strategy: The IR describes strategic priorities and related actions and results. Capital providers are the primary intended addressees of the material information. Although several actors engage in IR preparation, the materiality determination process is governed by a specific “IR hub” in strict collaboration with and dependence on the chief financial officer.

Research limitations/implications

In an IR context, materiality is intimately connected to the function that preparers assign to the report.

Originality/value

This novel research opens the “black box” of the process by which materiality gets defined and then practically implemented in an IR context.

Details

Meditari Accountancy Research, vol. 25 no. 4
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 24 August 2018

Zihan Liu, Christine Jubb and Subhash Abhayawansa

The integrated reports published by companies vary significantly in quality in spite of them claiming to be compliant with the integrated reporting (IR) Framework issued…

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1414

Abstract

Purpose

The integrated reports published by companies vary significantly in quality in spite of them claiming to be compliant with the integrated reporting (IR) Framework issued by the International Integrated Reporting Council (IIRC). The purpose of this paper is to develop and apply a normative benchmark against which compliance with the IR Framework, and the extent to which integrated reports make visible how organisations create value, can be evaluated.

Design/methodology/approach

The three pillars of the IR Framework – Capitals, Content Elements and the Guiding Principles – are operationalised by the way of a set of disclosure items that capture the extent to which they manifest within integrated reports. The created disclosure index is applied to analyse reports of five companies that are expected to be superior integrated reporters.

Findings

The normative benchmark that was created to operationalise the IR Framework identifies a vast amount of potentially communicable information and various degrees to which information may be disclosed. The integrated reports analysed differ significantly in the extent to which value-creation stories are made visible, despite some of the companies promoting to have actively engaged with IR as participants of the IIRC Pilot Program Business Network. All selected companies performed poorly in comparison to the normative benchmark.

Originality/value

This paper is the first to provide a comprehensive normative benchmark for analysing and evaluating compliance with the IR Framework and the extent to which integrated reports make visible how organisations create value.

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Abstract

Details

Mandatory and Discretional Non-financial Disclosure after the European Directive 2014/95/EU
Type: Book
ISBN: 978-1-83982-504-0

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Book part
Publication date: 10 August 2018

Emily Barman

Over the last several decades, the question of the import of firms’ social and environmental responsibilities has taken center stage. While once companies’ obligations to…

Abstract

Over the last several decades, the question of the import of firms’ social and environmental responsibilities has taken center stage. While once companies’ obligations to stakeholders and to sustainability were framed as normative issues, these criteria are taking on instrumental worth. Most recently, advocates of Responsible Investment have suggested that firms’ environmental, social, and governance (ESG) performance possesses critical implications for companies’ creation and capture of long-term economic value. Employing textual analysis, this chapter analyzes the accounting, rating, and reporting standards that have been developed by which companies are expected to measure, communicate, and be evaluated for their ESG performance. Drawing from literature on organizational imprinting, this chapter finds significant differences across these standards, in terms of the determination of materiality and firms’ desired stakeholder relations. The divergence present in the meaning and measure of Responsible Investment across these standards possesses important strategic implications for managers in this field who must consider the implications of each guideline for internal and external purposes.

Details

Sustainability, Stakeholder Governance, and Corporate Social Responsibility
Type: Book
ISBN: 978-1-78756-316-2

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Book part
Publication date: 20 May 2011

Martin T. Stuebs and C. William Thomas

According to the SEC, the proposed roadmap for adopting principles-based International Financial Reporting Standards (IFRS) is still a priority. The adoption of IFRS will…

Abstract

According to the SEC, the proposed roadmap for adopting principles-based International Financial Reporting Standards (IFRS) is still a priority. The adoption of IFRS will ultimately demand greater emphasis on practitioner judgment (Mintz, 2010). This chapter focuses on the need for building the judgment skills of the practitioner. Our methodology follows a three-step process. We start with accounting standards, reviewing similarities and differences between “rules-based” and “principles-based” standards and conclude that, while applying any standard requires judgment, applying principles-based standards requires more judgment. We then focus on preparer incentives that can influence this requisite judgment. We use the “fraud triangle” to analyze the influence of incentives on judgment under each standards setting approach. Our third and most important step involves equipping practitioners to make judgments in the presence of incentives. We present and discuss a model that considers economic, social (legal), and ethical dimensions for making principled judgments in the presence of incentives and advocate-improved education for accountants in implementing that model.

Details

Research on Professional Responsibility and Ethics in Accounting
Type: Book
ISBN: 978-1-78052-005-6

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Article
Publication date: 20 March 2017

Dominique Diouf and Olivier Boiral

The purpose of this research is to analyze the perceptions of stakeholders – more specifically, socially responsible investment (SRI) practitioners – of the quality of…

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6581

Abstract

Purpose

The purpose of this research is to analyze the perceptions of stakeholders – more specifically, socially responsible investment (SRI) practitioners – of the quality of sustainability reports using the Global Reporting Initiative (GRI) framework.

Design/methodology/approach

This paper is based on 33 semi-structured interviews carried out with different stakeholders and experts (e.g. consultants, fund managers, analysts, consultants) in the field of SRI in Canada.

Findings

The perceptions of SRI practitioners shed more light on the elastic and uncertain application of the GRI principles in determining the quality of sustainability reports. Their perceptions tend to support the argument that sustainability reports reflect the impression management strategies used by companies to highlight the positive aspects of their sustainability performance and to obfuscate negative outcomes.

Originality/value

First, undertake empirical research on stakeholders’ perceptions – which have been largely overlooked – of the quality of sustainability reports. Second, shed new light on the impression management strategies used in sustainability reporting. Third, show the reflexivity and the degree of skepticism of practitioners with regard to the reliability of information on sustainability performance.

Details

Accounting, Auditing & Accountability Journal, vol. 30 no. 3
Type: Research Article
ISSN: 0951-3574

Keywords

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