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We assess the impact of NZ IAS 32 on the financial reporting of convertible financial instruments by retrospective application of the standard to a sample of New Zealand companies over the period 1988 ‐ 2003. NZ IAS 32 has a broader definition of liabilities than does the corresponding current standard (FRS‐31) and it does not permit convertibles to be reported under headings that are intermediate to debt and equity. The results of the study indicate that in comparison with the reported financial position and performance, the reporting of convertibles in accordance with NZ IAS 32 would result in higher amounts for liabilities and higher interest. Thus, analysts using financial statement information to assess risk of financial distress will need to revise the critical values of commonly used measures of risk and performance when companies report under NZ IAS

The purpose of this study is to develop a new measure for discriminatory related party transactions (DRPTs). There are currently measures for such discriminatory transactions but the new measure has a strong theoretical basis and is less susceptible to measurement error.

This paper develops and tests a new measure for these discriminatory transactions. Type I and Type II error rates and the power of the new measure are compared with an existing measure using computer-simulated and real data.

The capital market sensitivity of the new measure is also tested and compared with the existing measure. The new measure is found to be superior.

The new measure of DRPTs has the potential to contribute to both further research on the impact of related party transactions and policy-making in relation to DRPTs.

This paper has developed and tested a new measure for DRPTs.

The purpose of this paper is to investigate whether levels-classified fair values of US banks based on SFAS 157: Fair Value Measurements, as recognised in the quarterly financial statements of the banks over the period from 2008 until 2015, have predictive value in relation to the banks’ future financial performance measured by operating cash flows and earnings over a three-quarter horizon period. In addition, we consider whether the global financial crisis (GFC) impacted the relationship between SFAS 157–based levels‐classified fair values and bank future financial performance.

We develop hypotheses connecting the net levels-classified bank fair values based on SFAS 157 with banks’ future financial performance. We test the hypotheses by estimating three-period quarters’ ahead forecasting models. We also use these models to test for the impact of the GFC on the relationship between the fair values and future financial performance.

Our findings suggest that the levels-classified net fair values based on SFAS 157 have predictive value in relation to future cash flows for banks. There is significant variation, across the levels, in the predictive value of levels-classified net fair values for future performance. Our findings indicate that the GFC has limited impact on the predictive value for cash flows, but the GFC had a significant adverse impact on earnings, and, with allowance for the effect of the GFC, the Level 2 net fair values have predictive value for the future earnings.

The study provides the first direct empirical evidence on the relationship between the SFAS 157 levels-classified quarterly bank fair values recognised in publicly available financial statements and banks’ future performance. Our results are consistent with the findings from earlier research (Ehalaiye et al., 2017) using annual data disclosed in the supplementary notes to the financial statements of US banks based on SFAS 107. The study, makes a significant contribution to the question of frequency of reporting and to the disclosure vs recognition debate. The study has implications for policy makers, regulators and accounting standards setters such as the Securities and Exchange Commission and the Financial Accounting Standards Board in evaluating the use of fair value measurement in financial reporting.

This purpose of this study is to examine the association between earnings management (accruals earnings management (AEM) and/or real activities manipulation (RAM)) and firm underperformance following seasoned equity offerings (SEOs) using cross-country data.

The study applies ordinary least squares regression analyses to a sample of 11,764 observations on firms from 22 countries over the period from 2005 to 2017. The methods include weighted least squares regression, sub-sampling approach and alternative measures of firm performance, earnings management and legal regime for robustness tests as well as a two-stage least squares instrumental variable (IV) approach to address endogeneity concerns.

The results suggest that RAM has a greater negative impact on post-SEO performance than AEM. The result is economically significant for RAM only. The results also reveal that the negative impact of earnings management, in particular RAM, on post-SEO performance is greater in countries with a strong legal regime than in other countries.

Earnings management around SEOs has important implications for investors, regulators and policymakers. The study suggests that policymakers should improve the current legal conditions to promote fairness in the equity market.

The results from the cross-country data support earlier results from single-country studies on the impact of earnings management on post-SEO performance. The study also provides new evidence on the variation in the impact of earnings management according to the strength of the legal regime operating in a country.

From 2007, New Zealand firms must report the cost of granting employee stock options (ESOs). Market‐based option pricing models assume that option holders are unconstrained in their portfolio choices and thus are indifferent to the specific risk of any firm. By contrast, ESO holders are frequently required to hold portfolios that are over‐exposed to the firm that employs them and so adopt exercise policies that reflect their individual risk preferences. Applying the model of Ingersoll (2006) to hypothetical ESOs, we show that ESO cost can be extremely sensitive to employee characteristics of risk aversion and under‐diversification. This result casts doubt on the usefulness of any market‐based model for pricing ESOs, since such models, by definition, produce option values that are independent of employee characteristics. By limiting employee discretion over the choice of exercise date, vesting restrictions help reduce the magnitude of this problem.

The purpose of this paper is to test the relative strengths of efficiency and opportunistic considerations in making client auditor choice decisions in an emerging audit services market. The authors examine whether the degrees of foreign and institutional shareholdings, audit complexity, industry orientation (i.e. whether the firm belongs to the banking sector), ownership concentration in the hands of domestic sponsor shareholders, state ownership, power concentration in the hands of a CEO who is also the chairperson of the board, and audit risk affect the demand for superior monitoring by Big‐4 auditors.

The authors carry out a multivariate analysis using binary logit regression technique. They test whether efficiency or opportunism rules auditor choice of firms in their sample. Efficiency‐based variables used in the authors' models include foreign shareholding by a multinational parent, institutional shareholding, audit complexity and whether the firm belongs to the banking sector. Opportunism‐based variables include ownership concentration in the hands of domestic sponsor shareholders other than government, government shareholding, power concentration in the hands of a CEO who holds the position of chair as well, and audit risk.

The authors find that opportunistic considerations outweigh efficiency considerations in shaping auditor choice decisions in their sample. Two out of four efficiency arguments (foreign shareholdings in the hands of a multinational parent and institutional shareholding) support efficiency as the main driver of auditor choice while one (client belonging to the banking sector) indicates otherwise. On the other hand, three out of four opportunism arguments (government shareholding, CEO‐chair duality and audit risk) document opportunistic considerations to be the main forces behind auditor choice. The influence of foreign shareholding becomes apparent only when the foreign shareholder is the controlling shareholder.

This paper is the first of its kind to address auditor choice in an emerging market context. No other paper looked at auditor choice using efficiency‐opportunism incentives. The paper contributes to our understanding of auditor choice dynamics in emerging markets. The finding that institutional shareholding is associated with choice of high quality auditors is encouraging. Individual small investors can use institutional investors as a shield to protect their investment through the higher quality auditing linked to the presence of institutional investors.

This study aims to investigate the differences in earnings quality of Malaysian companies after the adoption of IFRS‐based accounting standards named FRS.

It is hypothesize that under the new set of accounting standards, the quality of earnings reported by these companies is relatively higher. Specifically, the study tests whether the level of earnings management is significantly lower after the adoption of IFRS, and reported earnings is more value relevant during the IFRS period. This study uses a large sample of 4,010 observations over a three‐year period before and a three‐year period after the adoption of the new set of accounting standards.

The results show that IFRS adoption is associated with higher quality of reported earnings. It is found that earnings reported during the period after the adoption of IFRS is associated with lower earnings management and higher value relevant.

The results of this study contribute additional evidence to the literature on earnings quality and the impact of IFRS adoption. As most of the existing studies on earnings quality and IFRS have been conducted on data from the U.S and European countries, this study fills a gap in the existing literature by studying the effect of adoption of IFRS on earnings quality in an emerging market.

The purpose of this paper is to examine the impact of corporate governance on auditor quality choice by IPO companies in an emerging market setting. It seeks to identify whether efficiency or opportunism is the driving force behind the choice of auditors in Bangladeshi firms going public. We try to see whether ownership concentration in the hands of a owner‐CEO wins over foreign shareholders in the contest of ensuring financial reporting quality.

Multivariate analysis has been carried out on all IPOs made during 1990 to 2005 whose financial statements were available. Logistic regression tool has been used to identify client's corporate governance attributes affect their choice of auditors. In total, three corporate governance attributes – CEO‐Chair duality, retained ownership, and foreign equity participation – were used to test the impact of ownership structure on auditor choice.

Our findings from logistic regression suggest that CEO‐Chair duality and the degree of foreign equity participation are significant determinants of auditor choice while proportion of board ownership is not. In addition, issuer size and whether the issuer is a green field operation also influence auditor choice while the length of a firm's operating history does not seem to matter. The findings support agency theory prediction that (at least one category of) principals (foreign shareholders in this case), are likely to trade‐off higher monitoring costs (of hiring a higher quality auditor) with agency costs arising from asymmetric information, primarily borne by absentee owners.

The work is based on empirical data directly from company financial statements. It uses audited financial statements and makes objective analysis of auditor choice dynamics in a frontier market that demonstrated significant growth of IPO activity in recent years.

The purpose of this paper is to test whether dominant shareholder(s) of a firm enhance performance in Bangladesh and thus examines the arbitrary moves by the regulatory bodies, in the name of promoting “good corporate governance”, to restrict ownership concentration.

Building on the established literature, a simultaneous equations approach is applied to model the relationship between ownership concentration and performance and is tested on a sample of 567 observations on firms listed on the Dhaka Stock Exchange over a seven‐year period. The two equations model consists of firm performance and ownership concentration as endogenous variables along with other governance variable.

The results suggest a significant positive co‐deterministic relationship between ownership concentration and firm performance indicating that ownership concentration and firm performance simultaneously impact each other. It suggests that the ownership restriction imposed by the Securities and Exchange Commission is unjustified and detrimental to firm performance/growth in emerging countries such as Bangladesh.

This new evidence from an emerging market enhances our understanding of corporate governance in Asian countries. The study has implications for stakeholders, regulators and policy makers to revisit their attempt to limit founder‐family ownership holdings. Instead, their aim should be to balance the home‐grown unique features, such as a Top‐1 dominant shareholder, with Western governance mechanisms.

The paper is the first to consider Top 1 shareholder's ownership as the measure of ownership concentration, which is an important feature of the corporate sector in emerging markets. In emerging markets, founder‐family ownership concentration acts as an alternative governance mechanism substituting for strong and effective legal backing and other market‐driven monitoring mechanisms.