Knowledge,innovation, and control towards accountability: a comparative case study

This paper deepens the countervailing relationship between control and innovation in highly innovative networks. It adopts a middle range theory perspective [Broadbent and Laughlin, 2013. Accounting Control and Controlling Accounting: Interdisciplinary and Critical Perspectives. 1st ed. Bingley: Emerald Group] integrated with the quintuple helix model (Carayannis and Campbell, 2010. “Triple Helix, Quadruple Helix and Quintuple Helix and How Do Knowledge, Innovation and the Environment Relate To Each Other?.” International Journal of Social Ecology and Sustainable Development 1 (1): 41–69] to explore how control and innovation interact and shape each other in the contexts of high complexity and intensive knowledge creation, towards the satisfaction of accountability demands by stakeholders. The research relies upon two case studies and reveals what are the factors positively shaping the interaction between innovation and control towards greater accountability. We document that successful changes are facilitated by the implementation of adequate and innovative informal control devices favouring collaborative relationships, reinforcing innovation and shared knowledge and capabilities within the organisation. The findings are relevant to all complex settings involved in multifaceted processes of producing knowledge and innovation.     

Motivations behind users’ participation in the standard-setting process: Focus on financial analysts

The aim of this study is to investigate what motivates financial analysts to participate in the accounting standard-setting process. We focus on financial analysts because they are an important group of the financial statements users. The paper employs the meso-level approach used by Durocher et al. (2007) that integrates the macro domain’s focus on the standard setters with the micro domain’s focus on individuals and thus it links the characteristics of due process for standard setting with users’ attitudes. We develop a survey for the Chartered Financial Analysts Institute (CFA), which is one of the largest associations of investment professionals in the world, and collected data through computer-assisted Web interviews. We use a structural equation model with PLS to test our hypotheses. Our main findings confirm that a combination of micro and macro domains explains the frequency of financial analysts’ participation in the standard setting process. This investigation, thus, deepens our understanding of motivations behind analysts’ involvement in the accounting standard-setting process and delivers both theoretical contributions and practical insights.     

The Value Relevance of Risk Disclosure: An Analysis of the Banking Sector

Abstract

The aim of this study is to test whether financial risk disclosures required by IFRS 7 and Pillar 3 are value relevant for investors to support them in their investment decisions. The sample in the study consists of banks listed on the London, Paris, Frankfurt, Madrid, and Milan Stock Exchanges over an 8-year period, from 2007 to 2014. Based on the aforementioned standards, we built financial risk disclosure indexes and distinguished different risk categories, qualitative and quantitative, as well as credit, liquidity, and market risk. Our analyses confirm that there is a positive association between bank value and several categories of established risk disclosures. Furthermore, it suggests that disclosure adds value to more traditional risk value measures. Besides, our results suggest that investors pay attention to the strength of the bank authority when using risk disclosures.     

The board's role in risk disclosure: an exploratory study of Italian listed state-owned enterprises

The determinants of risk disclosure in the annual reports of listed state-owned enterprises (SOEs) have yet to be fully explored. This paper examines the potential impact of the composition of the boards of directors and other company-specific features on risk disclosure levels. The presence of women on a board made a significant difference to risk disclosure, as did the age of board members. Board directors having an accounting or finance/business qualification affected risk disclosure negatively; company size and an internet visibility were positively related to risk disclosure. Although an Italian study, the lessons here will have application to academia and to practitioners, policy-makers and standard-setters worldwide.     

Users’ legitimacy perceptions about standard-setting processes

Standard-setting institutions require legitimacy to survive. Prior research infers their legitimacy mainly from the characteristics of standard-setting processes rather than from the legitimacy judgments of important constituencies. Using a survey of financial analysts, we quantitatively assess users’ perceptions about the characteristics of standard-setting processes, the relationships between these characteristics and legitimacy perceptions, and users’ legitimacy perceptions. Our first contribution is to use a sample of sophisticated financial statement users to empirically examine the theoretical proposition that users’ legitimacy perceptions could be a function of the perceived characteristics of standard-setting processes. We find that users’ perceptions about the characteristics of standard-setting processes affect the legitimacy they attribute to these processes. A combination of pragmatic, moral and cognitive legitimacies are at play in such legitimacy assessments. Our second contribution is to point out the importance of separately investigating various types of legitimacy, as users’ perceptions about them vary. Lastly, our third contribution is to highlight that the distinction between users’ perceptions of the characteristics of standard-setting processes and their legitimacy perceptions is not always clear-cut and that there are multiple interrelations among these concepts.     

Do investors find carbon information useful? Evidence from Italian firms

The usefulness of carbon disclosures has been questioned in the literature because they do not truly reflect firm’s carbon performance, suggesting that they may not be useful for risk evaluation and investment decisions. This study empirically tests the usefulness of carbon information voluntarily disclosed by the Italian firms. Our results based on the price model show that there is a positive association between the stock price and carbon disclosures, suggesting that investors find carbon information useful for their investment decisions. We find similar results based on the market valuation model. Additionally, the results reveal that the positive association is especially strong for firms that have established environmental committees on a voluntary basis and also for firms from the highly polluting industries defined by the EU_ETS program, confirming that investors’ positive response is especially strong to carbon disclosures by firms from the highly polluting industries. We also find that the market reacts positively to carbon disclosures by firms with a higher percentage of independent directors on their corporate boards, but the positive association is marginally significant.     

Firm life cycle stages and earnings management

We provide evidence that the differences in economic growth and stability of firms during different stages of their life cycle encourage managers to manage the reported earnings differently to achieve their goals. Our findings support the expectation that managers adjust the reported earnings upward using positive discretionary accruals during the introductory and decline stages of firm life cycle. The upward adjustment of reported earnings during the introductory stage enables them to achieve the objective of sending positive signals on firm performance when the firm is in a formative stage, and also provides a better base for prediction of future earnings. The upward adjustment of reported earnings during the decline stage are expected to enhance firm’s life, which would enable managers to take remedial actions to improve firm performance, especially when the firm is in a distress situation. On the other hand, our findings show that managers may consider using negative discretionary accruals during the growth and maturity stages so that they can save some earnings for use during later years when firm performance compared to market expectations is weak. The managers are, however, not likely to adjust the reported earnings downward when the reported earnings fall short of market expectations. Additionally, we find that large institutional shareholdings perform effective monitoring and discourage managers to use discretionary accruals because their use may result in lower reliability of reported earnings.