Review of Accounting and Finance最新文献

{"title":"CEO compensation risk and pay for luck asymmetry","authors":"Yixi Ning, Ke Zhong, Lihong Chen","doi":"10.1108/raf-03-2023-0095","DOIUrl":"https://doi.org/10.1108/raf-03-2023-0095","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study aims to examine the effect of CEO compensation risk, as measured by the proportion of equity-based pay (option and stock awards) relative to total compensation and pay sensitivity to stock volatility, on CEO pay for luck asymmetry. This paper also empirically examines CEO compensation risk as a mediating variable between the regulatory changes and CEO pay for luck asymmetry.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>This paper test the proposed two hypothesis that CEO compensation risk is positively associated with the degree of CEO pay for luck asymmetry; and the pay related regulations implemented around 2006 could mitigate the degree of CEO pay for luck asymmetry using the fixed-effects regression models.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>Consistent with the managerial talent retention hypothesis, this paper finds that CEO compensation risk, as measured by the equity-based pay as a proportion of CEO total compensation and CEO pay sensitivity to stock volatility, is positively associated with the degree of CEO pay for luck asymmetry. In addition, this paper find that CEO pay for luck asymmetry is significantly reduced by the major regulatory changes on executive compensation implemented around 2006.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>This study is among the very few studies exploring the impact of CEO compensation risk on pay for luck asymmetry in the literature. While the major purpose of the widely used stock options is to align executive interests and shareholder values, it also tends to increase the risk level of CEO compensation. So, a well-designed CEO pay package should protect risk-averse CEOs from bad luck for the retention purpose, which is also beneficial to shareholder wealth maximization. Therefore, future research on executive compensation needs to examine the issue from various perspectives.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>For board of directors who is responsible for the compensation of CEOs, it is necessary to consider a broad range of factors when designing an optimal CEO pay package.</p><!--/ Abstract__block -->\u0000<h3>Social implications</h3>\u0000<p>The findings on the impact of regulations on CEO pay for luck asymmetry suggest that the executive-pay-related regulations around 2006 have indeed achieved some of their intended goals to significantly lower pay for nonperformance asymmetry, whereby CEO pay sensitivity to stock volatility has been identified as a major mediating variable.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This study contributes to the literature on executive pay for luck asymmetry in several perspectives. First, this paper finds that CEO compensation risk has a positive impact on the degree of CEO pay for luck asymmetry. Second, this paper finds that the CEO pay for luck asymmetry has been mitigated after 2006 when various regulatory changes on executi","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142248666","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Stock market reaction to mandatory climate change reporting: case of Bursa Malaysia","authors":"Dharen Kumar Pandey, Waleed M. Al-ahdal, Faten Moussa, Hafiza Aishah Hashim","doi":"10.1108/raf-01-2024-0015","DOIUrl":"https://doi.org/10.1108/raf-01-2024-0015","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study aims to comprehensively understand market reactions to Bursa Malaysia's announcement on mandatory climate-change-related disclosures, exploring sector-specific dynamics and cross-sectional influences.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The study uses event study methodology on 412 listed firms to analyze market reactions around the announcement date. The sector-wise analysis further delves into variations across industries. Cross-sectional analysis explores the significance of environmental, social and governance (ESG) scores and firm controls in explaining the differences across sample firms.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The event study reveals initial negative market reactions on the event day, with a subsequent shift from positive to negative cumulative impact, indicating the evolving nature of investor sentiment. The sector-wise analysis highlights heterogeneous effects, emphasizing the need for tailored strategies based on industry-specific characteristics. The cross-sectional findings underscore the growing importance of ESG factors, with firm size and performance influencing market reactions. Financial leverage and liquidity prove insufficient to explain cumulative abnormal return (CAR) differences, while past returns and volatility are influential technical factors.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>The economic significance of the results indicates a growing trend where investors prioritize companies with more substantial ESG scores, potentially driving shifts in corporate strategies toward sustainability. Better ESG performance signifies improved risk management and long-term resilience in the face of market dynamics. Regulatory bodies may respond by enhancing ESG reporting requirements, while financial institutions integrate ESG factors into their models, emphasizing the benefits of sustainability and financial performance.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This research contributes to the existing literature by providing a nuanced analysis of market responses to climate-related disclosures, incorporating sector-specific dynamics and cross-sectional influences. The findings offer valuable insights for businesses and policymakers, emphasizing the need for tailored approaches to climate-related disclosure management.</p><!--/ Abstract__block -->","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142223659","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Corporate narrative reporting on Industry 4.0 technologies: do the COVID-19 pandemic and governance structure matter?","authors":"Maha Shehadeh, Khaled Hussainey, Mohammad Alhadab, Qais Kilani","doi":"10.1108/raf-11-2023-0362","DOIUrl":"https://doi.org/10.1108/raf-11-2023-0362","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This research examines the impact of the COVID-19 pandemic and governance structure on corporate narrative reporting (CNR) concerning Industry 4.0 (I4.0) technologies in Jordanian commercial banks. The study aims to explore how these factors influence the extent and nature of disclosures in annual reports.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The study uses a comprehensive manual content analysis method to investigate the annual reports from all 15 Jordanian commercial banks from 2010 to 2022. This approach allows for the detailed examination of I4.0 disclosures, using a specially developed index to measure various disclosure dimensions. An ordinary least squares model is used to assess the determinants of CNR on I4.0, considering factors such as the pandemic’s impact and various governance attributes.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The findings indicate that both the COVID-19 pandemic and specific governance factors (e.g. board size and audit committee size) significantly enhance the disclosure of I4.0 technologies. The study reveals that during the pandemic, banks significantly increased their level of detailed disclosures about I4.0 strategies, challenges and benefits, reflecting a strategic response to the pandemic’s disruption.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This study introduces a novel I4.0 Reporting Index for banks, measuring disclosures across strategy implementation, business model transformation, challenges and benefits. It adds to the existing literature by offering insights into narrative reporting practices concerning I4.0 technologies within the banking sector and illuminates the impact of the COVID-19 pandemic on these practices.</p><!--/ Abstract__block -->","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-07-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141769612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Interbank systemic risk network in an emerging economy","authors":"Molla Ramizur Rahman, Arun Kumar Misra, Aviral Kumar Tiwari","doi":"10.1108/raf-07-2023-0206","DOIUrl":"https://doi.org/10.1108/raf-07-2023-0206","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>Interconnections among banks are an essential feature of the banking system as it helps in an effective payment system and liquidity management. However, it can be a nightmare during a crisis when these interconnections can act as contagion channels. Therefore, it becomes essentially important to identify good links (non-contagious channels) and bad links (contagious channels).</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The article estimated systemic risk using quantile regression through the ΔCoVaR approach. The interconnected phenomenon among banks has been analyzed through Granger causality, and the systemic network properties are evaluated. The authors have developed a fixed effect panel regression model to predict interconnectedness. Profitability-adjusted systemic index is framed to identify good (non-contagious) or bad (contagious) channels. The authors further developed a logit model to find the probability of a link being non-contagious. The study sample includes 36 listed Indian banks for the period 2012 to 2018.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The study indicated interconnections increased drastically during the Indian non-performing asset crisis. The study highlighted that contagion channels are higher than non-contagious channels for the studied periods. Interbank bad distance dominates good distance, highlighting the systemic importance of banking network. It is also found that network characteristics can act as an indicator of a crisis.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>The study is the first to differentiate the systemic contagious and non-contagious channels in the interbank network. The uniqueness also lies in developing the normalized systemic index, where systemic risk is adjusted to profitability.</p><!--/ Abstract__block -->","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141550172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The effect of economic, environmental and social sustainability performance on accounting conservatism: the moderating role of good corporate governance","authors":"Sawssen Khlifi, Mohamed Ali Boujelbene, Jamel Chouaibi","doi":"10.1108/raf-08-2023-0291","DOIUrl":"https://doi.org/10.1108/raf-08-2023-0291","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the impact of economic, environmental and social (EES) indicators of sustainability performance on accounting conservatism and the moderating effect of good corporate governance (GCG) on this relationship in European environmental, social and governance (ESG) firms.\u0000\u0000\u0000Design/methodology/approach\u0000To test the study’s hypotheses, this paper applied linear regressions with panel data from 136 European companies selected from the ESG index between 2015 and 2022.\u0000\u0000\u0000Findings\u0000The results show a positive effect of economic and environmental sustainability scores on the accounting conservatism level. However, social score has a negative and significant effect on the level of accounting conservatism. The findings also show that GCG accentuates these effects.\u0000\u0000\u0000Research limitations/implications\u0000The findings have several implications for companies, investors and academic researchers. For companies, EES reporting should be enhanced. For investors, sustainability performance is crucial in decision-making. The results show that exploring the interaction between sustainability performance scores and accounting conservatism is essential for academic researchers.\u0000\u0000\u0000Originality/value\u0000This paper is motivated by the limited research on EES sustainability scores and accounting conservatism around GCG, hence its pertinence for companies seeking to improve information quality.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141335034","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Impact of financial reporting quality on investment efficiency and role of investor protection in frontier markets","authors":"Muhammad Azhar Khan, Saadia Irfan, Samina Naveed","doi":"10.1108/raf-07-2023-0220","DOIUrl":"https://doi.org/10.1108/raf-07-2023-0220","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the link between financial reporting quality and investment efficiency in publicly listed firms in frontier markets, taking into account country-level investor protection. By comparing real and accrual earnings management, this paper demonstrates the context-dependent nature of the impact of financial reporting quality. It emphasises the importance of improving investor protection and reducing agency conflicts in promoting investment efficiency in frontier markets.\u0000\u0000\u0000Design/methodology/approach\u0000Accounting data from 1998 to 2020 are collected for all listed firms in six frontier market countries across 21 industries. Fixed-effect regression analysis is used to test causal relationships; several robustness checks are performed; and two-stage least squares is used to address endogeneity concerns.\u0000\u0000\u0000Findings\u0000Higher financial reporting quality improves investment efficiency in frontier markets. Furthermore, the positive effect is amplified when country-level investor protection in frontier markets is strong.\u0000\u0000\u0000Originality/value\u0000These findings add to the growing body of evidence showing that financial reporting quality improves investment efficiency, even in frontier markets. Furthermore, the level of investor protection within a country strengthens this relationship, particularly in firms that are prone to underinvestment.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141346724","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Firm sensitivity to changes in policy uncertainty and its impact on audit pricing","authors":"Joohyung Ha","doi":"10.1108/raf-12-2022-0345","DOIUrl":"https://doi.org/10.1108/raf-12-2022-0345","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine how a firm’s exposure to economic policy uncertainty affects the auditors’ perceptions of financial reporting risk. Firms that are more sensitive to policy uncertainty are predicted to engage in more earnings management because these firms are more likely to experience greater uncertainty in future operations. Audit fees will reflect this reporting risk. On the other hand, auditors might feel more fee pressure from policy-sensitive firms because firms are more inclined to reduce spending in the face of uncertainty and subsequently charge lower fees.\u0000\u0000\u0000Design/methodology/approach\u0000The author tests my hypothesis using U.S. data on audit fees and client characteristics of public companies between the years 2001 and 2021. The author estimates a standard audit fee model based on the audit fee literature (Hay et al., 2006) while also including the two policy sensitivity measures. This study uses panel data methods that allow time-series analyses, providing a powerful setting to test dynamic audit fee adjustment to improve the understanding of the audit market.\u0000\u0000\u0000Findings\u0000The results suggest that audit fee is higher for policy-sensitive firms than for policy-neutral firms. These results are robust to various proxies of policy sensitivity and various specifications designed to mitigate the endogeneity concerns. The study provides assurance that on average, auditor pricing reflects client risk adequately, mitigating the concern that auditors give in to fee pressure and compromise audit quality as a result.\u0000\u0000\u0000Research limitations/implications\u0000While the findings from this study should be of value to regulators and academics seeking to understand audit activities amid escalating macroeconomic uncertainty, when interpreting these results, several limitations must be considered. The study does not examine how external auditors evaluate risks tied to policy uncertainty. A comprehensive understanding of how and why external auditors respond to heightened policy uncertainty faced by firms could be better achieved through interviews with external auditors and audit committee members. In addition, while this study posits that auditors adjust their approach in response to changes in policy uncertainty, largely due to potential shifts in the risks of material misstatement, there might be additional factors at play that warrant higher audit fees post a change in policy uncertainty. For instance, specific policy changes may give rise to new risks or modify existing ones, thereby precipitating increased scrutiny of records and procedures as company directors’ demand. These aspects offer potential avenues for future research.\u0000\u0000\u0000Practical implications\u0000This study underscores the significant role of policy sensitivity in determining audit fees and audit quality. Policy-sensitive firms present unique complexities and potential risks that require additional effort and vigilance from auditors. Auditors must develop a specialized understanding","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141365739","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Board diversity, female executives and stock liquidity: evidence from opposing cycles in the USA","authors":"M. H. Shahrour, R. Lemand, Michal Wojewodzki","doi":"10.1108/raf-01-2024-0014","DOIUrl":"https://doi.org/10.1108/raf-01-2024-0014","url":null,"abstract":"\u0000Purpose\u0000This study aims to address gaps and limitations in the literature on corporate governance and stock liquidity. It explores the potential benefits of increasing female representation in corporate leadership, which has been a subject of debate and policy intervention in recent years.\u0000\u0000\u0000Design/methodology/approach\u0000Based on prior empirical studies and by integrating the insights of different theories, this study links gender diversity to stock liquidity and uses a multivariate panel regression approach.\u0000\u0000\u0000Findings\u0000The results show that gender diversity, both on the board and in executive positions, positively and consistently affects stock liquidity across different business cycles. The findings reinforce the notion that diverse executive leadership is crucial and influential irrespective of the prevailing economic conditions.\u0000\u0000\u0000Practical implications\u0000This study has practical implications for investors, managers and policymakers who are interested in the benefits of gender diversity in corporate leadership. It suggests that increasing the percentage of female executives and board members can improve stock market liquidity, which is a key indicator of market efficiency and firm value.\u0000\u0000\u0000Social implications\u0000This study advocates for gender equality and diversity in corporate leadership, which can benefit society. It demonstrates that the presence of women directors can enhance financial stability and thus benefit the stakeholders and the community.\u0000\u0000\u0000Originality/value\u0000This study contributes to the academic literature by examining the impact of gender diversity on board and executive levels on stock liquidity in the US market. Previous research on this topic has mainly relied on French or Australian data. Moreover, this study extends previous work through examining the case of executives’ gender diversity. To the best of the authors’ knowledge, this study is the first to analyze the relationship between gender diversity and stock liquidity across different business cycles, providing a nuanced understanding of how economic contexts affect this relationship.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-05-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141116272","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Financial inclusion, financial development and financial stability in MENA","authors":"Wael Ahmed Elgharib","doi":"10.1108/raf-05-2023-0146","DOIUrl":"https://doi.org/10.1108/raf-05-2023-0146","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>The study aims to find out the impact of financial inclusion and financial development on financial stability using panel data from eight countries in the Middle East and North Africa (MENA).</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>To achieve the aim of the study, the researcher prepared two indicators of financial inclusion and governance to find out the impact of financial development on the relationship between financial inclusion and financial stability. Data on financial inclusion was obtained from the International Monetary Fund, data on financial development and financial stability were obtained from the World Bank.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The results of the fixed and random effect methods show that financial inclusion has a significant positive effect on financial stability. Additionally, financial development represents a moderating variable in the significant positive effect on the relationship between financial inclusion and stability in the MENA countries.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>The current study suffers from some limitations that researchers must be aware of in future research. First, there is an inability to determine qualitative aspects such as time and cost when designing a composite indicator of financial inclusion. Second, due to limited data, we used only eight countries from the MENA. It is suggested to expand the sample to include other countries.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This paper contributes to the related literature between financial inclusion and financial stability by confirming or denying the results of previous studies. Also, to the best of the author’s knowledge, this paper is the only one that explains the role of financial development in the relationship between financial inclusion and stability in MENA countries, using a composite index to calculate financial inclusion. Finally, the study seeks to focus the attention of the government and policymakers to build a system of financial inclusion that leads to improving financial stability.</p><!--/ Abstract__block -->","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140636139","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Cognitive load, social values and financial distress: drivers of restructuring decisions","authors":"Fidèle Shukuru Balume, Jean-François Gajewski, Marco Heimann","doi":"10.1108/raf-07-2023-0212","DOIUrl":"https://doi.org/10.1108/raf-07-2023-0212","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study aims to analyze the effect of cognitive load and social value orientation on managers’ preferences when they face with two types of restructuring choices in financially distressed firms: the first belonging to the family of organizational restructuring (massive layoffs) and the second to the family of financial restructuring (debt increases).</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The authors investigate experimentally the impact of managers’ cognitive load and social value orientation on the decision to restructure leveraged buyout (LBO) firms in financial distress by using either massive layoffs or debt increases.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>By investigating the impact of managers’ cognitive load and social value orientation on the restructuring decision of an LBO firm in financial distress, the research reveals that, on average, cognitively loaded managers prefer massive layoffs over increased debt levels. The massive layoffs seemingly provide a relatively easier way to avoid conflict with influential, residual claimants. In contrast, social value–oriented managers actively avoid massive layoffs and prefer to increase debt.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>These results imply that the performance mechanisms emphasized to improve agency relations, for example, in LBOs, have their own limitations during periods of financial distress. This study shows that one of these limits is related to cognitive distortions and personality traits.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>In this research, the originality lies in understanding how managers’ internal factors affect their restructuring decision-making, in the case of LBO firms in financial distress.</p><!--/ Abstract__block -->","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2024-04-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140614122","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}