Search results

1 – 10 of 86
Book part
Publication date: 4 April 2024

Haoyu Gao, Ruixiang Jiang, Junbo Wang and Xiaoguang Yang

This chapter investigates the cost of public debt for firms using a comprehensive sample consisting of 17,368 industrial bond issues from 1970 to 2011. The empirical evidence…

Abstract

This chapter investigates the cost of public debt for firms using a comprehensive sample consisting of 17,368 industrial bond issues from 1970 to 2011. The empirical evidence shows that yield spreads for seasoned bond issues are significantly lower than those for initial bond issues. This seasoning effect is robust across different sample periods, subsamples, and model specifications. On average, the yield spreads for seasoned bond issues are around 50 bps lower than those for initial bond issues. This difference cannot be explained by other bond and firm characteristics. The seasoning effect is more pronounced for firms with higher levels of uncertainty, lower information disclosure quality, and longer time intervals between the first and subsequent issues. Our empirical findings provide supportive evidence for the extant theories that aim to rationalize the information role in determining the cost of capital.

Details

Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-83753-865-2

Keywords

Article
Publication date: 21 June 2023

Syed Zulfiqar Ali Shah and Fangyi Wan

This study examines whether country-level financial integration affects firms' accounting choices and the quality of financial information.

Abstract

Purpose

This study examines whether country-level financial integration affects firms' accounting choices and the quality of financial information.

Design/methodology/approach

This study employs Propensity Score Matching (PSM), and panel regressions of a large sample of data from 20 emerging markets over the period 1987–2018.

Findings

This study finds evidence that increased level of financial integration is significantly positively associated with firms' accruals earnings management (AEM) and real earnings management (REM).

Research limitations/implications

Findings in the study have implications for standard-setting bodies that aim to enhance the usefulness of financial reporting quality. The study also has implications for various initiatives by governments in emerging markets aimed at raising investor confidence and fostering stock market development through greater financial integration.

Practical implications

Findings in the study have implications for standard-setting bodies that aim to enhance the usefulness and quality of financial reporting. The findings can be of interest to analysts, auditors and other monitoring institutions who play a crucial role in detecting earnings management and reducing information asymmetry. Finally, the study has implications for various initiatives by governments in emerging markets aimed at raising investor confidence and fostering stock market development through greater financial integration.

Originality/value

Findings in the study reveal how country-level financial integration affects accruals and real earnings management in a sample of firms from 20 emerging markets. Further, the study adds to the growing body of literature on emerging markets where capital markets mechanisms, regulatory environment and firm's corporate governance are distinct to developed markets.

Details

Journal of Applied Accounting Research, vol. 25 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 26 July 2023

Iram Hasan, Shveta Singh and Smita Kashiramka

The coronavirus disease (COVID-19) has impacted all economies, businesses and societies. The purpose of this paper is to analyze and present a case for corporate social…

Abstract

Purpose

The coronavirus disease (COVID-19) has impacted all economies, businesses and societies. The purpose of this paper is to analyze and present a case for corporate social responsibility (CSR) in terms of its relevance amidst the turmoil caused by the pandemic.

Design/methodology/approach

The authors use a directed content analysis approach to retrieve relevant information from news articles using Thomson Reuters’ Eikon® and Bloomberg® databases. Based on stakeholder theory, the authors evaluate some of the CSR initiatives undertaken by organizations around the world. The authors then undertake a systematic literature review using the preferred reporting items for systematic reviews and meta-analyses standard to provide possible implications for organizations.

Findings

The findings suggest that in response to the pandemic, corporations from both developed and developing countries have been pursuing CSR measures for stakeholder engagement. The systematic literature review signals positive outcomes that companies might expect at the organizational level. The paper concludes by suggesting research propositions that indicate effective CSR at a time of crisis like COVID-19 encourages stakeholder partnerships and helps to gain a competitive advantage.

Originality/value

The authors present an overview of the CSR responses taken by firms globally in response to the pandemic by way of stakeholder engagement. The authors analyze the stakeholders targeted through such initiatives and report possible implications based on the extant literature. The findings of the study can be used to understand the various transitions that happen in an unprecedented situation like COVID-19 at all levels of business and society.

Details

Social Responsibility Journal, vol. 20 no. 3
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 2 June 2023

Emmanuel C. Mamatzakis, Lorenzo Neri and Antonella Russo

This study aims to examine the impact of national culture on classification shifting in Eastern European Member States of EU Eastern European countries (EEU) vis-à-vis the Western…

Abstract

Purpose

This study aims to examine the impact of national culture on classification shifting in Eastern European Member States of EU Eastern European countries (EEU) vis-à-vis the Western Member States of EU (WEU). The EEU provides a unique sample to study the quality of financial reporting that the authors measure with classification shifting given that for more than five decades they were following the model of a centrally planned economy, where market-based financial reporting was absent. Yet, the EEU transitioned to a market-based economy and completed its accession to the EU.

Design/methodology/approach

This study uses a panel data set of firm year observations from 1996 and 2020 that covers the full transition of EEU. This empirical analysis is based on fixed effects panel regression analysis where the authors report a plethora of identifications.

Findings

This study finds classification shifting in the EEU countries since their transition to the market-based economy, though they have no long record of market-based financial reporting. This study also notices that cultural factors are associated with classification shifting across all Member States of the EU. This study further examines the impact of interactions between cultural characteristics and special items and reveal variability between WEU and EEU. As part of the robustness analysis, this study also tests the impact of culture on real earnings management measures for both WEU vs EEU, confirming the variability of the impact of culture on earnings management.

Research limitations/implications

Future research could explore the role of religion differences in WEU vis-à-vis EEU states, as they are also subject to cultural differences.

Practical implications

The findings are important for regulators, external monitors and investors, as they show that cultural factors affect earnings management with some variability across countries in the EU, and they should be acknowledged in policymaking.

Social implications

The findings show that cultural differences between EEU and the “old” Member States of the EU could explain classification shifting.

Originality/value

To the best of the authors’ knowledge, this is the first study that sheds light on the impact of national culture on classification shifting in EEU of EU vis-à-vis the “old” WEU of EU.

Details

Journal of Accounting & Organizational Change, vol. 20 no. 2
Type: Research Article
ISSN: 1832-5912

Keywords

Article
Publication date: 19 October 2023

Guotai Chi and Ahmed R. Gooda

This study aims to explore how earnings management techniques are affected by corporate financial debt risk (FDR), internal control (IC) effectiveness and CEO education.

Abstract

Purpose

This study aims to explore how earnings management techniques are affected by corporate financial debt risk (FDR), internal control (IC) effectiveness and CEO education.

Design/methodology/approach

The study uses a sample from listed firms in China from 2010 to 2017, comprising different industries, including agriculture, forestry, livestock farming and fishing; mining; manufacturing; electric power, gas and water production and supply; construction; transport and storage; information technology; the real estate industry; social services; and communication and cultural. The regression analysis is used to test the hypotheses. The two-stage least squares technique is used to check for endogeneity issues.

Findings

The study finds that firms are less likely to manage real earnings when they have more robust IC and FDR. Likewise, companies with weak ICs are more likely to manipulate real earnings. Besides, the study finds an influence of CEO education on the relationship between IC, FDR and real earnings management (REM). These results can be applied to the sectors in the sample covered by the research, and the authors do not overlook the energy industry sector for the importance of its role in the economy.

Research limitations/implications

There are some limitations for the researcher when performing any research, and this study is no exception. Researchers are urged to take these circumstances into consideration when generalizing or comparing the results because the methods used to calculate the measurement variables in each study may differ somewhat from those used in other research. In addition, expanding the current research design to incorporate additional nations may be an area of interest for future research and could aid in evaluating the effects of nation-specific elements (such as inflation, culture, legal systems and political considerations) on the usefulness of IC and decreasing FDR. Second, the current study focuses on the impact of IC and FDR on REM; this paper does not dissect the “black box” of IC and consider how each element affects earnings management. Future research may need to focus specifically on how effective IC would affect earnings management and precisely what IC mechanisms would discourage the management of earnings.

Practical implications

Helping companies listed in China to make decisions and improve investors’ vision of the results of real companies’ businesses, as well as helping management to avoid falling into debt risk and the consequent effects and manipulation of earnings.

Originality/value

By highlighting the significance of IC and debt risk in enhancing information quality in China, the results contribute to the body of work examining the relationship between IC, FDR and REM. In addition, this study uses a CEO’s education to moderate this link.

Details

Journal of Financial Reporting and Accounting, vol. 22 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 1 March 2024

Abongeh A. Tunyi, Geofry Areneke, Tanveer Hussain and Jacob Agyemang

This study proposes a novel measure for management’s horizon (short-termism or myopia vs long-termism or hyperopia) derived from easily obtainable firm-level accounting and stock…

Abstract

Purpose

This study proposes a novel measure for management’s horizon (short-termism or myopia vs long-termism or hyperopia) derived from easily obtainable firm-level accounting and stock market performance data. The authors use the measure to explore the impact of managements’ horizon on firms’ investment efficiency.

Design/methodology/approach

The authors rely on two commonly used but uncorrelated measures of management performance: accounting performance (return on capital employed, ROCE) and stock market performance (average abnormal return, AAR). The authors combine these measures to develop a multidimensional framework for performance, which classifies firms into four groups: efficient (high accounting and high market performance), poor (low accounting and low market performance), myopic (high accounting and low market performance) and hyperopic (low accounting and high market performance). The authors validate this framework and deploy it to explore the relationship between horizon and firms’ investment efficiency.

Findings

In validation tests, the authors show that management myopia (hyperopia) explains firms’ decision to cut (grow) research and development investments. Further, as expected, myopic (hyperopic) firms are associated with significantly more (less) accrual and real earnings management. The empirical tests on the link between horizon and investment efficiency suggest that myopic managers cut new investments while their hyperopic counterparts grow the same. Ultimately, the authors find that myopia (hyperopia) exacerbates(mitigates) the over-investment of free cash flow problem.

Originality/value

The authors introduce a framework for assessing management’s horizon using easily obtainable measures of performance. The framework explains inconsistencies in prior empirical research using different measures of performance (accounting versus market). The authors demonstrate its utility by showing that the measure explains decisions around research and development investment, earnings management and firm investments.

Details

Review of Accounting and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 16 February 2024

Sujie Hu, Yuting Qian and Sumin Hu

The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial…

Abstract

Purpose

The purpose of this study is to explore the economic impact of financial restatements by major customers on the audit opinion of their suppliers, showing that non-financial information disclosure potentially helps auditors make better assessments.

Design/methodology/approach

Using a sample of China’s listed firms from 2007 to 2021, the authors aim to find the relationship between customers’ financial restatements and their suppliers’ audit opinions. Heckman selection model, placebo tests and other robustness checks are used as well.

Findings

The findings reveal that customers’ financial restatements have a significant effect on the likelihood of suppliers receiving modified audit opinions. This relationship is pronounced when suppliers face a higher level of financial constraints, exhibit poorer accounting conservatism or receive more negative media coverage. Additionally, this effect occurs through increased business risk and information risk, which heightens auditors’ perceived audit risk. Moreover, the study highlights the influence of switching costs, auditor expertise and restatement severity on this relationship.

Practical implications

Risks originating from customers can spread along the supply chain, emphasizing the necessity for auditors to give heightened attention to both the audited firms and their customer information. Moreover, regulators should carefully consider the important impact of customer information disclosures to maximize the protection of the interests of external information users.

Originality/value

This study not only confirms the crucial role of customer information disclosures in annual reports for stakeholders and auditors but also contributes to the existing literature on customer–supplier relationships.

Details

Managerial Auditing Journal, vol. 39 no. 3
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 12 March 2024

Bai Liu, Tao Ju, Jiarui Lu and Hing Kai Chan

This research investigates whether focal firms employ strategic supply chain information disclosure, focusing on the concealment of supplier and customer identities, as part of…

Abstract

Purpose

This research investigates whether focal firms employ strategic supply chain information disclosure, focusing on the concealment of supplier and customer identities, as part of their supply chain environmental risk management strategies (supplier sustainability risk and customer loss risk, respectively).

Design/methodology/approach

Using a panel dataset of Chinese listed firms from 2009 to 2019 and utilizing the suppliers’ environmental punishment of peer firms (peer events) as an exogenous shock and employing ordinary least squares (OLS) estimation, this study conducts a regression analysis to test how focal firms disclose the identities of their suppliers and customers.

Findings

Our results indicate that focal firms prefer to hide the identities of their suppliers and customers following the environmental punishment of peer firms’ suppliers. In addition, supplier concentration weakens the effect of withholding supplier identities, whereas customer concentration strengthens the effect of hiding customer identities. Mechanism analysis shows that firms hide supplier identities to avoid their reputation being affected and hide customer identities to prevent the deterioration of customers’ reputations and thus impact their market share.

Originality/value

Our study reveals that reputation spillover is another crucial factor in supply chain transparency. It is also pioneering in applying the anonymity theory to explain focal firms’ information disclosure strategy in supply chains.

Details

International Journal of Operations & Production Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3577

Keywords

Article
Publication date: 30 August 2023

Samuel Buertey, Ha Thanh Nguyen and Ephraim Kwashie Thompson

Post-Sarbanes Oxley Act (SOX), the audit committee has been empowered greatly to play a central role in the corporate governance of firms. Embedded in agency theory, this study…

Abstract

Purpose

Post-Sarbanes Oxley Act (SOX), the audit committee has been empowered greatly to play a central role in the corporate governance of firms. Embedded in agency theory, this study aims to examine the effect of the audit committee on the likelihood by firms to pay dividends.

Design/methodology/approach

The study population is US firms in the Institutional Shareholder Services (ISS) database from 2007 to 2018. The authors apply the multivariate logit fixed-effect regression for the analyses after conducting the appropriate statistical tests.

Findings

From the results of the research model, the authors find that there is a positive relationship between the size and gender diversity of the audit committee and the propensity to pay dividends suggesting that a larger audit committee with substantial women representation improve the information environment in firms leading to higher dividend distribution. The extent of busyness of the audit committee impacts negatively on the propensity to pay dividends. The results are driven by high-performing firms and not driven by specific levels of firm size.

Research limitations/implications

The findings of the study give impetus to the audit committee as an important component of the corporate governance mechanism that advances the interest of stakeholders. Thus, efforts that seeks to promote the audit committee’s resourcefulness must be embraced by all stakeholders.

Originality/value

To the best of the authors’ knowledge, this study is the first to focus on audit committee and dividend payout policy of US firms post-SOX. The study demonstrates how the audit committee characteristics including its size, gender diversity and busyness affect dividend policy by mitigating information asymmetry problems.

Details

Corporate Governance: The International Journal of Business in Society, vol. 24 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 18 July 2023

Ernest N. Biktimirov and Yuanbin Xu

The purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P…

Abstract

Purpose

The purpose of this study is to compare market reactions to the change in the demand by index funds between large and small company stocks by examining the transition of the S&P 500, S&P 400 MidCap and S&P 600 SmallCap indexes from market capitalization to free-float weighting. This unique information-free event allows not only avoiding confounding information signaling and investor awareness effects but also comparing the effect of the decrease in demand on stocks of different sizes.

Design/methodology/approach

This study uses the event study methodology to calculate abnormal returns and trading volume around the full-float adjustment day. It also tests for significant changes in institutional ownership and liquidity. Multivariate regressions are used to examine the relation of liquidity changes and price elasticity of demand to the cumulative abnormal returns around the full-float adjustment day.

Findings

This study finds significant decreases in stock price accompanied with significant increases in trading volume on the full-float adjustment day, and significant gains in quasi-indexer institutional ownership and liquidity. The main finding is that cumulative abnormal returns around the event period are related to changes in the number of quasi-indexer and transient institutional shareholders, not to changes in liquidity or price elasticity of demand.

Originality/value

This study provides the first comprehensive comparison analysis of stock market reactions to the decline in demand between large and small company stocks. As an important implication for future studies of the index effect, changes in institutional ownership should be considered in the analysis.

Details

International Journal of Managerial Finance, vol. 20 no. 2
Type: Research Article
ISSN: 1743-9132

Keywords

1 – 10 of 86