Showing papers in "Journal of Financial Reporting and Accounting in 2021"

Drivers of corporate voluntary disclosure: a systematic review

Abstract: The purpose of this paper is to provide a systematic and comprehensive review of the existing literature on the determinants of firms reporting practices.,Following a systematic method, the sample literature of 135 studies was collected from the Scopus database. These studies were evaluated in terms of the theoretical lenses applied in the literature, yearly trend, regional distribution, research settings and prior studies finding to provide some recommendations for further research.,The investigation revealed that the literature was more interested in the agency theory in investigating the drivers of voluntary reporting such as company size, age, leverage, liquidity, profitability, corporate governance and ownership structure. Although firm-specific determinants were the most examined in the previous studies, however, the result is still inconclusive. Also, limited work was found on the country-related factors, while internal audit impact has yet to be explored.,Being the first of its kind, this research provides a comprehensive review of the current research landscape on the drivers of environmental or social disclosure and highlights several interesting opportunities for future research.

Corporate governance and firm performance: empirical evidence from Jordan

Abstract: This study aims to assess the effect of director board and audit committee attributes and ownership structure on firm performance. In general, resource dependency and agency theories have underlined the superior performance of firms equipped with stronger Corporate Governance (CG) versus those of deficient governance. Concurrently, the study delineated the provisions of ownership structure provision, specifically foreign ownership and institutional ownerships, thus describing the component denoting the structural significance in explicating firm performance.,The current study implemented an empirical approach involving the construction of extensive CG measures thus, subjected to 81 non-financial firms listed on the Amman Stock Exchange spanning the period of 2014–2018.,The current study identified the positive and significant relationship between the board of directors and audit committee characteristics with the firm performance measures tested, namely, return on equity (ROE) and Tobin’s Q. In terms of ownership structure, both foreign and institutional ownerships yielded a significant and positive relationship with ROE. Meanwhile, Tobin’s Q led to an insignificant and negative relationship between both ownership types and firm performance measures.,The analytical outcomes substantiate the possibility of enhanced performance shown by growing global firms because of the implementation of CG mechanisms, specifically because of the practices resulting in minimised agency costs.,The current study offers novel evidence detailing the impact of CG effectiveness towards performance and its implementation in emerging markets following the minimal amount of scholarly efforts on the topic. It is a timely contribution towards the current understanding of the relationship linking governance and performance for the purpose of ensuring the adoption and imposition of a strong corporate governance code by the government.

The impact of corporate social responsibility on stock price volatility of the US banks: a moderating role of tax

Abstract: Corporate social responsibility (CSR) is considered one of the crucial branding and promotional tools for banks to legitimise their role in society to become socially and environmentally responsible corporate citizen. The purpose of this study is to investigate the effect of CSR on stock price volatility of the US banks. This study further examined the moderating role of tax on the relationship between CSR and stock price volatility. Design/methodology/approach: This study uses the random-effects panel regression estimation technique to test the hypotheses. The authors include a sample of 37 US banks from 2013 to 2017 with 144 bank-years observation. The authors consider the environmental, social and governance (ESG) scores from Refinitiv as a proxy for CSR. The financial data are also collected from the Refinitiv Datastream database. Findings: This study finds a significant and positive relationship between CSR and stock price volatility, which indicates that shareholders of the US banks may not prefer excess concentration on CSR because of the additional cost of investment associated with implementing CSR. Also, tax payments and stock price volatility show a significant positive association, which implies that there is a higher possibility of an increase in stock price volatility if the tax rate increases. Generally, shareholders are not interested in paying more taxes, so they may swap the market instead of paying more tax. On the other hand, the authors find a non-significant moderating effect of tax payment on CSR-volatility nexus. Originality/value: Previous studies mainly focussed on CSR and financial performance of banks. Conversely, studies focussing on CSR and stock volatility are limited. This study will fill the gap in the literature by considering the effect of CSR on the stock price volatility of the US banks.

Diversification, corporate governance, regulation and bank risk-taking

Abstract: The purpose of this paper is to investigate the impact of diversification, corporate governance and capital regulations on bank risk-taking in Asian emerging economies.,The authors applied the generalized method of moments to analyze a sample of 116 listed banks of ten Asian emerging economies for the years 2010–2018.,The authors found that diversification, board size, CEO duality and board independence, block holders and capital regulations significantly affect bank risk-taking. In particular, nontraditional income sources such as noninterest income and adoption of diversification strategies minimize bank risk-taking.,It is expected that the outcomes of this study can be used by banks in Asian emerging economies that seek to reduce risk-taking by managing the diversification of their income streams and managing the impacts of capital regulation and implementing sound corporate governance features in monitoring their operations. This study suggests practical risk minimizing strategies for banks. First is the sourcing of nontraditional income and adoption of diversification strategies. Second, maintaining nonexecutive directors on the board would enhance monitoring of business activities. Third, maintaining deposit insurance would reduce bank’s risk. Government provides insurance to depositors to motivate them to deposit their funds into the banks. This, in return, facilitates banks to overcome risk. However, banks need to be cautious of any increase in capital ratio, as channeling funds into risky investments would increase risk.,This study is the first to investigate the impacts of corporate governance, diversification and regulation on bank’s risk-taking in a cross-country setting of ten Asian emerging economies.

Do firm characteristics and ownership structure affect corporate philanthropic contributions in Jordan

Abstract: Purpose This paper aims to examine the drivers of corporate donations in Jordan. In particular, to examine whether firm-specific characteristics and ownership types affect corporate donations. Design/methodology/approach The analysis is based on a sample of 94 Jordanian listed companies, drawn from the manufacturing and service sectors, over the period 2010–2016. This paper uses ordinary least square regression with a year and industry fixed effects to test the research hypotheses. Findings This paper finds that corporate philanthropic contributions are positively associated with company size, age, profitability, media exposure and governmental ownership. This paper also finds that corporate philanthropic contributions are negatively associated with financial leverage and family ownership. Originality/value The paper provides new evidence on the determinants of corporate philanthropic contributions in a developing country.

Determinants of corporate social and environmental voluntary disclosure in Saudi listed firms

Abstract: Purpose This paper aims to examine firm characteristics and ownership structure determinants of corporate social and environmental voluntary disclosure (CSEVD) practices in Saudi Arabia to address the paucity of research in this field for Saudi listed firms. Design/methodology/approach The paper uses manual content and regression analyses for online annual report data for Saudi non-financial listed firms over the period 2016–2018 using CSEVD items drawing on global reporting initiative-G4 guidelines. Findings Models show that Saudi firm CSEVD has increased over time compared to previous studies to an average of 68% disclosure due to new corporate governance regulations and IFRS implementation. The models show that firm size, leverage, manufacturing industry type and government ownership are positive determinants of CSEVD, while family ownership is the negative driver of CSEVD. However, firm profitability, audit firm size, firm age and institutional ownership have no impact on the level of CSEVD. Originality/value Using legitimacy and stakeholder theories, the paper determines the influence of firm characteristics and ownership structure on CSEVD, identifying implications for firm stakeholders and providing some evidence on the impact of corporate governance regulation and IFRS implementation on such disclosure. The paper provides additional evidence on progress towards Saudi’s Vision 2030.

A systematic literature review on integrated reporting from 2011 to 2020

Abstract: Purpose This study aims to furnish the systematic literature review on integrated reporting (IR) and answer three research questions: How has the IR concept been developed recently across the different countries? How can the literature of IR be allocated among different focus areas/themes? What are the future opportunities available for IR? Design/methodology/approach The methodology involves selection, classification and categorization of 110 articles on IR into their focus areas, journals, time distribution, continent-wise distribution, research methodologies and keywords analysis. Findings The findings of the study suggest that there is a need of the following: increasing the case studies and empirical research in developing assurance models, analysis of the perception of shareholders in Asian countries, harmonization of financial and non-financial standards, research on the IR of non-listed companies. Practical implications It provides insights to practitioners regarding the challenges faced by the economies and internal organization. It might help researchers and academics to focus on developments of IR in different countries. It might also help regulators to develop some policies, models and frameworks for its future implementation. Originality/value It furnishes the outline of 110 articles published in eminent journals from the year 2011 to beginning of 2020.

Intended use of IPO proceeds and initial returns

Abstract: This study aims to investigate the effects of the intended use of initial public offerings (IPO) proceeds that is disclosed in the prospectus on IPO initial returns.,A sample of IPOs listed on Bursa Malaysia from 2005 to 2015 is used. The intended use of IPO proceeds is categorised into three uses, namely, growth opportunities, debt repayment and working capital. In addition to ordinary least squares regression, the study applies a more sophisticated and robust approach using the quantile regression technique.,The results show that the intended use of IPO proceeds for growth opportunities and working capital is positively associated with IPO initial returns, whereas debt repayment is negatively associated with IPO initial returns. When the intended use of IPO proceeds for growth opportunities is further expanded into capital expenditure (CAPEX) and research and development (R&D), the intended use of IPO proceeds for CAPEX is positively associated with IPO initial returns, whereas R&D is negatively associated with IPO initial returns.,These findings suggest that intended use of IPO proceeds provides useful information about IPO initial returns and investors can use this information as guidance to make informed decisions. In addition, regulatory authorities should pay close attention to the amount allocated to each intended use of IPO proceeds as this may play a critical role in the success of a company and the economy.,This study gives new empirical evidence on the desire and motivations of IPO and the usefulness of designated use of IPO proceeds disclosed in the prospectus in explaining IPO initial returns.

Do corporate attributes impact integrated reporting quality? An empirical evidence

Abstract: Purpose This study aims to examine the impact of corporate attributes on integrated reporting quality of top 100 listed firms in South Africa. Design/methodology/approach With a sample of the top 100 listed firms in South Africa, this paper drew insights from the legitimacy and stakeholder theory to examine the impact of corporate attributes on integrated reporting quality. This paper measured integrated reporting quality based on the International Integrated Reporting Council framework of 2013. Corporate attributes were determined taking into consideration three broad perspectives (board committee attributes, firm attributes and audit committee attributes). This paper analyzed the data using content analysis, ordered probit regression and logistic regression method. Findings Results indicate that board committee attributes, firm attributes and audit committee attributes have a positive and significant relationship with integrated reporting quality. Additional analysis reveals that external assurance contributes to the quality of integrated reporting. The findings empirically revealed that most South African firms have intensified efforts toward the quality and full disclosure of integrated reporting framework. Research limitations/implications The study was limited to a sample size of 100 firms, which is country-specific, however, it sets the tone for future empirical research on the subject matter. This study provides an avenue for future research in the area of corporate attributes and integrated reporting quality in other emerging countries, especially other African countries. Practical implications The result of this study provides practical implications in the areas of good corporate governance, corporate reporting and integrated reporting. The empirical approach used in this study emphasizes the need for corporate organizations to introduce integrated reporting practices into their reporting cycle. The finding implies that non-compliance with integrated reporting by corporate organizations may have an adverse effect on corporate growth, corporate sustainability and corporate reputation in the long run. Originality/value The work extends prior research on the subject of integrated reporting in South Africa. Also, this study broadens the application of legitimacy and stakeholder theory in influencing corporate organizations to disclose relevant information that could aids stakeholders’ interest.

Corporate governance, ownership structure and firms’ financial performance: insights from Muscat securities market (MSM30)

Abstract: The purpose of this study is to investigate the relationship between selected board characteristics and ownership elements and the performance of firms listed in the Muscat Securities Market (MSM30). The examination focused on how the firm financial performance was affected by the board size, the number of board meetings and the ratio of the independent board of directors along to the ownership concentration types (i.e. institutional, state and concentrated individual ownership).,Data were extracted from the annual reports available online on the MSM30 website over a period of seven years (2009–2015). The sample consisted of 14 firms belonging to the non-financial sector. The data were of a balanced type and there were 98 observations. The analysis was conducted using the ordinary least square in STATA with the use of the robustness technique of standard error.,The findings of this study provide evidence that the selected elements for board characteristics and ownership influence firm performance. Nevertheless, such influence has its interpretation that differs to some extent from other securities markets in the developing countries. For instance, the ratio of the independent board of directors, the number of board director’s meetings, state ownership and concentrated individual ownership were inversely affecting the firm performance. However, institutional ownership and board size were found to have a positive effect on firm performance.,Studies on the influence of corporate governance and ownership structures in the context of Oman are still scarce. MSM30 received little attention, even though such an index encompasses the most liquid and the most profitable firms. MSM30 is an important index for investors in Oman looking for capital gains. Accordingly, this present study contributes to the knowledge body by providing new findings related to Oman and compares it with the other markets within Gulf Council Countries (GCC) and around the world. This will provide more understanding of the Omani context. Moreover, the authors anticipate that the outcomes of this research, which so far is the most comprehensive study in the Omani context in terms of the impact of corporate governance and ownership structure on firm financial performance can significantly shape corporate governance discourse, practices and policies in Oman, in particular, and in other GCC countries in general, to improve financial performance and corporate sustainability.

CEO duality, earnings quality and board independence

Abstract: Purpose This study draws on agency, theory to evaluate the relationship between chief executive officer (CEO) duality and earnings quality, proxied by discretionary accruals. Additionally, this study aims to examine whether board independence moderates the relationship between CEO duality and earnings quality. Design/methodology/approach This study uses a fixed-effects regression model to examine the effect of CEO duality on earnings quality and to test whether board independence moderates that relationship for a sample of non-financial listed Portuguese firms-year from 2002 to 2016. Findings Consistent with agency theory, this study suggests that CEO duality decreases earnings quality. Further, the results also suggest that the earnings quality reduction associated with CEO duality is attenuated when the board of directors has a higher proportion of independent directors. Practical implications The findings based on this study provide useful information to investors and regulators in evaluating the impact of CEO duality on earnings quality and the effect of board independence on the role of CEO duality, especially under concentrated ownership. Originality/value To the knowledge, this study is the first to investigate the role of board independence on the association between CEO duality and earnings quality. In addition, this paper is the first empirical study to investigate the direct and indirect effect of CEO duality on earnings quality in Portugal.

Adoption of integrated reporting in Sri Lanka: coverage and trend

Abstract: Purpose: This paper aims to examine the coverage of and trends in reporting content elements in the integrated reports of the Sri Lankan companies following the International Integrated Reporting Framework (IIRF). Design/methodology/approach: Based on a comprehensive checklist developed on the content elements of the IIRF, 171 corporate integrated reports were content-analyzed over a period of three years. The results were theorized subsequently using the legitimacy theory. Findings: The study identifies that the extent of and trend in the coverage of content elements of the IIRF have increased during the period under consideration despite some under-addressed areas. It indicates that Sri Lankan companies are making progress in the preparation of integrated reports in line with the IIRF, which provides evidence in support of both strategic and institutional perspectives of the legitimacy theory because of the proactive actions taken by managers to acquire legitimacy along with the other normative and mimetic pressures available in the IR landscape. Originality/value: This is one of the first studies that evaluate the compliance of IR adopters with the IIRF overtime in the entirety of a single country. It also develops a comprehensive index to capture the disclosure requirements of IR and extends the analysis to a voluntary context using both strategic and institutional perspectives of the legitimacy theory.

Annual report readability and accounting irregularities: evidence from public listed companies in Indonesia

Abstract: This study aims to examine the association between annual report readability and accounting irregularities in Indonesia. Using 967 firm-year observations over the 2014–2017 period, this paper unable to find evidence that annual report readability is associated with accounting irregularities. The results are robust after using alternate measurements of accounting irregularities proxies and readability indexes. This paper also finds that the corporate governance mechanism and foreign shareholder structure did not moderate the association between annual report readability and accounting irregularities.,The study uses an archival method with cross-sectional regression of 967 firm-year observations over the 2014–2017 period to investigate an association between annual report readability and accounting irregularities in an emerging market setting. To check the robustness of the results, this paper conducts a battery of robustness tests.,This paper finds evidence that annual report readability is not associated with accounting irregularities in Indonesia. The results are robust after using alternate measurements of accounting irregularities proxies and readability indexes. This paper also finds that the corporate governance mechanism and foreign shareholder structure did not moderate the association between annual report readability and accounting irregularities. This implies that the readability of annual reports does not have the ability to predict the likelihood of accounting irregularities in Indonesia. It is possible that firms with accounting irregularities will be inclined to voice simpler stories which can counteract the tendency of lies to be linguistically more complex. Indeed, according to the Education First English Proficiency Index, Indonesia is categorized at a low proficiency level. Furthermore, this paper also discovers that the average readability of the management discussion and analysis (MDA Loughran and McDonald, 2014). Another caveat relates to the use of proxies for accounting irregularities. The M-Score and F-Score have some limitations in which, among others, were determined without considering the normal level of accruals or period where manipulations were absent (Ball, 2013).,One reason underlying the result is that Indonesian firms, in general, do not consider the complexity of the annual report, particularly MDA Lundholm et al., 2014). As such, the study findings provide insights related to MD&A in an under-researched area and contribute to improving MD&A not only in Indonesia but also in neighbor countries that share similar social, political and economic characteristics. Also, this study is important for foreign institutions or individuals investing on Indonesian-listed firms. According to Candra (2016), approximately 60% of companies listed in the Indonesia stock exchange are owned by foreign individuals or institutions. They rely greatly on the English texts of annual reports to understand the companies’ financial performance. Moreover, La Porta et al. (2002) asserted that firms with a majority of foreign shareholders (dominantly owned by foreign investors) are more likely to face information asymmetry, primarily due to geographical factors and language barriers.

Factors influencing corporate sustainability disclosure practices: empirical evidence from Indian National Stock Exchange

Abstract: Purpose This study aims to evaluate the nature and extent of sustainability disclosure practices of publicly listed companies in India. Further, it investigates the impact of potential determinants on the sustainability disclosure of companies. Design/methodology/approach The study analyzes data of 75 top listed nonbanking companies operating in India included in NIFTY100 Index for the years 2014-2015 to 2018-2019. In the present study, environment, social and governance disclosure dimensions were considered to evaluate the sustainability reporting performance of companies using content analysis. Panel data analysis was conducted to investigate the impact of various factors on the extent of sustainability information disclosure. Findings Results indicate that environmentally polluting industries disclose significantly higher sustainability information than non-polluting industries in India. The empirical findings suggest that determinants such as company size, age, free cash flow capacity, government ownership and global reporting initiative (GRI) usage positively related to the extent of corporate sustainability disclosure. Contrary to the expectations, financial leverage and profitability were found to be negatively related to the sustainability disclosure of companies in India. Practical implications This study provides empirical evidence for regulators, practitioners and corporate strategists to assess the progress in the sustainability reporting landscape in India. The finding implies that large and established companies can reduce legitimacy costs through higher sustainability information disclosure. Interestingly, this premise did not hold in the case of high leveraged and profitable companies. Overall findings can also help policymakers to incorporate necessary reforms to improve sustainability reporting in India. Originality/value This study is one of the first studies to investigate the nature, extent and potential determinants of corporate sustainability disclosure in India. The paper adds to the existing literature on sustainability reporting by providing empirical evidence on the relationship between sustainability reporting and potential determinants such as government ownership, size, leverage, profitability, age, free cash flow capacity, industry and GRI usage.

Agency and institutional related factors and the heterogeneity of sustainability and integrated report information disclosures in Kenya

Abstract: Purpose This paper aims to examine the factors influencing the level of disclosures of sustainability (SR) and integrated report (IR) information in a developing country context, with particular reference to Kenya. Design/methodology/approach The study uses a panel data set of 419 firm-year observations of listed companies in Kenya covering the period 2010 through 2018. Data are collected from the annual reports and analysed using a generalized estimations equation model. Findings The results reveal that there is momentum towards newer reporting frameworks in Kenya with substantial IR and SR disclosures in their annual reports. The results also show that level of SR and IR disclosures is influenced by both agency-related factors (board gender diversity, audit committee independence, block ownership and the presence of foreign ownership). Additionally, institutional-related factors (regulatory pressure and promotional efforts of regulatory and professional bodies [reporting excellence awards]) influence the disclosures. Practical implications The results highlight that initiatives such as those led by the regulatory and professional bodies in Kenya are effective in motivating companies to enhance disclosures. Thus, regulators and professional bodies might need to continue and even intensify their efforts. These results have implications for further research as they show that SR and IR disclosures are influenced by similar factors. Social implications The study has the potential to contribute to the ongoing initiatives and discussions on the adoption of IR by firms in Africa as spearheaded by the African Integrated Reporting Council. Originality/value To the best of the knowledge, the study is, perhaps, the first to examine both SR and IR disclosures at the same study allowing comparison of the extent and drivers of the two disclosures. Moreover, examining the institutional-related factors in a single country has not been done in prior literature, and so this is an innovation.

Product market competition, board gender diversity and corporate sustainability performance: international evidence

Abstract: Purpose This study aims to investigate whether board gender diversity is associated with corporate sustainability performance and whether industry-level product market competition moderates the effect of board gender diversity on corporate sustainability performance. Design/methodology/approach This study uses international data extracted from global ESG data set from Thomson Reuters (Refinitiv) database. Using data of 23,137 firm-year observations from 37 countries, the authors perform regression analyses to examine the hypotheses. Findings The findings show that firms with high board gender diversity exhibit high corporate sustainability performance. The authors also find firms in highly competitive industries to have low corporate sustainability performance. In highly competitive industries, the positive relationship between board gender diversity and corporate sustainability performance is weakened. The results are robust to various specification tests such as alternative measures for corporate sustainability performance, board gender diversity, product market competition and also the use of propensity score matching to address endogeneity issue. Overall, the results support the prediction that board diversity and product market competition play a substitutive role in influencing corporate sustainability performance. Research limitations/implications This study offers empirical evidence that the appointment of female directors is a useful way to improve a firm’s corporate sustainability performance, hence, providing significant benefits in terms of stakeholders’ values and corporate reputation. Practical implications This study provides useful insights to investors and policymakers that intense industry competition might mitigate the role of board governance, particularly board gender diversity, in enhancing corporate sustainability performance. Originality/value Using an international data set, where the observations operate in various market and institutional differences, this study is able to extricate the positive impact of board gender diversity and product market competition on corporate sustainability performance. This study corroborates evidence that sustainability strategy and initiatives are reflections of integrated factors, including corporate governance as internal driver and market forces faced by firms as external driver.

The impact of internet financial reporting on Egyptian company’s performance

Abstract: Purpose This study aims to examine the impact of internet financial reporting (IFR) on companies’ performances as measured by three performance indicators, namely, stock price, stock returns and company value. Design/methodology/approach A sample of 139 non-financial companies listed in the Egyptian stock exchange is used and classified as 108 IFR companies and 31 non-IFR companies. To test the research hypotheses, an independent t-test and multiple linear regression analyses are used. Findings The results indicate that there are no significant differences between IFR companies and non-IFR companies for both stock price and stock return variables. Conversely, there is a significant difference between IFR companies and non-IFR companies in the company value variable. These results imply rejecting hypotheses H1 and H4 and accepting the hypothesis of H7 that the presence of IFR has an impact on company value. The multiple regression analyses results indicate a significant relation between the scope of IFR and stock price. Likewise, between the degree of IFR and company value. Both degree and scope of IFR have an insignificant impact on stock return, which infer that applying different performance measures can reveal different conclusions. Research limitations/implications This research is a snapshot of IFR limited to a cross-sectional study and could not study the longitudinal data of internet reporting. Second, Marston and Polei (2004) contend that “weights contain an element of subjectivity, which cannot be completely avoided in the composition of such a score” (p. 297) and a variation in the disclosure index can lead to a modification in the results (Kaur and Kaur, 2020). This research applied a weighted index to measure the degree of IFR, which may affect the results and may change it if other indexes are applied. Moreover, the scores of the degree and scope of information disclosure are assumed to be similar every year due to the lack of information regarding the variations in content and presentation in the companies’ websites. Finally, the absence of a complete data set and stock prices for some companies in the sample. Practical implications To enhance the quantity and quality of IFR could be implemented through setting regulations and standards to govern IFR practices companies in Egypt. Moreover, the trade-off of the requirement of the Egyptian Financial Supervisory Authority for Egyptian companies make information available online and the secrecy culture profound in the Egyptian society (Ahmed et al., 2015) involve assigning a regulatory body for monitoring the IFR practices to ensure disseminating timely and accurate information that helps investors make rational decisions. Social implications The researchers recommend the suggestion to have an external assurance conducted by external auditors to enhance the accuracy and credibility of the IFR information. Originality/value Based on prior literature, no studies in Egypt compare between IFR companies and non-IFR companies concerning stock price and company value as measured by Tobin’s Q. Moreover, few research studies in Egypt covered the degree of IFR disclosure whilst not addressing the impact on the stock price. In addition, no prior study examined the scope of IFR disclosure in Egypt. Therefore, the research findings attribute to literature.

Corporate governance and integrated reporting: evidence of French companies

Abstract: Purpose This paper aims to draw on the agency theory to examine the relationship between corporate governance and integrated reporting on a sample of 120 listed French companies making up the SBF 120 Index during the period 2016–2019. Design/methodology/approach The methodology adopted in the present study consists of the hypothetico-deductive approach. Thus, as part of this quantitative approach, the authors aim at investigating the hypotheses concerning the impact of corporate governance mechanisms on integrated reporting. Moreover, the applied data are analyzed using the multiple linear regressions. Findings The finding of this study is that the cognitive diversity and audit committees have a positive and significant effect on integrated reporting. However, the chief executive officer’s duality and the board’s size have a positive and non-significant effect on integrated reporting. Originality/value In fact, this study contributes to the literature on the practices of integrated reporting. Faced with the rarity of studies linking the corporate governance mechanisms and the integrated reporting, this study makes a huge contribution to the determinants of integrated reporting.

Influence of firm size and firm age on classification shifting: an empirical study on listed firms in India

Abstract: Prior studies document that managers engaged in shifting of non-operating revenue to operating revenue (revenue shifting) and shifting of operating expenses to non-operating expenses (expense shifting (ES)) within income statement to report inflated operating profits of firms. This study aims to identify the factors affecting revenue shifting and ES.,The operating revenue model (Malikov et al., 2018) and the core earnings expectation model (McVay, 2006) are used for measuring revenue shifting and ES, respectively. The panel data regression models are used to analyze the data for this study.,The study results show that large and old firms are engaged in revenue shifting, whereas small and young firms prefer ES over revenue shifting for reporting inflated operating profits. These results imply that firms choose the shifting strategy based on relative advantage and ease in execution. The results are robust after controlling for accruals earnings management, real earnings management and endogeneity bias.,It suggests investors minutely investigate the operating performance metrics of initial public offering firms that are relatively small and young while buying their shares. Besides, findings suggest accounting standard setters make more mandatory disclosure requirements for recording expense and revenue items in the income statement to curb this corporate misfeasance of classification shifting.,This is among the earlier attempts to identify firm-specific factors that incentivize firms to prefer one form of shifting over another. Second, the study jointly examines both forms of shifting by taking a uniform sample of firms over the same period. Most of the prior studies have examined one form at a time.

The impact of conservatism and secrecy on the IFRS interpretation: the case of Tunisia and Egypt

Abstract: The effect of culture, through the accounting values of conservatism and secrecy, on accounting judgments is an area of research extensively studied in developed countries. However, little research has focused on this issue in developing countries, specifically Arab countries. Thus, this study aims to fill this gap by investigating the impact of the combined effect of the culture/accounting dimensions on the interpretation of the probability expressions used in the international accounting standards/international financial reporting standards (IFRSs) in two North African/Arab countries: Tunisia and Egypt.,In the first place, this study determines Hofstede’s cultural index scores for Tunisia, ignored in his original model and updates those related to Egypt, which provides a more relevant understanding of the cultural effect. Then, the study relies on the Hofstede/Gray cultural accounting model to examine the extent to which the accounting values of conservatism and secrecy may affect the recognition of the increase and the decrease of income and the disclosure of this information in the financial statements by postgraduate accounting student in both countries.,The results provide evidence of the generalizability of Gray’s conservatism hypothesis in the North African/Arab countries (i.e. Tunisia and Egypt), at least in the context of income recognition. Moreover, the findings demonstrate that culture, through its influence on the accounting value of secrecy, affects the interpretation of probability expressions used in the IFRSs to establish disclosures.,This study calls for more attention from the standard setters to provide further guidance related to the consistent and accurate numerical value that needs to be assigned to the probability expressions to reduce the ambiguity related to their interpretation. The international accounting standards board (IASB) should pay greater attention to the use of vague probability expressions in developing the IFRSs to promote the true comparability of financial reporting worldwide. Like with any research, this study implies certain limitations specifically related to the sample selection, a sample size, which may affect the generalizability of the results. Thus, future research may rely on a larger sample combining and cover other cultural areas.,The results of this study may give insights into the practical issues faced by the accounting practitioners and which are related to the interpretation and the application of the IFRS including probability expressions. This may trigger their attention toward this issue to reduce the occurrence of these expressions in the revised and newly released standards to guarantee homogeneous financial reporting practices across countries and enhance the IASB’s objective of international accounting harmonization.,This study might be the first one that investigates the issue of the IFRS interpretation in two North African and Arab countries: Tunisia and Egypt. It also provides an original investigation of the cultural effect on accounting judgments based on the actualized Hofstede’s cultural indexes, especially for Tunisia which is ignored in the original country classification.

Corporate social responsibility and debt financing of listed firms: a quantile regression approach

Abstract: The purpose of the study is to examine the effect of corporate social responsibility (CSR) on debt financing (natural logarithm of debt and leverage ratios) of listed firms,Using content analysis for data extraction, the study examines listed firms on the Bombay Stock Exchange (BSE) from 2010 to 2019 financial year It uses a quantile regression and panel fixed effect regression as the model's application,The study shows that CSR expenditure has a positive and strong correlation with debt financing (ie natural logarithm of long-term and short-term debts) The first findings show that CSR expenditure has a negative and statistically significant association with total leverage ratio, using conditional mean and median percentile However, there is a positive and statistically significant association between CSR expenditure and long-term leverage ratio at the 25th and 50th percentile The second findings show that CSR expenditure has a positive and statistically significant association with long-term debt but an insignificant association with short-term debt and total debt under a conditional mean average The application of quantile regression addresses the values that fall outside the confidence interval and therefore document a positive and statistically significant association between CSR expenditure and debt financing (short-term debt, long-term debt and total debt) at the 25th, 50th and 75th percentile,The introduction of quantile regression gives a novelty in CSR and debt financing study, which to the best of the authors’ knowledge, has not received any attention Similarly, firms have better information on how to position their CSR expenditure to attract providers of debt financing

A systematic literature review on AAOIFI standards

Abstract: This paper aims to systematically review the existing studies for Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards which include different tracks of researches and then identify the gaps to propose opportunities for future research,By adopting a systematic literature review approach, 46 papers that were published between 2000 and 2020 from 23 journals concerned with AAOIFI were selected for review and analysis,The authors combine electronic searches to identify relevant studies using keywords such as “AAOIFI” or and “Islamic standards” In light of the existing studies’ limitations, this paper derives and summarizes five leading future research tracks: identifies the research gaps in AAOIFI and then suggests that AAOIFI still requires more empirical analyses; identifies the alternative analytical methods as meta-analysis; identifies additional measurements for macro and microeconomics factors; identifies recent tracks as corresponding to Covid-19 pandemic; and future studies should consider the role of central banks and positive criticism for AAOIFI,This analysis address the literature gaps on measuring compliance, determinants and consequences of AAOIFI adoption as this study serves as a guide for the researchers, regulators and Islamic financial institutions in research associated with this area The findings would support AAOIFI, regulators and related authorities across jurisdictions with suggestions on improving the current AAOIFI practices,This literature review is a historical record and guidance for researchers who seek to examine and explore several questions about AAOIFI To the best of the authors’ knowledge, this is the first paper that applies systematic literature review over AAOIFI research field

The impact of mandatory adoption of XBRL on firm’s stock liquidity: a cross-country study

Abstract: The purpose of this paper is to examine the impact of the mandatory adoption of eXtensible Business Reporting Language (XBRL) on firm’s stock liquidity.,Using a random-effects model, this study examines the impact of the mandatory adoption of XBRL (ADOPXBRL) on firm’s stock liquidity of 980 companies pertaining to 13 countries for a period from 2000 to 2016.,This paper finds that the mandatory ADOPXBRL affects negatively and significatively Amihud’s (2002) illiquidity ratio. Therefore, mandatory XBRL adoption enhances the firm’s stock liquidity. In addition, this paper finds that the impact of the mandatory ADOPXBRL on firm’s stock liquidity is more pronounced in civil law countries than in common law countries.,This paper contributes to the literature on the advantage of XBRL especially for the civil law countries by examining the impact of the mandatory ADOPXBRL on firm’s stock liquidity.

Corporate social responsibility and tax avoidance: the case of French companies

Abstract: The purpose of this paper is to shed light on the effect of tax avoidance on corporate social responsibility performance. It also investigates whether audit quality affects tax avoidance practices by socially responsible performance.,Based on a sample of French non-financial companies over the period 2005 to 2016, this paper uses panel data regressions. The authors apply generalized least square panel regression to overcome autocorrelation and heteroscedasticity problems. For further robustness, this paper runs instrumental variable regressions using the three-stage instrument variable method (three-stage least square).,The results show that firms with high CSR scores are more likely to engage in aggressive tax avoidance. The findings also show that firms audited by high-quality auditors are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices.,The findings are consistent with risk management theory, which suggests that firm’s hedge against any reputational risks that might arise from avoiding taxes by engaging more in CSR.,Results have implications for policymakers in that CSR firms audited by high-quality auditors may engage in CSR to overcome any negative reactions that could be caused as a result of tax avoidance. Thus, they need to be cautious about managers’ opportunistic behavior and enhance monitoring to enforce social compliance and to be tax compliant.,This paper extends the existing literature by examining the effect of audit quality on the relationship between CSR performance and corporate tax avoidance. Audit quality is deemed to be an important governance feature that is likely to constraint managerial opportunistic behaviors. Audit quality, along with CSR performance, are associated with a higher level of tax avoidance.

Corporate governance and voluntary disclosure: evidence from India

Abstract: Purpose This study aims to examine the influence of some prominent corporate governance (CG) mechanisms such as board size (BS), board independence (BI), role duality (RD), board’s gender diversity (GD), ownership concentration (OC), audit committee independence (ACI), nomination and remuneration committee (NRC) and risk management committee (RMC) on voluntary disclosure (VD), as well as different types of VD after controlling the effect of some firm-specific factors for Indian firms. Design/methodology/approach The study selects market capitalization-based top 100 non-financial and non-utility firms listed on the Bombay Stock Exchange as on 31st March 2014. Data are drawn from the Capitaline Plus database over the period of 2014–2018. Appropriate panel data regression model is applied to examine the influence of CG on VD. Findings The study reveals a significant negative influence of BI on VD while GD and RMC exhibit a significant positive influence on the same. The remaining CG mechanisms such as BS, RD, OC, ACI and NRC appear to have no significant influence on VD. Analysis into the relationship between CG mechanisms and different types of VD reveals that BI, in particular, has a strong negative influence on corporate strategic disclosure (CSD) and forward looking disclosure (FWLD) while GD and RMC both exhibit a significant positive influence on CSD, FWLD, CG disclosure and financial and capital market disclosure. Notably, none of the CG mechanisms under consideration influence human and intellectual capital disclosure. Research limitations/implications The study considers annual reports as the only medium of making VD and ignores all other sources such as websites and press releases. Besides, it mainly emphasizes on corporate board structure, board committees and OC while other ownership structure-related variables family ownership, managerial ownership are not covered, which can be analysed in future studies. Practical implications The study offers some important theoretical, as well as practical connotations for regulators and practitioners operating in India, as well as other emerging economies having similar institutional settings. Originality/value The study is the first of its kind in India that examines the influence of various CG mechanisms on different types of VD and thereby contributes novel findings in the context of an emerging economy.

Do corporate governance practices restrain earnings management in banking industry? Lessons from India

Abstract: Purpose This study aims to investigate the role of corporate governance practices in restraining earnings management in Indian commercial banks. Design/methodology/approach Estimation of earnings management is based on discretionary loan loss provision and discretionary realised security gains and losses using Beatty et al. (2002) model. The effect of corporate governance on earnings management is examined by performing two-way least square dummy variable regression. Data for a period of five years (2016–2020) is collected from the Centre for Monitoring Indian Economy ProwessIQ database, Reserve Bank of India website, annual report of banks, National Stock Exchange and bank’s website. Findings Regression results exhibit that number of board committees, size and independence of audit committee and joint audit are significantly effective in curbing earnings management. Other board-related variables (size, independence, meetings and diligence) and audit committee variables (meetings and diligence) are not effective in restraining earnings management in Indian banks. Practical implications The findings may prove to be helpful to regulators, board of directors and investors. It shows the weak area of corporate governance in India that is lack of autonomy to independent directors, which needs regulators attention and it also suggests that the number of independent auditors should be adequate for audit purposes. The board of directors must ensure the formulation of an adequate number of committees, which perform their own super specialised functions. This study brings an alarm to investors not to rely on reported earnings alone as they may be manipulated. Originality/value This paper substantiates the scant literature on the role of corporate governance practices in restraining earnings management in banks of emerging markets and to the best of the authors’ knowledge impact of joint audits on earnings management is previously unexplored in Indian banks, which are examined in this study.

Intellectual capital: mediator of board of directors’ effectiveness and adoption of International Financial Reporting Standards

Abstract: The purpose of this paper is twofold: to test whether intellectual capital mediates the relationship between board of directors’ effectiveness and adoption of International Financial Reporting Standards (IFRS) and to examine the contribution of the specific elements of intellectual capital and board of directors’ effectiveness to adoption of IFRS.,This study is cross-sectional. Usable questionnaires were received from 67 microfinance institutions (MFIs) that are members of the Association of MFIs of Uganda. The data was analyzed using Statistical Package for Social Sciences and MedGraph program (Excel version).,Results indicate that intellectual capital mediates the relationship between board of directors’ effectiveness and adoption of IFRS. Results further indicate that board independence and board meetings contribute significantly to the adoption of IFRS unlike board size and board committees. Results also indicate that in the intellectual capital elements, only structural capital and human capital significantly contribute to the adoption of IFRS unlike relational capital.,This study provides more insights on our understanding of the relationship between intellectual capital, board of directors’ effectiveness and adoption of IFRS. Specifically, it provides first time evidence of the mediation effect of intellectual capital in the relationship between board of directors’ effectiveness and adoption of IFRS using evidence from an African developing country – Uganda. Further, this paper adds to existing literature on corporate governance and reporting practices, as it provides more insights on the contribution of specific elements of board of directors’ effectiveness and intellectual capital to adoption of IFRS.

Board governance, ownership structure and foreign investment in the Saudi capital market

Abstract: Purpose This paper aims to examine whether board governance mechanisms and ownership structure play a role in foreign investors’ decisions when buying shares in Saudi listed companies Design/methodology/approach Foreign investment in the Saudi capital market started in 2015 and reached a peak in 2019, with corporate governance regulations having been updated in 2017. The authors tested the proposed relationships using hand collected data for all Saudi non-financial firms in 2019. Findings This study found that it does not play a role in attracting foreign investment in the Saudi capital market. Foreign investors also seem to avoid firms with concentrated ownership that either have high government or director ownership; however, accounting and market variables show significant impact on foreign investors' decisions. The outcomes of this study provide empirical evidence that current foreign investors in the Saudi stock market do not place enough merit on board governance and their investment decisions tend to depend on share performance. Thus, the results show that the current governance changes and capital market regulations in Saudi Arabia may not have been sufficient to stimulate the inflow of institutional foreign investment to the country to date, but rather they have attracted individual retail foreign investors. Originality/value This empirical study is one of only a small number of studies to investigate the impact of internal corporate governance on foreign ownership in developing countries and the first in the Saudi context. In fact, most previous governance research in Saudi Arabia focused on how board governance and ownership structure influences firm performance. A review of the prior studies found that only Badawi et al. (2019) examined the determinants of foreign ownership among Saudi listed firms. Thus, the present investigation extends that study by examining the role of board governance in attracting foreign investors.

Impact of environmental, social and governance disclosures on market reaction: an evidence of Top50 companies listed from Thailand

Abstract: Purpose This study aims to survey the extent, level and trend of environmental, social and governance (ESG) disclosures of top50 listed companies from Thailand, to test the different level of ESG disclosures of the companies between high profile industry and low profile industries and to examine the impact of ESG disclosures on the market reaction of top50 listed companies in Thailand. Design/methodology/approach Population and sample were top50 listed companies from the Stock Exchange of Thailand. Using corporate annual reports from 2015 to 2019, content analysis by word counting was used to quantify the extent, level and trend of ESG disclosures, while the market reaction was collected by the average stock price. Descriptive analysis, independent sample t-test, correlation matrix and multiple regression were used to analyze the data. Findings There was an increased level of ESG disclosures during the period being study. The most common ESG disclosures were social disclosure following by governance and environmental disclosures. Moreover, there were different levels of environmental disclosure of top50 listed companies between high and low profile industries, while no different levels of social and governance disclosures between high and low profile industries were found. Finally, the study found that environmental and social disclosures had a positive impact on market reaction, while there was a negative impact of governance disclosure on market reaction. Originality/value Thai investors can use ESG disclosures for their decision-making on investment.

CSR or social impression management? Tone management in CSR reports

Abstract: The purpose of this paper is to investigate to what extent corporate social responsibility (CSR) is used as a symbolic strategy of greenwashing. Analyses focus on the relationship between CSR and disclosure tone management practice in sustainable reports derived from social impression management incentives.,This study is based on a sample of French listed firms (SBF 120) over a seven-year period (2010–2016), i.e. 539 firm-year observations.,Multivariate analysis indicates a significant relationship between CSR and disclosure tone management. The obtained results show that firms that are less concerned with tone management in sustainable reporting process consider more socially responsible issues. Findings support the socially substantive initiatives and the transparency perspective of CSR.,The negative association between CSR and tone management highlights the firm’s transparency. However, there could be other discretionary practices which may determine impression management strategies. Thus, future research may consider other discretionary behavior associated with CSR to mislead users.,All actors (government, green-association, investors, etc.) interested in CSR and greenwashing issues have to bring initiatives to reinforce the monitoring and reporting procedures.,This study investigates the association between CSR and disclosure tone management for the French context since the specificity of its regulatory framework of CSR disclosure. Thus, corporate narrative reporting users may be required to consider impression management practices (i.e. tone management) and read between the lines.