JournalTOCs

Asian Review of Accounting
Journal Prestige (SJR): 0.222

Citation Impact (citeScore): 1
Number of Followers: 2

Hybrid journal (It can contain Open Access articles)
ISSN (Print) 1321-7348 - ISSN (Online) 1758-8863
Published by Emerald

[361 journals]

Environmental disclosure and firm efficiency: a study of Pakistani firms
- Authors: Imad Rahim
  Abstract: The purpose of this paper is to examine the effect of environmental disclosure on firm efficiency of the listed firms in Pakistan. The study uses secondary sources such as sustainability reports, annual reports and company websites to collect the data. A sample of 46 large firms is selected based on market capitalization and listing on the KSE-100 index. The results suggest that environmental disclosure plays a significant positive role in determining the efficiency of the listed firms. The robustness test also confirms these results. The study suggests that regulators should take appropriate steps for better and increase the firm's environmental disclosure. The number of sample firms restricts the generalization of results from this study. However, the results are consistent and can be validated using a large sample. The study includes implications to develop strict guidelines on environmental disclosure in response to its positive effect on the efficiency of the firm. The study contributes to the growing environmental and efficiency literature by providing empirical evidence from a developing country where there are no strict guidelines on environmental regulations. This study is one of the first to capture environmental disclosure and measure efficiency by employing the data envelopment analysis (DEA) method in developing markets.
  Citation: Asian Review of Accounting
  PubDate: 2021-03-23
  DOI: 10.1108/ARA-05-2019-0100
  Issue No: Vol. 29, No. 2 (2021)
Do audit committee characteristics improve financial reporting quality in
emerging markets' Evidence from Iran
- Authors: Mehdi Safari Gerayli, Yasser Rezaei Pitenoei, Ahmad Abdollahi
  Abstract: The purpose of this study is to investigate the association between certain audit committee characteristics like independence and financial expertise with financial reporting quality (FRQ) of the firms listed on the Tehran Stock Exchange (TSE). The sample includes the 558 firm-year observations from companies listed on the TSE during the years 2012–2017, and the study’s hypotheses were tested using multivariate regression model based on panel data. The authors find that audit committee independence has no significant effect on corporate FRQ, whereas audit committee's financial expertise significantly improves firms' FRQ. In other words, higher financial expertise of an audit committee can lead to an increase in its FRQ. The findings of the study are robust to alternate measures of FRQ, individual analysis of the research hypotheses for each year and endogeneity problem. To the best of the authors’ knowledge, this is the first study to analyze the association between audit committee characteristics and FRQ in emerging capital markets, and so, the findings of the study not only extend the extant theoretical literature concerning the audit committee in developing countries including emerging capital market of Iran but also help investors, managers, capital market regulators, policymakers and audit profession regulators to make informed decisions.
  Citation: Asian Review of Accounting
  PubDate: 2021-03-04
  DOI: 10.1108/ARA-10-2020-0155
  Issue No: Vol. 29, No. 2 (2021)
Does managerial ability affect disclosure' Evidence from earnings
press releases
- Authors: Beibei Yan, Özgür Arslan-Ayaydin, James Thewissen, Wouter Torsin
  Abstract: Prior research shows that managers with lower ability release less accurate management earnings forecasts and have more earnings restatements, lower earnings persistence and lower quality accruals estimations. Yet, whether the impact of managerial ability (MA) on financial reporting can be extended to the narrative section of firms' financial disclosures needs to be theoretically and empirically examined. The authors theorize in this paper that managers with low ability opportunistically inflate the tone to increase outsiders' perceptions of their ability. The authors also examine the relation between MA and the informativeness of tone to predict future firm performance and explain investors' reaction at earnings announcement. The authors collect 24,000 earnings press releases of 1,149 distinct firms between 2004 and 2013. Content analysis is used to proxy the tone of the disclosures. The authors use the score developed by Demerjian et al. (2012) to measure MA. The authors then employ panel data regressions to examine the impact of MA on disclosure tone. The authors find that low-ability managers inflate the disclosure tone to positively influence labor market's perceptions about their ability. This effect is magnified for younger and shorter-tenured managers, for firms with more intense monitoring and during bear markets. The authors also find that the tone of earnings press releases of low-ability managers results in a lower stock price reaction. Supplementary analyses show that the results do not only hold for the tone, but also can be extended to other linguistic features such as the numerical intensity and the readability of earnings press releases. The results are robust to alternative library specifications and other corporate disclosures such as CEO letters to shareholders or 10-K filings. The paper shows that managers worry about how firm performance influences the labor market assessment of their ability. In particular, the authors find that managers of low ability are willing to opportunistically manipulate the content of corporate disclosures to improve this perception and build their reputation. The authors contribute by providing theoretical and empirical evidence on how managers attempt to steer assessments of their ability by manipulating corporate disclosures. Consistent with prior business research suggesting that one's ability is a key feature that affects managers' propensity to engage in ethical practices, such as tax avoidance or manipulation of financial information, this study shows that less able managers tend to inflate the tone of the earnings announcements and that this ability-driven bias is likely to be magnified by career concerns.
  Citation: Asian Review of Accounting
  PubDate: 2021-02-18
  DOI: 10.1108/ARA-03-2020-0036
  Issue No: Vol. 29, No. 2 (2021)
Proximity to broad bond rating change and annual report readability
- Authors: Wray Bradley, Li Sun
  Abstract: The purpose of this study is to examine the impact of proximity to broad bond rating change on annual report reading difficulty. We use regression analysis to examine the association between proximity to broad bond rating change and reading difficulty of annual report. Using a large panel sample with 11,767 firm-year observations representing 1,474 unique US companies from 1994 to 2016, we find a significant positive relation between proximity to broad bond rating change and annual report reading difficulty, which suggests that the annual reports of borderline firms are difficult for stakeholders to read and understand. By investigating whether and how borderline firms manipulate readability of annual reports, our study contributes to bond rating research in finance literature and disclosure quality research in accounting literature. To the best of our knowledge, this study is perhaps the first empirical study that directly tests the link between proximity to broad bond rating change and annual report readability. In particular, the majority of prior studies concentrate on the economic consequences of annual report readability, but few studies investigate the determinants of readability. Therefore, examining the impact of proximity to broad bond rating change on readability contributes to a more comprehensive understanding of annual report readability.
  Citation: Asian Review of Accounting
  PubDate: 2021-02-11
  DOI: 10.1108/ARA-06-2020-0096
  Issue No: Vol. 29, No. 2 (2021)
The effect of audit engagement partner professional experience on audit
quality and audit fees: early evidence from Form AP disclosure
- Authors: Chenyong Liu, Chunhao Xu
  Abstract: The purpose of this study is to examine the effect of audit engagement partner's professional experience on audit quality. The authors also investigate the relationship between the audit partner's experience and audit fees in both Big 4 and non-Big 4 accounting firms. Since the Public Company Accounting Oversight Board (PCAOB) officially enacted Rule 3211 in 2017, US accounting firms are required to disclose detailed information of engagement partners in Form AP (PCAOB, 2015b). The authors obtained a sample of 2,283 audit partners from Form AP and hand collected their individual professional experience data through Certified Public Accountant (CPA) database, corporate disclosure and social media sites (e.g. Linkedin). Econometric models with fixed effects are used in this study to test our hypotheses. Two-stage least square (2SLS) model is used in the robustness test. The authors find that the relationship between audit engagement partner's professional experience and audit quality is concave. It indicates that audit quality is increasing during the early stage of engagement partners' career and then decreases as the partners approaching the late-career phase. Further, the authors find that partner's professional experience is positively associated with audit fees in non-Big 4 accounting firms but not significantly associated with audit fees in Big 4 accounting firms. The finding of how auditor experience impacts audit quality can be useful for accounting firms to better plan their staffing in auditing engagements. This study’s results are also helpful for small accounting firms to optimize their pricing strategy. This study provides new empirical evidence about the relation between auditor professional experience and audit quality. Furthermore, the authors extend the literature of audit fee determinants by testing the joint effects of audit firm-level factors and auditor individual-level professional experience on audit fees.
  Citation: Asian Review of Accounting
  PubDate: 2021-02-08
  DOI: 10.1108/ARA-08-2020-0121
  Issue No: Vol. 29, No. 2 (2021)
The effect of conservative financial reporting and tax aggressiveness on
the market valuation of unrecognized tax benefits
- Authors: Carlos E. Jiménez-Angueira, Emeka Nwaeze, Sung-Jin Park
  Abstract: Prior studies document a positive relation between stock prices and tax-related contingent liability, unrecognized tax benefits (UTBs) and interpret the finding as evidence that investors reward tax aggressiveness. The purpose of this paper is to explore the nature of this puzzle finding by considering a link between UTBs and financial reporting strategy and propose that financial reporting conservatism may explain the positive association between UTBs and stock prices. To estimate the incremental valuation weights on UTBs, the authors employ the Ohlson (1995) valuation model and regress stock prices on UTBs and its interactions with the proxies for financial reporting conservatism and tax aggressiveness. Further, the authors adopt a UTB estimation model to decompose its balance into the predicted and unpredicted components. The authors find that the reporting conservatism has a positive effect on the market valuation of UTBs. The authors also find some evidence that tax aggressiveness increases the valuation weight of UTBs. When UTBs are decomposed into predicted and unpredicted components, the authors find that the effect of financial reporting conservatism is more pronounced for the market valuation of predicted UTBs. Collectively, the evidence suggests that conservative financial reporting is a major driver of the positive valuation of UTBs and that tax aggressiveness plays a less significant role in investors' valuation decisions. While prior studies focus on how UTBs are associated with stock prices, this paper is the first attempt to explain why UTBs are positively valued by investors.
  Citation: Asian Review of Accounting
  PubDate: 2021-02-04
  DOI: 10.1108/ARA-07-2020-0111
  Issue No: Vol. 29, No. 2 (2021)
Stakeholders expectations for CSR-related corporate governance disclosure:
evidence from a developing country
- Authors: Yousuf Kamal
  Abstract: The purpose of this paper is to explore stakeholders' expectations in relation to corporate social responsibility (CSR)–related corporate governance practices. The paper aims to understand how stakeholders' expectations potentially translate into the disclosure of information about CSR-related corporate governance practices. The evidence for this study was collected using semi-structured in-depth personal interviews with 18 stakeholders. These include representative of multinational buying companies who source garments from Bangladesh, international as well as local NGOs, news media personnel, senior government officials, trade union leaders and social audit firm. This paper finds evidence of stakeholders' dissatisfaction with the disclosures of governance information which tended to be viewed as limited and symbolic in nature. It also finds an apparent disconnection between stakeholder expectations and corporate disclosures. This paper finds an alternative media of disclosures, for communicating social responsibility related governance information to the stakeholders, which has so far, been neglected by the social accounting researchers.
  Citation: Asian Review of Accounting
  PubDate: 2021-01-29
  DOI: 10.1108/ARA-04-2020-0052
  Issue No: Vol. 29, No. 2 (2021)
Independence and effectiveness of Shariah supervisory board of Islamic
banks: evidence from an emerging economy
- Authors: Md. Kausar Alam, Muhammad Shahin Miah
  Abstract: The main objective of the study is to ascertain the level of independence and the effectiveness of the Shariah Supervisory Board (SSB) members of Islamic banks in Bangladesh. This is because only SSB members are empowered to oversee and certify the overall business functions of Islamic banks. This paper implements qualitative case research approach to explore the research objective in the context of Bangladesh. We applied purposeful and snowball sampling tactics for selecting respondents. By using a semi-structured questionnaire and face-to-face interviews, we collect data from SSB members, central bank executives and experts in Islamic banking and Shariah governance. The study finds that majority Islamic banks' SSB's positions are similar to the Board of Directors (BOD) of the banks. Next, this study finds that in recruiting/selecting SSB members, some banks do not follow the guidelines of the central bank. This study finds mixed evidence regarding the independence of the members of the SSB. Most of the respondents opined that SSBs do not have power; in some cases, members of SSB are not independent and seeming powerless as BOD selects and recruits them. In contrast, they are dependent on management in respect of strategy implementation. The study significantly contributed to the national and global regulatory bodies by identifying an important governance determinant of Islamic banks that is the independence of SSB members, which is highly important for both Shariah functions, and to enhance the trust level of the stakeholders. This study makes a theoretical contribution by documenting the violation of stakeholder theory and agency theory in recruiting SSB members by BOD's choice. The lack of SSB members' independence has an impact on Shariah legitimacy of the Islamic banks which is contradictory with the notion of legitimacy theory. This study recommends the central bank to ensure the independence of the SSB and central bank should take initiatives to develop an environment for the Islamic banking sector. This study extends the literature of corporate governance relating to Islamic banking and financial institutions. More specifically, this paper explores the necessity of independence of members of the monitoring body (here SSB), an important constituent of governance, to ensure high-quality governance and transparency in reporting to increase diverse stakeholders' trust/confidence. The absence of independence of SSB in performing their functions contradicts with the agency, stakeholder and legitimacy theory, which is inconsistent with global evidence, that demands further investigations.
  Citation: Asian Review of Accounting
  PubDate: 2021-01-28
  DOI: 10.1108/ARA-01-2020-0005
  Issue No: Vol. 29, No. 2 (2021)
Asian Review of Accounting