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Article
Publication date: 7 September 2022

Wan Adibah Wan Ismail, Khairul Anuar Kamarudin, Akmalia Mohamad Ariff and Wan Nordin Wan-Hussin

This paper investigates whether board gender diversity and the strength of auditing and reporting standards are associated with analysts' forecast accuracy and whether the…

Abstract

Purpose

This paper investigates whether board gender diversity and the strength of auditing and reporting standards are associated with analysts' forecast accuracy and whether the strength of auditing and reporting standards moderates the association between board gender diversity and analysts' forecast accuracy.

Design/methodology/approach

The sample covers 24,086 firm-year observations from 37 countries from 2009 to 2018. The data were obtained from various sources: earnings forecast data from the Institutional Brokers' Estimate System (IBES) database; board gender diversity and financial data from Thomson Reuters Fundamentals; and country-level data from World Economic Forum database. The authors measure board gender diversity using four proxies namely, the proportion of women directors on the board, a dummy variable for board with at least one women director, BLAU measurement corresponds to the proportion of group females and males using the formula adopted from the Hirschman-Herfindahl index (Hirschman, 1964) and the proportion of the number of women executives over the total number of directors. The study also uses a series of specification tests using alternative measures for each variable and controlling the global financial crisis and endogeneity issue.

Findings

Firms with higher board gender diversity have higher analysts' forecast accuracy. Compared to countries with weak auditing and reporting standards, the authors find firms in countries with strong auditing and reporting standards have more accurate forecasts. Further, the positive relationship between the board gender diversity and analysts' forecast accuracy is weaker for firms in countries with strong auditing and reporting standards, as compared to firms in countries with weak auditing and reporting standards.

Research limitations/implications

This study found new evidence on the effect of women directorships on analyst forecasts and this relationship varies between levels of the strength of auditing and reporting standards, which was not addressed in prior studies.

Practical implications

This study highlights the importance of strengthening the policy on getting more women on board and the continuous efforts to enhance the strength of auditing and reporting standards of a country as valuable strategies to enhance the quality of analyst forecasts.

Originality/value

This is the first study that employs the international dataset to examine the moderating effect of the strength of auditing and reporting standards on the relationship between board gender diversity and analysts' forecast accuracy.

Details

Journal of Applied Accounting Research, vol. 24 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

Open Access
Article
Publication date: 21 March 2023

Akmalia Ariff, Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Mohd Taufik Mohd Suffian

This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association.

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Abstract

Purpose

This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association.

Design/methodology/approach

The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is measured using the ZSCORE by Altman (1968), while tax avoidance is based on the book-tax difference.

Findings

Financially distressed firms exhibit low tax avoidance pre- and during the pandemic periods. The authors find higher tax avoidance during the pandemic compared to the pre-pandemic period, but the pandemic enhances the negative relationship between financial distress and tax avoidance.

Research limitations/implications

The study offers evidence on how financial distress drives firms to engage in more tax avoidance when firms globally encountered various levels of financial difficulty sparked by the economic challenges of the COVID-19 pandemic.

Practical implications

The findings provide insights to policymakers on the need to monitor and incentivise financially distressed firms, especially during economic challenges due to pandemic.

Originality/value

This study adds to the limited, albeit important, evidence on the joint effect of the COVID-19 pandemic and financial distress on tax avoidance.

Details

Asian Journal of Accounting Research, vol. 8 no. 3
Type: Research Article
ISSN: 2459-9700

Keywords

Article
Publication date: 26 July 2021

Khairul Anuar Kamarudin, Wan Adibah Wan Ismail, Iman Harymawan and Rohami Shafie

This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.

Abstract

Purpose

This study examined the effect of different types of politically connected (PCON) Malaysian firms on analysts' forecast accuracy and dispersion.

Design/methodology/approach

The study identified different types of PCON firms according to Wong and Hooy's (2018) classification, which divided political connections into government-linked companies (GLCs), boards of directors, business owners and family members of government leaders. The sample covered the period 2007–2016, for which earnings forecast data were obtained from the Institutional Brokers' Estimate System (IBES) database and financial data were extracted from Thomson Reuters Fundamentals. We deleted any market consensus estimates made by less than three analysts and/or firms with less than three years of analyst forecast information to control for the impact of individual analysts' personal attributes.

Findings

The study found that PCON firms were associated with lower analyst forecast accuracy and higher forecast dispersion. The effect was more salient in GLCs than in other PCON firms, either through families, business ties or boards of directors. Further analyses showed that PCON firms—in particular GLCs—were associated with more aggressive reporting of earnings and poorer quality of accruals, hence providing inadequate information for analysts to produce accurate and less dispersed earnings forecasts. The results were robust even after addressing endogeneity issues.

Research limitations/implications

This study found new evidence of the impact of different types of PCON firms in exacerbating information asymmetry, which was not addressed in prior studies.

Practical implications

This study has a significant practical implication for investors that they should be mindful of high information asymmetry in politically connected firms, particularly government-linked companies.

Originality/value

This is the first study to provide evidence of the impact of different types of PCON firms on analysts' earnings forecasts.

Details

Journal of Applied Accounting Research, vol. 22 no. 5
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 16 August 2021

Khairul Anuar Kamarudin, Wan Adibah Wan Ismail and Akmalia M. Ariff

This study aims to investigate whether auditor tenure has a significant influence on accounting quality and whether investor protection moderates the effect of auditor tenure on…

Abstract

Purpose

This study aims to investigate whether auditor tenure has a significant influence on accounting quality and whether investor protection moderates the effect of auditor tenure on accounting quality.

Design/methodology/approach

This study uses weighted least squares regression on a sample of 77,855 firm-year observations from 36 countries during the period 2010–2016. This study uses the absolute value of performance-matched discretionary accruals to measure financial reporting quality.

Findings

This study finds that a longer auditor tenure is associated with higher accounting quality, thus supporting the knowledge effect arguments. The results on the joint effect of investor protection and auditor tenure show evidence of the substitutive effect of investor protection, where the positive impact of auditor tenure on accounting quality is weaker in a high investor-protection environment.

Practical implications

These findings provide input for policy implications involving the auditing profession. Regulators may need to weigh the costs and benefits of mandatory audit rotation because country-level institutional factors influence auditing regulations and practices, as well as the auditors’ behaviors.

Originality/value

This study adds to the limited, albeit important, evidence on the joint effect of auditor tenure and country-level governance on accounting quality. The authors respond to the call by Brooks et al. (2017) for more evidence on the role of audits on financial reporting outcomes across various legal institutions for creating effective policies.

Details

Accounting Research Journal, vol. 35 no. 2
Type: Research Article
ISSN: 1030-9616

Keywords

Article
Publication date: 27 November 2023

Iman Harymawan, Nadia Klarita Rahayu, Khairul Anuar Kamarudin, Wan Adibah Wan Ismail and Melinda Cahyaning Ratri

This study aims to explore the relationship between the level of busyness of Chief Executive Officers (CEOs) and investment efficiency in the context of emerging markets.

Abstract

Purpose

This study aims to explore the relationship between the level of busyness of Chief Executive Officers (CEOs) and investment efficiency in the context of emerging markets.

Design/methodology/approach

The sample includes firms listed on the Indonesia Stock Exchange from 2010 to 2018 using ordinary least square estimation.

Findings

The findings suggest that companies led by busy CEOs tend to exhibit lower investment efficiency, thus providing support for the hypothesis that as CEOs’ commitments increase, their ability to concentrate on the company diminishes. Furthermore, our analysis reveals that companies with busy CEOs tend to demonstrate a greater tendency to over-invest, potentially in response to market pressures to showcase strong performance. A more in-depth examination of the data shows that the negative impact of busy CEOs on investment efficiency is especially noticeable in firms lacking risk and management committees (RMC).

Practical implications

These findings have substantial practical implications for the structuring and composition of corporate boards. They highlight the significance of conducting comprehensive assessments to gain insights into the external commitments of incoming CEOs.

Originality/value

This study underscores the importance of establishing RMC.

Details

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

Keywords

Article
Publication date: 27 August 2021

Khairul Anuar Kamarudin, Akmalia M. Ariff and Wan Adibah Wan Ismail

This study aims to investigate whether board gender diversity is associated with corporate sustainability performance and whether industry-level product market competition…

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Abstract

Purpose

This study aims to investigate whether board gender diversity is associated with corporate sustainability performance and whether industry-level product market competition moderates the effect of board gender diversity on corporate sustainability performance.

Design/methodology/approach

This study uses international data extracted from global ESG data set from Thomson Reuters (Refinitiv) database. Using data of 23,137 firm-year observations from 37 countries, the authors perform regression analyses to examine the hypotheses.

Findings

The findings show that firms with high board gender diversity exhibit high corporate sustainability performance. The authors also find firms in highly competitive industries to have low corporate sustainability performance. In highly competitive industries, the positive relationship between board gender diversity and corporate sustainability performance is weakened. The results are robust to various specification tests such as alternative measures for corporate sustainability performance, board gender diversity, product market competition and also the use of propensity score matching to address endogeneity issue. Overall, the results support the prediction that board diversity and product market competition play a substitutive role in influencing corporate sustainability performance.

Research limitations/implications

This study offers empirical evidence that the appointment of female directors is a useful way to improve a firm’s corporate sustainability performance, hence, providing significant benefits in terms of stakeholders’ values and corporate reputation.

Practical implications

This study provides useful insights to investors and policymakers that intense industry competition might mitigate the role of board governance, particularly board gender diversity, in enhancing corporate sustainability performance.

Originality/value

Using an international data set, where the observations operate in various market and institutional differences, this study is able to extricate the positive impact of board gender diversity and product market competition on corporate sustainability performance. This study corroborates evidence that sustainability strategy and initiatives are reflections of integrated factors, including corporate governance as internal driver and market forces faced by firms as external driver.

Details

Journal of Financial Reporting and Accounting, vol. 20 no. 2
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 9 June 2020

Khairul Anuar Kamarudin, Akmalia Mohamad Ariff and Wan Adibah Wan Ismail

This paper aims to investigate the joint effect of product market competition (PMC) and institutional environment on accrual quality.

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Abstract

Purpose

This paper aims to investigate the joint effect of product market competition (PMC) and institutional environment on accrual quality.

Design/methodology/approach

The sample covers a large data set of 52,138 firm-year observations from 35 countries over the period of 2011-2015. Using the weighted least square regression, the study estimates PMC and institutional environment on accrual quality. The study measures PMC based on Herfindahl-Hirschman index, anti-director rights index (ADRI) based on the revised and updated La Porta et al.'s (1998) and accrual quality using the modified Dechow and Dichev (2002) model proposed by McNichols (2002). The study also uses a series of specification tests using alternative measures for each variable.

Findings

The study finds that highly intensified PMC relates to a lower quality of accruals. The results also show that accrual quality is better in countries with stronger institutional environment, specifically countries with higher ADRI, investor protection, judicial independence, protection of minority shareholders’ interests, protection of property rights, strength of the auditing and reporting standards, efficacy of corporate boards and corporate ethics. The findings suggest that institutional factors weaken the negative impact of PMC intensity on accrual quality, hence suggesting that institutional environment has a significant role to enhance accrual quality among firms in highly intensified industries.

Practical implications

The findings provide additional insights to policymakers and regulators on the importance of strong institutional and industry environment that can provide incentives and extra governance mechanisms besides the conventional firm-level corporate governance.

Originality/value

This study contributes in understanding the impact of intensity of PMC on accrual quality internationally and subsequently highlights the role of institutional environment as significant country-level governance in determining financial reporting quality, particularly accrual quality.

Details

Pacific Accounting Review, vol. 32 no. 3
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 9 January 2024

Khairul Anuar Kamarudin, Nor Hazwani Hassan and Wan Adibah Wan Ismail

This study examines the non-linear effect of board independence on the investment efficiency of listed firms worldwide. This study further tests whether the COVID-19 pandemic…

Abstract

Purpose

This study examines the non-linear effect of board independence on the investment efficiency of listed firms worldwide. This study further tests whether the COVID-19 pandemic, industry competition and economic development influence the relationship between board independence and investment efficiency.

Design/methodology/approach

The data are retrieved from the Thomson Reuters (Refinitiv) database and include international data from 33 countries, comprising 21,363 firm-year observations. The authors' regression analyses include firm-specific variables as controls that may impact investment efficiency. The authors also perform various robustness tests including, alternative measures of investment efficiency, weighted least squares regression, quantile regression and endogeneity issues.

Findings

The results reveal a non-linear relationship between board independence and investment efficiency. Specifically, the relationship follows a U-shaped pattern, indicating that the negative impact of board independence on investment efficiency becomes positive after it reaches its optimal point, thus supporting optimal board structure theory. Interestingly, the authors find no significant evidence of board independence’s effect on investment efficiency during the pandemic. In contrast, the relationship between board independence and investment efficiency is significant only during the non-pandemic period. Furthermore, the authors discover evidence of a U-shaped relationship in both emerging and developed markets, as well as in industries with high and low competition.

Research limitations/implications

The authors' study discovers new evidence on the non-linear impact of board independence on investment efficiency, which has not been explored previously in existing research.

Practical implications

This study has practical implications for investors by emphasising the importance of corporate governance and the appointment of independent directors. Investors should consider the findings of this study when making decisions related to corporate governance, as they can impact a firm's investment efficiency.

Originality/value

Despite a considerable body of literature exploring the link between corporate governance and investment effectiveness, there is a dearth of research on the non-linear effects of board independence. Furthermore, the effects of the COVID-19 pandemic, industry competition and economic development remain unexplored.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 26 December 2023

Khairul Anuar Kamarudin, Wan Adibah Wan Ismail, Larelle Chapple and Thu Phuong Truong

This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors…

Abstract

Purpose

This study aims to examine the effects of product market competition (PMC) on analysts’ earnings forecast attributes, particularly forecast accuracy and dispersion. The authors also investigate whether investor protection moderates the relationship between PMC and forecast attributes.

Design/methodology/approach

The sample covers 49,578 firm-year observations from 38 countries. This study uses an ordinary least squares regression, a Heckman two-stage regression and an instrumental two-stage least squares regression.

Findings

This study finds that PMC is associated with higher forecast accuracy and lower dispersion. The results also show that investor protection enhances the effect of PMC on forecast accuracy and dispersion. These findings imply that countries with strong investor protection have a better information environment, as exhibited by the stronger relationship between PMC and analysts’ forecast properties.

Practical implications

The findings highlight the importance of strong governance mechanisms in both the country and industry environments. Policymakers, including government agencies and financial regulators, can leverage these insights to formulate regulations that promote competition, ensure investor protection and facilitate informed investment decisions.

Originality/value

This study advances our understanding of how PMC affects analysts’ earnings forecast attributes. In addition, it pioneers evidence of the moderating role of investor protection in the relationship between PMC and forecast attributes.

Details

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

Keywords

Content available
Article
Publication date: 28 June 2022

Iman Harymawan, Mohammad Nasih, Nadia Klarita Rahayu, Khairul Anuar Kamarudin and Wan Adibah Wan Ismail

This study aims to examine the relationship between CEO busyness and financial reporting quality in a country which implements a two-tier board system.

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Abstract

Purpose

This study aims to examine the relationship between CEO busyness and financial reporting quality in a country which implements a two-tier board system.

Design/methodology/approach

This study includes firms listed on the Indonesian Stock Exchange during the 2010–2018 period. This study employs an ordinary least squares regression, the propensity score matching procedure, and a Heckman two-stage regression in testing the hypothesis.

Findings

This study finds that firms with busy directors have a higher financial reporting quality, and these results are robust to a battery or sensitivity analysis. The additional analyses also find that a busy CEO is negatively associated with the firm's financial reporting quality with decreasing income.

Practical implications

This paper provides implications for policy-makers in the emerging market on devising policies on CEOs' appointments, especially when involving multiple directorships. Despite the general belief on the detrimental workload effects of busy directors, this study offers evidence supporting the opposite effect.

Originality/value

As many previous studies focused on the effect of director busyness on firm’s performance, this study focusses on the effect of CEO busyness on financial reporting quality. To the best of our knowledge, this study is the first to investigate this issue in an emerging market.

Details

Asian Review of Accounting, vol. 30 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

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