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This study investigates the influence of corporate culture on financial reporting transparency within Iranian firms.
Abstract
Purpose
This study investigates the influence of corporate culture on financial reporting transparency within Iranian firms.
Design/methodology/approach
Leveraging a dataset of 1,480 firm-year observations from the Tehran Stock Exchange spanning from 2013 to 2022, the study employs text mining to quantify linguistic features of corporate culture and transparency, specifically readability and tone, within annual financial statements and Management Discussion and Analysis (MD&A) reports.
Findings
Our results confirm a positive and significant relationship between corporate culture and financial reporting transparency. The distinct dimensions of corporate culture — Creativity, Competition, Control, and Collaboration — each uniquely enhance financial transparency. Robustness tests including firm fixed-effects, entropy balancing, Generalized Method of Moments (GMM), and Propensity Score Matching (PSM) validate the profound influence of corporate culture on transparency. Additionally, our analysis shows that corporate culture significantly affects the disclosure of business, operational, and financial risks, with varying impacts across risk categories. Cross-sectional analysis further reveals how the impact of corporate culture on transparency varies significantly across different industries and firm sizes.
Research limitations/implications
The study’s scope, while focused on Iran, opens avenues for comparative research in different cultural and regulatory environments. Its reliance on text mining could be complemented by qualitative methods to capture more nuanced linguistic subtleties.
Practical implications
Findings underscore the strategic importance of cultivating a transparent corporate culture for enhancing financial reporting practices and stakeholder trust, particularly in emerging economies with similar dynamics to Iran.
Originality/value
This research is pioneering in its quantitative analysis of the textual features of corporate culture and its impact on transparency within Iranian corporate reports, integrating foundational theoretical perspectives with empirical evidence.
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Wan Adibah Wan Ismail, Marziana Madah Marzuki and Nor Asma Lode
This study examines the relationship between financial reporting quality, Industrial Revolution 4.0 and social well-being of stakeholders among public companies in Malaysia.
Abstract
Purpose
This study examines the relationship between financial reporting quality, Industrial Revolution 4.0 and social well-being of stakeholders among public companies in Malaysia.
Design/methodology/approach
The sample of the study includes 232 firm-year observations of Malaysian publicly listed companies from 2013 to 2017. Social well-being is measured using social pillar scores from the Environmental, Social and Governance (ESG) data provided by Refinitiv. The study identified companies as an adopter of IR 4.0 based on their disclosure on the use of autonomous robots, simulation, cloud, horizontal and vertical system integration, cybersecurity, additive manufacturing, augmented reality and big data analytics in their financial reports. Financial reporting quality is measured using discretionary accruals.
Findings
This study found that financial reporting quality and IR 4.0 are related to social well-being, particularly the workforce. These results imply that companies with higher adoption of IR 4.0 are more likely to provide more information concerning job satisfaction, a healthy and safe workplace, maintaining diversity, equal and development opportunities for its workforce. Furthermore, the results show that firms with lower discretionary accruals (i.e. higher quality of financial reporting) are more likely to provide more information about social well-being. The results are robust even after addressing endogeneity issues.
Research limitations/implications
This research contributes new insights into the role of financial reporting quality and IR 4.0 in enhancing social well-being in Malaysia. These findings offer valuable input for regulators striving to advance the United Nations' 2030 Agenda for Sustainable Development.
Practical implications
This study carries substantial practical implications for policymakers and businesses alike. It underscores the importance of embracing IR 4.0 technologies and integrating them into strategic planning to foster social well-being. These insights can guide policymakers in shaping economic strategies and assist businesses in prioritizing financial reporting quality while engaging stakeholders to promote social well-being.
Originality/value
This is the first study to investigate the combined relationship of financial reporting quality and IR4.0 on social well-being, which provides valuable evidence in this novel domain. While previous studies have primarily explored the relationship of IR4.0 on sustainability from an environmental and human resource perspective, this study sheds light on the specific dimension of social well-being, hence promoting sustainable development goals by the United Nations in 2030.
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This study aims to assess how prepared and flexible accounting professionals are to produce financial accounts that adhere to Shariah regulations in the metaverse. The study also…
Abstract
Purpose
This study aims to assess how prepared and flexible accounting professionals are to produce financial accounts that adhere to Shariah regulations in the metaverse. The study also highlights the potential positive and negative effects of metaverse utilization on the financial reporting quality of Islamic financial institutions (IFIs).
Design/methodology/approach
A questionnaire was distributed to a random sample of 102 accounting professionals employed in IFIs in Bahrain.
Findings
The capacity to provide real-time reporting within the metaverse would enhance the quality and reliability of Islamic financial reporting. Furthermore, the fluctuating values of digital assets in the metaverse pose a significant challenge to ensuring accurate financial reporting. IFIs fail to create an environment suitable for transitioning to the metaverse. Moreover, the participants expressed concerns about how the rapid expansion of the metaverse may challenge the adherence to Shariah governance principles in virtual financial transactions. They further recommended that the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) establish explicit directives on Shariah governance in the metaverse.
Practical implications
Various IFIs’ stakeholders, including practitioners, shareholders and employees interested in adopting the metaverse technology, can benefit from the findings of the studies. In addition, the study could help Islamic banks in Bahrain better grasp the readiness and adaptability of accounting professionals. This understanding would aid in establishing robust financial reporting standards that align with Shariah principles in the metaverse.
Originality/value
This research examines the metaverse through the lens of Islamic financial reporting, offering recent evidence on technological developments and financial reporting practices within an Islamic context. The research findings would contribute to advancing the knowledge among academics, professionals and all interested parties concerning the effects of metaverse implementation on Shariah governance principles and the quality of financial reporting. The study findings would offer policymakers and regulators in the Islamic finance sector essential insights.
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Samuel Koufie, Lexis Alexander Tetteh, Amoako Kwarteng and Richard Amankwa Fosu
This study aims to investigate the impact of ethical accounting practices on financial reporting quality by using the extended theory of planned behaviour (ETPB) and integrating…
Abstract
Purpose
This study aims to investigate the impact of ethical accounting practices on financial reporting quality by using the extended theory of planned behaviour (ETPB) and integrating religiosity as a moderating variable.
Design/methodology/approach
Using a survey method, data was obtained from 371 chartered accountants who were in good standing as of April 2023. The collected data were then analysed using partial least squares structural equation modelling.
Findings
The results revealed that there is a significant positive relationship between ethical accounting practices (attitude, subjective norm, perceived behavioural control and ethical judgement) and financial reporting quality of accounting practitioners. Furthermore, a moderation test was conducted, which demonstrated that religiosity enhances the positive correlation between ethical accounting constructs (attitude, subjective norm and ethical judgement) and financial reporting.
Practical implications
Leading by example, top-level management should actively promote a culture of religiosity that prioritises integrity and adherence to financial reporting requirements.
Originality/value
To the best of the authors’ knowledge, this is one of the very few ethics studies in accounting that demonstrates that the application of the ETPB improves financial reporting quality in a context fraught with allegations of moral breaches by accountants.
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Lennart Nørreklit, Hanne Nørreklit, Lino Cinquini and Falconer Mitchell
The aim of this paper is to propose a basis upon which accounting reporting can be developed to reflect real values and the real economy. It aims to address the environmental…
Abstract
Purpose
The aim of this paper is to propose a basis upon which accounting reporting can be developed to reflect real values and the real economy. It aims to address the environmental considerations discussed in the UN debate (Bebbington and Unerman, 2020) and the concern for a “better life-world”, which is the theme of this special issue.
Design/methodology/approach
Addressing the task involves the application of the philosophy of pragmatic constructivism (which explains how people can relate to their reality in ways that lead to successful action) and the philosophical concept of the “good life” (which establishes the values to be pursued through action and so defines action success). Also, it outlines the necessary characteristics of measurement frameworks if they are to be effective in the development and control of human practices to achieve desired values.
Findings
This paper proposes a conceptual framework for guiding the measurement of how a sustainable good life has improved and/or deteriorated as a result of organisational activities. It outlines a system of concepts on basic and instrumental values for analysing the condition of maintaining a sustainable good life in real terms. This is related to the financial results and societal regulations to analyse and adjust controls according to the real economic goals. Also, it provides a system of value measurands to produce valid information about the development of a sustainable good life. The measurand makes accounting reporting reflect the conditions of the good life that constitute the real economy instead of merely the financial economy driven by shareholder capitalism. Providing tools to analyse whether the existing practices of business and social regulations promote or counteract the real economic goals of producing a sustainable good life means the measurement system proposed makes the invisible hand of the market visible.
Originality/value
The mechanism proposed to enable accounting reporting to reflect real values and the real economy is a new conceptual framework that will allow accounting to more fully realise its potential to contribute to a “better world”. In aiming to serve a sustainable good life, accounting reporting will inherently foster ethical social practices.
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Abhishek N., M.S. Divyashree, Habeeb Ur Rahiman, Abhinandan Kulal and Meghashree Kulal
This study aims to examine the impact of extensible business reporting language (XBRL) technology and its functionality on various aspects of financial reporting and its overall…
Abstract
Purpose
This study aims to examine the impact of extensible business reporting language (XBRL) technology and its functionality on various aspects of financial reporting and its overall quality.
Design/methodology/approach
To conduct this study, data was collected from a variety of professionals, including accountants, auditors, tax advisors and others. A structured research instrument was developed, and the collected data were analysed using structural equation modelling and mediation analysis techniques.
Findings
The study’s results showed that XBRL technology and its functionality have a noteworthy impact on different aspects of financial reporting. Moreover, the various aspects of financial reporting positively affect the overall quality of financial reporting.
Research limitations/implications
This study solely relied on the opinions of various professionals regarding the current issue under investigation and did not empirically assess the reporting practices of companies by examining their XBRL-based reports. Additionally, it concentrated solely on financial reporting aspects and did not account for non-financial aspects. The main theoretical contributions of this paper to technology in financial reporting, XBRL and accounting literature are that it sheds light on the influence of the use of technologies in the business reporting process and their influence on various aspects of business reporting, which has only received confined focus from earlier studies so far.
Practical implications
This study’s findings could provide valuable insights to the managerial teams of organizations seeking to digitize their business reporting practices, specifically in areas such as regulatory compliance, integrated reporting and timely dissemination of reports in a sustainable way. Furthermore, it could help these teams reap the benefits of technology for various regulatory compliance matters.
Originality/value
This study could assist business organizations and regulatory authorities in adopting and implementing technology such as XBRL for accounting and business reporting. Furthermore, the study’s findings can aid in enhancing financial reporting practices by considering emerging aspects such as ESG and sustainability aspects.
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Farrat Outmane, Hajji Zouhair and Benabdallah Hamza
To achieve sustainable development objectives, managers are encouraged to implement best practices in corporate social and environmental responsibility within their…
Abstract
To achieve sustainable development objectives, managers are encouraged to implement best practices in corporate social and environmental responsibility within their establishments. The main objective of this chapter is to assess the quality of environmental, social, and governance (ESG) communication for Moroccan financial institutions. This chapter is devoted to the content analysis of the annual reports of 14 financial institutions listed in Morocco regarding ESG strategies between 2017 and 2021. The reference assessment tool we used is the Global Reporting Initiative (GRI) standards (2016), based on six principles. Each principle contains requirements and guidance on how to apply it. These principles are summarized in the following: Accuracy, Balance, Clarity, Comparability, Reliability, and Timeliness. The sample is composed of 14 financial institutions listed on the Casablanca Stock Exchange. After checking the content of the annual reports of listed Moroccan financial institutions, we detected several shortcomings in Corporate Social Responsibility (CSR) reporting behavior. Companies avoid disclosing information about negative events and performance. We saw this as a bad sign for stakeholders. The results showed a significant gap between the GRI standards and the content of the annual reports. These weaknesses mainly concern accuracy, comparability, and, timeliness, hence the need to carry out corrective measures to improve the quality of ESG practices within Moroccan financial institutions. One of the limitations of this research is its focus on financial institutions. However, it is possible to broaden the scope of the research by assessing the quality of ESG communication for nonfinancial companies.
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Deepthi S. Pawar and Jothi Munuswamy
The present study aims to investigate the effect of environmental reporting on the financial performance of banks in India.
Abstract
Purpose
The present study aims to investigate the effect of environmental reporting on the financial performance of banks in India.
Design/methodology/approach
The study is based on the secondary data. The sample includes the banks listed in the NSE Nifty Bank Index from 2016–2017 to 2020–2021. The environmental reporting data was obtained through the content analysis technique. The financial data was collected from the CMIE Prowess database. Panel regression analysis was used to analyse the data.
Findings
The findings indicate a negative significant influence of environmental reporting on the ROA and ROE of banks. On the other hand, environmental reporting does not significantly influence the EPS of banking institutions.
Originality/value
To the best of the authors’ knowledge, this study is the first to contribute to the scarce literature on the influence of environmental reporting on financial performance, pertinently in the context of a developing nation's banking sector.
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Abdollah Taki and Afsaneh Soroushyar
The purpose of this study is to investigate the moderating role of honesty-humility of financial managers on aggressive financial reporting behavior.
Abstract
Purpose
The purpose of this study is to investigate the moderating role of honesty-humility of financial managers on aggressive financial reporting behavior.
Design/methodology/approach
To test the research hypotheses, a scenario-based questionnaire taken from Brink et al. (2018) was used. Using a cross-sectional survey design, the authors collected primary data of 160 financial managers of firms in Iran using structured questionnaires. The research sample selected was based on Cohen et al.’s (2000) table. To test the research hypotheses, analysis of variance was used.
Findings
The results showed that increasing honesty-humility of financial managers decreases the impact of social pressure and risk appetite interaction on aggressive financial reporting. In addition, the results of further analysis showed that reducing the honesty-humility of financial managers increases the impact of risk appetite on aggressive financial reporting. Moreover, the results indicate that reducing the honesty-humility of financial managers increases the impact of social pressure on aggressive financial reporting.
Research limitations/implications
This finding provides significant evidence for auditor, managers and policymakers in Iran. Policymakers, auditor and company managers can emphasize compliance with the code of ethics, internal control and corporate governance to increase ethics and reduce negative economic consequences.
Originality/value
To the best of the authors’ knowledge, this is the first case in an emerging economy to survey the moderating role of honesty-humility of financial managers on aggressive financial reporting behavior. Also, this study contributes to understanding how factors at the individual, social and organizational level combine to influence financial managers’ aggressive financial reporting behavior.
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This paper aims to review 68 archival studies on the impact of audit committees (ACs) on firms’ consequences [(non)financial reporting, performance and audit quality] in European…
Abstract
Purpose
This paper aims to review 68 archival studies on the impact of audit committees (ACs) on firms’ consequences [(non)financial reporting, performance and audit quality] in European firms.
Design/methodology/approach
Applying a stakeholder agency-theoretical framework, the author differentiates between three categories of AC variables: presence; composition; and resources, incentives and diligence.
Findings
The author finds that AC composition, (non)financial reporting and audit quality are dominant in the literature review. Other inputs or outputs are either too low in amount or yielded heterogeneous results, hindering clear tendencies. However, there are indications that financial expertise is positively related to financial reporting and audit quality, in line with agency theory and European regulatory assumptions.
Research limitations/implications
In the discussion of potential future research, the author emphasizes, among others, the need for the recognition of innovative and sustainable AC variables, inclusion of moderator and especially mediator variables and reaction to endogeneity concerns by advanced regression models.
Practical implications
As the European Commission currently discusses extended regulations on AC duties and composition, this literature review highlights the huge impact of financial expertise on financial reporting and audit quality. In view of the increased monitoring duties of sustainability reporting, both business practices and regulatory bodies should increase the sustainability expertise of ACs.
Originality/value
This analysis makes useful contributions to prior research by focusing on attributes of AC and their impact on firms’ outputs in the European capital market, based on a differentiation between mandatory one-tier/two-tier systems and the choice model. The findings support the promotion of European evidence-based regulations, such as the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.
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