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The present paper aims to discuss the “money laundering” aspect and related governance practices of third sector, non-government organizations (NGOs). In NGOs globally, foreign contributions are not an old story. But in NGOs, the spotlight on the vulnerability of money laundering in the name of foreign contribution(s) requires special attention. The study highlights the dimension of money laundering in an Indian NGO and related dominance of board leadership about governance issues by way of foreign contribution.

The present study uses case study method for enlightening the money laundering tussle in a non-government organization and its governance impact on the stakeholders’ interests at large.

The results stress upon the need for to have strong anti-money laundering practices in non-government organizations in the form of foreign contributions which are still struggling to have a sound governance system in place.

It is of significance to both policymakers and standards setters at the international level in the light of increasing global awareness about anti-money laundering practices of the third sector.

There will be an improvement in the corporate management related to money-laundering of these organizations and infuse higher confidence among stakeholders and further lead to their effective regulatory framework.

It is an original paper which highlights the role and significance of money laundering practices in the third sector.

Accounting and Finance.

Postgraduate/graduate.

This paper aims to analyse the fixed assets management of Larsen & Toubro Ltd (L&T), a leading Indian construction company for sufficiency and efficiency, and explore its future growth prospects in relation to its capital investments. It also investigates whether the global crisis in 2008 had any impact on the development plans of the company for future orientation as the global recession affected companies in various sectors worldwide. It specifically aims to find out whether L&T was in a better position to face the situation in the industry.

Expected learning outcomes are as follows: to learn and apply the concept of fixed assets management in a business organization; to evaluate the impact of fixed assets management on the profitability of the company; to appreciate the importance of fixed assets management efficiency in a business organization; and to illustrate the use of financial crisis on the growth prospects of a business.

Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

CSS 1: Accounting and finance.

It is largely believed that stock pricing is influenced by disclosure of earnings. This motivates the corporate to exercise earnings management practices. This paper aims to analyse and detect the earnings management practices of Indian firms over earnings cycles. The earnings behaviour of the firms has been analysed at three levels of earnings cycles for the pricing effect: complete, incomplete and prospective. In India, the corporate ownership model is promoter-dominated shareholders’model (PDSHM) which highlights the relevance of the study for earnings-management motivation. This paper contributes by examining earnings management of the units at three levels of earnings cycle with regard to stock pricing. Earnings cycles have been decomposed into three components: complete, incomplete and prospective. While earnings management has been studied extensively, virtually all studies have focused on firm-specific effects. This study relates earnings management to the cycle of the earnings for stock-price effect.

The cash-flow model has been used for the computation of accruals (Collins and Hribar, 1999), and D’Angelo model (for calculating discretionary accruals) has been used for detecting earnings management in the present study, being comprehensive in nature and detailed in approach. The results of the “complete earnings cycle”are measured by net income. The results of the “incomplete earnings cycle” are measured by the ratio of gross margin over sales multiplied by inventory. It yields an approximate measure of the unrealized holding gains and losses. The “prospective earnings cycle” stems from the management decision to choose a rate of income growth. Statistical tools have been used for testing the results. These include regression analysis and descriptive statistics like arithmetic mean, median and standard deviation.

An examination of the units shows that firms report more discretionary accruals (DACC) at complete cycle, i.e. when financial markets are more certain about their future prospects which influence their securities’ pricing. It verified that unrealized income and growth prospects have very little role to play in determining returns. The results indicated that each of the components of the earnings cycle has a relevance factor for returns. In complete earnings cycle, DACC had the highest significance on returns than operating cash flows (OCF) and non-discretionary accruals (NDACC). Its determination content is the highest. So, the firms report more negative DACC when financial markets are less certain about their future prospects. Stock-price responses to earnings surprises are moderated when firm-level uncertainty is high, consistent with performance being attributed more to chance rather than performance.

The present study could be confined to only top 12 profit-making corporate enterprises in the private sector in India, leaving all other enterprises due to data non-availability. Of 25 enterprises, there were public sector undertakings too which had to be excluded. The period in the study is of five years (from 2003-2004 to 2007-2008) to highlight earnings management motivation. This period is best suited to identify the effects of global recession on the practice of earnings management in India. Researchers may like to select a different time-period based on their perspective.

It is hoped that the study would improve the understanding of the manner in which the capital markets process the publicly available earnings and its components for global firms. The findings of this study are significant not only for organisations that function in India but also for other companies that are based in economies with relatively mature corporate governance mechanisms. So, the authors’ findings have important policy implications for the Western world, as the sample companies are multinationals and operate globally. Similar efforts in other countries would be rewarding in controlling the management of reported earnings and enhance the reliability and transparency of reported earnings to promote economic efficiency.

Evidence on this issue could bring a new dimension to how the capital markets interpret these reported earnings and its components (cash flows, DACC and NDACC) at different levels of earnings cycles for minority shareholders in particular. Further, the evidence could also provide insights into the economic incentives for discretionary accounting choice and disclosure of the results of these earnings cycles.

It is an original paper which highlights the earnings behaviour and its motivation in Indian corporate enterprises for earnings cycles with regard to stock pricing.

The earnings management (EM) research on the impact of firm’s multi-nationality and reputation on the earnings’ quality is limited, particularly in the context of emerging economies like India. In India, the corporate ownership model is “Promoter-dominated shareholder model” wherein companies have global operations. The purpose of this paper is to analyze the EM practices of corporate enterprises in India about multi-nationality, reputation and related determinants.

The present study employs DeAngelo model for calculating discretionary accruals for detecting EM. Multi-nationality, reputation and related determinants are measured as accounting indices. The statistical tools applied for testing the accuracy of results include correlation and regression analysis, t-test and descriptive statistics, like arithmetic mean, median and standard deviation.

The results show that multi-nationality is the driving force for EM and significantly affects the accounting choices of management in the sample units. The firm’s reputation and other related determinants, except size, vary with accruals. The earnings behavior of the corporate is influenced by other factors, like growth and leverage as well.

A total of 12 units out of top 25 units, taken for the study, met the sampling requirements. So, the present study is confined to 12 profit-making private listed companies in India. These companies constitute a significant size of BSE’s market capitalization for completeness of data; still the size and diversity of units can be extended for further study. The period in the study is of five years (2003–2004 to 2007–2008) to find the effects of global recession on EM practices in India. Researchers may like to select a different time-period based on their objective.

The study draws new dimensions about the quality of financial reporting in case of global firms and with high-perceived reputation. The findings are of significance to standard setters and regulators, particularly for emerging economies, like India where companies have international operations. They are equally important for other companies that are based in economies with relatively mature corporate governance mechanisms because of common regulatory focal points.

It brings out the importance of financial reporting process of global corporations for shareholders’ value creation. It is likely to enrich the knowledge and understanding of the EM phenomenon in developing economies like India.

It is an original paper, which highlights the EM motivation about multi-nationality, reputation and related variables in Indian corporate.

The purpose of this paper is to explore the role of independent directors’ diligence in restraining earnings management practices in the Indian context.

It employs a panel data analysis to test the association of earnings management with the diligence of independent directors.

The results suggest that the diligence of independent directors has a significant impact on earnings management. The findings support the agency theory and provide evidence of the role played by the board processes in restricting earnings management.

This study is important for the regulators as it highlights the significance of independent directors’ diligence in producing higher quality financial statements, thereby creating the real economic value of companies. This is the first article that explores the impact of independent directors’ diligence on earnings management practices particularly in the context of an emerging economy, like India in the light of new Companies Act 2013 and revised Clause 49 of the Listing Agreement, 2014 by Securities and Exchange Board of India.

Income smoothing is exercised by the management for numerous reasons. Growth opportunities available to a firm are a very important reason but an undermined area for income smoothing by the management. This paper aims to review the income smoothing practices in corporate enterprises in India with respect to growth pattern of a firm as measured by investment opportunity set (IOS) defined in Fudenberg and Tirole’s (1995) model. In India, the main corporate ownership model is promoter dominated shareholders model. This makes the study unique highlighting the role of board for income smoothing. The study contributes by extending this model to earnings per share definition with IOS by a firm. The study also investigates the level of income smoothing and its impact on the informativeness of earnings in regard to IOS.

The enterprises have been chosen on the basis of their performance in terms of profit generation [profit after tax (PAT) performance] for the year 2007-2008 as per Economic Times October 2007 Survey in a private sector. The period to be covered is from 2003-2004 to 2007-2008. 2007-2008 has been a year of global recession which is an indicative reason for income smoothing by the corporate. DeAngelo model has been used for calculating discretionary accruals and detecting income smoothing. Fudenberg and Tirole’s (1995) model has been specifically used in studying the relationship between IOS and income smoothing. Specifically, we use three variables to construct an index of the IOS of each firm, market-to-book assets, market-to-book equity and the earnings price ratio.

An examination of the units shows that there is smoothing behaviour exercised by them. Analytical results of anticipatory smoothing and the IOS propose that concern about job security creates an incentive for managers to smooth earnings in consideration of both current and future relative performance. More explicitly, the extent of smoothing is expected to be negatively related to the level of IOS in periods of low current/high future performance and positively related to the level of IOS in periods of high current/low future performance. The empirical results confirmed our predictions.

The sampling requirements were met by 12 units only of top 25 units, taken for the study. So, the present study was confined to only 12 profit-making corporate enterprises in the private sector in India, leaving all other enterprises. Though these companies constitute a significant size of Bombay Stock Exchange’s market capitalization for completeness of data, still the size can be extended for further study. The present study has not considered public sector units and closely held companies. The scope of the units can be extended to other units in diverse sectors with different size and scale of operations. It would further verify the present discussion and also provide future enlightenment on the issue of income smoothing. The magnitude of discretionary accruals has been analysed in regard to potential earnings management. But, discretionary accruals are not directly available. They are calculated as a proxy using a model. Estimating discretionary accruals is still a tedious task.

The results clearly indicate that growth opportunities available to a firm are potential indicative of a firm’s income smoothing behaviour. The findings of this study are important to standard setters and regulators, as it highlights the need for an effective regulation for detecting income smoothing. There is a strong need to have well-defined policies and regulatory mechanism with respect to prevent and detect income manipulation practices at an early stage. Standard-setting bodies can consider the attributes of assets and liabilities and changes in them also with the fundamental process of measurement of income. In short, the evidence argues for a revenue/expense and asset/liability view of earnings, rather than the cash-flow view of earnings. The findings of this study are important to policymakers and other stakeholders, as it highlights the need for an effective board in discharging their role qualitatively, rather than quantitatively.

It brings out the importance of fair accounting for shareholders.

It is an original paper which highlights the income smoothing behaviour in Indian corporate enterprises in terms of growth opportunities available to them.

This paper aims to focus on the concept of abolition of black money and the demonetization movement started in India for cleaning black money and its impact on corporate world and Indian economy. It discusses the corporate governance effect of the demonetization scheme and various policy measures taken by the government to unearth and curb the black money in the country. It also states the challenges in its process of implementation and implications for future.

It appraises and reviews the concept of demonetization and its process in India since its implementation on November 8, 2016.

The biggest positive effects of this move were eradication of stocked and staked up money, cleansing of the financial system and improving governance in India. But its implementation had mix outcomes with its own challenges for future improvement.

The lessons drawn from the experience are expected to pave way for the countries at large.

It is an original paper on demonetization in India, and it is hoped that the lessons learnt thereof will pave the way for the world at large.

The present article aims to test the fairness of reported numbers by the management and examine the magnitude of earnings management in Indian corporate enterprises by testing the Beneish profit model. This paper contributes by further verifying the results of the Beneish model by applying the concept of “quality of earnings and revenue” to the sample units. Quality of reported numbers by the management has always been a concern for a common shareholder on account of the underlying proposition of earnings management. There are numerous models available to test the quality of these numbers, i.e. presence of earnings management. Most of these models are accrual based which have been subject to significant criticism due to estimate-based approach. The Beneish profit model, which combines accruals and financial ratios and/or indexes, is one such alternative to the accruals approach.

A “case-based” research approach has been followed here for analyzing Indian corporate enterprises on select basis. The Beneish profit model, developed specifically for testing earnings quality and detecting earnings management, has been used in the present study. The data analysis has been well supported by “quality measurement tools”.

An examination of the units shows the need for improvement in the quality of earnings in the sample units, and there is a presence of earnings management in them.

The present study could be confined to only top 12 profit-making corporate enterprises in the private sector in India, leaving all other enterprises due to data non-availability. Of 25 enterprises, there were public sector undertakings too which had to be excluded.

The present study was confined to only 12 profit-making corporate enterprises in the private sector due to sampling requirements; the scope of the units can be extended to other units in diverse sectors with different size and scale of operations. It would further verify the present discussion and also provide future enlightenment on the issue of earnings management.

It is an original article which explores creative accounting practices for better shareholders’ interest.

Based on socioemotional wealth theory, the authors explore the impact of founder domination (with the founder as the chairman or CEO) on the earnings management activities of family firms and examine the moderating effect of the industry environment on the above relationship.

Based on the multivariate regression model, the authors test the theoretical view on the empirical data of Chinese family-owned listed companies.

The authors propose and find that under founder domination, family firms are unlikely to engage in earnings management activities. Furthermore, the authors find that industry growth enhances the above relationship, while industry competition weakens it.

First, by clarifying the importance and heterogeneous impacts of the founder serving as chairman or CEO on China's family firms' earnings management, this research contributes to a fuller understanding of the impact of founder domination on the business activities of firms, especially family firms. Second, the authors contribute to the literature that examines the antecedents of earnings management, particularly in family firms. Third, the authors contribute to the study of the boundary conditions of the “founder domination-firms’ business activities” framework.

Smart furniture is an essential part of research that has been designed to best complement easy and safe human interaction. The purpose of smart furniture is to save the space of the house and make the products unique, awesome and safe, functional, strong and also make it works better so the people can live better with it. This research aims to explore the key supply chain strategies implemented by the Indian smart furniture industry to reduce the impact of a post-COVID-19 pandemic.

This work utilized a case study and conducted semi-structured interviews with the top leadership of the smart furniture manufacturing industry to explore key supply chain strategies to reduce the influence of the post-COVID-19 pandemic. Additionally, key supply chain strategies have been analyzed using a multi-criteria decision-making technique known as grey relational analysis (GRA) to determine their ranking significance in the smart furniture industry.

The results of this study discovered that “Inventory-Categorization” is essential in ensuring business continuity during the COVID-19 pandemic and helps reduce the amount of stock they have on hand. It enhanced the opportunity for employees to properly focus on their work and an opportunity for better work-life balance. The results of the study can also help supply chain stakeholders in their establishment of critical strategies.

The implications of this research work help the Indian furniture industry to make supply chain investment decisions that benefit the organization to sustain itself.

This is the first study to explore key supply chain strategies for the post-COVID-19 era. This work will assist managers and practitioners in helping the organization decide which supply chain strategies are more critical to the betterment of the organization.