Showing papers in "Asian Review of Accounting in 2020"

Generic skills in accounting education in Saudi Arabia: students’ perceptions

Abstract: The purpose of this exploratory study is to examine the perceptions of Saudi university accounting students of the importance of developing generic skills in their accounting education, the levels of competence they should acquire and expect to achieve during the academic study, and the constraints that may hinder the development of generic skills in accounting education.,The study uses the skills outlined in the IFAC’s International Education Standards (IES) 3 (intellectual, personal, organizational and business management, and interpersonal and communication) and IES 4 (ethics in accounting/business). A survey questionnaire was used to collect the data.,The findings show that students perceived all five generic skill categories to be important, with ethical skills rated as the most important. However, the students expected that they would achieve a somewhat lower level of generic skill by the end of their studies in all areas, and they perceived a number of constraints that impede their skill development. The results indicate the importance of developing generic skills in accounting education and suggest that the Saudi accounting education system could do more to provide students with opportunities to develop generic skills to enable them to succeed in their future careers.,As little of the current literature has focused on generic skills in accounting education in a non-Western country, this research contributes to the literature on generic skills in a developing nation.

Auditors’ response to readability of financial statement notes

Abstract: The main objective of the present study is to assess the potential impact of readability of financial statement notes on the auditor's report lag, audit fees and going concern opinion (GCO).,The statistical population of this study includes all listed firms on the Tehran Stock Exchange (TSE) for the period of 2012–2017. The systematic elimination method is used for sampling and multiple regression and EViews software are used for testing the hypothesis models.,The obtained results show that there is a significant and positive relationship between audit report lags and readability of financial statements. Moreover, it is also revealed that readability of financial statements is positively associated with audit fees. Furthermore, the findings suggest a negative correlation between readability indexes and issuing GCOs, denoting hard-to-read statements is considered as a risk factor by auditors. Finally, the observations of our robustness tests suggest that the association between audit report lag and readability of financial statements is robust.,This is the first conducted investigation concerning auditor's response to the readability of financial statement notes in TSE. The outcome of current paper may pave the way for revising and developing Iranian accounting standards in order to give a fairer and clearer picture of financial reports.

A retrospective overview of the Asian Review of Accounting during 1992–2019

Abstract: Asian Review of Accounting (ARA), a leading journal in the field of accounting, completed its 29 years of active publishing in the year 2019. The primary objective of this study is to provide a comprehensive overview of the journal's publishing activities over these years.,The authors use the bibliometric analysis and graphical visualization of bibliographic data to ascertain the publication pattern of ARA. Annual publication and citation structure, leading trends in authorship, institutional affiliation, country affiliation, most cited papers in ARA, documents most cited by ARA and frequency of keyword occurrence are also studied to provide a comprehensive overview of the journal between 1992 and 2019.,Major findings show that ARA has a progressive trend, in terms of both productivity and stature. The journal is highly influenced by Australia and Malaysia in respect of productivity. Major themes published include auditing, financial accounting, governmental and nonprofit accounting, corporate social responsibility, accounting education and financial reporting.,This study offers the first of its kind comprehensive summary of the research work published in ARA.

Integrated capitals reporting and companies' sustainable value: evidence from the Asian continent

Abstract: Purpose - This paper examines the going concern of integrated reporting as the pessimistic about its sustainable value relevance is gaining momentous. The study employs a quantitative approach to data analysis and mainly sourced secondary data from integrated reports of 83 sampled companies. Design/methodology/approach - Utilising data from the companies' integrated reports from 2015 to 2018, the study analyses the impact of capitals disclosure on corporate sustainable value. was proxied by its six capital elements, which include financial, manufactured, human, intellectual, natural and social, and relationship capitals, while sustainable value was surrogated by the cost of financing and revenue growth rate. The study develops a checklist and utilises content analysis to score the quality of disclosure by sample companies during the period. Findings - The longitudinal panel data analysis results reveal that on overall disclosure, capital has a significant positive effect on the revenue growth but fails to document such on the cost of financing. Meanwhile, on the individual level, human capital and natural capital disclosure have an indirect effect on the cost of financing, while all the six subclassifications affect the revenue growth of the sampled companies. Research limitations/implications - The study sampled only 83 companies across the region due to the limited availability of data. Therefore, the generalisation of findings might be hindered, and further examination might be considered as more data become available. Practical implications - The study would support the regulators in developing countries to monitor practices for their domestic companies. It would assist the International Integrated Reporting Council (IIRC) to review the industry's current practices and give the reason for better implementation in the future, from both minority and majority economies. Originality/value - The study is among the pioneer studies that would consider research across the Asian continent. The study contributes to the recent discussion about sustainable value relevance of . Also, it would provide some level of incentive to those charged with governance concerning the voluntary compliance with the framework.

Accounting comparability, financial reporting quality and audit opinions: evidence from Iran

Abstract: Type of audit opinion is important for all stakeholders. Firm-specific characteristics have a direct impact on the type of audit opinion. The purpose of this study is to examine the association between accounting comparability (as a micro level characteristic), financial reporting quality (as a macro level characteristic) and audit opinions.,This study uses a multivariate regression analysis to tests it hypotheses to a sample of firms listed in Tehran Stock Exchange during 2015–2019. To measure accounting comparability, the authors use De Franco et al. (2011) model, and Hutton et al. (2009) model to measure financial reporting quality. The authors use type of audit opinion, and auditor's remarks (explanatory notes) as the measure for audit opinions.,The authors find a negative association between accounting comparability, and the proxies for audit opinion. The authors also find that a negative association between financial reporting quality and audit opinions. These results suggest that higher accounting comparability, and higher financial reporting quality (proxied by earnings quality) increases auditor tendency to issue unmodified audit opinion.,To the authors' best knowledge, this is the first study that empirically examines the association between accounting comparability, financial reporting quality and audit opinion. This study provides empirical support for the theoretical views on the association between financial reporting quality and audit opinion. The results could be of interest of both auditors and managers, especially in emerging capital markets, who seek to improve financial reporting quality.

Impacts of activity-based costing on organizational performance: evidence from Thailand

Abstract: To extend the limited yet conflicting results of prior studies, this paper hypothesizes and statistically tests alternative, structurally different models of likely positive impacts of activity-based costing (ABC) on organizational performance (OP). It also tests moderating effects of business type and business size.,To test the models' abilities to explain the data, this comparative study uses survey data from 191 Thai firms, measures validated in the study and structural equation modeling (SEM).,Extensive use of ABC for cost analysis, cost strategy and cost evaluation directly improves operational performance (OPP); it also indirectly improves financial performance (FP) through improving OPP. The results are similar for manufacturing and non-manufacturing firms and for large firms and small-medium enterprises (SMEs).,Future studies could test the alternative models in other geographical and industrial contexts and could widen the range of control variables.,Monitoring of the effects of ABC use on OPP is crucial to achieving positive financial outcomes. The cross-functional nature of ABC is apparent; for it to be effective managers must ensure cooperation from departments and employees involved in the design and implementation of ABC systems.,This research arbitrates prior inconsistent findings by adopting an original approach of testing structurally different models in a single comparative study, using measures validated in the study. It provides new evidence that extends knowledge about impacts of ABC on OP. Further, it demonstrates its applicability in the context of developing economies.

Measurement uncertainty and management bias in accounting estimates: the perspective of key audit matters reported by Chinese firms' auditors

Abstract: This study examines (1) the extent of key audit matters (KAMs) reported by auditors is related to accounting estimates, (2) whether measurement uncertainty and management bias affect auditors to do so and (3) whether the use of accounting estimates, given the measurement uncertainty and management bias reported in KAMs adversely affects the decision usefulness of accounting information.,Data on key audit matters, accounting estimates, measurement uncertainty, management bias, etc. were collected from the auditor's reports of 351 sample Chinese listed firms. It employs regression analyses to assess the hypotheses on issues affecting the report of these key audit matters and the impacts on the decision usefulness of accounting information.,Fair value and impairment loss estimations make up of 2.6 and 44.1% of the 606 KAMs identified, respectively. Measurement uncertainty is positively, while management bias is negatively, affecting auditors report KAMs related to accounting estimates. The use of accounting estimates in firms where their auditors reported the KAMs related to accounting estimates does not enhance the value and predictive relevance of reported earnings. The assurance works on, and reporting of, KAMs served as a “red flag” about the accounting estimates.,The use of accounting estimates does not always lead to enhanced decision-useful accounting information. Auditors, in their stewardship role, shall ensure that the measurement uncertainty issue is appropriately identified, addressed and verified. In addition, they shall provide an effective check-and-balance to the accounting discretion managers have in providing decision-useful information from opportunistic reporting.,This study examines the proposition that while the use of estimates can enhance the decision usefulness of accounting information, it can also induce measurement uncertainty and management bias into financial reporting.

CEO career horizons and earnings quality in family firms

Abstract: The present study examines the effect of the chief executive officer (CEO) career horizon (CH) problem on earnings quality (ERN) for selected family-controlled firms known to have a unique operational goal.,The generalised method of moment linear regression model was used on a sample of family-controlled firms in Malaysia from 2005 to 2016.,The study found a negative relationship between CH and ERN, measured by earnings persistence and earnings predictability. However, in the earnings predictability model, the reverse was found to be the case after interacting CH with CEO family affiliation, CEO experience and CEO equity. However, the use of a reputable auditor could not mitigate the CH problem. Also, the study obtained a closely related result in the earnings persistence model. The result aligns with the socio-emotional wealth (SEW) theory, which states that the goals of family-controlled firms go beyond financial objectives to include other non-financial objectives, and hence, their commitment to perpetuating their dynasty encourages them to preserve the quality of their earnings.,Existing studies on family firms and ERN have treated family firms as homogeneous entities by comparing family and non-family firms, using the underlying theoretical justification of the agency theory. However, this study departs from the agency theory, by considering those factors (i.e. the extent of CEO alignment with family owners and the choice of auditor), using the SEW theory, which establishes the differences among family firms. This work builds on that of Chen et al., (2018) and Ali and Zhang (2015), which suggested that corporate governance can mitigate the CH problem. Therefore, the strength of a CEO's attachment to the family firm (measured by CEO equity ownership and CEO affiliation to family members in family firms) and the choice of the auditor can explain the variation in the effect of the CH problem in family firms.

Earnings persistence, institutional investors monitoring and types of political connections

Abstract: The purpose of this study is to examine whether institutional investors monitoring attenuate (exacerbate) weaker earnings persistence in politically connected firms (PCFs). In addition, it investigates whether earnings persistence do vary according to different types of political connections.,This study employs earnings persistence as measure of earnings quality and ordinary least squares (OLS) model to examine: (1) the moderating effect of institutional investors’ ownership on the association between earnings persistence and PCFs and (2) the association between different types of political connections and earnings persistence.,This study finds that institutional investors' ownership attenuates weaker earnings quality in PCFs, indicating effective monitoring. However, stronger earnings persistence is associated with PCFs with longer political ties, audited by big four audit firm and with higher CEO power.,This study reveals the lower earnings persistence in PCFs can be attenuated by institutional investors monitoring. However, findings also suggest that earnings persistence in PCFs is affected by duration of political ties, big four audit firm and CEO power. This suggests that PCFs should not be viewed as a homogeneous group of firms.

Financial reporting quality, audit fees and risk committees

Abstract: The purpose of this paper is to examine the association between the existence of a risk committee (RC) in a firm and financial reporting quality. We also investigate whether having an RC has an effect on audit pricing. We argue that the existence of an RC in a firm contributes to higher financial reporting quality and this, eventually, affects audit pricing.,This study uses two different proxies for RC measures and investigates the impact on financial reporting quality and audit pricing. Multivariate regression analysis and propensity score matching techniques are both applied to data from the Australian Stock Exchange's listed companies for the years 2001–2013.,The results indicate that the existence of an RC reduces the discretionary accruals; this means the financial reporting quality improves when RCs are in operation. Our findings also indicate that the existence of an RC increases audit fees.,The findings from this study will be beneficial to the regulatory authorities responsible for improving the compliance of corporate governance (CG). An RC can serve as a risk-mitigating tool in the investment decision-making process. Finally, the results are beneficial for the development of best practices in CG by promoting the existence of an RC.,This study goes beyond the traditional focus on CG as we use the existence of an RC as an indicator of better governance practices to mitigate financial and non-financial risk factors. To the best of our knowledge, this paper is among the first to investigate the consequences for firms operating with RCs. This issue has implications for investors, auditors, directors and regulators.

Earnings opacity and corporate governance for Chinese listed firms: the role of the board and external auditors

Abstract: The purpose of this paper is to investigate the relationship between corporate governance and earnings opacity in China.,Two corporate governance mechanisms form the basis of the analysis: 1) the board of directors and 2) the external audit function. OLS regression analysis is employed on a large sample from 2000 to 2014 with 20,235 firm-year observations.,Corporate governance is found to be associated with reduced levels of earnings opacity for Chinese listed companies. Furthermore, the association between corporate governance and reduced levels of earnings opacity strengthened after the implementation of various key reforms.,Chinese regulators are advised to proceed with caution as not all Western approaches to corporate governance are transferrable to the Chinese setting.,This study contributes to the literature by analyzing broad latent constructs of corporate governance in addition to individual observable dimensions in order to reveal that various key reforms have been successful in strengthening the link between governance and reporting quality for Chinese listed companies.

Effects of financial distress and financing constraints on trade credit provisions

Abstract: Existing studies that documented the effect of financial distress on trade credit provisions did not include measures financial constraint. It is possible that financial distress is tie to financial constraints, and both financial distress and financial constraints mutually reinforce each other in their effects on trade credit provision. The purpose of this study is to evaluate the effects of financial constraint and financial distress on trade credit provisions in the UK FTSE 350 listed firms.,This study employs panel data in the estimation of the determinants of accounts payables and accounts receivables of the UK FTSE 350 firms from 2009 to 2017.,This study finds that financial distress has significant positive effect on accounts payables and a significant negative effect on accounts receivables. Financial constraints have significant negative effect on accounts payables and a significant positive effect on accounts receivables.,Trade creditor desiring to maintain an enduring product-market relationship grant more concessions to customer in financial distress. The amount of trade credit that sellers provide to financially constrained firm is an increasing function of the buyer's creditworthiness. The urgent cash needs of financially distressed firms lead them to sell trade receivables to factoring company leading to reduction in trade receivables. Firm facing external financing constraints increase trade credit to customers in anticipation of cash flow inflow to enhance liquidity.,This study shows that financial distress and financial constraints mutually reinforce each other in their effects on trade credit provisions, and firm's financing condition contributes to divergence in trade credit policies.

Accrual mispricing in the era of corporate governance reforms

Abstract: This study is primarily motivated by the increasing concern of the academic, practitioners, regulators and standard setters regarding the quality of earnings and financial reporting. The purpose is to investigate whether the accrual anomaly exists in Australia; whether the occurrence of the accrual anomaly is attributed to the discretionary accruals component stemming from managerial discretion; and the impact of corporate governance reforms on accrual mispricing.,This study employs the Mishkin (1983) rational expectations test to examine whether the earnings expectations embedded in stock prices accurately reflect the differential persistence of earnings components. It also employs the hedge portfolio trading strategy to examine whether taking a long position in firms with low accruals and a short position in firms with high accruals will yield positive abnormal stock returns.,The results show that investors overestimate the persistence of accruals and underestimate the persistence of cash flows and subsequently, overprice the accruals and underprice the cash flows. The evidence of accrual mispricing is severe for the component of discretionary accruals. Nonetheless, the association between discretionary accruals and abnormal returns are weakened during the corporate governance reforms period.,It should be cautious to attribute the investors' ability to accurately price accruals and cash flows to the passage of corporate governance reform program. Despite there is control for firm size, book-to-market, PE multiple, growth and leverage, other macro-economic factors such as interest rates, inflation and GDP could potentially have an impact on stock returns.,The passage of corporate governance reform program has increased the level of financial reporting disclosure and the monitoring of management, which subsequently improved accruals persistence and earnings quality. A direct practical implication is that investors should better understand the information in accruals for future earnings when the corporate disclosure environment is strengthened.,This study provides useful information to regulators, academics and investors interested in market efficiency and accrual mispricing. The results suggest that the reform of corporate governance is associated with more efficient prices. This may be of interest to the regulators who intend to improve earnings quality and financial reporting environment through the regulatory reform.,To test the accrual anomaly in the period of corporate governance reforms is particularly useful to regulators and policy makers. It allows regulators and policy makers to gain insight as whether the change of regulation has been effective – more transparent and timely reporting of financial information are supposed to help the investors to better understand the accruals and thus mitigate the potential for accrual mispricing.

Audit committee returnees and auditor choice: evidence from China

Abstract: The purpose of this paper is to examine whether the presence of returnees serving on the audit committee affects auditor choice in emerging markets.,Using a logistic model, this study tests the relationship between the presence of returnees in the audit committee and auditor selection and how this relationship varies with the level of agency costs. The authors also perform several other additional analyses to ensure the robustness of the results, including propensity score matching, Heckman’s two-stage model and change analysis.,Using A-share listed companies in China from 2008 to 2016, the authors find a positive association between the presence of audit committee returnees and a demand for high-quality auditors and such association is strengthened in firms with a higher level of agency costs. The authors further find that discretionary accruals and the incidence of financial restatements are lower in firms with audit committee returnees.,Although this study focuses on audit committee members with foreign study or foreign work experience, it remains to be seen if similar effects could be achieved through foreign ownership or work experience with foreign customers or suppliers.,This study provides evidence on a new channel of international knowledge spillover through which the emigration of talent increases board monitoring by demanding high-quality auditors in an emerging economy.

Deception by commission or by omission – management forecasts surrounding share repurchases

Abstract: In this study, the authors extend upon Brockman et al. (2008), who provide evidence that managers opportunistically accelerate bad news prior to share repurchases, but provide limited evidence that managers withhold good news until after repurchases. The authors examine management forecasts surrounding share repurchases in periods when companies must disclose detailed repurchase information. The authors argue these disclosures increase managers' legal and reputation risks of accelerating bad news, but have a lesser effect on delaying good news.,First, the authors examine whether managers alter the information released to the market before buying back shares by comparing managerial forecasts made within 30 days before the beginning of a repurchasing period with those made outside of this window. Second, the authors examine whether managers are more likely to provide good news forecasts, in terms of both magnitude and frequency, after buying back shares. Lastly, the authors examine the impact of CEO stock ownership on managerial forecasting behavior surrounding share buybacks.,Consistent with the authors’ hypotheses and contrary to Brockman et al. (2008), the authors find limited evidence that the likelihood or magnitude of bad news forecasts is greater in the period before share buybacks. Instead, the authors document that the frequency and magnitude of good news forecasts increase in periods following share buybacks and that these associations are positively moderated by managerial equity incentives. The authors also find that the withholding of good news is associated with lower average repurchase prices and greater repurchase volume. The authors further show that, when litigation risk is greater, managers are less likely to accelerate bad news prior to repurchases and more likely to withhold good news until after. Overall, the study results are consistent with managers balancing the benefits of opportunistic repurchase behavior with the costs.,This study contributes to the management forecast and share repurchase literatures by providing evidence consistent with managers opportunistically releasing earnings forecasts in the period after buying back shares. Most importantly, the authors show that after the rule revision, managers refrain from actively disclosing bad news that carry higher legal costs. Instead, they opt for the omission of good news to repurchase stocks at lower prices. The study results reconcile the conflicting evidence of Brockman et al. (2008) and Ge and Lennox (2011).

Commercial lender judgments and fair-value recognition: an investigation into the impact of future accounting standards

Abstract: This paper examines the impact that fair-value recognition of non-financial assets has on the judgments of commercial lenders.,Commercial lenders, who were attending a national banking conference, participated in a controlled experiment.,The experimental results show that commercial lenders incorporate fair values into their judgments but only when this information is recognized (vs disclosed) on the financial statements. Additionally, lenders assigned the highest loan interest rates when recognized fair values increased net income, and they assign the lowest loan amounts when recognized fair values decreased net income.,Typical limitations regarding behavioral experiments are acknowledged in the paper. For example, the commercial lenders in this study could not request additional information. In addition, because of the difficulty in obtaining these participants, the sample size is relatively small.,US Generally Accepted Accounting Principles (GAAP) does not allow the fair-market valuation for most non-current assets while International Financial Reporting Standards (IFRS) require such valuations. The article adds to our understanding about how a significant user group of financial statements, commercial lenders, view GAAP and IFRS accounting.,This article provides insights regarding how commercial lenders' decisions may change based on accounting principles related to asset valuation. Obtaining credit through loans has significant implications for society.,This article is unique because it examines commercial lenders' judgments using different asset valuations on the financial statements.

Discussion of (dis)aggregated earnings guidance and acquisition financing

Abstract: The author discusses the paper by Ordyna (2020) and suggests a few areas for improvement. First, the author could think more about the financing scheme of the acquisition including hybrid debt securities. Second, the author could consider forecast reputation, the timing and frequency of earnings guidance. Third, the author may consider the difference-in-differences research design and identification strategy. Other model designs, robustness checks and alternative measures of key variables are discussed.

Sales order backlog and corporate cash holdings

Abstract: We examine the impact of sales order backlog (an important leading performance indicator) on corporate cash holdings and the role of corporate governance in the relation between sales order backlog and cash holdings.,We use the regression analysis to examine our research questions.,Consistent with the agency motive and the precautionary motive of cash holdings, we document a significant negative relation between order backlog and cash, suggesting that firms with higher order backlog hold less cash. We further examine and find that the relationship between order backlog and cash becomes stronger for firms with stronger corporate governance, highlighting the role of governance in determining the level of corporate cash holdings.,Our study contributes to the accounting literature on sales order backlog and the finance literature on corporate cash holdings. In particular, our study contributes to developing a more comprehensive understanding of the sales order backlog because it is still an under-researched area in accounting. To the best of our knowledge, this study is perhaps the first empirical study that examines the direct link between order backlog and cash.

The differentiated CSR activities and corporate value

Abstract: Corporate social responsibility (CSR) index represents attributes of firms that are differentiated. The purpose of this paper is to investigate the impacts of differentiated CSR, CSRS (strategic CSR activities) and CSRD (defensive CSR activities) on R&D expenditure and its effectiveness on firm values.,The sample includes 1,388 firm-year observations for 2004–2015 of listed firms on the Korean Stock Exchange (KSE) whose CSR measures, KEJI (Korea Economic Justice Institute) index are available from the Citizens' Coalition for Economic Justice (2016).,The results show that while CSRS is positively associated with R&D expenditure, CSRD is not. Further, development costs and its interaction term with CSRS positively affect firm values.,This study provides an important reason to separate the attributes of the CSR in future empirical studies. The results imply that the study of effects of CSR on sustainable growth or firm values should focus on CSRS rather than CSR activities in general in future research.

Institutional investors, stewardship code disclosures and audit fees

Abstract: This study uses content analysis of disclosures under the Japanese Stewardship Code to examine how investee company audit fees are influenced by institutional investor governance.,Scores are developed based on objective and verifiable Code disclosures made by the top-five institutional investors of Nikkei 225 index companies. The scores are related to management of conflicts of interest, monitoring actions and resource availability connected with stewardship.,The results show that higher scores on monitoring and resource availability are associated with lower audit fees. The extent of resources that institutional investors allocate to playing an effective stewardship role is found to be the primary determinant of their influence on audit fees. Overall, the findings are consistent with governance by institutional investors reducing audit risk and audit effort, which leads to lower audit fees.,The study offers new insights because there is no apparent prior research that uses Code disclosure content to measure institutional investor governance. This provides new information on the open question of the relation between audit fees and institutional investor governance.

Aggregate market attention around earnings announcements

Abstract: This analysis is the first to explore the overall roles of the offsetting attraction and distraction influences of earnings news in shaping the level of attention given to the equity market by market participants.,We use multivariate regression approach and examine how trading activity levels within the set of non-announcing firms varies with respect to collective measures of contemporaneous earnings announcement visibility. We employ attention and information transfer theories in our hypothesis development.,This analysis is the first to explore the overall roles of the offsetting attraction and distraction influences of earnings news in shaping the level of attention given to the equity market by market participants. Specifically, we examine how the number of earnings announcement activity affects investor attention as measured by trading volume given to the set of non-announcing firms. We find that while earnings announcement numbers lower trading volume responses to earnings news among announcing firms (consistent with Hirshleifer et al., 2009), their distractive influence does not carry over into the market as a whole. More importantly, investor attention to both the overall market and the larger subset of non-announcing firms increase in response to earnings news activity levels. However, after decomposing the announcers as same-industry and different-industry announcers, we find that investor attention to the non-announcing segment of the market increases with the number of same-industry announcers, but actually seems to decrease (i.e. they distract attention) with the number of different-industry announcers. We also find that the associated earnings surprise brings attention to non-announcing firms (consistent with earnings news is relevant to overall market price movements). Finally, we find that distraction effects are attenuated in the financial crisis period.,A promising area of future research is to examine the relation between market pricing efficiency and aggregate earnings activity for the set of non-announcing firms. Although it will be a challenging task to measure pricing efficiency for the non-announcers, this will complement the prior literature only focusing on the announcing segment of the market.,First, instead of assessing the impact of number of earnings announcements on the subset of announcing firms, which is a micro-level perspective, we identify the impact of news arrivals on all firms in the market including the vastly larger set of non-announcing firms. Second, by decomposing the number of announcements into industry-related and -unrelated news we show that different types of news arrivals spark investor attention differently, suggesting the importance of categorizing the news into related and unrelated industries.,A potential future area of research identified by our analysis is to investigate what type of investors' attention is distracted or attracted during the earnings announcements. A promising area of future research is to examine the relation between market pricing efficiency and aggregate earnings activity for the set of non-announcing firms.,This paper is the first one exploring the overall roles of the offsetting attraction and distraction influences of earnings announcements in shaping the level of investor attention given to the equity market by market participants. Our findings should be of interest to investors, analysts, security market regulators and researchers.

The future of integrated reporting in an emerging market: an analysis of the disclosure conformity level

Abstract: This study provides an analysis of the possibility of companies in Indonesia to adopt integrated reporting (IR). This is undertaken by comparing the degree of conformity between current reporting disclosures with that of the IR framework.,A mixed-method approach is employed, which entailed using both quantitative and qualitative techniques to access data. For the quantitative analysis, a total of 64 companies are chosen, which represent companies with significant market capitalization included in the LQ45 index (an index for the 45 most liquid stocks) in 2016 and the non-LQ45 by publishing a sustainability report. These companies are selected on the basis of high levels of disclosure compared with other companies and serve as an appropriate benchmark for other listed companies. The level of disclosure conformity is employed using 39 principle disclosure indices and 76 content disclosure indices based on the IR framework. For the qualitative analysis, interviews were conducted with nine interviewees that are considered as experts in the field of IR. The interviews are conducted to assist in providing explanations for the findings.,The results indicate that approximately 60% of companies (mostly in the banking, finance and mining industries) have an adequate degree of conformity, reflecting their higher probability of voluntary compliance to apply the IR framework. However, the principles of conciseness and connectivity of information provide significant challenges for Indonesian firms when they will consider implementation. Further analysis using in-depth interviews with experts showed that several factors from various perspectives should be considered in shifting to IR.,This study provides empirical evidence on the current reporting landscape of Indonesian firms. Scant research is available on the possible adoption of IR in emerging markets such as Indonesia. Hence, this project raises further possible explanations for the challenges and pressures faced by Indonesian firms in an era of changing stakeholder expectations.

Discussion of commercial lender judgment and fair-value recognition: an investigation into the impact of future accounting standards

Abstract: This paper aims to discuss the study by Warne (2020), which investigates whether disclosure or recognition of fair value information for nonfinancial assets influences commercial lenders’ judgment on interest rates and the dollar amounts of business loans.,Provides a discussion of research design and general issues related to behavioral/experimental studies.,Identifies issues that should be carefully thought out and properly addressed by behavioral researchers in order to improve the robustness of the empirical evidence.,This discussion highlights issues that should be carefully thought out and properly addressed by behavioral researchers in order to improve the robustness of the empirical evidence.

Discussion of Troubled Asset Relief Program and earnings informativeness

Abstract: Vega et al. (2020) find that incentives in executive compensation result in higher earnings informativeness. The discussion focuses on two areas for improvement. First, the authors could look into additional measures of earnings quality. This further analysis could help us understand whether the enhanced earning informativeness stems from capital market effects or real effects. Second, the authors could consider replacing their main earnings response coefficient (ERC) model with one of the alternative ERC models in the literature. Three different ERC models are discussed.,This paper discusses capital market effects versus real effects and illustrates different ERC models.,The discussed paper could differentiate between capital market effects and real effects and use an alternative ERC model.,An accounting audience could be interested in the discussion on capital market effects versus real effects and the illustration on various ERC models.