Subjects -> BUSINESS AND ECONOMICS (Total: 3570 journals)
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PUBLIC FINANCE, TAXATION (37 journals)

Showing 1 - 35 of 35 Journals sorted alphabetically
American Economic Journal : Economic Policy     Full-text available via subscription   (Followers: 164)
Analyses of Social Issues and Public Policy     Hybrid Journal   (Followers: 14)
Annals of Public and Cooperative Economics     Hybrid Journal   (Followers: 6)
Annual Review of Public Health     Open Access   (Followers: 33)
Antitrust Bulletin     Hybrid Journal   (Followers: 8)
Australian Journal of Public Administration     Hybrid Journal   (Followers: 214)
BMC Public Health     Open Access   (Followers: 126)
Canadian Public Policy / Analyse de Politiques     Hybrid Journal   (Followers: 4)
Corporate Governance International Journal of Business in Society     Hybrid Journal   (Followers: 4)
Current Issues in Auditing     Full-text available via subscription   (Followers: 4)
Economics of Governance     Hybrid Journal   (Followers: 8)
Financial Internet Quarterly     Open Access  
Governance : An International Journal of Policy, Administration and Institutions     Hybrid Journal   (Followers: 51)
HOLISTICA ? Journal of Business and Public Administration     Open Access  
Institute of Public Affairs Review: A Quarterly Review of Politics and Public Affairs, The     Full-text available via subscription   (Followers: 8)
International Journal of Business Governance and Ethics     Hybrid Journal   (Followers: 5)
International Journal of Corporate Governance     Hybrid Journal   (Followers: 4)
International Journal of Disclosure and Governance     Hybrid Journal   (Followers: 6)
International Journal of Organization Theory and Behavior     Hybrid Journal   (Followers: 1)
International Journal of Public Health     Hybrid Journal   (Followers: 15)
International Journal of Public Policy     Hybrid Journal   (Followers: 5)
Journal of Accounting and Public Policy     Hybrid Journal   (Followers: 7)
Journal of Applied Sciences in Accounting, Finance, and Tax     Open Access  
Journal of Business Thought     Full-text available via subscription  
Journal of Entrepreneurship and Public Policy     Hybrid Journal   (Followers: 7)
Journal of Management and Governance     Hybrid Journal   (Followers: 8)
Journal of Monetary Economics     Hybrid Journal   (Followers: 95)
Journal of Public Affairs     Hybrid Journal   (Followers: 1)
Journal of Public Economics     Hybrid Journal   (Followers: 76)
Journal of Public Economics Plus     Open Access  
Journal of Public Policy     Hybrid Journal   (Followers: 26)
Jurnal Akuntansi dan Perpajakan     Open Access  
Public Integrity     Full-text available via subscription   (Followers: 1)
Public Money & Management     Hybrid Journal   (Followers: 7)
Public Understanding of Science     Hybrid Journal   (Followers: 15)
Similar Journals
Journal Cover
International Journal of Disclosure and Governance
Journal Prestige (SJR): 0.198
Citation Impact (citeScore): 1
Number of Followers: 6  
 
  Hybrid Journal Hybrid journal (It can contain Open Access articles)
ISSN (Print) 1741-3591 - ISSN (Online) 1746-6539
Published by Springer-Verlag Homepage  [2469 journals]
  • Revenue recognition and channel stuffing in the Taiwanese semiconductor
           industry

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      Abstract: This paper examines whether a new revenue recognition standard, namely International Financial Reporting Standard 15 Revenue from Contracts with Customers (IFRS 15), incentivizes Taiwanese semiconductor companies to employ channel stuffing (CS) to meet or beat their earnings targets. By using a sample comprising 1399 firms listed on the Taiwanese Stock Exchange and over-the-counter markets between 2013 and 2019, we find that compared with Taiwanese firms in other sectors, semiconductor companies in Taiwan are more likely to employ CS to meet their earnings targets. Moreover, Taiwanese semiconductor companies have become more likely to use CS to meet their earnings targets since the implementation of IFRS 15. The obtained results pass a series of robustness checks and may help the potential driving forces for CS to be understood.
      PubDate: 2022-05-12
       
  • Improving the global comparability of IFRS-based financial reporting
           through global enforcement: a proposed organizational dynamic

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      Abstract: The International Accounting Standards Board (IASB) seeks to provide global financial reporting comparability of its International Financial Reporting Standards (IFRS). The objective of this study is to propose an organizational dynamic that could improve global comparability of financial reporting under IFRS through rigorous and homogeneous global enforcement. We use the qualitative framework of Gioia et al. (Organ Res Methods 16:15–31, 2012) to identify the relevant literature, methodologies, and organizational dynamics to understand the issues and changes needed to possibly achieve full-IFRS financial reporting for cross-border listed firms. We draw on previous studies that provided evidence of limitations and issues about comparability of financial reporting based on (not homogeneous) adoption, application, and enforcement of IFRS worldwide. A content analysis of IASB’s deliberations in developing its interactions with (International Organization of Securities Commissions (IOSCO)) and national regulatory bodies is used to provide evidence about the initiatives IASB has undertaken to support the homogeneous global enforcement of its standards. Then, we prescribe an organizational dynamics change for IOSCO, to enhance its engagement in promoting rigorous and homogeneous enforcement of IFRS globally. Lastly, we propose that IOSCO review, at least once every three years, cross-border listed firms’ financial reports using a comment letter approach. The results of such a review would be publicly available so that investors and creditors might be able to ascertain whether the financial reports published by cross-border listed firms are comparable with their cross-border listed competitors stating IFRS compliance.
      PubDate: 2022-05-07
       
  • Multiple audit mechanism, audit quality and cost of debt: empirical
           evidence from a developing country

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      Abstract: Abstract This study focuses on the distinctive Egyptian setting, where firms could use multiple audit mechanism voluntarily or mandatory under certain circumstances. We investigate the effects on audit quality and cost of debt. A sample of 1699 firm-year observations of Egyptian listed firms for the 2009–2019 period is used. Abnormal accruals are employed as proxies of audit quality through abnormal working capital accruals and modified Jones models. Results suggest that joint audits are not associated with both proxies of audit quality. In contrast, the dual audit is positively associated with abnormal accruals leading to conclude that dual audits are not providing a high level of audit quality. But this result holds only in companies with income-decreasing discretionary accruals. These results are in line with litigation and reputational risk fears offering motivations for auditors to favour conservative accounting alternatives (i.e. income-decreasing discretionary accruals). This implies that firms opting to employ dual audits have a higher level of earnings conservatism. Our evidence also indicates that the choice of multiple audit mechanisms, especially joint audits, is related to significant increases in the cost of debt, implying a higher perceived level of risk. Further, dual audits decrease the cost of debt only in companies with high earnings management. This study adds to the literature on whether the preference of income-increasing or income-decreasing discretionary accruals is related to multiple audit mechanism and consequently affected the cost of debt. Together, our results support the view that voluntary joint audits are not related to audit quality in Egypt compared to mandatory dual audits, which consequently affect the pricing of debt. Our results have important implications for policymakers, audit firms and investors.
      PubDate: 2022-04-04
       
  • Does winning a CSR Award increase firm value'

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      Abstract: Abstract This study explores the effect of winning a corporate social responsibility (CSR) Award on firm value. Drawing on the stakeholder value maximization view of stakeholder theory, we analyze a sample of 14,039 US firm-years between 2002 and 2018 and find that winning a CSR Award is value enhancing. We further offer evidence that demonstrates how the CSR dimensions of environmental, social and governance criteria influence the CSR Award–firm value nexus. Our results are supported by a series of robustness tests. As CSR Awards are typically awarded to firms that excel in CSR, our findings are expected to encourage managers to pursue CSR more rigorously so as to attain high firm value.
      PubDate: 2022-03-17
       
  • The effect of corporate social responsibility practices on real earnings
           management: evidence from a European ESG data

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      Abstract: Abstract The new trend in the ranking of companies, not only in financial terms but also according to their commitment to ethics and corporate social responsibility (CSR), is explained by the importance of responsible investment and responsible governance criteria in the decision making of the shareholders and other investors. These new business evaluation criteria have attracted the attention of several stakeholders, such as investors, financial analysts, researchers, and also specialized media, that require quality information based on this social and ethical approach. The aim of this article is to examine the link between corporate social responsibility practices and the level of real earnings management (REM) of a sample firms belonging ESG index from five European countries. The variables related to the ethical behavior of companies have a statistically significant and negative relationship with the level of real earnings management. Indeed, the more important the socially responsible and ethical practices are, the less the company engages in an aggressive REM strategy. Thus, the integration of new dimensions in the explanation and determination of the REM is under-explored. The explanation of the quality of the results by ethical or social variables makes it possible to overcome the criticisms addressed to the contractual approaches of companies.
      PubDate: 2022-03-01
      DOI: 10.1057/s41310-021-00125-1
       
  • The effects of the mandated disclosure of CEO-to-employee pay ratios on
           CEO pay

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      Abstract: Abstract This study examines whether the mandated disclosure of CEO-to-employee pay ratios motivated firms to curb CEO pay prior to their first pay ratio disclosures. In July 2010, the US Congress directed the SEC, via Section 953(b) of the Dodd–Frank Act, to enforce a rule that requires firms to disclose the ratio of the CEO’s pay to the median employee’s pay (the “rule”). The SEC proposed the rule in September 2013 and adopted it in August 2015. Though the SEC contends that the rule is intended to benefit shareholders, opponents claim that the rule is intended to shame firms into reducing CEO pay. The opponents’ claim is consistent with theory that posits, and evidence that suggests, that disclosure mandates can be used to motivate disclosers to adopt certain, desired behaviors. Based on this theory, as well as evidence indicating that firms likely expected to incur reputational losses from disclosing high pay ratios, this study hypothesizes that firms that are required to comply with the rule (relative to firms that are not) curbed CEO pay prior to their first pay ratio disclosures. This study further hypothesizes this relative curb on CEO pay was greater for firms that are more sensitive to the reputational effects of the rule—that is, firms that are more susceptible to public scrutiny of or adverse stakeholder reactions to pay ratios. These hypotheses are tested through a difference-in-differences research design that examines changes in residual total CEO pay (i.e., the portion of total CEO pay that is not predicted by economic determinants) from the periods before to the periods after the SEC’s proposal and adoption of the rule. Although there is no evidence of a curb on residual CEO pay in response to the SEC’s proposal (or adoption) at the average firm, there is evidence of a curb in response to the proposal (but not adoption) at firms that are more susceptible to public scrutiny of or adverse stakeholder reactions to pay ratios. Thus, regardless of the intended consequences of the rule, firms that are more sensitive to the reputational effects of pay ratios behaved as if the rule shamed them into curbing CEO pay. This is important because it contributes to the current understanding of how disclosure mandates can change firm behavior. The results of this study should therefore be of interest to legislators, regulators, special-interest groups, and the public.
      PubDate: 2022-03-01
      DOI: 10.1057/s41310-021-00128-y
       
  • Corporate social responsibility and unverifiable net assets ratio

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      Abstract: Abstract The move of the Financial Accounting Standards Board to expand the use of fair value instruments results in an increase in unverifiable assets and liabilities, which do not have actively traded market prices. Prior research suggests that managers may use discretion in estimating fair values of such assets and liabilities for their self-serving interests, leading to more agency conflicts. We examine the association between a firm’s corporate social responsibility (CSR) performance and the unverifiable net assets ratio, used to capture the level of unverifiable assets and liabilities. We find a significant negative relation between CSR and the unverifiable net assets ratio, suggesting that socially responsible firms use a low level of unverifiable assets and liabilities.
      PubDate: 2022-03-01
      DOI: 10.1057/s41310-021-00126-0
       
  • Decoding lessons from the Facebook Consent Decree: Does Sarbanes–Oxley
           foreshadow the future of privacy regulation'

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      Abstract: Abstract This paper examines the utility of the Sarbanes–Oxley Act of 2002 to assist regulators engaged in privacy policy development. By exploring best practices employed by the financial reporting industry, and the specific terms of the Sarbanes–Oxley Act of 2002, the present research offers guidance for the incorporation into privacy regulation. The paper advocates that both the FTC/Facebook Court Order and the Sarbanes–Oxley Act of 2002 should be now be considered de facto minimum standards for American privacy policy, including required CEO certifications of industry obligations, establishment and maintenance of effective internal controls, required CEO, CFO and CPO certification of control compliance, disgorgement of ill-gotten gains by organizations and executives, requirement of independent third-party compliance review as well as independence of audit committees and privacy compliance staff and, finally, the establishment of, and compliance with, a regulatory oversight board similar to the PCAOB.
      PubDate: 2022-03-01
      DOI: 10.1057/s41310-021-00124-2
       
  • Political transparency, corporate governance and economic significance

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      Abstract: Abstract This study explores the rationale behind a company’s voluntary disclosure of political activity and the economic significance of political transparency and accountability. Using a unique database, the CPA-Zicklin Index ranking of S&P 500 company political activity disclosure, we investigate the role of corporate governance playing behind the increasing political transparency. The results show that corporate board functions are associated with corporate political transparency. In specific, board independence is positively related to political activity policy and disclosure. Boards with more independent directors tend to have a more transparent political activity policy and a higher level of political activity disclosure. The board monitoring intensity is negatively associated with the political activity policy. Greater monitoring intensity weakens firms’ political accountability. Greater board gender diversity has a positive impact on boards’ political transparency. Furthermore, we find that corporate political accountability has economic significance. Greater political transparency is associated with better operating performance, lower equity risk, and lower information asymmetry. In addition, political transparency is positively related to firm valuation.
      PubDate: 2022-03-01
      DOI: 10.1057/s41310-021-00127-z
       
  • Mapping the intellectual structure of corporate risk reporting research: a
           bibliometric analysis

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      Abstract: Abstract This paper conducts a bibliometric analysis and a review of existing literature focusing on past 20 years (2000–2019) of research on corporate risk disclosures. The bibliometric data are gathered from two of the most widely referred repositories: Web of Science (WoS) and Scopus. The paper analysed various performance parameters such as research growth, most productive and highly cited authors, top source journal, affiliation analysis (institution-wise and country-wise), annual publication output, country affiliation analysis, document-based citation analysis, cited author-based co-citation Analysis and Top 30 highly influential papers from both databases WoS and Scopus. Apart from this, based on bibliometric analysis, authors’ country of origin, document-based citation analysis and cited authors-based co-citation analysis are visualized using VOSviewer software. This paper also listed thirty highly cited titles from both the databases.
      PubDate: 2022-02-18
      DOI: 10.1057/s41310-022-00141-9
       
  • Dual 8-K filings and auditor downward switches

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      Abstract: Abstract In the USA, firms announce auditor changes in either one or multiple filings of Form 8-K, depending on the length of time between the end of the incumbent audit engagement and the engagement of the successor auditor. I find that auditor changes reported using multiple 8-K filings (referred to as “dual 8-K filings”) are associated with a 7% greater likelihood of downgrading from a big-N to a non-big-N audit firm. Dual 8-K filings provide information that is incremental to the length of the auditor search period. In addition, they provide a timelier signal, as it is immediately observable upon the initial 8-K filing whether a successor auditor has been named or a second 8-K filing announcing the successor auditor is expected to follow. The distinction between single and dual 8-K filings outperforms the distinction between auditor resignations and dismissals in predicting downward auditor switches, though the most negative auditor changes are those reported both as auditor resignations and using dual 8-K filings. My results suggest that dual 8-K filings are a strong signal of risk associated with auditor changes that should be considered by academics and practitioners alike.
      PubDate: 2022-01-28
      DOI: 10.1057/s41310-021-00136-y
       
  • The impact of audit quality on real earnings management: evidence from
           Bangladesh

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      Abstract: Abstract We present empirical evidence regarding the association between audit quality and real earnings management in case of the capital market of Bangladesh. Our analysis visualizes a panel of 2195 firm data with year-level observations which are listed on the Dhaka Stock Exchange throughout the period of 2000–2017. We report inverse association between ‘big 4’ audit firms’ service and levels of real earnings management practices. This result suggests that the client pool of big audit firms are less likely to engage in earnings management. This particular result is also consistent with the ‘big 4’ audit firms’ commitment to their reputation and long track-records of noted exhibition of due diligence. Also, we find no association between industry-specialized auditor (in terms of audited assets) and real earnings management. This result provides important insights to the nature of competition in the audit market of Bangladesh. Finally, we also observe no correlation between audit specialization (in terms of audited revenue) and real earnings management. This pattern invokes significant findings regarding the industrial depth of specialization of Bangladeshi firms. It also uncovers whether ‘specialized’ provision of audit service can meaningfully serve the more ‘generalized’ nature of industrial composition of the firms active in the capital market of the country.
      PubDate: 2022-01-27
      DOI: 10.1057/s41310-021-00137-x
       
  • Can corporate governance structure effect on corporate performance: an
           empirical investigation from Indian companies

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      Abstract: Abstract This research foremost intention is to investigate the corporate governance structure effect on the firm’s performance of the Indian-listed companies. The study was based on a six-year financial figure from FY 2014–2015 to FY 2019–2020 of Indian-listed companies on the Bombay Stock Exchange (BSE). The study applied the panel data statics model such as pooled OLS, fixed effect and random effect model, Hausman test and the Sys-GMM models for testing the study hypotheses. The study findings indicate that higher board size has a positive significant impact with the ROA, Tobin’s Q on the firm’s performance, and this helps in strengthen the decision-making process. Besides, the study results show statistically insignificant correlation among the ROA, EPS and NPM with the board independence. The results also reflected the positively correlation among the board meetings and the performance indicators of Tobin’s Q, and these scenarios lead to that enhancement of corporate governance practices. Besides, the results negatively revealed correlation amongst the ROE, NPM and corporate governance indicators of CEO duality. The results of the study suggested that companies likely implement proper corporate governance practices leading to sophisticated effectiveness in firm’s performance and minimize agency cost. The study attempted corporate governance issues with the several different measures and firm’s variables other than using a single-measure context. Additionally, various model descriptions and statistical techniques are applied for analyzing the corporate governance structure and firm-related performance.
      PubDate: 2022-01-27
      DOI: 10.1057/s41310-021-00135-z
       
  • Corporate social responsibility and firm performance: evidence from
           India’s national stock exchange listed companies

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      Abstract: Abstract The paper aims to empirically investigate the influence of corporate social responsibility (CSR) on firm performance in Indian listed firms. We use regression analysis to determine the relationship between CSR and firm performance. Both accounting and market measures of firm performance have been deployed for the purpose of the study. We have found mixed evidence. While CSR has a positive impact on the accounting measure, it has a weak relationship with market-based returns. Our most significant finding in the study is that markets do not perceive the standard mandated CSR spends worthy of a reward. Instead, such spends are considered hygiene whereas expenditure made by firms in excess of the mandated CSR spends is rewarded by markets for their CSR conscious behaviour. We therefore advise the Indian companies to spend beyond the mandated CSR outlays if they are to improve on their market value.
      PubDate: 2022-01-24
      DOI: 10.1057/s41310-021-00138-w
       
  • The integration of sustainability in corporate governance systems: an
           innovative framework applied to the European systematically important
           banks

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      Abstract: Abstract The growing interest in corporate social responsibility (CSR) issues is the result of a cultural path that sees banks react to market changes and become protagonists of an increasingly sustainable future. Based on these considerations, this paper intends to investigate the level of integration of sustainability issues in banks’ corporate governance systems. We carry out an exploratory analysis on all European systematically important banks during the period 2015–2019. By adopting the content analysis approach, we develop a novel governance score based on a research model made up of 40 items. We name the score: “Bank’s governance ESG (Environmental Social Governance) integrated index”. The main results of our study reveal not only growing awareness of banks to integrate sustainability in their corporate governance, but also a strong heterogeneity in their corporate behaviours and large rooms for improvement. Indeed, we find that just over half of the surveyed banks pay really attention to the integration of sustainability issues in their business and governance processes. This contribution is especially driven by the banks’ boards of directors, whose size and composition contribute positively to overall sustainable performance. To the best of the authors’ knowledge, this is the first empirical study that investigates the level of integration of ESG factors in the banking sector, developing a quantitative score ranging from 0 to 100%. This study differs from previous studies in that it develops an “Bank’s governance ESG integrated index”, which considers the areas of corporate governance that have the greatest impact on the implementation of sustainable practices in banks. Our research is limited to investigating the level of integration of ESG factors for listed banks over a 5-year period. In fact, our time horizon is represented by the four-year period 2015–2019. This research has practical implications. First, investors more attentive on sustainability issues could identify and select the banks that best implement ESG criteria in their corporate governance systems. Second, our research model could be adopted by banks as a “diagnostic tool” to carry out a self-assessment process and identify possible room for improvement.
      PubDate: 2022-01-19
      DOI: 10.1057/s41310-021-00140-2
       
  • Building a corporate governance index (JCGI) for an emerging market: case
           of Jordan

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      Abstract: Abstract A comprehensive corporate governance index (JCGI, 0–100) is constructed to measure the quality of corporate governance practices of the universe of publicly traded Jordanian firms during 2018–2019. We survey all firms' corporate governance practices and manually collect governance data for listed corporations in Amman Stock Exchange to construct the first JCGI, which comprises five sub-indices and 60 elements.The results show that Jordanian companies did not progress in the corporate governance reform during the study period. The overall JCGI mean value is 67.80%. Sub-index results show that governance is weakest in both board procedure and disclosure, with a mean value of 57.36% and 52.43%, respectively. The board procedure subindex shows that most listed firms practice poor governance. Within the board structure sub-index, only 18% of the study sample has the policy to specify the board's professional qualifications and training requirements. Results of shareholders' rights show a rigid and nontransparent environment in the enterprises' control structure.
      PubDate: 2022-01-17
      DOI: 10.1057/s41310-021-00139-9
       
  • Do audited firms have a lower cost of debt'

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      Abstract: Abstract The purpose of this study is to investigate if audited financial statements add value for firms in the private debt market. Using an instrumental variable method, we find that firms with audited financial statements, on average, save 0.47 percentage points on the cost of debt compared to firms with unaudited financial statements. We also find that using the big, well-known auditing firms does not yield any additional cost of debt benefits. Lastly, we investigate if there are industries where alternative sources of information make auditing less valuable in reducing the cost of debt. Here, we find that auditing is less important in lowering cost in one industry, agriculture, where one lender has a 74% market share and a 100-year history of lending to firms within that industry. As such, it seems that lenders having high exposure to a certain industry might act as an alternative to auditing in reducing the information asymmetry between the firm and the lender.
      PubDate: 2022-01-01
      DOI: 10.1057/s41310-021-00133-1
       
  • Do Pakistani Corporate Governance reforms restore the relationship of
           trust on banking sector through good governance and disclosure practices

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      Abstract: Abstract Trust is the focal point of this thesis. Trust is an integral part of capitalist economics and, therefore, corporate governance. The relationship of trust serves as a bond and brings together different individuals of diverse interests to work along to fulfil their objectives. But in the last two decades, this relationship of trust badly shaken due to various reasons. In order to resort the bond of trust, policymakers in different jurisdictions have developed and introduced various policies and procedures. The same effort has been made by the Security and Exchange Commission of Pakistan (SECP), as it developed and implemented the country first Corporate Governance Code in 2002 and revised them twice in 2012 and 2017. But making rules, regulations, procedures and policies are only one aspect of restoring the relationship of trust. The rules can be made very strong and as fancy as possible, but only the implementation, compliance, and actions make them effective. Therefore, this paper empirically examines and evaluates the SECP Corporate Governance Code and tries to find out to what degree the SECP has succeeded in restoring the relationship of trust. The study has developed a Governance Disclosure Quality Index (GQI) using guidelines identified in the United Nations Conference on Trade and Development (UNCTAD, 2006). In contrast with the previous studies in Corporate Governance domains, which mainly examined and compared the Corporate Governance practices between developing and developed countries, this study examines and compares the Corporate Governance practices within a single country, but in three different time periods. The research's main findings show that the Governance Disclosure Quality of the Pakistani listed banks in their annual reports enhanced (and so trust) after each revision of the SECP Corporate Governance Code.
      PubDate: 2021-12-03
      DOI: 10.1057/s41310-021-00132-2
       
  • The role of audit committees in social responsibility and environmental
           disclosures: evidence from Chinese energy sector

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      Abstract: Abstract This study investigates the role of Chinese audit committees in social responsibility and environmental disclosures. We examine whether audit committee characteristics are related to the disclosures. By using a balanced panel dataset of Chinese energy firms and firm fixed-effects regressions, we find that audit committees’ female representation is positively associated with the likelihood of issuing social responsibility reports and the level of environmental disclosures. Nevertheless, there is no consistent evidence that some conventional measures of audit committee effectiveness including audit committee independence and financial expertise can positively affect the disclosures. The findings suggest that female audit committee members are more effective in enhancing the disclosures than their male counterparts, which may pose a demand for the presence of more female directors on Chinese audit committees. Meanwhile, there is room for Chinese audit committee members to extend their oversight role. This study enriches the research on the role of audit committees in social responsibility and environmental disclosures, which has been little addressed in the literature.
      PubDate: 2021-10-04
      DOI: 10.1057/s41310-021-00131-3
       
  • Using machine learning methods to predict financial performance: Does
           disclosure tone matter'

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      Abstract: Abstract We use three supervised machine learning methods, namely linear discriminant analysis, quadratic discriminant analysis, and random forest, to predict corporate financial performance. We use a sample of 63 listed banks from eight emerging markets, covering 10 years from 2008 to 2017, using earning per share as a measure of performance. We use the design science research (DSR) framework to examine whether the textual contents of annual reports in previous years contain value-relevant information to predict future performance; thus, these contents can improve the accuracy and quality of predictive models. We combine two groups of variables in the proposed models. The first group is the sentiment analysis of disclosure tone in annual report narratives using the Loughran and McDonald dictionary (J Finance 66:35–65, 2011), while the second group is the quantitative properties of banks which consist of five variables, namely size, financial leverage, age, market-to-book ratio, and risk. Our analysis suggests that the random forest method provides the best predictive model. We also provide evidence on the accuracy and performance of predictive models that can be increased by incorporating disclosure tone variables as non-financial variables with financial variables. Interestingly, we find that the uncertainty variable is the most important disclosure tone variable. Finally, we find that size is the most important variable related to banks’ quantitative characteristics. Our study suggests that the analysis of tone through corporate narrative disclosures can be used as a complementary or diagnostic approach rather than an alternative in making decisions by different stakeholders such as analysts, investors, and auditors.
      PubDate: 2021-09-05
      DOI: 10.1057/s41310-021-00129-x
       
 
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