The value relevance of disclosure: Evidence from the emerging capital market of Egypt

This study examines the value of voluntary and mandatory disclosure in a market that applies International Accounting Standards (IAS) with limited penalties for non compliance. The lack of enforcement creates an element of choice in the level of mandatory disclosure by companies. Using panel-data analysis, our empirical results show that, after controlling for factors such as asset size and profitability, mandatory disclosure has a highly significant but negative relationship with firm value. This result, although puzzling from a traditional perspective, is consistent with the predictions of analytical accounting models, which emphasize the complex interplay of factors determining disclosure effects. Our results also show that voluntary disclosure has a positive but insignificant association with firm value. This lack of statistical significance supports the view that there is a complex interplay of different factors determining the relationship between disclosure and firm value.     

Vernacular accountings: Bridging the cognitive and the social in the analysis of employee-generated accounting systems

We unpack the concept of “informal accounting systems” and bracket “vernacular accountings” based on the modality and source of legitimacy of such systems. Vernacular accountings are accounting and control systems that are self-generated by organizational actors in the context of their work and not officially sanctioned within the organizational hierarchy. We argue that these systems capture actionable knowledge from the epistemic perspective of their users. We identify three ideal types of vernacular accountings: vernacular accountings as an inventory of knowledge that employees construct to meet their task specific information needs; vernacular accountings as a defensive resource constructed and used by employees who resist or do not trust the formally sanctioned systems; and, vernacular accountings as organizational practice that has both pragmatic and epistemic functions and that facilitates distributed cognition. Drawing on an epistemic perspective that spans cognitive and social levels of analysis we develop theoretical propositions on the emergence and use of these three types of vernacular accountings.     

The deliberation around accounting techniques: accounting for depreciation and foreign exchange in an Indian jute company, 1870-1900

This paper examines the way two accounting techniques, namely depreciation and foreign exchange, were deliberated on, between 1870 and 1900, in an Indian jute company whose shareholders resided in the UK. The arena for these deliberations was the conflictual relationship between controlling and non-controlling shareholders as to how best to account for depreciation and foreign exchange especially when the particular accountings affected distributional issues such as the dividend decision. The purpose of this paper is to analyse and explain the processes by which a company's accounting practices emerge and develop as a contest between different interests. Accounting framed the parameters of the deliberations and provided the language of power and dissent. The paper uses a rich archive that includes narrative and accounting material.     

THE ENTERPRISE THEORY: AN EXTENSION

In America in the 1950s it was observed that large public corporations were portraying their sense of social responsibility through an analysis of gross income in various forms of supplementary accountings. Suojanen (1954) considered these accountings and their setting and then proposed the production value added statement as an appropriate accounting for the situation. The recent use of value added statements in the United Kingdom has prompted this examination of the enterprise theory and resulted in strengthening some of its assump tions and extending its accounting. The main extension is the separation of the rewards of management from those of other employees.     

Impact of earnings performance on price‐sensitive disclosures under the Australian continuous disclosure regime

This study examines the relation between accounting earnings and the frequency of price‐sensitive corporate disclosure under Australia's statutory continuous disclosure requirements. Despite low litigation threats and excepting loss‐making firms, results show that firms with earnings declines (bad news) are more likely to make continuous disclosure than firms with earnings increases (good news). This suggests that market forces and regulators’ scrutiny are sufficient to induce a ‘bad news’ disclosure bias. This study also examines the ‘materiality’ requirement under the continuous disclosure requirements and finds a positive relation between disclosure frequency and the magnitude of earnings news. The earnings–return correlation is positively associated with disclosure frequency for the financial services industry.     

Disclosure of provisions for decommissioning costs in annual reports of oil and gas companies: A content analysis and stakeholder views

This study examines the extent of compliance with accounting disclosure requirements relating to provisions for decommissioning costs by oil and gas companies. We also investigate the views of stakeholders on the reporting practices of these companies. Using a content analysis approach, our findings reveal that compliance is substantially high, but companies tend to take a tick-box approach providing only minimum disclosure requirements. In semi-structured interviews, we find that disclosure decisions were driven by concerns about the credibility of information due to complexities in the accounting processes, regulatory requirements, lack of information demand and proprietary costs. These findings have policy implications.     

The Disciplinary Role of Financial Statements: Evidence from Mergers and Acquisitions of Privately Held Targets

This study examines whether requiring the disclosure of audited financial statements disciplines managers’ mergers and acquisitions (M&As) decisions. When an M&A transaction meets certain disclosure thresholds, the Securities and Exchange Commission (SEC) requires the public acquirer to disclose the target's audited financial statements after the merger is completed. Using hand‐collected data, I find that the disclosure of private targets’ financial statements is associated with better acquisition decisions. Furthermore, I find that this disciplining effect of disclosure is more pronounced when monitoring by outside capital providers is more difficult and costly, and when other disciplining mechanisms are weaker. Finally, these findings are robust to several alternative explanations, such as monitoring from blockholders and voluntary disclosures. In sum, the evidence suggests that the ex post mandatory disclosure of private targets’ accounting information disciplines managers’ acquisition decisions and improves acquisition efficiency.     

Narrative accounting disclosure: Its role in the gold mining industry on the Gold Coast 1900–1949

Gold mining played a major role in the extraction of surplus value by colonial powers in Africa. The paper examines the role of narrative accounting disclosure in the gold mining industry in colonial Ghana (the Gold Coast) during the period 1900–1949. Narrative accounting disclosure was deployed in the extraction of value by English gold mining companies, in raising capital via a series of “gold booms” and subsequently in defending the companies’ labour policies in the face of trade union resistance. The paper concludes that an accounting disclosure was an important part of the strategy of the gold mining companies in promoting and legitimising themselves.     

The influence of the introduction of accounting disclosure regulation on mandatory disclosure compliance: Evidence from Jordan

This paper examines the influence of accounting disclosure regulation, governance reforms and ownership changes, resulting from privatisation, on mandatory disclosure compliance of a sample of 80 non-financial, listed Jordanian companies for the years 1996 and 2004. Employing two checklists based on the International Financial Reporting Standards (IFRS) extant in the years 1996 and 2004, we find that disclosure compliance with the IFRS is significantly higher in 2004 than that in 1996. Our multiple regression results indicate that disclosure regulation reforms produced the most significant influence on mandatory disclosure compliance. Further, governance reforms through the mandate of audit committees emerged as a significant determinant of compliance with mandatory disclosure requirements.     

Money shouts! How effective are punishments for accounting fraud?

This study examines the impact of different punishments for Chinese accounting fraud on shareholder valuation of firms between 2007 and 2016. From an examination of both monetary and non-monetary ‘name and shame’ penalties, it is reported all punishments have a negative and significant impact on the shareholder wealth of fraudulent firms. Investors perceive punishments involving monetary penalties far more severely than non-monetary punishments used to combat accounting fraud. Stock market reactions are also sensitive to the type of fraud committed with manipulation of recognition and disclosure fraud viewed more negatively by investors than fraud related to disclosure. Information leakage to capital markets prior to the announcement of punishments is also observed. It is proposed fines have been relatively more effective, than ‘name and shame’ punishments in addressing Chinese accounting fraud during the last decade, due not least to information leakage.     

The development of fixed asset accounting in South African gold mining companies: confronting the issues of prudence,matching, periodicity and capital maintenance

The ‘Appropriation Method’ of accounting applied by South African gold mining companies is fundamentally different from mine accounting elsewhere and results in reported earnings and asset values that are not comparable with those of mining companies in other countries. This paper traces the development of the Method, in an historical context, in an attempt to understand why, and how, it emerged and became established. Particular attention is paid to 19th century writings of local accountants, ‘transactions’ of professional bodies, and to the special characteristics of the South African gold mining industry. Transitional processes are illustrated by reference to the published accounts of the Crown Reef Gold Mining Company. The persistence of the Appropriation Method is a reminder that while assumptions of uniform accounting periods, matching, business continuity and the need for capital maintenance underpin most conventional accounting, nevertheless useful accountings can exist without these assumptions.     

Disclosure indexes and compliance with mandatory disclosure—The case of intangible assets in the Italian market

Disclosure of financial statements is an important topic both for investors and for preparers as disclosure allows investors to understand the application of the accounting principles used by companies. This research examines the 2010 financial statements under IFRS of 189 Italian listed groups and their compliance with mandatory disclosure on intangible assets and presents an in depth empirical analysis of the Italian market—that belongs to the Continental European accounting cluster. Different variables were tested to analyze the compliance with the mandatory disclosure such as size variables, performance variables, financial interest variables and market variables. Many studies on mandatory disclosure are based on one disclosure index method and results are affected by the different approaches used: Cooke's dichotomous approach, Partial Compliance method, weighted and unweighted. In this paper, the decision was taken to run all the previous methods: results show that the only significant variable for all Dscore indexes is the weight of interests on revenues and this result is a distinctive feature of the Italian market where the role of the banking systems is more important than in other countries.     

Accounting disclosure and firms' financial attributes: Evidence from the UK stock market

This paper focuses on the disclosure of accounting information in the financial statements of UK firms. The primary objective of the study is to analyse the financial characteristics of firms that provide extensive disclosures, and assess the financial impact of their motives, such as for example the need to raise equity finance. The study examines the financial attributes of firms that disclose information about key accounting issues including risk exposure, changes in accounting policies, use of international financial reporting standards and hedging practices. Firms are inclined to disclose accounting information in order to assure the market participants that their accounting policies are consistent with the accounting regulation and meet the information needs of their stakeholders. The study shows that in order to raise finance in the capital and debt markets, firms tend to provide extensive accounting disclosures. Firms that provide informative accounting disclosures appear to display higher size, growth and leverage measures. The findings also show that the disclosure of sensitive accounting information has not adversely affected firms' profitability. In fact, firms that provide detailed accounting disclosures tend to exhibit higher profitability. The implementation of international financial reporting standards enhances the quality and the comparability of financial statements; hence it promotes consistency and reliability in financial reporting and facilitates companies in raising capital internationally.     

Stock price reaction and value relevance of recognition versus disclosure: the case of stock-based compensation

This study examines the equity price reaction to the pronouncements related to accounting for stock-based compensation and assesses the value relevance of recognition versus disclosure in financial reporting. We document that firms exhibit significant abnormal returns around the issuance of the Exposure Drafts proposing to require recognition of stock-based compensation costs, and also around the event reversing that decision to require disclosure only (while encouraging recognition). We also document that the abnormal returns are most pronounced for high-tech, high-growth, and start-up firms. Our results are consistent with the contracting theory, and show that disclosure is not a substitute for recognition.     

Accounting for long-tail asbestos liabilities: Metaphor and meaning

This paper examines the different meanings of the ‘long-tail’ metaphor in the corporate environment. Using the case study of James Hardie Industries, this paper analyses the disclosure of corporate long-tail liabilities arising from asbestos operations under different regulatory frameworks. This analysis demonstrates the long-tail metaphor is redefined and reshaped in accounting discourse to fit with extant reporting frameworks rather than representing any legally enforceable claim or future liability. It also demonstrates that, as well as functioning symbolically to enable understanding of complex phenomena, the long-tail metaphor can be harnessed as a tool to objectify financial risks and justify corporate strategy.     

The Impact of Statutory Sanctions on the Level and Information Content of Voluntary Corporate Disclosure

This article examines the effect of statutory civil and criminal sanctions on voluntary corporate disclosures by firms listed on the Australian Stock Exchange (ASX). Apart from direct investigation of the quantity of voluntary disclosure, we also investigate several possible consequences of altered corporate disclosure policies, namely properties of analysts' forecasts, the degree to which share prices anticipate the information content of periodic earnings reports, and the relationship between volatility and corporate disclosures. Results suggest that, post-sanctions, any increase in voluntary disclosure is confined to smaller firms and those which performed relatively poorly. Moreover, analysts' earnings forecasts did not become more accurate or less diverse following the introduction of statutory sanctions, and there was no statistically significant increase in the weight placed on each disclosure's ability to explain return volatility. There is some evidence that share prices have anticipated earlier the value relevant components of annual periodic accounting data, although this result is again confined to smaller firms. Although the tests used are not independent and have a limited time period post-sanctions, the results cast doubt on the extent to which the imposition of substantive civil or criminal sanctions affects corporate disclosure policy.     

Voluntary CSR disclosure,institutional environment,and independent audit demand

Using a sample of A-share listed companies on the Shanghai and Shenzhen Stock Exchanges, this study examines the impact of voluntary corporate social responsibility (CSR) disclosure on independent audit demand in different institutional environments. The sample covers the 2008–2016 period and excludes firms that are required to disclose CSR information. The findings show that compared with companies that choose to not disclose such information, companies that voluntarily disclose CSR information prefer to employ “small” accounting firms for auditing services, although the auditing fees are much higher. However, as the institutional environment improves, this preference is weakened. Further analyses show that this preference is stronger in enterprises where CSR disclosure is driven by strong political motivations and managerial self-interest motivations. Legitimate motivations and economic motivations do not significantly impact the preference for “small” audit firms. Furthermore, this preference is more obvious in enterprises with poor operational performance and low information disclosure quality, and it increases as CSR disclosure level decreases. The study enriches our understanding of the economic consequences of voluntary CSR disclosure and the factors that influence independent audit demand. The results also have implications for the construction and regulation of China’s system for supervising CSR information disclosure in the transitional phase.     

Accounting,paper shadows and the stigmatised poor

The social implications of accounting are explored through an historical study of spoiled identities in state welfare systems. The processing, recording, classification and communication inherent in the accounting practices deployed in such systems have the potential to (re)construct identities, inform perceptions of self and impact on the social relationships of the welfare claimant. The paper examines these potentialities through an investigation of the accounting regime attending the system of poor relief in Victorian England and Wales. Informed primarily by the work of Goffman it is suggested that accounting processes comprised degradation ceremonies which compounded the stigmatisation of the recipient of relief, accounting classifications served to inscribe existing and create additional spoiled identities of the pauper, and individualized forms of accounting disclosure compromised the management of stigma by the poor.     

Empires of the sky: determinants of global airlines' accounting-policy choices

This study quantifies the current level of diversity observed in airline accounting and examines possible determinants that explain accounting-policy choices by the global airline industry. Airlines' accounting-measurement policy for unrealized foreign-exchange differences and their disclosure of frequent-flyer information remains diverse. Inferential statistics shows that larger airlines tend to take unrealized foreign-exchange differences directly to equity and tend to disclose frequent-flyer accounting policy, while airlines with lower leverage tend to disclose frequent-flyer accounting.     

Motivations behind human capital disclosure in annual reports

Although much has been discussed about voluntary disclosure of human capital in annual reports there has been limited examination of the motivations behind such disclosure. This study uses the perspective of the political economy of accounting to understand motivations. Using the method of content analysis, this paper examines human capital disclosure practices in annual reports of a sample of firms in Sri Lanka, a developing nation. Eleven case study interviews from the sample explore the motivations behind the disclosure practices of firms. Findings reveal that firms use disclosure to reduce tension between firms and their constituents, in the interest of further capital accumulation.