The impact of CSR performance and CSR disclosure readability on investors’ earnings estimates

We investigate how the valence of corporate social responsibility (CSR) performance and the readability of CSR disclosure impact investors’ earnings estimates. Ninety-seven part-time MBA students participate in an experiment, in which we manipulate the valence of CSR performance (positive versus neutral) and the readability of CSR reports (high versus low), while holding financial information constant. Our findings reveal that investors make more positive earnings estimates when CSR performance is positive. The readability level of CSR reports also influences investors’ decision-making process. Moreover, by using an eye-tracking device, we are able to observe investors’ different reading behaviours upon the different levels of readability.     

The effects of executive compensation and outside monitoring on firms’ pre-repurchase disclosure behavior and post-repurchase performance

Review of Quantitative Finance and Accounting - We show that corporate governance mechanisms play an important role in controlling managers’ opportunistic behavior. Low executive equity...     

Review: Chinese public administration and finance—a call for a new theory,research and dialogue

In implementing its national strategy to achieve global leadership, China needs a new public administration theory that integrates political administration, economic management and social regulation. Even so, China has already started to promote its brand of political and economic development abroad. Therefore new comparative research and dialogue is called to explore the universality of Chinese and Western public administration ideas.     

Do auditing standards improve the accounting disclosure and information environment of public companies? Evidence from the emerging markets in China

In this paper, we investigate the impact of the implementation of a set of new auditing standards in 1996 on the information environment in the emerging markets in China. Because the implementation of such standards can increase the quality and/or quantity of accounting disclosures, it can be conceptualized as an improvement in the information environment of public companies. We investigate the improvement in accounting disclosure and information environment from both the market perspective and the accounting perspective. First, consistent with the information economics literature (e.g., [Holthausen, R., & Verrecchia, R., (1990). The effect of informedness and consensus on price and volume behavior. The Accounting Review, 65, 191–208]), we find that companies experience a significant increase in trading volume and price volatility subsequent to the implementation of the standards. Second, consistent with the literature on earnings management (e.g., [Chen, C. W. K., & Yuan, H. Q., (2004). Earnings management and capital resource allocation: evidence from China's accounting-based regulation of right issue. The Accounting Review, 79, 645–665, Jian, M., & Wong, T. J., (2004). Earnings management and tunneling through related party transactions: evidence from Chinese corporate groups. Working Paper, Nanyang Technological University and Hong Kong University of Science and Technology]), we find a decrease in earnings management and, hence, an increase in quality of earnings. Finally, we find a decrease in the synchronicity of stock prices and, hence, an increase in the quality of firm-specific information available to investors, which is consistent with the literature on price synchronicity (e.g., [Morck, R., Yeung, B., & Yu, W., (2000). The information content of stock markets: why do emerging markets have synchronous stock price movements? Journal of Financial Economics, 58, 215–260]). Our results have significant implications for standard setters, regulators, researchers, managers, and investors in general and those in the emerging markets in particular.     

The impact of corporate governance and agency effect on earnings management – A test of the dual banking system

This study investigates the impact of the Board characteristics, Chief Executive Officer’s (CEO) power and Shariah supervision on Earnings Management (EM) within conventional and Islamic banks. We provide evidence that EM levels do not significantly differ between Islamic and conventional banks. Contrary to public belief, additional value-based attributes such as the Shariah Supervisory Board (SSB) that promotes ethical and religious values, do not help in the restriction of opportunistic behaviour in Islamic banks. Additionally, attributes such as board size, firm size and leverage have a significant negative influence on EM of both Islamic and conventional banks. Our results are important in deliberating that the word ‘Islamic’ must not be used merely as a profit manifestation, but instead must promote a value-based business, which in turn could ensure reliability and sustainability.     

On the value relevance of information on environmental and social activities and performance – Some evidence from the UK stock market

Motivated by the requirements of the UK Companies Act 2006 for a Strategic Report introduced in late 2013, and the subsequent Directive 2014/95/EU of the European Parliament and of the Council, we investigate the relationship between the levels of disclosures on environmental and social activities and performance (analyst following) and subsequent analyst following (subsequent levels of disclosures on environmental and social activities and performance). We do so to investigate the value relevance of information about environmental and social activities and performance. Our evidence is consistent with their value relevance and an associated demand for, or general interest in, such disclosures from informed market participants. We also argue that our results suggest positive links between analyst following and the quality of environmental and social disclosure.     

Accounting change and value creation in public services—Do relational archetypes make a difference in improving public service performance?

Evidence points out that the outcome of accounting change in local governments is not simply a matter of ‘corporate’ resource investments and change management activities to accounting system replacement. This paper examines the link between such corporate-level interventions and the patterns of value creation at street-level. It emphasizes a resource- and capability-driven approach to explore processes and consequences of an ‘embedded agency’-effect assigned to the street-level rationale of public service improvement. Considering a logic chain of cause-and-effect sequences, the data analysis provides evidence that corporate and street-level interventions are unique dimensions to signify the multiple patterns of accounting change in local governments. The supplementary effect of cross-functional relationships is also distinguished, considering the relational archetype as a mechanism to explain the emerging outcome state. Recognizing the distinction and the sequential effects of relational archetypes induces a refined typology of accounting change according to its processes and outcomes in local governments. The analysis is based on a comparative case study design to explore accrual accounting introduction in six German municipalities.     

The effect of information sharing between lenders on access to credit,cost of credit,and loan performance – Evidence from a credit registry introduction

Using a rich dataset from a commercial bank in Albania, we utilize the introduction of a public credit registry by the Albanian central bank in January 2008 as a natural experiment to analyze the effect of information sharing between lenders on (1) access to credit, (2) cost of credit, and (3) loan performance. Our results suggest that information sharing by means of a credit registry does not affect access to or cost of credit, but improves loan performance. Specifically, loans granted after the introduction of the credit registry are 3% points less likely of turning problematic, representing a 35% reduction of the overall sample average arrear probability. We further find that the effect is more pronounced for repeat borrowers and in areas, where competition is weak. This indicates that information sharing among lenders improves loan performance mainly by disciplining borrowers to repay in their concern about future access to credit.     

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.     

Repoliticalization of accounting standard setting—The IASB,the EU and the global financial crisis

Since its inception, the IASB has been able to set standards with relatively little political influence in its governance or standard setting process. But this changed with the outbreak of the global financial crisis. Political bodies began to view accounting standards as a contributing factor that amplified the consequences of the crisis on banks, financial markets and the overall economy. Regaining control over accounting standard setting was seen as imperative. In this article, we investigate how the EU sought to gain control over the IASB and how the global standard setter responded to limit political influence. Our findings show that a re-balancing of power in favor of political interests has occurred between the stakeholders of international accounting standard setting. Further research in this area looks promising. We suspect that the heightened influence of political actors may lead to further power struggles and efforts to cope with on-going changes in the institutional environment.     

Toward a different debate in environmental accounting: The cases of carbon and cost–benefit

Many champions of environmental accounting suggest that calculating and internalizing ‘externalities’ is the solution to environmental problems. Many critics of neoliberalism counter that the spread of market-like calculations into ‘non-market’ spheres, is, on the contrary, itself at the root of such problems. This article proposes setting aside this debate and instead closely examining the concrete conflicts, contradictions and resistances engendered by environmental accounting techniques and the perpetually incomplete efforts of accountants and their allies to overcome them. In particular, it explores how cost–benefit analysis and the carbon accounting techniques required by the Kyoto Protocol, the European Union Emissions Trading Scheme and other carbon trading mechanisms ‘frame’ new agents, spaces, relations and objects, and what the consequences have been and are likely to be.     

How can we explain internal auditing? The inadequacy of agency theory and a labor process alternative

This paper draws on labor process theory (LPT) to explain how capitalism creates conditions that give rise to a demand for internal auditing. Internal auditing developed from the metamorphosis of capitalism during the twentieth century, when capital gradually succeeded in institutionalizing structural control of labor processes to address the problem of control in inherently antagonistic capital-labor relationships. In this control context employees, management, and the board of directors are responsible for achieving the required rate of return on capital. With the premise that the literature has not adequately theorized the role of internal auditing in this context, this paper proposes an initial theorization of the role of internal auditing as a mechanism employed by management and the board of directors to control the labor process in the generation and realization of surplus value. Internal audit's assurance services to execute business activities according to management's conceptions, and its advisory services to enhance efficiency and effectiveness, are interpreted within the firm's overarching goal of maximizing the rate of return on capital employed. Future research agenda and methodological considerations are discussed.     

The impact of digital transformation of manufacturing on corporate performance — The mediating effect of business model innovation and the moderating effect of innovation capability

Digital technologies have been rapidly changing traditional industries. In the given context, this study reveals the internal influence mechanism of digital transformation on the corporate performance of the manufacturing industry based on the resource-based view theory. We build a theoretical framework incorporating business model innovation and innovation capability as mediator and moderator variables. To evaluate our hypothesis, we conduct an empirical study on 255 Chinese manufacturing enterprises. We classify digital transformation into exploitative and explorative transformations with the ambidexterity theory. The results show that exploitative and explorative digital transformations significantly and positively impact corporate performance, and business model innovation has a significant mediating effect. Innovation capability positively moderates the impact of exploitative and explorative digital transformations on business model innovation and moderates the mediating effect of business model innovation. This paper provides support for promoting the deep integration of the digital economy and the real economy.     

Does environmental investment pay off?—portfolio analyses of the E in ESG during political conflicts and public health crises

This paper examines the contribution of environmental investment on firm value during the Russia-Ukraine War and Global Public Health Crisis. Using media-based environmental scores, we investigate the performance of the emission-reduction-based and green-innovation-based portfolios. The results indicate that while engaging in environmental activities decreases firm value during the noncrisis time, it creates value when companies face market-wide crises. Our findings suggest that environmental investment serves as a risk-hedging vehicle for political and health crises. In addition, compared to corporate ESG disclosures, firm-level media-based environmental scores mitigate the endogeneity between a company's ESG disclosure policies and its firm characteristics.     

The perceiver’s social role and a risk’s causal structure as determinants of environmental risk evaluation

We present a dual-process risk perception model that integrates cognitive and emotional as well as consequentialist and deontological components by distinguishing between two modes of evaluative processing: (a) a consequentialist evaluation that focuses on potential consequences and (b) a deontological evaluation that focuses on moral values. Each of these two modes is assumed to trigger specific cognitive evaluations, specific emotions, and specific behavioral tendencies concerning a perceived risk. We conducted an experiment (N = 270) that tested whether the relative dominance of the two evaluative modes would depend on the causal structure of the environmental risk being evaluated and on the social role of the evaluator. Three types of causal structure were varied by providing scenario information: (a) anthropogenic risks that endanger only nature, (b) naturally caused risks with potential harmful consequences for humans, and (c) anthropogenic risks that may harm humans. Participants evaluated each scenario from the perspective of one of three social roles: mayor, expecting parent, and environmental activist. For each scenario, participants specified their focus and evaluated the event’s morality and perceived risk, the intensity of specific emotions, and their preferences for prospective behaviors. Results showed that the consequentialist evaluation was generally stronger than the deontological evaluation and was less affected by the experimental manipulations. The deontological evaluation was substantially affected by the risk’s causal structure. It was stronger for anthropogenic than for natural causation; risks caused by humans were associated with greater perceived moral blameworthiness, more intense morality-based emotions (e.g. outrage), and a stronger tendency to perform agent-related behaviors (e.g. aggression) than naturally occurring risks. The effect of the social role was less pronounced than that of the causal structure. Furthermore, the effect of an evaluative focus on behavior was fully mediated by emotions for deontological evaluations and partially mediated for consequentialist evaluations. The implications for environmental risk perception and communication are discussed.