Showing papers in "Journal of Financial Reporting and Accounting in 2019"

Abstract: The purpose of this paper is to establish why firms in developing countries are slow to adopt integrated reporting (IR) and what needs to be done to ensure such firms embrace the practice of integrated reporting using evidence from Uganda.,This study uses a narrative cross sectional survey conducted using qualitative data collection techniques specifically the structured interviews. We conducted interviews on senior executive managers of Capital Markets Authority, Professional accountancy bodies, Uganda Securities Exchange (USE) and firms listed on Uganda Securities Exchange. The study also involved an analysis of annual reports of listed firms on USE from 2010 to 2016.,Results suggest that, firms are slow to adopt integrated reporting because of the scarce resources, culture and leadership, stakeholders demand, the regulatory requirement, the effect of globalization and the mindset, lack of awareness about IR and the nature of business and size. Results further suggest that integrated reporting be made mandatory for all firms, especially those that are publicly interested, such as financial institutions, and those that are listed on the stock exchange.,IR being an emerging phenomenon there are few empirical studies exploring IR practices in a developing economy perspective. To the best of the authors’ knowledge this is the first paper that provides some insights into IR from a Ugandan perspective using the Diffusion of innovation theory.

Abstract: This study aims at providing a proof of the factors associated with sustainability assurance demand by French companies.,This research used panel data methodology.,The study results demonstrate that institutional ownership and the presence of corporate social responsibility (CSR) committee within the management board have an effect on the demand for sustainability assurance. The results also reveal that three types of stakeholders (employees, environment and customers) positively affect the demand of voluntary sustainability assurance.,The paper provides a preliminary proof on the effects of the governance of corporation and pressure of some groups of stakeholders on the voluntary demand of sustainability assurance in France.

Abstract: This paper aims to analyse the implications of globalisation and the adoption of international standards (International Financial Reporting Standards [IFRS]) for accounting information quality.,This paper uses a sample of 329 banks across 29 countries leading up to and beyond the implementation of IFRS to test for related hypotheses.,First, banks’ financial statements are prepared on the basis of international standards as national economies are integrated when social norms are diffused. Building on these results, the second test suggests that the relatively high-quality earnings among banks in Africa during the period is attributable to the adoption of and interaction of IFRS with globalisation and the strategy of banks to diversify within and across interest and non-interest income.,The authors investigate how globalisation and the adoption of IFRS affect accounting information quality.

Abstract: The purpose of this study is to investigate whether a country’s ownership concentration affects the financial reporting quality in a cross-country setting.,This paper uses six accounting and auditing indicators to construct a comprehensive index to measure the country-level financial reporting quality.,The authors find a non-linear nature of the relationship between the national financial reporting quality and national ownership structure. Specifically, the relation is negative in a relatively spread ownership structure with no controlling shareholders, implying the entrenchment effects dominate. When ownership is highly concentrated, particularly with controlling shareholders whose interest is aligned with that of the firm, the relation turns to positive and alignment effects dominate.,The study is an important extension of prior research examining the financial reporting quality effect of ownership concentration. It enhances the understanding of the role of ownership concentration in determining a country’s financial reporting quality and has potential important policy implications for countries’ reformers and regulators who are concerned with the transparency of financial reporting and the quality of corporate governance.

Abstract: The purpose of this study is to discuss the extent to which Indonesian Islamic banks (IBs) disclose corporate social responsibility (CSR) according to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) index. It also empirically examines the determinants of CSR disclosure in Indonesian IBs, based on disclosure from AAOIFI index, which is based on Islamic principles.,The determinant used in this paper is the corporate governance (CG) mechanism, which focuses on the board of commissioners (BOC) and Sharia Supervisory Board (SSB) and their characteristics. The paper uses multiple regression analysis to examine the influence of these variables on CSR.,The results indicate that the level of CSR disclosure of IBs measured by the AAOIFI index continues to be low. The statistical results reveal that CSR disclosure has an insignificant relationship with BOC size and SSB qualifications, while the other results show a negative association between the composition of independent BOCs and CSR disclosure, and the frequency of BOC and SSB meeting has a positive effect on this.,The study focuses on Indonesian IBs. The variables of the CG mechanism are limited to the BOC and SSB, while the BOC exists only in countries that adopt two-tier boards.,IBs should provide a wider range of information to be disclosed. The government should establish specific items that need to be disclosed by IBs, considering there are no specific CSR disclosure regulations for IBs in Indonesia.,This study uses the AAOIFI index, which may be a suitable measure of CSR in IBs. The study also analyzes why certain items in the index have a high disclosure level and others do not.

Abstract: The purpose of this paper is to investigate the internal control disclosure (ICDISC) practices in South Asia and compare those disclosure practices across enforced setting (India) versus comply or explain setting (Pakistan and Bangladesh). Further, whether the audit firm size moderates the relationship between ICDISC practices and board & audit committee effectiveness.,To achieve these objectives, a sample of 100 non-financial companies was selected from Pakistan and India for three years’ period (2013-2015), whereas 93 companies were selected from Bangladesh based on market capitalization. The ICDISC index has been used which is based on the COSO framework.,Results of univariate analysis show that public sector companies in South Asia tend to disclose significantly more internal control information as compared to private sector companies. In terms of enforcement variable, the results of Mann–Whitney test show that companies listed in enforced setting have disclosed significantly greater extent of overall as well as individual categories of ICDISC as compared to companies listed in comply or explain setting. Based on multivariate analysis results for overall sample, it was found that board and audit committee characteristics and ownership by government have positive significant effect on ICDISC except representation of female or foreigner on audit committee which was found negatively significant. In addition to this, listing on foreign stock exchange and enforcement effect emerged as significant variables to influence ICDISC. Finally, the results of additional analysis state that the role of board and audit committee for influencing ICDISC has been moderated by the external auditor size in South Asia. In addition, enforcement variable is highly positively significant for companies having non-big four audit firm.,These results imply that enforcement variable acts as an important alternative external control mechanism when companies do not have big four audit firm as their external auditors.,This is very first study on ICDISC in South Asia which explores the effect of enforcement and governance on ICDISC practices of firms. It also contributes toward the literature that the regulation on reporting of internal control can be effective in developing country only if there is strong penalty for non-compliance by regulatory authorities.

Abstract: The purpose of this paper is to examine the relationship between earnings management and the efficiency of French firms’ investments. It also investigates the moderating effect of board of directors’ features on this relation.,This study is based on a sample of French listed companies from 2011 to 2015, i.e. 435 firm-year observations. The authors use the instrumental variable method based on 2SLS models.,The authors show that there is a negative relationship between earnings management and investment efficiency. This finding supports the theoretical perspective of the agency theory, as the propensity of firms to engage in earnings management practices is associated with high managerial opportunistic behavior and asymmetric information issues, leading to the problem of under and overinvestment. The findings also show that board size, independence and gender diversity are positively associated with investment efficiency. These board features moderate the relationship between earnings management and investment efficiency suggesting that earnings quality plays a more prominent role in guiding managers to choose the right investments when the corporate governance environment is strong.,The negative relationship between earnings management and investment efficiency suggests that firms with lower earnings quality are exposed to high information asymmetries. They are then more likely to deviate from their expected level of investments. In addition, the results highlight the importance of corporate financial transparency and board monitoring to reduce agency costs and ensure the efficiency of corporate investments, particularly in a setting where investors’ interests are poorly protected.,This paper is the first to the best of the authors’ knowledge to examine the effect of earnings management, a metric for earnings quality, on the corporate investment efficiency in France. Besides, they extend previous literature by investigating how board features are able to monitor managerial actions and decisions and therefore to moderate the effect of earnings management on investment efficiency.

Abstract: This study aims to examine the relationship between online financial disclosure (OFD) and profitability of Islamic banks in the Gulf Cooperation Council (GCC) countries.,An extensive review of the literature was carried out and a checklist of 90 items (71 for content and 19 for presentation) was adopted to measure the level of OFD for the Islamic banks that are listed on the GCC stock exchanges. Additionally, the study used three indicators to measure profitability, namely, return on equity, return on assets and earnings per share.,The findings show that the overall OFD by Islamic banks in the GCC is 72.5 per cent, and a negative and insignificant relationship between OFD and profitability.,The study recommends that regulatory bodies should develop a guideline of disclosing information through the internet to enhance the transparency and performance among Islamic banks, which leads to reasonable economic decision-making.,The study contributes to the financial reporting and the Islamic economy literature relating to the GCC countries as previous studies gave no attention to Islamic banks.

Abstract: This paper aims to examine the influence of firm characteristics on harmonisation of companies listed on the Egypt, Morocco and Tunisia Stock Exchanges.,This study uses a checklist based mainly on the International Financial Reporting Standards (IFRS).,The findings of the study are 6that the level of compliance with IFRS was higher in 2010 than in 2005. Multiple regression analysis indicates that the level of compliance with IFRS increases with company size, institutional ownership, industry and language of disclosure.,The findings of this study suggest that both institutional- and firm-level forces influence the harmonisation process.,This study contributes to the literature on accounting harmonisation in the context of North Africa.

Abstract: The purpose of this paper is to investigate the impact of board composition on the level of corporate internet reporting (CIR) practices.,This study uses content analysis to examine the CIR practices of 140 Indian companies selected from the Bombay Stock Exchange 200 index for the year 2015. CIR was measured on a comprehensive internet disclosure index of 136 items capturing both content and presentation dimensions. Regression analysis was used to explore the impact of board composition (board size, board independence, frequency of board meetings, CEO duality and family members on the board) and audit committee characteristics on CIR while controlling the impact of variables firm size, leverage, profitability and industry type.,The findings reveal that larger boards, boards with less family members and audit committees that meet more frequently are more likely to engage in CIR practices. In addition, larger firms and firms that make less use of debt tend to disclose more information on their websites.,The focus of the study has been on one aspect of corporate governance mechanisms i.e. board characteristics. Future studies can explore the impact of ownership structure on CIR practices.,This study extends the prior CIR research by demonstrating the effectiveness of corporate governance mechanisms in particular board characteristics in adopting internet reporting practices for Indian companies. The examination of the relationship between corporate reporting on the internet and corporate governance aids regulators in evaluating and enhancing the effectiveness of the boards.

Abstract: This paper aims to examine the reporting on sustainability and the level of compliance with international best practice, the Global Reporting Initiative (GRI), aimed at improving communicative value to users.,Using a qualitative approach, comprising interviews with senior managers and analysis of disclosures in annual reports of Thai-listed companies, this paper contributes to the literature by providing evidence from an emerging market setting.,This study finds that sustainability reporting and integrated reporting perspectives of sampling companies are aiming to satisfy information needs to stakeholders and value creation to external users. Sustainability disclosures are related to some aspect of integrated reporting (IR) principles but not all.,The findings of this study are based on the results from interviews and annual reports of five business sectors, and may therefore, not reflect the sustainability reporting practices and/or annual reports of other Thai-listed companies. Also, there is limited reporting on future outlook.,The findings suggest that while sustainability and IR is being adopted very widely, in many countries, there is much variation in reporting practice especially in our emerging country context adopting a “comply or explain” approach.,For the Thai-listed companies, IR systems could be in their early stages and still have long way to go. The results can greatly encourage Thai-listed firms to incorporate integrated information in annual reports based on international standards thus building trust in capital markets and wider society.,The findings contribute to the literature on sustainability reporting and on the level of compliance with international best practice such as GRI by providing empirical analysis of non-financial disclosures within publicly available reporting in Thailand.

Abstract: This paper aims to examine the impact of the 2011 mandatory introduction of integrated reporting ( ) on the financial performance, risk and institutional shareholding of listed companies in South Africa to assess whether there is a benefit to and which may encourage greater adoption of it globally. It contrasts the results with two other African stock exchanges (Nigeria and Egypt with no mandatory ) and examines whether quality also has an impact on these and on environmental, social and governance (ESG) disclosure scores.,A series of multivariate ordinary least squares regressions was estimated on a range of financial, risk, institutional and ESG data from firms on the three African stock exchanges, between 2006 and 2015.,Financial performance and risk in South African firms appear to have decreased since the start of mandatory reporting, but institutional shareholding has increased. The production of higher quality reports is associated with decreased financial performance and risk, higher institutional shareholding and increased ESG scores.,This study is first to test the quantitative effects of and quality on a broad range of financial performance and risk measures and the level of institutional shareholding. It also adds to the literature by assessing how the quality of can impact the ESG scoring of the business. Hence, this study is of interest to firms looking to adopt for its benefits and to regulatory bodies considering the mandatory adoption of in support of achievement of national social and environmental goals.

Abstract: The purpose of this paper is to examine the effect of Research and Development (R&D) disclosures on earnings management practices.,This study has been conducted by using a longitudinal archival data set of French companies belonging to the CAC All-Tradable index and instrumental variable estimations.,The results of the research highlight the moderating effect of International Financial Reporting Standards (IFRS) adoption and the financial crisis in this relationship. It also shows that R&D disclosures are negatively associated with earnings management. The findings also show that the IFRS adoption is complementary in its monitoring role of managerial behavior in reducing earnings management in the presence of R&D disclosures. Furthermore, this study finds that the negative effect of R&D disclosures on earnings management is more prevalent during the global financial crisis.,This study examined the consequences of the voluntary disclosure of R&D information in the French context. It introduces a measurement for the disclosure of R&D activities in annual reports through the construction of an R&D disclosure index.

Abstract: This study aims to explore and identify the factors that affect Saudi Arabia's decision concerning the adoption of International Financial Reporting Standards (IFRS), and particularly the resistive factors that delay full IFRS adoption. It identifies the way in which Saudi Arabia’s social, political, educational and religious context influence the adoption of IFRS and the delay in doing so.,A mixed methodology is used in this research, including both quantitative (questionnaires) and qualitative (semi-structured interviews) data analysis. Whereas, using mixed methods led to enhance the results.,The findings show that globalisation, accounting bodies and political circumstances were found to be positively related to IFRS adoption in Saudi Arabia. In contrast, culture and accounting development were found to have a negative impact on the IFRS adoption. Interestingly, the results showed that religion has no effect on IFRS adoption in Saudi Arabia.,This paper can be of use to both researchers and practitioners interested in investigating more resistive factors that could affect future IFRS adoption in developing countries. Moreover, the findings could be useful to senior managers and legislators in Saudi Arabia firms, in relation to decisions about enhancing the quality of adopting IFRS.,This research provides an important contribution to the existing literature by using a comparative method to present an in-depth exploration of the factors that affect countries, drawing on the framework of the neo-institutional perspective in a developing country.

Abstract: The purpose of this study is to explore the impact of internal audit (IA) compliance with the International Standards for the Professional Practice of Internal Auditing (ISPPIA) on financial reporting quality (FRQ).,Data were gathered from 142 chief audit executive from Saudi listed companies, and also from the annual reports of the participating companies. Two proxies are used to measure FRQ, namely, discretionary accruals and accruals quality.,The findings reveal that companies demonstrating higher IA compliance with standards have better FRQ. They also indicate that the interaction between IA competency and its compliance with standards has an impact on FRQ. Further, the findings provide evidence that FRQ is higher in companies where IA departments have formal documentation, that is, entirely consistent with the ISPPIA. These results retain their robustness after further analysis.,In offering these findings, the paper contributes to the existing IA literature by introducing evidence from a Middle Eastern context, namely, Saudi Arabia, of the link between IA compliance with the ISPPIA and FRQ. It confirms the role of IA in FRQ, and hence, as an element of corporate governance, information, which is valuable for both the institute of internal auditors and companies.

Abstract: This paper aims to investigate whether the key items encompassed in the new reporting trends are addressed in the current reporting set and, also, whether there are certain patterns regarding disclosure practices across a sample of reporting entities.,The research methodology takes into consideration both the financial and non-financial elements from the entities’ activities and embeds them in the analysis, in a more holistic frame offered by integrated reporting. The disclosure level is investigated using the six-tier capital model from the International Integrated Reporting Council Framework and the eight major principles from GRI guidelines. Furthermore, the cluster analysis is used to identify the disclosure practices patterns within some European Union local public administrations.,The level of disclosure within the analyzed entities is relatively high. Also, the results of the cluster analysis reveal some disclosure patterns, especially regarding the Anglo-Saxon and Northern local public administrations, the municipalities with the highest degree of disclosure of the sample.,The most significant limitations are represented by the sample of municipalities, the language filter and the fact that only one-year data were considered for analysis.,The study can be useful to any other institutions under the dome of the public sector, willing to enhance public accountability throughout greater transparency. Also, it might help the public managers to outline a long-term development plan about how to create value and to whom, material issues, risks and strategy through the integrated reporting, a cornerstone for future changes. Moreover, it might also be a subject of interest in the research environment, offering new opportunities for further empirical studies, by applying and testing it in other public organizations.,The study provides an original assessment tool useful to improving the reporting process. Also, it can be useful to other public institutions that are willing to enhance public accountability throughout greater transparency.

Abstract: The purpose of this study is to test the effect of the presence of outside blockholders on earnings management around seasoned equity offerings (SEOs).,Given that SEO can be one of motivations for earnings management, the authors examined the role of outside blockholders in monitoring the opportunistic behavior of managers around 50 SEOs realized by 45 French companies during the 2005-2009 period based on panel data model.,The authors found that issuing firms are used for upward earnings management during the pre-offering period. Indeed, the discretionary accruals know a continuous evolution during the three years preceding SEO and peaked in the year prior to the SEO. This result led us to examine the role played by the outside blockholders on earnings management. The results provided empirical evidence that the presence of outside blockholders in SEO firms is able to restrain earnings management practices.,This study allows to inform investors that French issuing firms are less overvalued in the presence of outside blockholders than in their absence. As a result, investors have an interest in participating in the SEO of firms that hold outside blockholders in their capital structure. Again, based on this study, users of financial statements can trust the reliability of the financial statements published by companies with outside blockholders because of the careful control exercised by these shareholders in the process of producing financial information. However, similar to how any research may suffer from some limitations, this work has two major limitations. Firstly, the authors examined the impact of outside blockholders on earnings management without distinguishing between the different types of blockholders (such as individual investors, pension funds, mutual funds, banks and trusts). Secondly, they have estimated the discretionary accruals by referring to a single model (Kothari et al., 2007). However, the use of two or more models for estimating accruals will lead to more robust results.,The empirical literature emphasizes the monitoring role played by these shareholders on earnings management. However, it does not distinguish between the circumstances when the monitors either lose or win from exaggerations. This research completes this lack by studying the impact of outside blockholders on earnings management around SEOs.

Abstract: The purpose of this paper is to appraise existing literature on International Financial Reporting Standards (IFRS) in Africa. It covers all 54 African countries and their membership in regional and international accounting bodies.,This paper uses qualitative research methods, including review and synthesis of a variety of archival materials.,Unlike the numerous variations in IFRS adoption on other continents, IFRS countries in Africa have adopted the standards as issued by International Accounting Standard Board (IASB). However, most countries are slow to implement the ROSC (AA) recommendations for IFRS adoption due to lack of institutional and professional capacity. With regards to the unintended consequences, IFRS adoption has made international professional qualifications such as Association of Certified Chartered Accountants popular in Africa; hence, national accounting qualifications are not attractive to prospective accountants. Similarly, IFRS adoption has created a competitive advantage for the Big4 audit firms because companies in IFRS countries prefer the services of the Big4 to that of the local audit firms.,It is concluded that international organisations that recommend IFRS to Africa, such as the IFRS foundation, IMF and World Bank, should build the sustainable professional and institutional capacity of the countries before persuading them to adopt IFRS, because in Africa, adopting a law is easy but operationalising it has always been the challenge.

Abstract: This study aims to predict the determinants of net income of 101 US university football programs.,Guided by stakeholder theory, financial capacity model and resource dependency theory, the dependent variable was net income (indicated as profit or loss) and independent variables were measured as the number of women and men’s team sports, average home attendances, win–loss records, conference ranking, endowment funds and age of football programs. Statistical analysis was performed using Kendell tau and binary logistic regression (BLR).,Net income was positively and statistically associated with home attendance, win–loss record, conference rankings and endowment funds, but not number of women’s sports, age of football program and number of men’s sports teams. The BLR indicated that home attendance was the best predictor of net income.,The research was delimited to 101 Football Bowl Subdivision football programs from public universities.,The findings indicate that home attendance and conference rankings had the highest association with net income, but the former was the best predictor of net income and not football tradition nor number of sports teams.,The study was pioneering in the predictive evaluation of the possible determinants of loss or profitability in college football programs.

Abstract: This paper focuses on the influence of overconfident managers on strategic investment acquisitions performance, by investigating the influence of key contextual factors on acquirers’ returns of UK domestic and cross-border acquisitions during the period 2000-2009. In this study, particular attention has been paid to management attributes (frequent acquirers vs non-frequent acquirers); method of payment (cash vs non-cash deals); the geographic scope (domestic vs cross-border deals); the type of the target (public vs private); the industry scope; and the relative size.,An event study is used to analyse domestic and cross-border acquisitions. The market model is used for estimating the acquirers’ abnormal returns of 1,133 domestic and cross-border acquisitions by UK firms between 1 January 2000 and 31 December 2009.,The findings reveal that acquirers with domestic targets have higher returns than cross-border targets. Infrequent acquirers generate higher returns from domestic and cross-border acquisitions than frequent acquirers. Further, acquirers that acquire domestic targets from different industrial sectors produce higher returns than acquirers with targets from the same sector. Acquirers with cash deals, private targets and high book-to-market ratio generate significant returns compared to acquirers with non-cash deals, low book-to-market ratio and public targets and that for domestic and cross-border deals. These results suggest that UK domestic and cross-border acquisitions are partially shaped by overconfident managers.,The study has a number of limitations, including the use of the market model, the data-collection process and the limited number of contextual factors. Future research may examine a number of avenues related to the current study, including incorporating the acquiring firms’ financial characteristics.,The study provides a better understanding of the influence of contextual factors on the success and failure of strategic investment projects such as acquisitions. Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.,Results of post-acquisitions performance in UK firms show how estimation of value can be distracted at the pre-acquisition stage because of overconfident managers.

Abstract: We examine the impact of the reclassification of IAS 39 on income smoothing using loan loss provisions among European banks. We predict that the strict recognition and re-classification requirements of IAS 139 reduced banks' ability to smooth income using bank securities and derivatives, motivating them to rely more on loan loss provisions to smooth income. Our findings do not support the prediction for income smoothing through loan loss provisions. Also, there is no evidence for income smoothing in the pre- and post-IAS 39 reclassification period. The implication of the findings is that: (i) European banks did not use loan loss provisions to smooth income during the period examined, and rather rely on other accounting numbers to smooth income; (ii) the IASB’s strict disclosure regulation improved the reliability and informativeness of loan loss provision estimates among European banks during the period of analysis.

Abstract: This paper aims to examine whether traditional accounting information has lost its relevance in the context of sub-Sahara Africa. Specifically, the study examines whether historical cost and inflation-adjusted data are related to the market value of equity and stock returns on the Ghana Stock Exchange (GSE).,The authors collect firm-specific data from annual reports of 20 listed firms from the GSE over the period 2007-2012. The authors use ordinary least squares and two stage least square (2SLS) to examine the value relevance of historical and inflation-adjusted income and equity.,The results suggest that the market equity is related to both historical-cost and inflation-adjusted earnings. Market return is also associated with both historical-cost and inflation-adjusted earnings and book value. Overall, the authors conclude that inflation-adjusted information content is more value relevant than the traditional cost accounting information.,The findings are a wake-up call to policymakers and practitioners in formulating financial reporting policies. This study, however, focuses on only non-financial listed firms on the GSE. Thus, the results may not be valid for all companies in Ghana.,The finding has an implication on the choice of valuation used in the preparation and reporting of financial statements. Accordingly, the authors offer policy directions to financial reporting regulatory authorities to enhance the value relevance of accounting information.,Regulators, especially the GSE may improve life of investors if the recommendations are transformed into directives that will help enhance the quality of financial reporting.,The findings suggest that inflation-adjusted data are more relevant in countries with extreme inflationary trend and lax International Financial Reporting Standards compliance enforcement. The results also lend support for the current cost accounting theory.

Abstract: The expectation gap between auditors and users has recently been the topic of many controversies. This paper aims to evaluate the relationship between auditor’s characteristics and audit expectation gap among information users in listed companies on the Tehran stock exchange market. In other words, the study attempts to find whether there is a significant relationship between audit components and the audit expectation gap or not.,The multiple regression model is used to test the hypotheses. Research hypotheses are tested using a sample of 78 listed companies on the Tehran stock exchange during 2012-2016, by using integrated data technique of the multiple regression model.,The findings show that standard audit fees are not significantly associated with the audit expectation gap. Furthermore, audit fees are negatively associated with the audit expectation gap, which provides that allocated audit price in financial statements gives useful information for external and internal individuals. Predictably, it is recommended that audit opinion significantly determines the level of the audit expectation gap. The authors also find that the independence of the director boards and audit committee members fulfill the expectation gap of individual users. Moreover, finding the negative impact of audit firms ranking on the expectation gap, supports the idea of higher ranked audit firms provide high quality services, and consequently, more reliable information. Finally, the results show that the audit record is positively associated with the audit expectation gap.,As all recent studies on the expectation gap were qualitative, the present study is the first paper, which measures the expectation gap quantitatively through the statistical method.

Abstract: The purpose of this paper is to examine the value relevance of accounting information in the Middle East and North Africa region (MENA) region with an emphasis on the potential impact of IFRS adoption. This paper aims to not only examine the value relevance of accounting information in the MENA region but also draw comparisons between Gulf countries (GCC) and non-GCC country firms to determine whether there are distinct differences across the two regions.,To investigate the value relevance of accounting information in the MENA region, two pooled regression models are used based on the Ohlson (1995) model. The first regression model is conducted for the GCC and non-GCC regions separately. A second regression model is conducted using a pooled sample of the MENA region collectively with dummy and interaction variables to further explore the potential differences between the two regions in terms of the value relevance of accounting information.,The empirical results show that the measures of accounting information have a highly significant positive relationship with the market value per share for firms in the MENA region, thereby indicating that accounting information in the MENA region is value relevant. Although book value per share and earnings per share are significant determinants of value relevance in both GCC and non-GCC country firms, operating cash flows per share is only a significant determinant of value relevance in non-GCC country firms. The research findings of the study also show a significant negative impact of IFRS adoption on the value relevance of accounting information in the MENA region.,This research paper provides important insights for investors and regulators by providing evidence that accounting information is value relevant in the MENA region, and that IFRS adoption does not necessarily lead to a greater degree of value relevance. In fact, investors and regulators should be aware that the adoption of IFRS in MENA country firms results in diminished value relevance of accounting information. This finding is of particular significance to policymakers attempting to improve accounting disclosure.,The paper expands the value relevance of accounting information literature in the context of developing economies, in general, and the MENA region, in particular. There is a paucity of research into the value relevance of accounting information for MENA country firms, particularly in the case of the impact of IFRS adoption. Thus, this paper provides an important contribution in terms of expanding the value relevance literature in relation to IFRS adoption in the MENA region.

Abstract: There is a few studies about stickiness and changes in audit fees. In previous studies, researchers focused on fees behavior, which is expected to change in the short term, regardless of mentioning stickiness of fees and its possible changes. In this study, the authors investigate stickiness of audit fees and the influential factors, specifically audit quality and financial crisis in an emerging economy.,Audit quality is examined under three main criteria, namely, auditor size, auditor industry specialization and auditor tenure. The Altman adjusted bankruptcy model is used to identify firms’ financial crisis. In this study, listed companies in Tehran stock exchange market is investigated during the period of 2009-2015. Multiple regression models are used to test research hypotheses. Furthermore, Chow and Hausman tests are selected to choose among hybrid, fixed and random effects models.,The findings show no significant relationship between audit quality and audit fees stickiness. The authors also find that financial crisis has no impact on the association between audit quality and audit fees stickiness.,The current study almost is the first study, which conducted in emerging market of Iran. So, the results may play a helpful role for developing nations.

Abstract: Fundamental shifting of the world toward intangible intensive economy raised an apprehension regarding value relevance of internally generated intangible assets. In the previous studies, research and development (R&D) expenditure is recognized as a significant accounting item, which can indicate potential internally generated intangible assets. This study aims to examine whether investors consider nature of intangible intensity of a firm for the evaluation of R&D expenditure to determine equity values in India.,The authors compared value relevance of capitalized and the expensed portion of R&D expenditure between intangible- and non-intangible-intensive firms. They adopted empirical model grounded on the generalized version of Ohlson’s (1995) model.,The findings of the study indicate that, in intangible-intensive (non-intangible) firms, the capitalized portion of expenditure is positively (negatively) significant and the expensed portion of R&D expenditure is negatively (positively) significant to explain equity values.,The findings of this study may have potential implication for the discussion on the accounting treatment of internally generated intangible assets based on the nature of intangible intensity of the firm. The study also suggests that while setting standards, standard-setters should consider nature of intangible intensity of the firm, which could disseminate the discrepancy between the market and book value of the equity.,The study provides evidence, how value relevance of R&D reporting is affected by the nature of intangible intensity of a firm.

Abstract: The purpose of this study is to address the impact of the related party transactions (RPTs) on firm value. The authors bring evidence from a usually ignored empirical setting: an African emerging market.,In particular, the authors focus on companies listed on the Egyptian stock market using a sample of EGX 30 from 2012 to 2017.,Unlike the literature, the authors find no significant relationship between RPTs and market value.,This research provides insights for policymakers and other interested parties concerning the perception of RPTs in Egypt.,The reported different findings of this study assure the intermediary role of the context and the local culture in the relationship between RPTs and firm value, in contrast to the negative view that is mostly reported in the literature.

Abstract: This study aims to examine the role of principal–principal (P–P) agency conflict in shaping the information environment of firms in China. Moreover, it investigates whether audit quality and analyst following play any role in moderating the effects of P–P agency conflict.,The authors used principal component analysis to synthesize a measure of P–P agency conflict and used accruals quality as measure of information quality. They used two-step Arellano Bond system GMM estimators to cope with potential endogeniety in the model. Moreover, they also performed subsample analyses based on state ownership to ensure the robustness of findings.,The results of this paper provide evidence that high P–P agency conflict is associated with poor information quality in China. But this is not true for subsample of state-owned enterprises. Moreover, better audit quality and high analyst following mitigate the negative effects of high P–P agency conflict on information quality but only in subsample of non-state-owned enterprises.,The findings of this paper are important, as they contribute in literature on forces shaping the information environment of firms. Moreover, it presents audit quality and analyst following as external governance mechanisms to alleviate the negative consequences of the P–P agency conflict vastly embedded in the ownership structure of firms in China.

Abstract: The use of social networking websites by companies to disclose corporate news and by investors to collect information for investment purposes is increasing rapidly. However, the role of investors’ affective reactions to corporate disclosures on social networking websites is under-researched. This paper aims to examine how the disclosure platform (disclosing news on a company’s Facebook Web page or the corporate investor relations Web page) and news valence (positive or negative) jointly influence investors’ affective reactions to corporate news and stock price change judgments.,The authors conduct an experimental study using 364 participants from Amazon’s Mechanical Turk website as a proxy for reasonably informed investors.,Results show that the disclosure platform influences investors’ affective reactions and stock price change judgments when the corporate news is negative, but not when the corporate news is positive. In addition, investors’ affective reactions mediate the influence of the disclosure platform on investors’ stock price change judgments when the corporate news is negative rather than positive.,This paper extends the theory on affective reactions to a social networking context by showing that differences in disclosure platforms and news valence influence investors’ affective reactions to corporate news. In addition, the study’s theory and findings have significant implications for researchers, company managers and public relations specialists, capital market participants, regulators and investor education organizations and users of social networking websites.

Abstract: This paper aims at studying earnings management phenomenon in its wider social and economic context to get better understanding for the following points: whether there is “one-size-fits-all” earning management approach which can be widespread applied among nations and whether the Egyptian context affects managers’ trade-off between three different earnings management approaches: accounting, operational and investment.,The paper adopts interpretive approach and analyses data from official documents and 34 interviews with company executives; financial analysts; external auditors; and Stock Exchange regulators to inform our understanding of the influence of the Egyptian context on the trade-off between earnings management approaches.,The results show that there is no application for “one-size-fits-all” earning management approach; unlike the developed cultures, where RD identifying that operational cash flows matter more to managers than accounting profits; focusing on the fact that managers differentiate and compare between three various earning management approaches: accounting techniques, investment activities and operational activities; and showing that changes in political and economic Egyptian context makes operational manipulation favorable to be adopted compared with others. It also overcomes the criticism of New Institutional Sociology Theory.