Most Cited Advances in Accounting Articles
The most cited articles published since 2011, extracted from Scopus.
The extent of corporate governance disclosure and its determinants in a developing market: The case of EgyptKhaled Samaha | Khaled Dahawy | Khaled Hussainey | Pamela Stapleton
Volume 28, Issue 1, June 2012, Pages 168-178
This paper assesses the extent of corporate governance voluntary disclosure and the impact of a comprehensive set of corporate governance (CG) attributes (board composition, board size, CEO duality, director ownership, blockholder ownership and the existence of audit committee) on the extent of corporate governance voluntary disclosure in Egypt. The measurement of disclosure is based on published data created from a checklist developed by the United Nations, which was gathered from a manual review of financial statements and websites of a sample of Egyptian companies listed on Egyptian Stock Exchange (EGX). Although the levels of CG disclosure are found to be minimal, disclosure is high for items that are mandatory under the Egyptian Accounting Standards (EASs). The failure of companies to disclose such information clearly shows some ineffectiveness and inadequacy in the regulatory framework in Egypt. Moreover, the phenomenon of non-compliance may also be attributed to socio-economic factors in Egypt. Therefore, it is expected that Egyptian firms will take a long time to appraise the payback of increased CG disclosure. The findings indicate that that-ceteris paribus-the extent of CG disclosure is (1) lower for companies with duality in position and higher ownership concentration as measured by blockholder ownership; and (2) increases with the proportion of independent directors on the board and firm size. The results of the study support theoretical arguments that companies disclose corporate governance information in order to reduce information asymmetry and agency costs and to improve investor confidence in the reported accounting information. The empirical evidence from this study enhances the understanding of the corporate governance disclosure environment in Egypt as one of the emerging markets in the Middle East. © 2011 Elsevier Ltd.
Corporate governance and environmental performance and disclosuresYu Cong | Martin Freedman
Volume 27, Issue 2, December 2011, Pages 223-232
In this study the relationships between good corporate governance practices and environmental performance and disclosure are examined. Firms that are among the major emitters of toxic emissions in the United States comprise the sample for the study. Pollution performance is measured using a methodology that includes both the toxicology of the emissions and the population density of the community. A corporate governance measure and a pollution disclosure evaluation that were previously presented in the accounting literature are utilized in the study to validate the main performance measure.The findings indicate that there is no relationship between good governance and good pollution performance. Additionally good governance is positively related to pollution disclosure while the correlation does not hold when governance was improved by SOX. The overall findings support legitimacy theory. This may indicate that the story about pollution performance is better than the actual outcome. © 2011 Elsevier Ltd.
The relation between earnings management and financial statement fraudJohan L. Perols | Barbara A. Lougee
Volume 27, Issue 1, June 2011, Pages 39-53
This paper provides new evidence on the characteristics of firms that commit financial statement fraud. We examine how previous earnings management impacts the likelihood that a firm will commit financial statement fraud and in doing so develop three new fraud predictors. Using a sample of 54 fraud and 54 non-fraud firms, we find that fraud firms are more likely to have managed earnings in prior years and that earnings management in prior years is associated with a higher likelihood that firms that meet or beat analyst forecasts or that inflate revenue are committing fraud. We further find that fraud firms are more likely to meet or beat analyst forecasts and inflate revenue than non-fraud firms are even when there is no evidence of prior earnings management. This paper contributes to the fraud detection literature and the earnings management literature, and can help practitioners and regulators develop better fraud detection models. © 2010 Elsevier Ltd.
Transition to IFRS and compliance with mandatory disclosure requirements: What is the signal?Ioannis Tsalavoutas
Volume 27, Issue 2, December 2011, Pages 390-405
The present study examines 153 Greek listed companies' compliance with all IFRS mandatory disclosure requirements during 2005 and complements and extends prior literature in the following way. The unique setting i.e., measuring compliance with IFRS mandatory disclosure requirements during the first year of IFRS implementation, allows for examination of the possibility that the changes in the 2004 shareholders' equity and net income, as a result of the adoption of IFRS, constitute explanatory factors for compliance. Thus, this study hypothesises that, in addition to the financial measures and other corporate characteristics that prior literature identifies as proxies for explaining compliance, a significant change in fundamental financial measures, because of the change in the accounting regime, may also explain compliance based on the premises of the relevant disclosure theories. The findings confirm these hypotheses. This study also makes a methodological contribution on measuring compliance with all IFRS mandatory disclosure requirements by using two different disclosure index methods and pointing out the different conclusions may be drawn as a result. © 2011 Elsevier Ltd.
Corporate governance, earnings management, and IFRS: Empirical evidence from Chinese domestically listed companiesYing Wang | Michael Campbell
Volume 28, Issue 1, June 2012, Pages 189-192
This research used 1,329 Chinese publicly listed companies' data from 1998 to 2009 to investigate how IFRS, state ownership, and board of directors (BOD) influence earnings management. We conclude that state-ownership to an extent discourages earnings management in the current environment of China. However, IFRS implementation does not seem to deter earnings management. When state-ownership is not the case, increasing the number of independent BOD seems to be a good practice to discourage earnings management, although non-independent BOD does not make any difference. © 2012 Elsevier Ltd.
Financial crisis and accounting quality: Evidence from five European countriesGeorge Iatridis | Augustinos I. Dimitras
Volume 29, Issue 1, June 2013, Pages 154-160
This study investigates how the economic crisis affects the scope for earnings manipulation and the value relevance of reported financial numbers for companies that are audited by a big 4 auditor. The analysis is focused on Portuguese, Irish, Italian, Greek and Spanish listed companies. The findings show that Portugal, Italy and Greece tend to engage more in earnings management in their effort to improve their lower profitability and liquidity, and accommodate their higher debt and growth. Ireland exhibits less evidence of earnings manipulation, while the findings for Spain are to some extent conflicting. Additionally, the reported financial numbers of Portuguese and Greek companies that are audited by a big 4 auditor were found to be of higher quality before the crisis. In contrast, Irish, Italian and Spanish companies report more value relevant financial numbers during the crisis. The results of this study are particularly useful for accounting regulators when preparing accounting rules that seek to reduce information asymmetry and earnings manipulation and increase the quality of reported disclosures in light of a crisis and for investors that need further assistance for the establishment of a profitable investment strategy in periods characterized by high uncertainty and volatility. © 2013 Elsevier Ltd.
The usefulness of firm risk disclosures under different firm riskiness, investor-interest, and market conditions: New evidence from FinlandAntti Miihkinen
Volume 29, Issue 2, December 2013, Pages 312-331
To date, there is only meager research evidence on the usefulness of mandatory annual report risk disclosures to investors. Although it has been argued that corporate disclosure decreases information asymmetry between management and shareholders, we do not know whether investors benefit from high-quality risk reporting in a highly regulated risk disclosure environment. In this paper, we performed association tests to examine whether the quality of firms' mandatory risk disclosures relate to information asymmetry in the Finnish stock markets. In addition, we analyzed whether the usefulness of risk disclosures depends on contingency factors such as firm riskiness, investor interest, and market condition. We demonstrate that the quality of risk disclosure has a direct negative influence on information asymmetry. We also document that risk disclosures are more useful if they are provided by small firms, high tech firms, and firms with low analyst coverage. We also found that momentum in stock markets affects the relevance of firms' risk reports. © 2013 Elsevier Ltd.
The impact of IFRS on accounting quality: Evidence from GreecePanagiotis E. Dimitropoulos | Dimitrios Asteriou | Dimitrios Kousenidis | Stergios Leventis
Volume 29, Issue 1, June 2013, Pages 108-123
This paper examines the impact of IFRS adoption on the quality of accounting information within the Greek accounting setting. Using a sample of 101 firms listed in the Athens Stock Exchange (ASE) for a period of eight years (2001-2008) we find convincing evidence that the implementation of IFRS contributed to less earnings management, more timely loss recognition and greater value relevance of accounting figures, compared to the local accounting standards. Also, our findings document that audit quality further complements the beneficial impact of IFRS since those companies that are audited by Big-5 audit firms exhibit higher levels of accounting quality. Our findings are robust in regard to different model specifications and after controlling for firm-specific effects like size, risk, profitability and growth opportunities. © 2013 Elsevier Ltd.
Intellectual capital disclosures by South African companies: A longitudinal investigationMaina Michael Wagiciengo | Ataur Rahman Belal
Volume 28, Issue 1, June 2012, Pages 111-119
Most of the previous studies on intellectual capital disclosures have been conducted from developed countries' context. There is very limited empirical evidence in this area from the context of emerging economies in general and Africa in particular. This paper is one of the early attempts in this regard. The main purpose of this study is to examine the extent and nature of intellectual capital disclosures in 'Top 20' South African companies over a 5. years period (2002-2006). The study uses content analysis method to scrutinise the patterns of intellectual capital disclosures during the study period. The results show that intellectual capital disclosures in South Africa have increased over the 5. years study period with certain firms reporting considerably more than others. Out of the three broad categories of intellectual capital disclosures human capital appears to be the most popular category. This finding stands in sharp contrast to the previous studies in this area where external capital was found to be most popular category. © 2012 Elsevier Ltd.
The use of the Internet for corporate reporting in the Mercosur (Southern common market): The Argentina caseFatima Alali | Silvia Romero
Volume 28, Issue 1, June 2012, Pages 157-167
This study examines disclosure practices on the websites of companies listed on the Buenos Aires Stock Exchange. We perform content analysis to provide evidence on Internet reporting practices by 84 publicly traded firms. We also identify the characteristics of firms that communicate financial and non-financial information on the Internet. We find that companies in the financial and insurance, services and mining industries disclose more financial and non-financial information on their websites than companies in other industries. The average concentration of ownership is 68%, with 27% of the companies being controlled by foreign groups. Those companies with higher concentration disclose more financial and non financial information than companies with less concentration. Companies in the financial and insurance and service industries, utilize their websites for commercial purposes to facilitate access to customers to their accounts and also to sell services. This e-commerce usage of websites is less developed in other industries. About 71% of companies in the financial and insurance industry are included in the Merval25 index and are audited by Big 4. These companies are both larger in size and less profitable than companies in other industries. We find that profitability and leverage do not have significant effect on corporate Internet reporting practices and that growth has negative effect on corporate Internet reporting practices. We also find that companies in the mining sector provide significantly more disclosure about social responsibility indicating a desire to improve the public image of harming the environment. The results documented, herein, extend the literature on voluntary disclosure of financial and non-financial information using the Internet in emerging markets. © 2012 Elsevier Ltd.
Voluntary disclosure practices amongst listed companies in NigeriaIsmail Adelopo
Volume 27, Issue 2, December 2011, Pages 338-345
This study examines voluntary disclosure practices amongst listed companies in Nigeria. Results from univariate and multivariate analyses of 52 listed companies suggest an average voluntary disclosure of 44% based on modified Meek, Roberts and Gray (1995) disclosure index comprising 24 disclosure items. The study found significant positive relationship between voluntary disclosure and firm size, measured as the natural logarithm of total asset. The study documents significant positive relationship between market-based definition of firm performance and voluntary disclosure. The study also found significant negative relationship between percentage of block share ownership and percentage of managerial share with firm disclosures. The study has important implication for both individual and institutional investors globally, regulators and policy makers in developing economies. © 2011 Elsevier Ltd.
Corporate aggregate disclosure practices in JordanBilal Omar | Jon Simon
Volume 27, Issue 1, June 2011, Pages 166-186
This study reports the results of an empirical investigation of the disclosure behavior of listed companies in Jordan after important changes in economic and accounting regulations. It also reports the relationship between aggregate disclosure (both mandatory and voluntary) and a number of company characteristics (financial and non-financial) for Jordanian companies listed in Amman Stock Exchange (ASE). The results of the study revealed that there was a significant increase in the level of aggregate disclosure (its average was 69%) compared to previous studies in Jordan. The extent of mandatory and voluntary disclosures was 83% and 34% respectively. Univariate analysis revealed that firm size, profitability, number of shareholders, listing status, industry type, audit firm size and company age are significant variables in explaining the variation in the level of aggregate disclosure among Jordanian companies. Meanwhile, multivariate analysis showed firm size (sales), profitability (ROE), audit firm size, industry type and listing status, to be significantly associated with the level of aggregate disclosure. © 2011 Elsevier Ltd.
The differential CEO dominance-compensation and corporate governance-compensation relations: Pre- and post-SOXAnna M. Cianci | Guy D. Fernando | Edward M. Werner
Volume 27, Issue 2, December 2011, Pages 213-222
We examine the relationship between corporate governance (as measured by traditional corporate governance variables and a new measure of corporate governance, called CEO dominance) and executive compensation, pre- and post-SOX. We conceptualize CEO dominance as a measure of a CEO's power and define it as the difference between CEO pay and the next highest executive's pay divided by the CEO's pay. We argue that for traditional corporate governance variables, the inverse governance-compensation relation that exists pre-SOX will improve post-SOX. On the other hand, we expect a strong and positive CEO dominance-compensation relation to exist both pre- and post-SOX. Consistent with expectations, our results indicate that SOX has changed the relationship between CEO duality and compensation relation, but it has not changed the CEO dominance-compensation relation. This suggests that SOX regulatory reforms do not limit the ability of CEO power to obstruct traditional corporate governance mechanisms in extracting compensation-related rents. © 2011 Elsevier Ltd.
How is the IFRS for SME accepted in the European context? An analysis of the homogeneity among European countries, users and preparers in the European commission questionnaireAlberto Quagli | Paola Paoloni
Volume 28, Issue 1, June 2012, Pages 147-156
In this paper we analyze the answers to the "Questionnaire on the public consultation of the IFRS for SMEs", promoted by the European Commission. Our aim is to evaluate the homogeneity among respondents, according to the different perspectives of analysis between both users, preparers and also in European Countries. Results show a substantial diversity among respondents. In particular, preparers demonstrate a strong opposition to the IFRS for SMEs, while users are more favorable. Concerning Country classification, German-speaking Countries and Latin Countries show much less appreciation for that standard with respect to Anglo. -. Nordic Countries. Relevant consequences for European public policy issues and for accounting studies on differential reporting arise from this result, concerning respectively the role of European accounting system and the acceptance of "user primacy" principle. © 2012 Elsevier Ltd.
The impact of government ownership on dividend policy in ChinaXi Wang | David Manry | Scott Wandler
Volume 27, Issue 2, December 2011, Pages 366-372
We investigate the impact of State ownership on Chinese corporate dividend policy. We find that Chinese firms' dividend payout rates respond fairly quickly to earnings changes, and the average actual payout ratio for Chinese firms falls between the payout ratios for emerging-market and developed firms. These results are consistent with the dividend policies of developing economies in general. We also find that dividend payouts among dividend-paying firms, and the likelihood that a firm will pay a dividend, are increasing in State ownership. Our findings are consistent with the State's need for cash flow as a partial motivation for continued State ownership of a significant portion of the corporate economy, and support the agency and tax clientele explanations for dividend policy. © 2011 Elsevier Ltd.
What factors influence auditors' use of computer-assisted audit techniques?James Bierstaker | Diane Janvrin | D. Jordan Lowe
Volume 30, Issue 1, January 2014, Pages 67-74
To meet the challenges of rapid advances in client technology, audit standards urge auditors to use computer-assisted audit tools and techniques (CAATs). However, recent research suggests that CAAT use is fairly low. This paper uses the Unified Theory of Acceptance and Use of Technology (UTAUT) to identify and then examines factors potentially influencing auditors' use or non-use of CAATs. Examining auditor use of CAATs is important because CAATs hold out the promise of improving audit efficiency and effectiveness. Data was obtained from 181 auditors from Big 4, national, regional, and local firms. Results indicate that outcome expectations, the extent of organizational pressures and technical infrastructure support influence the likelihood that auditors will use CAATs. © 2013 Elsevier Ltd.
IT governance: Objectives and assurances in internet bankingShi Ming Huang | Wei Cheng Shen | David C. Yen | Ling Yi Chou
Volume 27, Issue 2, December 2011, Pages 406-414
This paper develops and tests a new factor of the trust model in electronic commerce; namely, internet banking. Internal control of internet banking is very consistent with high levels of trust factors such as security, privacy, and other risk issues. However, this type of association has not yet been widely recognized as a trusted model from the consumer's electronic commerce point of view. This study attempts to create new factors in IT governance and the COBIT (Control Objectives for Information and Related Technologies) assurance seal. The empirical results of this experiment show that customer familiarity with IT governance and the COBIT assurance seal has impacted customers' trust in internet banking. Moreover, the results also show that perceived internet banking quality and reputation impact customers' trust in internet banking. Given the results of this study, we propose future research aimed at developing a COBIT assurance web seal of internal control, applicable to information technology based on IT governance. © 2011 Elsevier Ltd.
Determinants of corporate social responsibility disclosures: Evidence from IndiaMonika Kansal | Mahesh Joshi | Gurdip Singh Batra
Volume 30, Issue 1, January 2014, Pages 217-229
Over the last few decades, a number of studies, mostly in the western countries, have investigated the nature and frequency of corporate social responsibility disclosures, their patterns and trends, and their general relationships with corporate size and profitability. This study seeks to extend the knowledge regarding the relationship between a number of financial and non-financial corporate characteristics and the level of social responsibility disclosures based on an extensive sample of top Indian companies. Corporate size and industry category are found to correlate with the corporate social disclosures of the companies and the corporate reputation as recognised through awards and social ratings has also been observed to be a significant factor that influences the social disclosures made by the Indian companies. © 2014 Elsevier Ltd.
Environmental uncertainty and the market pricing of earnings smoothnessAhsan Habib | Mahmud Hossain | Haiyan Jiang
Volume 27, Issue 2, December 2011, Pages 256-265
Environmental uncertainty induces variability in an organization's reported earnings, and accentuates the information asymmetry between its managers and outside stakeholders. Managers operating in an environment of high uncertainty, therefore, have an incentive to reduce such variability by smoothing income numbers. We investigate the stock market response to earnings smoothness for firms operating in an environment of high uncertainty. We measure income smoothing by the negative correlation of a firm's change in discretionary accruals with its change in pre-managed earnings as per Tucker and Zarowin (2006). Using future earnings response coefficient (FERC) methodology to measure the informativeness of smoothed earnings, and two measures of environmental uncertainty, this paper documents that current stock price incorporates more information about future earnings for firms operating in high uncertain environments, thus supporting the informational value view of income smoothing. © 2011 Elsevier Ltd.
The relationship between business strategy, management control systems and performance: Evidence from ChinaMathew Tsamenyi | Sunil Sahadev | Zheng Shi Qiao
Volume 27, Issue 1, June 2011, Pages 193-203
Over the past two decades, China has emerged as a global economic power, ranking behind only the USA, Japan and Germany. China's continuous global economic power has therefore prompted a surge in interest in understanding Chinese business practices. This paper reports on the results of a survey on the contingent relationship between business strategy, management control systems (MCS) and performance in Chinese Enterprises. The analysis is based on data gathered from 215 enterprises operating within the Xinjiang autonomous region of China. For those firms that were classified as pursuing differentiation strategy, the use of more non-financial based MCS has a positive effect on performance and this finding is consistent with the literature. We also found that for those firms classified as pursuing a low cost strategy, the use of more financial based MCS had a positive effective on performance as suggested in the literature. Our research has implications for understanding management accounting practices in Chinese enterprises. © 2011 Elsevier Ltd.
The adoption of International Financial Reporting Standards in a non-colonized developing country: The case of NepalGhanshyam Poudel | Andreas Hellmann | Hector Perera
Volume 30, Issue 1, January 2014, Pages 209-216
The purpose of this paper is to provide a systematic and rigorous analysis of the accounting environment in Nepal. Based on the accounting ecology framework developed by Gernon and Wallace (1995) and interviewing selected key stakeholders, it critically examines issues related to the adoption of International Financial Reporting Standards (IFRS) in Nepal. It contributes to the literature by examining issues associated with the adoption of IFRS in a non-colonized developing country. This study finds that the decision to adopt IFRS in Nepal is not driven by the needs of local organizations and is rather imposed by donor organizations such as the Asian Development Bank, International Monetary Fund and World Bank. The findings of this study provide evidence that the adoption of IFRS is likely to be problematic due to the country's contextual environment. Specifically, there is a severe lack of qualified accountants in Nepal and the accounting profession is not ready to adopt IFRS. The study also finds that social problems such as widespread corruption and fraud are likely to cause problems for the adoption of IFRS. © 2014 Elsevier Ltd.
Corporate ownership concentration and audit fees: The case of an emerging economyArifur Rahman Khan | Dewan Mahboob Hossain | Javed Siddiqui
Volume 27, Issue 1, June 2011, Pages 125-131
The paper investigates the effects of corporate ownership concentration on audit fees in emerging economies, using Bangladesh as a case. Prior studies have indicated that audit fees in Bangladesh are significantly low. Also, the Bangladeshi private sector is dominated by high ownership concentration. Agency theory predicts that in an efficient market, managers in a highly concentrated ownership situation will have sufficient incentives to have more rigorous audits performed. However, managers in emerging economies, where the markets are not as strong, may not have similar incentives. We test whether audit fees in Bangladesh are related to corporate ownership concentration. Our results indicate that audit fees have a significant negative relationship with sponsor and institutional ownership concentrations. This indicates that in Bangladesh, companies actually pay lower audit fees when these are dominated by sponsor and institutional shareholders. For the public shareholders, we find a negative, but statistically insignificant relationship. The results seem to suggest that corporate ownership pattern may be a major factor in explaining the low audit fees in Bangladesh. © 2011 Elsevier Ltd.
Are incentives for earnings management reflected in the ERC: Large sample evidenceEmeka T. Nwaeze
Volume 27, Issue 1, June 2011, Pages 26-38
In this study, I examine the effect of exposure to earnings management (EM) incentives on the earnings response coefficient (ERC). Drawing from several anecdotes and normative arguments about the implications of managers' incentives for investor perception, I predict and test that exposure to EM incentives is negatively associated with the ERC. I find that ERC is reliably lower for firms with elevated exposure to EM incentives, holding constant the effects of actual EM and other factors that affect the returns-earnings relation. Furthermore, the effect of the incentive exposure on cash flows as well as on total accruals is reliably negative. These results are robust across alternative price- and returns-earnings specifications, and are insensitive to the inclusion of other measures of earnings quality. Additional analysis shows that the effect of such incentives on the ERC is more pronounced at higher levels of institutional stock ownership. However, a certain class of institutional owners - transient institutions - are less sensitive to the implications of such incentives for earnings quality. © 2011 Elsevier Ltd.
Good disclosure doesn't cure bad accounting-Or does it?. Evaluating the case for SFAS 158.Cathy Beaudoin | Nandini Chandar | Edward M. Werner
Volume 27, Issue 1, June 2011, Pages 99-110
This paper investigates whether the newly required recognition of the funded status of defined benefit (DB) plans under SFAS 158 is incrementally value relevant in its adoption year (2006) relative to the corresponding amounts which were previously disclosed from both equity investor and credit rating perspectives. In equity valuation models, we use a sample of 878 firms (1756 firm years) offering DB plans in 2005 (disclosure year) and 2006 (recognition year), and find no incrementally significant association with market prices of newly recognized amounts under SFAS 158 over the same information that was disclosed pre-SFAS 158. Our credit rating tests, using a sample of 428 DB firms (856 firm years) for 2005 and 2006 also show no differential impact of recognition over disclosure. Overall, we find that equity investors price the SFAS 158-imposed pension differential while credit rating agencies do not, regardless of whether such information is recognized or disclosed in the financial statements. Our results are consistent with efficiency in both equity and credit markets with respect to pension information and suggest that SFAS 158 has not changed the way market participants in aggregate use pension-related financial statement information. © 2011 Elsevier Ltd.
AIA submission: CEO overconfidence and the incidence of financial restatementTheresa J. Presley | Lawrence J. Abbott
Volume 29, Issue 1, June 2013, Pages 74-84
The role of the Chief Executive Officer (hereafter, CEO) in financial reporting is almost universally assumed to be significant (Carcello, Neal, Palmrose & Scholz, 2011; Cohen, Krishnamoorthy, & Wright, 2002; Connelly, 2005; Paredes, 2004). While academics and regulators agree that the CEO can have a large impact on financial reporting decisions, there is very little research on how individual CEO characteristics actually influence the financial reporting process. This paper examines the impact of one such CEO characteristic - CEO overconfidence - on the incidence of financial restatement. We utilize a matched-pairs research design consisting of 75 restatement firms (obtained through the GAO restatement sample) and a set of 75 non-restatement control firms. Using an options-based measure of CEO overconfidence developed by Malmendier and Tate (2008), we document a statistically significant positive relation between CEO overconfidence and financial statement restatement. © 2013 Elsevier Ltd.