Signaling strategies in annual reports: Evidence from the disclosure of performance indicators

In voluntary annual report communication, empirical results of signaling theory are contrasting, mainly owing to problems in disclosure measurements. We focus on a specific piece of incremental information and study the signaling strategies in annual reports by analyzing the disclosure of performance indicators that provide incremental information. In this paper, we scrutinize the business review of a sample of 120 listed Italian companies for fiscal year 2010. After controlling for size, risk, and industry, our analysis confirms that the number of indicators published is positively related to firm profitability. Our results help clarify the signaling strategies in annual report communication. Operatively, our evidence can help regulators and standard setters to better discipline the communication of relevant and private information in annual reports, particularly performance indicators.     

沪市公司年报对公司实际控制人的披露情况分析

绝大部分沪市上市公司均按规定在2008年报中对实际控制人的情况进行了披露,但也有一些上市公司未按或未完全按年报准则关于实际控制人的披露要求履行披露义务,无助于广大投资者了解其产权和控制关系状况。针对披露中存在的问题,我们建议:进一步明确界定实际控制人的含义、类型及其控制形式,充实和完善对实际控制人应予披露的内容,加强对法人控股股东和中间层级控制主体的披露;出台专门的实际控制人披露指引,规范披露的内容和形式;严格上市公司及其控股股东、实际控制人未按规定如实、准确、完整披露的责任。     

Sustainability accounting regulation in Spanish public sector organizations

In 2011, the Spanish government made sustainability accounting mandatory for public sector organizations. This paper documents why, despite the new legislation, the quantity and quality of sustainability accounting practices remains low.     

Public service motivation and public sector employment preference: Comparing Italian and British students

ABSTRACT

Previous research has suggested that an individual’s public service motivation (PSM) is positively linked to a preference for public sector employment. The authors explore this link using a sample of British and Italian undergraduate students. They found a positive relationship between PSM and public sector job preferences among Italian students but not with the British students. The UK has implemented more NPM-style reforms than Italy and this could be impacting on public sector recruitment. Implications for recruitment and retention the public sector are discussed.     

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.     

Use of derivatives in public sector organizations

The present paper develops and tests a model explaining public sector derivative use in terms of budget discrepancy minimization. The model is different from private sector models. Private sector models do not readily translate into the public sector, which typically faces different objectives. Hypotheses are developed and tested using logistic regression over a sample of Australian Commonwealth public sector organizations. It is found that public sector organization derivative use is positively correlated with liabilities and size consistent with the hypotheses concerning budget discrepancy management.     

Harmonizing public sector accounting in Europe: thinking out of the box

A broad debate about the harmonization of public sector accounting standards in Europe is underway. The authors provide arguments in favour of harmonization, but they also acknowledge the existing pluralism and diversity by taking stock of the state of play in 14 European countries. The paper makes a proposal for a way forward for policy-makers and standard-setters, in which the benefits of harmonization can be obtained without obliging EU member countries to necessarily abandon their current public sector accounting systems.     

Lean in a cold fiscal climate: the public sector in an age of reduced resources

Reflecting on recent public sector reform, this paper examines the use of Lean during a period of financial austerity. The paper outlines several challenges for public sector organizations as they manage performance targets, and engage in service re-design. The author challenges the current use of Lean working arguing for a re-evaluation of the traditional public sector model of work and for a collective approach to co-production of service redesign.     

New development: The conceptual underpinnings of international public sector accounting

The conceptual underpinnings of accounting standards are potentially very important for the future of public sector accounting internationally. The authors explain why and comment on the implications for public sector accounting.     

Litigation risk, strategic disclosure and the underpricing of initial public offerings

Using word content analysis on the time-series of IPO prospectuses, we show that issuers tradeoff underpricing and strategic disclosure as potential hedges against litigation risk. This tradeoff explains a significant fraction of the variation in prospectus revision patterns, IPO underpricing, the partial adjustment phenomenon, and litigation outcomes. We find that strong disclosure is an effective hedge against all types of lawsuits. Underpricing, however, is an effective hedge only against Section 11 lawsuits, those lawsuits which are most damaging to the underwriter. Underwriters who fail to adequately hedge litigation risk experience economically large penalties, including loss of market share.     

New development: The protective role of conservatism in public sector accounting

This article picks up a discussion in international business accounting about the appropriate definition and use of conservatism (or prudence) and calls for a similar discussion in public sector accounting. If financial reports present an overly optimistic situation, politicians might use them to justify spending public money that is not there, risking the sustainability of services and ‘borrowing’ from future generations.     

The impact of the stapled security structure on the quality of financial disclosure: Evidence from Australian Real Estate Investment Trusts and Listed Infrastructure Funds

This paper is the first study to explore whether the stapled structure influences firms’ activities in earnings management (EM). Trusts and firms under stapled securities are exposed to various managerial opportunities and activities that can provide the flexibility of using EM approaches. Therefore, the stapled structure is expected to induce increased EM behavior and signal a lower level of financial disclosure quality than the unstapled structure. This empirical research analyzes a panel dataset that contains information of Australian REITs (A-REITs) and Listed Infrastructure Funds (LIFs) from the year of 2000–2017. Evidence shows that stapled A-REITs and LIFs use a greater magnitude of EM approaches than unstapled entities. The results imply that the stapled security structure may signal lower-quality of financial disclosure for firms than the unstapled security structure. This study provides additional insight into the understanding of how the security structure may impact firms’ financial disclosure behavior.     

The use of performance measurement systems in the public sector: Effects on performance

We study the use of performance measurement systems in the public sector. We hypothesize that the way in which these systems are being used affects organizational performance, and that these performance effects depend on contractibility. Contractibility encompasses clarity of goals, the ability to select undistorted performance metrics, and the degree to which managers know and control the transformation process. We expect that public sector organizations that use their performance measurement systems in ways that match the characteristics of their activities outperform those that fail to achieve such fit. We test our hypotheses using survey data from 101 public sector organizations. Our findings indicate that contractibility moderates the relationship between the incentive-oriented use of the performance measurement system and performance. Using the performance measurement system for incentive purposes negatively influences organizational performance, but this effect is less severe when contractibility is high. We also find that an exploratory use of the performance measurement system tends to enhance performance; this positive effect is independent of the level of contractibility. The effectiveness of the introduction of performance measurement systems in public sector organizations thus depends both on contractibility and on how the system is being used by managers. These findings have important implications, both for practice and for public policy.     

The potential of integrated reporting to enhance sustainability reporting in the public sector

This paper examines the influence of integrated reporting (IR) on the sustainability reporting practices of a state-owned enterprise through a content analysis of their reports and interviews with report preparers. The findings show a steady increase in the quantity and quality of sustainability disclosures. In 2012, the organization chose to adopt the IR framework in order to enhance sustainability reporting for all stakeholders. The IR process resulted in a more balanced disclosure of material aspects of sustainability. However, while IR has the potential to enhance public sector sustainability reporting, inter-generational equity issues were ignored.     

A theoretical basis for public sector accrual accounting research: current state and perspectives

ABSTRACT

Public sector or government accounting has been the subject of many research endeavors. However, scholars have repeatedly criticized the lack of a consistent and well-defined theoretical basis for international research. So far, most researchers have drawn from various streams of theoretical perspectives with often unsatisfactory results. The goal of this paper is to put forward the International Public Sector Accounting Standards Board’s (IPSASB) Conceptual Framework as a point of reference for establishing a better-fitting theoretical basis for public sector accrual accounting research.     

The first steps towards harmonizing public sector accounting for European Union member states: strategies and perspectives

This paper analyses the process that led the European Commission to the decision to develop European Public Sector Accounting Standards (EPSAS) for harmonizing public sector accounting practices within the European Union. The paper finds that there was limited scope in terms of stakeholder participation in the public consultation that served as a basis for the decision. In addition, the decision to adopt EPSAS for EU member states raises questions on the relationship between regional and global governance in the area of public sector accounting.     

Performance measurement and institutional processes: a study of managerial responses to public sector reform

Institutional aspects of performance measurement (PM) in public sector organizations are attracting increasing research interest. Only recently, however, has the literature on this topic recognized the pertinent critique of neo-institutional sociology (NIS) pivoting around its view of managers and organizations as primarily passive adaptors to change. This paper explores how the properties of institutional processes associated with recent reforms in the Norwegian health care sector impinge on the extent of pro-active choice exercised by senior management in the development of multidimensional PM reflecting the interests of a wider range of institutional constituencies. Addressing this issue, we draw on Oliver’s (1991) conceptual framework, based on a continuum of responses characterized by a varying degree of pro-active choice. The study thus provides a more detailed analysis of the managerial tactics in developing organizational PM than most prior research informed by NIS. We find support for several of Oliver’s hypotheses regarding the influence of institutional aspects, particularly those pertaining to the causes of the adoption of PM practices, the pattern in which these are diffused and the influence of constituency multiplicity and dependence, but also identify some areas requiring conceptual refinement in this respect.     

How numbers of the future are shaping today: The role of forecasts and calculations in public sector strategic thinking

This article examines the role of numbers in forming a city strategy in the case of Gothenburg, Sweden. The article illustrates how numbers make people act and react and shape the strategy process. The study is situated between the theoretical fields of accounting and strategy processes in cities. By relating them to the concept of ‘governmentality’, numbers are seen as helping render the city governable. Because strategizing is seen as concerning the future, the actors involved in drafting the strategy feel free to challenge historically institutionalized practices. The effect is paradoxical: the future‐looking strategy process becomes a forum for solving current problems.     

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.