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Article
Publication date: 28 January 2022

Talie Kassamany, Etienne Harb, Wael Louhichi and Mayssam Nasr

This paper aims to investigate the impact of risk disclosure practices (voluntary, mandatory and risk disclosure index) on stock return volatility, market liquidity and financial…

Abstract

Purpose

This paper aims to investigate the impact of risk disclosure practices (voluntary, mandatory and risk disclosure index) on stock return volatility, market liquidity and financial performance for insurance companies in the UK and Canada, before and after the International Financial Reporting Standards (IFRS) adoption.

Design/methodology/approach

The panel data analysis covers 14 insurance companies in the UK and 12 in Canada over a six-year period, three years before and three years after the implementation of IFRS. The authors collected risk disclosure data manually from the annual reports and analyzed it through QSR NVivo software for each country. The other variables are secondary data collected from Thomson Reuters Eikon and Datastream.

Findings

The results reveal that mandatory risk disclosure practices positively influence stock return volatility for UK insurers but not Canadian ones. Moreover, both mandatory and voluntary risk disclosures increase market liquidity for UK insurers. The outcomes also show a negative influence of risk disclosure practices on financial performance for both the UK and Canadian insurers. The adoption of IFRS enhances the impact of risk disclosure practices in both countries on market liquidity and financial performance.

Research limitations/implications

The findings rationalize the impact of risk disclosure practices on volatility, liquidity and financial performance of UK and Canada insurers, and the effect of IFRS in triggering those results.

Practical implications

The findings highlight the diverse effects of voluntary and mandatory risk disclosure practices in enhancing market discipline and mitigating information asymmetry problems to investors. Regulators and policymakers could rely on the findings to amend and develop disclosure standards more frequently to assure their effectiveness. The authors also offer insights to managers to determine the levels of mandatory and voluntary disclosure practices and disclosure strategies to gain their stakeholders’ confidence.

Originality/value

This study contributes to the literature of risk disclosure in the insurance industry for both the UK and Canada where scarce studies are conducted. It also offers interesting implementations to investors, managers and policymakers.

Details

Competitiveness Review: An International Business Journal , vol. 33 no. 1
Type: Research Article
ISSN: 1059-5422

Keywords

Article
Publication date: 11 August 2021

Samah El Hajjar, Elie Menassa and Talie Kassamany

Motivated by the findings of Bhabra and Hossain (2017) that highlight an improvement in US market performance in the post-Sarbanes–Oxley (SOX) period, this paper aims to…

Abstract

Purpose

Motivated by the findings of Bhabra and Hossain (2017) that highlight an improvement in US market performance in the post-Sarbanes–Oxley (SOX) period, this paper aims to investigate how this change varies with the methods of payment used for the deals.

Design/methodology/approach

Deductive in nature and using an event study approach, this paper uses a sample of 675 deals between 1999 and 2006 to test three research hypotheses in a pre-post setting.

Findings

Results show that at the aggregate level, there is a significant improvement in the market performance of US acquirers around the announcement day in the aftermath of the passage of SOX 2002. Considered separately, both US stock acquirers and cash acquirers did not experience any significant improvement in market performance in the post-Sarbanes–Oxley period. These results are robust to controlling for governance, firm and deal variables, as well as industry and year fixed effects.

Research limitations/implications

Exploratory in nature, the results are to be interpreted in light of the sample size and the period under investigation.

Practical implications

The results provide evidence for regulators and legislators on the contribution of SOX 2002 to curbing managerial misconduct. Significant improvement in the market performance also signals more confidence in managerial decisions and a reduction in agency problems. The insignificant change in stock acquirers’ market performance can be an indication that policymakers should exert more efforts to improve shareholders' confidence in the quality of disclosure.

Originality/value

This investigation provides unique insights on whether SOX has been effective in mitigating mispricing concerns associated with stock-financed acquisitions and whether it was effective in moderating the governance mechanism associated with cash-financed acquisitions.

Details

Journal of Financial Reporting and Accounting, vol. 21 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 6 November 2017

Talie Kassamany, Salma Ibrahim and Stuart Archbold

This study aims to investigate the occurrence of pre-merger earnings management for a sample of 197 stock- and cash-financed UK acquirers between 1990 and 2009. It also examines…

Abstract

Purpose

This study aims to investigate the occurrence of pre-merger earnings management for a sample of 197 stock- and cash-financed UK acquirers between 1990 and 2009. It also examines the earnings management behaviour around the change in the Corporate Governance Code in 2003 based on the Higgs recommendations.

Design/methodology/approach

Mean and median accrual- and real-based manipulation are examined in the period before the announcement of a merger and acquisition. These are compared across stock and cash acquirers as well as before and after the implementation of the Higgs recommendations. Logistic regressions are also run to examine accrual- and real-based manipulation across stock and cash acquirers after controlling for variables that may affect the acquisition type.

Findings

The study found some evidence of upward pre-merger accrual-based earnings management by stock-financed acquirers, which is in line with the findings of Botsari and Meeks (2008). Furthermore, no significant changes were found in the post-Higgs period, which indicates that the recommendations put forth by Higgs may not have been successful in mitigating earnings management. The evidence also shows that cash bidders engage in pre-merger real earnings manipulation through lower discretionary expenses, possibly to enhance cash availability for the bid.

Practical implications

The findings in this study confirm earnings management exists around mergers and acquisitions and provide some evidence that the recommendations set out in the Higgs Report do not appear to have mitigated earnings management activities. This is of interest to regulators as well as investors and academicians.

Originality/value

This provides the first analysis in the UK examining the use of real-based earnings management activities by UK acquirers. It also extends prior research around corporate governance changes that occurred in the UK.

Details

Journal of Accounting & Organizational Change, vol. 13 no. 4
Type: Research Article
ISSN: 1832-5912

Keywords

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