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Journal of Applied Accounting Research
Number of Followers: 18  
 
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 0967-5426
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  • Ethical finance and governance
    • Pages: 202 - 205
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 202-205, May 2018.

      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:27:52Z
      DOI: 10.1108/JAAR-12-2017-0139
       
  • Board gender diversity and ESG disclosure: evidence from the USA
    • Pages: 206 - 224
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 206-224, May 2018.
      Purpose The purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings. Design/methodology/approach The environmental, social and governance (ESG) disclosure score provided by Bloomberg is used as a proxy for the extent of corporate social responsibility (CSR). The empirical analysis is based on a sample of 379 firms that made up the Standard & Poor’s 500 Index over the period 2010-2015. In order to take into account the endogeneity problem between board gender diversity and ESG disclosure, a fixed effect model with lagged board variables is used. Findings Two main results arise from this study. First, no significant relationship is found between board gender diversity and ESG disclosure. Second, the evidence also partially confirms critical mass theory, as below three female directors the relationship between board gender diversity and ESG disclosure is not statistically significant. However, beyond that, no significant relationship was found. Research limitations/implications Reasonable theoretical arguments drawn from stakeholder theory suggest that board gender diversity may have a positive effect on ESG disclosure. The empirical evidence presented neither supports, nor denies stakeholder theory. However, the results may be improved by enlarging the frontiers of this research in time and space, increasing the perimeter of qualitative data integrated in this investigation. Practical implications This paper offers theoretical and empirical arguments for the feminization of corporate boards, not only in the name of equality between women and men and organizational justice, but also in the light of organizational performance (examined through the prism of governance). Transparency, analyzed using the proxy of ESG disclosure, is strongly and positively correlated with a feminization of boards, if the proportion of women is significant and sufficient to be able to prevent and surpass the “invisibilization” phenomenon, which is based on the marginalization of passive ultra-minorities, reduction to silence, marginalization (disqualification of women voice or exit strategy), assimilation or the endorsement of stigma. Originality/value First, this makes a theoretical contribution to the diversity and governance literature by examining the effect of WOCB on ESG disclosure through the stakeholder theory (Freeman, 2010). Second, the authors contribute to the CSR literature (cf. Byron and Post, 2016) by documenting specifically the effect of board gender diversity on CSR disclosures through ESG. Indeed, ESG research mainly concentrates on firm financial performance (Galbreath, 2013). No study has examined the relationship between WOCB and ESG disclosure. Finally, from an empirical standpoint, an FE model with lagged board variables (Liu et al., 2014) is used to fully address the endogeneity problems in the relationship between WOCB and ESG disclosure that may occur because of differences in unobservable characteristics across firms or reverse causality (Boulouta, 2013).
      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:28:09Z
      DOI: 10.1108/JAAR-01-2017-0024
       
  • CEO inside debt and the value of excess cash
    • Pages: 225 - 244
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 225-244, May 2018.
      Purpose The purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings. Design/methodology/approach The sample comprises 876 US firms covered by ExecuComp over the period 2006-2013. The authors apply the valuation regression of Fama and French (1998) to examine the marginal value of excess cash as a function of CEO inside debt holdings. Findings This paper proposes one hypothesis. The results constitute evidence that the value of excess cash to shareholders declines as CEO inside debt increases. More interestingly, excess cash holdings contribute less to firm value when shareholders expect their value to be destroyed due to managers’ conservative behavior. Research limitations/implications The sample comprises only US firms, owing to a lack of firms data from other countries. It would be interesting to conduct future research on an international sample. Practical implications This paper contributes to a deeper understanding of investor valuation of excess cash in the presence of CEO inside debt. The findings complement previous studies on US firms by confirming the existence of a relationship between the agency costs of debt and firm policy decisions. Originality/value This work is, to the best of the authors’ knowledge, the first to examine the relationship between debt-like compensation and excess cash valuation, and it supports the view that the conflict between shareholders and debtholders largely affects firm cash policy, and hence, cash valuation.
      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:27:50Z
      DOI: 10.1108/JAAR-02-2017-0028
       
  • Investigating the associations between executive compensation and firm
           performance
    • Pages: 245 - 270
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 245-270, May 2018.
      Purpose While there have been extensive empirical investigations of pay-performance sensitivity, the perspective of performance-pay has received less attention to date. While executive compensation is sensitive to firm performance, firm performance is also likely to be affected by executive compensation. Adopting multiple theoretical perspectives, the purpose of this paper is to examine whether executive compensation has a greater influence on firm performance or whether the latter has a greater influence on compensation. Design/methodology/approach Using data from a five-year period (2010-2014) for Financial Times and Stock Exchange 350 companies, the authors employ a set of simultaneous equation modelling to jointly investigate, after accounting for endogeneity problem, the mutual association of executive compensation and firm performance by employing four control variables (board size, non-executive directors, leverage and boardroom ownership). Findings The authors find strong evidence for the greater influence of executive compensation on firm performance than the pay-performance framework. This finding supports the tournament theory compared with the agency perspective. Research limitations/implications Inevitably, there are limitations in a wide-ranging study of this nature that could be addressed in future research. As any empirical study utilising company data, there may be concerns to the effect of survivorship bias and the manner in which companies have reorganised, if there is any, themselves during the period under examination. There are also issues as to missing data, some measures relating to both executive compensation and corporate governance are not provided by the BoardEx database. Practical implications The study results provide evidence that using the tournament perspective by remuneration committees as a guide for determining executive compensation helps in achieving better performance. This helps in developing appropriate mechanisms for setting executive remuneration. Originality/value This paper combines an empirical investigation of the frameworks of pay-performance and performance-pay and develops a system of six simultaneous equations to examine the associations between executive compensation and firm performance.
      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:27:43Z
      DOI: 10.1108/JAAR-03-2015-0027
       
  • The control-ownership wedge and the survival of French IPOs
    • Pages: 271 - 294
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 271-294, May 2018.
      Purpose The purpose of this paper is to investigate the effect of the control-ownership wedge of controlling shareholders (excess control) on the survival of French initial public offerings (IPOs). Design/methodology/approach This paper studies a large sample of 434 French IPOs. The empirical analysis uses the Cox proportional hazard and accelerated-failure-time models. Data are manually gathered from IPO prospectuses. Findings The findings support a positive relation between the control-ownership wedge and IPO survival time, indicating that survival is more likely in firms with high excess control levels. This result is consistent with the view that controlling shareholders with a large control-ownership wedge have incentives to preserve their private benefits of control by increasing firm survival chances. The findings also show that older IPOs are more likely to survive, while riskier and underpriced IPOs are more likely to delist. Practical implications The results provide a better understanding of the role of excess control in IPO survival. They also enrich the debate on the efficiency of the one-share-one-vote rule. Originality/value The research provides new insights into the role of agency conflicts in IPO survivability. In particular, it explores the effect of dominant shareholders with a control-ownership wedge on survival time.
      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:27:46Z
      DOI: 10.1108/JAAR-02-2017-0027
       
  • Does shareholder-oriented corporate governance reduce firm risk'
           Evidence from listed European companies
    • Pages: 295 - 311
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 295-311, May 2018.
      Purpose The purpose of this paper is to explore the impact of the mechanisms of corporate governance on the volatility of companies’ financial profitability. Design/methodology/approach For the period 2002-2014, the authors evaluate the relations linking various indices involved in corporate governance with the systematic risk supported by these companies for a sample of 355 firms domiciled in Europe. To empirically test these relationships, the authors calculated a synthetic index of corporate governance quality (QGI) based on the 53 items of assessment of the companies’ governance proposed by the database ASSET4. Following the method used by Boncori et al. (2016), the authors first reduced the number of dimensions of corporate governance by performing a principal component analysis of the sample, which resulted in the following five components: management’s shareholder commitment, shareholder rights, characteristics of the board of directors, transparency of the financial information and independence of the audit. Findings The results of the tests indicate that the synthetic index of governance that the authors have built is only significant at the 10 percent threshold. The impact of this variable on the systematic risk of the company is of the order of one-tenth of a point. The decomposition of this index into five variables shows that management’s commitment to shareholders and the effectiveness of the board of directors in carrying out its supervisory tasks are likely to reduce, but again to a limited extent, the risk borne by the company. Research limitations/implications This observation guides the future work in introducing variables that reflect the social responsibilities of the companies in the sample in order to distinguish the effects of social responsibility from those of purely shareholder-oriented governance on systematic risk. Practical implications This paper demonstrates the interest of good governance on the risk of firms and identifies certain characteristics upon which to act. Originality/value Although the relations between corporate governance mechanisms and profitability expectations have been the subject of numerous studies, few authors have examined the influence of governorship on the volatility of this profitability, particularly in Europe. To the best of the authors’ knowledge, the rare work on this topic relates to only a limited number of countries.
      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:28:05Z
      DOI: 10.1108/JAAR-02-2017-0033
       
  • The role of state ownership on earnings quality: evidence across public
           and private European firms
    • Pages: 312 - 332
      Abstract: Journal of Applied Accounting Research, Volume 19, Issue 2, Page 312-332, May 2018.
      Purpose The purpose of this paper is to examine the role of state ownership on financial reporting quality regarding the characteristics of conservatism and earnings management. Design/methodology/approach Using a large sample of public and private European firms during the period 2003-2010, the authors test the hypotheses following Ball and Shivakumar’s (2005) model for conservatism and the modified Jones (1991) model proposed by Dechow and Sloan (1995) for earnings management. To ensure that the results are robust, the authors conduct sensitivity analysis with regard to potential endogeneity and selection bias. Findings The authors find that state-owned firms are less conservative than non-state-owned firms, which is consistent with the idea that there is less need for accounting conservatism due to government protection. The authors also show that capital markets play an important role in shaping the relation between state ownership and earnings management. Among public firms, the authors find that state-owned firms have higher abnormal accruals and worse accruals quality than non-state-owned firms, which suggests that state-owned firms are not immune to capital market pressures. Research limitations/implications The study has two limitations. First, as state-owned and non-state-owned firms face quite different incentive structures, management behavior might be determined by factors that have yet to be identified. Second, prior research results suggest an inverted U-shape relation between ownership concentration and earnings management (Ding et al., 2007). It would be interesting to investigate the impact of different levels of state ownership on earnings quality. Practical implications As the paper investigates the role of state ownership on earnings quality using a sample of European firms, it brings new insights regarding the role of state ownership in accounting quality and firm performance. In addition, it considers the role of capital markets in the relation between the quality of financial reporting and ownership by considering a sample with both public and private firms. Originality/value The study contributes to the debate about state intervention in the corporate sector, by extending the knowledge of the effects of government ownership on earnings quality by using a large sample of European firms. Furthermore, the authors also introduce the effect of capital market forces on managers’ behavior in state-owned and non-state-owned companies by analyzing private and publicly listed firms.
      Citation: Journal of Applied Accounting Research
      PubDate: 2018-05-01T07:28:00Z
      DOI: 10.1108/JAAR-07-2016-0067
       
 
 
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