Overconfidence and optimism: The effect of national culture on capital structure

This study assesses whether variations in capital structure across countries can be explained by cultural traits. We analyze capital structure choices of firms in 42 countries and provide evidence that these decisions are affected by the degree of individualism of the country where the firm is located. We assert that managers in countries with high level of individualism exhibit strong optimism and overconfidence which cause an upward bias in perception of supportable debt ratios. Our results are robust to controlling for other firm- and country specific determinants of capital structure choices and to using alternative model specifications and estimation techniques.     

National culture and bank risk-taking: Contradictory case of individualism

Previous studies have reported a positive association between the cultural dimension of individualism and bank risk-taking. We hypothesize that this association is likely to be confounded by the omitted effects of corporate governance. Given the indicative evidence that such confounders are less likely to affect listed banks, we test this association for a global sample of 467 commercial listed banks from 56 countries. Our results show that the association between individualism and bank risk-taking is negative. This result is consistent with the cushioning hypothesis, the idea that people take on more risk in collectivist societies because they expect to receive help from the members of their social networks in the case of failure.     

Neoclassical finance,behavioral finance and noise traders: A review and assessment of the literature

While mainstream neoclassical finance ignores the role played by noise traders, a significant amount of empirical evidence is available to show that noise traders are active market participants and that their participation gives rise to market anomalies. Unlike neoclassical finance, behavioral finance allows for market inefficiency on the grounds that market participants are subject to common human errors that arise from heuristics and biases. In this paper we review the literature on the behavior of noise traders and analyze the consequences of their presence in the market, starting with a distinction between neoclassical finance and behavioral finance. We identify the market anomalies that provide evidence for the tendency of markets to trade at irrational levels, demonstrate how noise trading is related to some market fundamentals, and describe the models used to quantify noise trader risk.     

Applications of high-frequency data in finance: A bibliometric literature review

This study aims to provide a bibliometric literature review (BLR) on the applications of high-frequency data in finance. To the best of our knowledge, this is the first BLR on this topic. It aims to map the evolution of the literature, identifying the leading sources of knowledge in terms of the most influential journals, articles, and authors. It also provides a chronological development of the conceptual and intellectual structures of the networks in this topical research area. Using the Scopus database, the study identifies 2920 articles on the application of high-frequency intraday data in finance. These had been published in 393 journals during the period from 1977 to 2019. A thorough content analysis of the 100 most influential papers (ranked based on average citations per year) is also provided concerning research attributes in terms of datasets, asset classes, country of analysis and the major themes and sub-themes of these papers. The Journal of Banking and Finance is the leading journal in terms of the number of publications, whereas the Journal of Finance is the leading journal in terms of citations received on this topic. Tim Bollerslev is the leading author in this area in terms of the total number of publications (36), total citations (7241) and h-index (30). The most cited article in terms of total citations and average citations per year is Andersen, Bollerslev, Diebold, and Labys (2003) titled “Modeling and forecasting realized volatility”, which has appeared in Econometrica. The majority of the top 100 surveyed papers are empirical (66%). Volatility modeling as a major theme is the front runner with 29% of the surveyed papers. The theme “Volatility modeling” has most often been studied with Realized Volatility. The Trade and Quote (TAQ) database and 5-minute interval data appear to be the most favored choices in terms of data usage in high-frequency finance research. 56% of the surveyed papers have used the data on stocks, with NYSE stocks being the most popular, while US financial markets are the most commonly studied markets (65%).     

The business of sport and the sport of business: A review of the compensation literature in finance and sports

This paper provides a review of literature measuring the value of human capital in the sports markets and the field of corporate finance. We discuss the seminal literature in both fields. We then compare and contrast these two fields of research and show that many studies in both fields have found similar relationships for compensation. However, the link between compensation and performance is strongest in the sports literature. Our goal is to link these two fields of research so as to better understand compensation and performance and thus, further our understanding of the best compensation practices to use in business.     

Cross-national differences in access to finance: Influence of culture and institutional environments

In spite of rising interest, there is little prior research on the degree to which national differences in access to finance are determined by national culture. Using World Economic Forum survey data for over eighty countries, this paper examines the determinants of (1) access to equity financing, (2) access to loan financing (3) access to venture capital and (4) overall access to capital. We document that less access to financing is associated with the cultural dimensions of uncertainty avoidance and masculinity. But, greater access to financing is positively associated with greater national wealth and better investor protection. Consistent with earlier literature we also find that greater access to finance is associated with greater government favoritism toward selected firms. These results should be of much interest to policy makers, scholars, bankers and managers of multinational firms.     

Product market competition in accounting,finance, and corporate governance: A review of the literature

Product market competition has been identified as one of the most powerful corporate governance tools for motivating managers to maximize firm value. Consistent with this view, a large body of theoretical and empirical research over the years has investigated the implications of product market competition. This paper synthesizes and critically evaluates the empirical literature on the consequences of product market competition in the accounting, finance, and corporate governance domains. Our review focuses on issues like financial reporting quality, analyst forecasting activities, asset pricing, investment, and financing decisions, and the substitutive versus complementary relationships between product market competition and other corporate governance tools. Our review suggests that, although market competition has profound implications for these issues, the empirical findings often provide conflicting results. We highlight such contradictory findings and offer suggestions for future research. Our review will help researchers intending to further investigate the implications of product market competition, both in the US and internationally.     

The effects of environmental,social and governance disclosures and performance on firm value: A review of the literature in accounting and finance

This paper not only attempts to survey the burgeoning literature on environmental, social and governance disclosures and performance and their effects on firm value, but its focus also lies on highlighting stylised observations coming from the most recent work that has not yet become part of the ‘conventional wisdom’ in the field. In addition, it outlines some of the crucial knowledge gaps and interesting questions that have not, as of yet, been addressed and thus outlines a potential agenda for future research on socially responsible investing. Lastly, it introduces the papers published in this special issue of the British Accounting Review.     

Corporate governance,accounting and finance: A review

We review accounting and finance research on corporate governance (CG). In the course of our review, we focus on a particularly vexing issue, namely endogeneity in the relationships between CG and other matters of concern to accounting and finance scholars, and suggest ways to deal with it. Given the advent of large commercial CG databases, we also stress the importance of how CG is measured and in particular, the construction of CG indices, which should be sensitive to local institutional arrangements, and the need to capture both internal and external aspects of governance. The ‘stickiness’ of CG characteristics provides an additional challenge to CG scholars. Better theory is required, for example, to explain whether various CG practices substitute for each other or are complements. While a multidisciplinary approach to developing better theory is never without its difficulties, it could enrich the current body of knowledge in CG. Despite the vastness of the existing CG literature, these issues do suggest a number of avenues for future research.     

Consequences of local social norms: A review of the literature in accounting,finance, and corporate governance

We synthesise the empirical archival research on the consequences of local social norms on accounting, finance, and corporate governance outcomes in an international setting. The literature reviewed is premised on the theory that corporations do not make decisions, but managers do, and managers are likely to be influenced by the socioeconomic environment of the region in which they operate and/or by the people with whom they interact. To provide a structure to our review, we identify social capital, religiosity, gambling norms, and corruption culture, as four constructs of local social norms and link these with financial reporting and external auditing, financial, investment, and dividend decisions, capital market consequences and finally, corporate governance and corporate social responsibility behaviour of firms. We highlight some limitations of the existing research and offer some suggestions for future research.     

Indigenous sustainable finance as a research field: A systematic literature review on indigenising ESG,sustainability and indigenous community practices

Sustainable finance research has come into its own as an established area in the finance literature. The increased awareness of sustainability and global concerns around environmental, social and governance (ESG) issues, particularly among institutional investors, has catalysed a shift towards greater research and publications in this area. Accompanying this is the emerging body of work being produced on indigenous investments and indigenous community practices. These nascent strands of literature tell a story of the shift that is taking place within the finance field. To chart this shift and create a harmonised view of these bodies of work, this paper conducts a systematic literature review of the significant nexus between sustainable investments and indigenous approaches to sustainability. We present a framework for conceptualising and characterising the various stands of literature and, in so doing, make the case for Indigenous Sustainable Finance (ISF) as a distinct disciplinary field. This paper argues that ISF is distinct from mainstream sustainable finance and other social and management sciences and constitutes a legitimate, well-defined sub-field of research in its own right.     

Sustainable finance and blockchain: A systematic review and research agenda

Sustainable finance and blockchain studies have garnered considerable interest recently. but there has been no systematic analysis of blockchain in sustainable finance to far. To fill this gap, based on the theme structure of blockchain research in the field of renewable finance from November 1, 2008 to January 31, 2022, this paper proposes a multi-level and all-round comprehensive bibliometric method (Co-occurrence Analysis method, Natural Language Processing method, and Exploratory Factor Analysis method) to comprehend the mode, process, and mechanism of the integration of them. The findings indicate that: (1) Blockchain has been widely used in many industries involved in sustainable finance; (2) Blockchain will have a long-term impact on Sustainable Finance in the fields of smart city and sharing economy; (3) Blockchain can be deeply integrated with other technologies to promote the diversified development of sustainable finance. Additionally, we highlight trends and research directions regarding blockchain in sustainable finance research.     

The effects of ethnic culture and organizational culture on judgments of accountants

This study extends prior cross-cultural research by examining the effects of ethnic culture and organizational culture (Big 4 and non-Big 4 accounting firm affiliations) on the judgments of accountants in Fiji. The study also examines how interaction between ethnic culture and organizational culture influences the judgments of accountants. It examines the extent and the cause of differences between the judgments of Ethnic Fijian and Indo-Fijian accountants when interpreting and applying selected International Financial Reporting Standards (IFRSs). Consistent with their ethnic cultural values, the results show that Indo-Fijian accountants are generally more conservative in their judgments than their Ethnic Fijian counterparts. This study provides empirical evidence to support the view that both ethnic culture and organizational culture have a significant effect on the manner in which accountants within a country interpret uncertainty expressions contained in the IFRSs. The results also show that organizational culture has a greater effect on the judgments of accountants than ethnic culture. The results of this study provide important insights into the factors affecting the judgments of accountants within a country and raise interesting theoretical issues.     

Quality of reported earnings by Chinese firms: The influence of ownership structure

This paper examines the influence of ownership structure on earnings quality of firms listed on the Chinese Stock Exchanges. We empirically test four contemporary earnings quality measures, including volatility of earnings, variability of earnings over cash flows, correlations between accruals and cash flows, and level of discretionary accruals, for 1438 firms listed on Shenzhen Stock Exchange and Shanghai Stock Exchange. We find that although state-owned firms are bigger in size and appear more profitable based on reported earnings; privately-owned firms, foreign-owned firms and society-owned firms outperform the state-controlled firms in earnings quality; and foreign-owned firms have the highest earnings quality among all types of ownership groups. We find that there is not much difference in earnings quality between collectively-owned firms and state-owned firms and employee-owned firms exercise least discretion in earnings management. The findings in particular will have direct policy implications for the China Securities Regulatory Committee (CSRC).     

Momentum effects in China: A review of the literature and an empirical explanation of prevailing controversies

The contribution of this paper is to enable solid conclusions to be drawn about the existence of momentum effects in China as the current evidence is unsatisfactory. We review and analyse the existing empirical studies on momentum and contrarian strategies in China and show that many of the findings in these studies appear inconsistent, if not actually contradictory. To clarify this confused situation we initially identify common findings in the diverse and seemingly contradictory body of existing empirical evidence. Subsequently, we systematically assess how the design of empirical studies affects the results of investigations in this area. We do this by conducting an empirical analysis of monthly data on Chinese A shares, varying one factor in the research design at a time (sample period, equally or value-weighed portfolios, skipping a period between portfolio formation and holding periods, and exclusion of post-IPO observations). This allows us to pinpoint directly how each of these factors affects momentum profits and thus when these profits are likely to be observed. It also indicates why studies using different designs might have arrived at seemingly inconsistent conclusions. Overall, we draw a number of conclusions: there appear to exist medium- and longer-term reversals in the pre-2001 period and short-term reversals and longer-term momentum effects thereafter; there is substantial time-variation in the profits to momentum strategies; small stocks exhibit stronger reversals than their larger counterparts; a large fraction of portfolio returns occur in the first month after formation; there is evidence of post-IPO price drifts. In summary, this study reconciles and explains the inconsistent evidence on the existence of momentum and contrarian effects in China allowing clear conclusions to be drawn.     

How information systems influence user decisions: a research framework and literature review

Technology has created new information alternatives that may influence the way information system users make decisions. This paper proposes a research framework for examining how features of an information system affect the decision-making process. The framework is synthesized by merging frameworks from the accounting information systems (AIS) literature and the human information processing (HIP) literature. The framework is then used to organize a literature review of 15 journals from 1987 through mid-1999, which identified 57 decision-making studies. Findings indicate that a wide range of opportunities is available for information systems research on issues of contemporary importance. This discussion includes changes in the decision process initiated by implementing enterprise resource planning (ERP) systems, data warehouses, electronic commerce, virtual organizations, on-line financial reporting, and disaggregated financial statement information.     

Determinants and consequences of tournament incentives: A survey of the literature in accounting and finance

This paper synthesizes the theoretical underpinnings of tournament models, reviews the extant empirical literature on the determinants and consequences of tournament incentives, critiques the findings and offers suggestions for future research. We synthesize findings from 63 empirical papers and find that several firm-level fundamental and corporate governance variables affect the structure of corporate tournaments. Our review of the consequences of tournament structure reveals that tournaments affect financial reporting and auditing as well as firm-level operational and capital market-based outcomes. This review reveals that the existing accounting and finance literature lacks a strong justification for why one theory rather than another is favored. Moreover, based on potential problems that may exist in empirical models, this review also offers some methodological implications for empirical tournament studies.     

The importance of informal professional networks in developing a proactive organizational culture: a public value perspective

Public value theory was used by the authors to investigate informal professional networks, perceived discretionary power, and the organizational culture that forms in physical asset management organizations. The results, from a structural equation model, indicated that informal professional networks are positively associated with higher discretionary power and a proactive asset maintenance organizational culture. In the absence of public managers promoting public value, professionals use their informal networks as a source of power to be proactive and contribute to asset reliability and public safety (public value).     

Achieving the United Nations' sustainable development goals through financial inclusion: A systematic literature review of access to finance across the globe

Access to credit may have a direct effect on achieving United Nations (UN) Sustainable Development Goals (SDGs) in ending poverty, improving health and education, and reducing inequality. In this paper, we systematically review the growing empirical evidence on whether individuals' demographic characteristics (such as gender and race) and socio-economic features (such as income and education) effect their ability in accessing credit. Our survey covers peer-reviewed articles providing empirical evidence, using quantitative and qualitative data, published between 2000 and 2020 (February). We find that having more education and/or being more financially literate increases households' and entrepreneurs' access to credit. Individuals with lower income and less wealth are less likely to obtain credit from the mainstream financial institutions. In emerging countries, women are more likely to be rejected and deprived from formal credit, and pay higher cost. Non-Whites, ethnic minorities, disabled people and immigrants are also more likely to be excluded from the formal credit markets. We find that abovementioned credit deprived segments of the society resort to fringe finance providers, such as pay-day lenders or pawnbrokers, with higher costs. These findings are remarkably similar across developed and developing countries. Finally, we provide direction for further research in achieving SDGs through financial inclusion and access to credit by highlighting various shortcomings of the existing literature and empirical evidence.     

Second and higher moments of fundamentals: A literature review

This literature review outlines the recent progress in fundamental second and higher moments of research. We survey the moments’ existence, formation, and financial market and macroeconomic implications. Research shows that time‐varying volatility and non‐Gaussian shocks exist throughout all measures of fundamentals at both the micro‐ and macro levels. In addition, the granular network among firms helps explain the origin of fundamental second and higher moments. Empirical evidence shows that the moments have strong predictive power on asset prices and macroeconomic variables. We also highlight several areas where more research is needed to better understand the moments.