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Open Access
Article
Publication date: 3 October 2023

Mario Daniele

When financial statements are public, the choice between alternative reporting regimes constitutes a signal that addresses external stakeholders. Generally, the choice of more…

Abstract

Purpose

When financial statements are public, the choice between alternative reporting regimes constitutes a signal that addresses external stakeholders. Generally, the choice of more complex regimes acts as a complement of firms' transparency. However, in the absence of audits, opportunistic behaviors could be incentivized. This study aims to test whether SMEs' choice between alternative accounting regimes is associated with earnings quality.

Design/methodology/approach

Drawing on the literature about accounting choices and earnings quality, this study investigates whether the same conclusions are confirmed for SMEs. Using a sample of 4,054 Italian companies and 12,114 observations, it compared four earnings quality proxies of a group of companies that opted for the “Full” rules and those of a subsample of the population of companies that applied the Simplified rules.

Findings

The results suggest that the signaling power of accounting rules' choice could lead to wrong conclusions for SMEs. Indeed, a positive relationship emerged (H1) between the choice of the “Full” rules and income smoothing behaviors, while the same choice appears to reduce the probability to disclose SPOS. Moreover, the results suggest that opportunistic behaviors are more frequent for firms that have settled in a “non-cooperative” social environment (H2).

Research limitations/implications

This study could foster research on financial reporting quality in private firms.

Practical implications

Comparing the quality of financial statements drawn up according to two alternative accounting regimes could provide useful suggestions for both users and regulators.

Originality/value

The results contribute to the limited literature on the implications of differential reporting. Finally, it enriches the literature about heterogeneity in accounting quality within private firms.

Details

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

Keywords

Article
Publication date: 2 November 2023

Khouloud Ben Ltaief and Hanen Moalla

The purpose of this study is twofold. On the one hand, it studies the impact of IFRS 9 adoption on the firm value; and on the other hand, it investigates the impact of the…

Abstract

Purpose

The purpose of this study is twofold. On the one hand, it studies the impact of IFRS 9 adoption on the firm value; and on the other hand, it investigates the impact of the classification of financial assets on the firm value.

Design/methodology/approach

The study covers a sample of 55 listed banks in the Middle Eastern and North African (MENA) region. Data is collected for three years (2017–2019).

Findings

The findings show that banks’ value is not impacted by IFRS 9 adoption but by financial assets’ classification. Firm value is positively affected by fair value through other comprehensive income assets, while it is negatively affected by amortized cost and fair value through profit or loss assets. The results of the additional analysis show consistent outcomes.

Practical implications

This research reveals important managerial implications. Priority should be given to the financial assets’ classification strategy following the adoption of IFRS 9 to boost the market valuation of banks. It may be useful for investors, managers and regulators in their decision-making.

Originality/value

This study enriches previous research as IFRS 9 is a new standard, and its adoption consequences need to be investigated. A few recent studies have focused on IFRS 9 as a whole or on other parts of IFRS 9, namely, the impairment regime and hedge accounting and concern developed contexts. However, this research adds to the knowledge of capital market studies by investigating the application of IFRS 9 in terms of classification in the MENA region.

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: 14 March 2023

Yu-Lin Hsu and Gavin C. Reid

This study aims to analyze why listed Taiwanese firms uniquely rejected the early adoption of International Financial Reporting Standards (IFRS) in 2012. It investigates the…

Abstract

Purpose

This study aims to analyze why listed Taiwanese firms uniquely rejected the early adoption of International Financial Reporting Standards (IFRS) in 2012. It investigates the underlying decision-making processes behind this policy reluctance to further understand the continuous phenomenon of rare voluntary IFRS adoption.

Design/methodology/approach

It reports on fieldwork evidence obtained in situ by in-depth interviewing in Mandarin. It uses qualitative methods, complemented by quantitative cost-benefit metrics of IFRS adoption. It presents five diverse illustrative case-study vignettes, using a judgment sample based on expert opinion.

Findings

While the net-benefits of implementing IFRS varied across firms, this study’s unanimous finding was that no firms (in the sample or population) adopted IFRS early, despite stated intentions to the contrary. The key reasons for shunning early IFRS adoption were found to be frequent changes in regulations, insufficient benefits from adopting IFRS and the undermining of comparability across companies, compounded with scarce preparation time. Further, this study found that the Taiwanese accounting regulator’s reluctance toward IFRS adoption, partly caused by a long-standing US influence, contributed to this anomalous outcome.

Practical implications

This study recommends two critical policy changes: more realistic timelines and less frequent regulatory changes.

Originality/value

To the best of the authors’ knowledge, this is the first study to investigate the reasons behind the anomaly of no early adoption of IFRS in Taiwan, using new primary data and illustrative case studies. Its novelty lies in extending understanding beyond the existing quantitative literature on accounting standards, using new “thick” qualitative evidence on motives for such choices and decision-making processes, which have been neglected in previous work.

Details

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

Keywords

Open Access
Article
Publication date: 30 November 2023

Domenico Campa, Alberto Quagli and Paola Ramassa

This study reviews and discusses the accounting literature that analyzes the role of auditors and enforcers in the context of fraud.

1563

Abstract

Purpose

This study reviews and discusses the accounting literature that analyzes the role of auditors and enforcers in the context of fraud.

Design/methodology/approach

This literature review includes both qualitative and quantitative studies, based on the idea that the findings from different research paradigms can shed light on the complex interactions between different financial reporting controls. The authors use a mixed-methods research synthesis and select 64 accounting journal articles to analyze the main proxies for fraud, the stages of the fraud process under investigation and the roles played by auditors and enforcers.

Findings

The study highlights heterogeneity with respect to the terms and concepts used to capture the fraud phenomenon, a fragmentation in terms of the measures used in quantitative studies and a low level of detail in the fraud analysis. The review also shows a limited number of case studies and a lack of focus on the interaction and interplay between enforcers and auditors.

Research limitations/implications

This study outlines directions for future accounting research on fraud.

Practical implications

The analysis underscores the need for the academic community, policymakers and practitioners to work together to prevent the destructive economic and social consequences of fraud in an increasingly complex and interconnected environment.

Originality/value

This study differs from previous literature reviews that focus on a single monitoring mechanism or deal with fraud in a broadly manner by discussing how the accounting literature addresses the roles and the complex interplay between enforcers and auditors in the context of accounting fraud.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 22 August 2023

Ani Wilujeng Suryani, Christine Helliar and Amanda Carter

Diversity and inclusion is a key focus of the profession. This paper investigates the ecological inherited niche of Indonesia and which employers accounting students choose and…

Abstract

Purpose

Diversity and inclusion is a key focus of the profession. This paper investigates the ecological inherited niche of Indonesia and which employers accounting students choose and whether this will result in a diverse and inclusive profession. The authors conceptualise diversity as the demand-from the profession encompassing professional accounting firms, and inclusion as the supply of individuals wishing to enter the profession.

Design/methodology/approach

The 1377 responses to a questionnaire survey of students deciding on their career paths were analysed using a multinomial logistic regression and path model.

Findings

The findings show that a lack of diversity in the profession is caused by the ecological background, constructing a local niche, that prevents diversity. This is manifest in ethnicity, gender and education, whereby the local niche consists of Chinese males recruited from B-rated private universities. To bring diversity and inclusivity into the workplace, the profession needs to entice people from multi-faceted groups and match ecological niche underpinnings to expectations of the professional landscape. Non-Chinese females are needed to become role models and trail blazers to establish a diverse profession. The public interest will then be better served.

Originality/value

This study uses niche construction as the theoretical framing and demonstrates that the profession needs to take action to become truly diverse and inclusive.

Details

Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 12 February 2024

R.M. Ammar Zahid, Muhammad Kaleem Khan and Volkan Demir

Current research aims to investigate the relationships between Chinese national cultural values (uncertainty avoidance (UA), power distance, masculinity (MAS), individualism (IDV…

97

Abstract

Purpose

Current research aims to investigate the relationships between Chinese national cultural values (uncertainty avoidance (UA), power distance, masculinity (MAS), individualism (IDV) and Confucian dynamism) and accounting practices (professionalism, uniformity, conservatism and secrecy).

Design/methodology/approach

A sample of 842 users/preparers of financial statements participated in this cross-sectional, questionnaire-based survey from China. Covariance-based structural equation modeling (CB-SEM) was used to test the proposed relationship.

Findings

Results show that cultural values strongly impact financial reporting practices in China. Chinese society is characterized by low UA, high power distance, collectivism, future orientation (Confucianism) and masculine traits. These values show an overall preference for uniformity, conservatism and secrecy in financial reporting with weak professionalism. The findings show that Chinese society emphasizes law abidance, strict codes of conduct, written rules and regulations and respect for consistent orthodox measures.

Practical implications

This study provides valuable input for policymakers in developing regulations and accounting standards in the Chinese market. Understanding the relationship between cultural dimensions and accounting values helps to address societal challenges and align policies with cultural values to acquire desired financial reporting values. Global firm managers must consider cultural dimensions in accounting when entering Chinese markets or negotiating with partners from different cultures. Findings also suggest local managers gain self-awareness of their cultural biases and accounting values, enabling them to navigate businesses and society's financial reporting needs.

Originality/value

This study enriches the existing literature on cultural and accounting practice studies by validating the role of stakeholder and social contract theories in Gray–Hofstede’s framework and highlighting the influence of dominant cultural values on accounting values. The study provides a unique empirical analysis of the Chinese market by using a questionnaire survey and structural equation modeling (SEM). Further, it also opens avenues for future research on the relationship between cultural dimensions, accounting practices and their global impact. These findings emphasize the importance of cultural sensitivity and adaptability, especially in multicultural environments.

Details

Management Decision, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 3 August 2023

Paul L. Baker, Peiwei Lyu and Pietro Perotti

This paper examines the relationship between tax avoidance and accounting comparability. The authors argue that aggressive tax behavior impairs the comparability of financial…

Abstract

Purpose

This paper examines the relationship between tax avoidance and accounting comparability. The authors argue that aggressive tax behavior impairs the comparability of financial statements by altering the accounting function, which maps economic events into accounting data.

Design/methodology/approach

The empirical analysis is based on a large sample of United States (US) firms. The authors use raw and industry-adjusted effective tax rates (ETRs) to proxy tax avoidance. The authors use the measure of accounting comparability developed by De Franco et al. (2011), which aims to capture the similarity of the accounting function.

Findings

The authors find that firms with more aggressive tax avoidance strategies have substantially lower accounting comparability. The evidence also shows that the negative effect of tax avoidance on accounting comparability is driven by firms with aggressive tax planning strategies beyond the industry norm. Furthermore, using an alternative measure of accounting comparability as a function of pre-tax income, the authors continue to find evidence of the negative effect of tax avoidance behavior. Importantly, this provides evidence that the effect of aggressive tax planning is not limited to the reported tax expense, but affects the comparability of the overall financial reporting system.

Originality/value

The authors identify a new potential cost of tax aggressive activities, being the loss of accounting comparability as driven by tax aggressive activities. The results contribute to the literature on the costs of tax avoidance and on the determinants of accounting comparability.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 9 October 2023

Manish Bansal

This paper undertakes an extensive and systematic review of the literature on earnings management (EM) over the past three decades (1992–2022). Furthermore, the study identifies…

Abstract

Purpose

This paper undertakes an extensive and systematic review of the literature on earnings management (EM) over the past three decades (1992–2022). Furthermore, the study identifies emerging research themes and proposes future avenues for further investigation in the realm of EM.

Design/methodology/approach

For this study, a comprehensive collection of 2,775 articles on EM published between 1992 and 2022 was extracted from the Scopus database. The author employed various tools, including Microsoft Excel, R studio, Gephi and visualization of similarities viewer, to conduct bibliometric, content, thematic and cluster analyses. Additionally, the study examined the literature across three distinct periods: prior to the enactment of the Sarbanes-Oxley Act (1992–2001), subsequent to the implementation of the Sarbanes-Oxley Act (2002–2012), and after the adoption of International Financial Reporting Standards (2013–2022) to draw more inferences and insights on EM research.

Findings

The study identifies three major themes, namely the operationalization of EM constructs, the trade-off between EM tools (accrual EM, real EM and classification shifting) and the role of corporate governance in mitigating EM in emerging markets. Existing literature in these areas presents mixed and inconclusive findings, suggesting the need for further theoretical development. Further, the study findings observe a shift in research focus over time: initially, understanding manipulation techniques, then evaluating regulatory measures, and more recently, investigating the impact of global accounting standards. Several emerging research themes (technology advancements, cross-cultural and cross-national studies, sustainability, behavioral aspects and non-financial indicators of EM) have been identified. This study subsequent analysis reveals an evolving EM landscape, with researchers from disciplines like data science, computer science and engineering applying their analytical expertise to detect EM anomalies. Furthermore, this study offers significant insights into sophisticated EM techniques such as neural networks, machine learning techniques and hidden Markov models, among others, as well as relevant theories including dynamic capabilities theory, learning curve theory, psychological contract theory and normative institutional theory. These techniques and theories demonstrate the need for further advancement in the field of EM. Lastly, the findings shed light on prominent EM journals, authors and countries.

Originality/value

This study conducts quantitative bibliometric and thematic analyses of the existing literature on EM while identifying areas that require further development to advance EM research.

Details

Journal of Accounting Literature, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0737-4607

Keywords

Article
Publication date: 8 December 2023

Augusta Ferreira

The aim of this paper is to investigate whether Mayors in Portugal engage in earnings management close to zero with the motivation of re-election.

Abstract

Purpose

The aim of this paper is to investigate whether Mayors in Portugal engage in earnings management close to zero with the motivation of re-election.

Design/methodology/approach

The data used in this study were annual financial information from Portuguese municipalities from 2005 to 2016, as well as data on elections and Mayor re-elections involving three political cycles. The methodologies employed were quantitative, including graphical and panel data regressions.

Findings

The results indicate that municipalities used discretionary accruals to engage in earnings management to report net earnings close to zero, and re-election seems to be a motivation for earnings management behaviour. Furthermore, the results suggest that municipalities in which the Mayor is re-elected are less likely to report positive net earnings close to zero.

Originality/value

This paper makes a valuable contribution to the literature on earnings management in municipalities. At the theoretical level, it makes it possible to identify whether re-election is a motivation for earnings management and, in this sense, to identify patterns of behaviour by managers. On a practical level, the knowledge of a manager's behaviour patterns will help to anticipate his or her future behaviour and, consequently, may prevent inefficiencies.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1096-3367

Keywords

Article
Publication date: 1 August 2022

Sarayut Rueangsuwan and Supavinee Jevasuwan

The main purpose of this study is to examine the determinants of firms’ earnings management (EM) activities during natural disasters, specifically the 2011 floods in Thailand. The…

Abstract

Purpose

The main purpose of this study is to examine the determinants of firms’ earnings management (EM) activities during natural disasters, specifically the 2011 floods in Thailand. The motivation for conducting this study is that although disasters stem from natural processes, such events affect firms’ actions, resulting in adverse economic and social outcomes.

Design/methodology/approach

Based on data from listed companies in Thailand and using a sample of 5,786 firm-year observations from 2008 to 2013, this study uses the differences-in-differences method to estimate the relation between earnings quality (EQ) and floods. Additionally, this study uses the same research design to observe how fast firms engage in EM, as reflected by the trends in EQ following the floods.

Findings

This study finds that firms engage in EM to increase their earnings numbers and misrepresent their performance after experiencing the 2011 floods in Thailand. The evidence is consistent with the hypothesis that natural disasters are related to EQ. In addition, this study finds that firms’ responses are observed only in the year after the floods (2012).

Originality/value

This study contributes to the literature on EM and quality in two ways. First, this study provides new evidence that during crisis situations such as natural disasters, firms strive to signal good news to capital markets, consistent with the market expectation hypothesis. Second, this study shows that natural disasters are as useful and equal as other exogenous shocks such as financial crises for economic research.

Details

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

Keywords

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