Review of Accounting and Finance最新文献

{"title":"Information uncertainty of fiscal year end quarter earnings","authors":"Linda H. Chen, G. Jiang, Kevin X. Zhu","doi":"10.1108/raf-11-2020-0317","DOIUrl":"https://doi.org/10.1108/raf-11-2020-0317","url":null,"abstract":"\u0000Purpose\u0000The purpose of this study is to investigate whether within the same firm, earnings risk is exacerbated in the fiscal year end (FYE) quarters relative to that of other quarters, more importantly, if this type of earnings risk is unique. Further, the authors discuss solutions to mitigate this type of information risk.\u0000\u0000\u0000Design/methodology/approach\u0000This study provides evidence that the information risk associated with FYE quarter earnings cannot be explained by other identified risk factors. Solutions to mitigate this risk include strong corporate governance and a more streamlined financial reporting structure.\u0000\u0000\u0000Findings\u0000The paper shows that there is significantly lower earnings response coefficient for FYE quarters than for non-FYE quarters (1984–2015). Furthermore, strong corporate governance and a more streamlined financial reporting structure, either by firms willingly reducing the usage of extraordinary item reporting or by FASB codification changes such as FASB 145, can help mitigate this type of information uncertainty.\u0000\u0000\u0000Research limitations/implications\u0000This study explains that the causes of the exacerbated information risk associated with FYE quarter earnings identified in prior literature, namely, the “integral explanation” and “manipulation explanation,” are not mutually exclusive. Therefore, the authors deem it futile to disentangle the two. Instead, the authors offer two possible solutions.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2022-04-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45397215","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 governance and firm performance in hybrid model countries","authors":"Alfonso Mendoza-Velázquez, Luis Carlos Ortuño-Barba, L. D. Conde-Cortés","doi":"10.1108/raf-10-2020-0293","DOIUrl":"https://doi.org/10.1108/raf-10-2020-0293","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine the dynamic nexus between corporate governance (CG) and firm performance in hybrid model countries. It also investigates the effect of horizontal agency conflicts on CG adherence.\u0000\u0000\u0000Design/methodology/approach\u0000This research uses vector autoregression methods and dynamic panels to examine the cross-sectional and longitudinal association between CG and performance, using three CG adherence indexes of transparency, management and board governance. The data set includes annual market and firm performance data from a sample of 93 companies trading in the Mexican stock market for the period 2010–2016.\u0000\u0000\u0000Findings\u0000This study finds evidence of dynamic interdependence between CG and firm performance, as well as weak effects of CG adherence on firms’ performance. The adverse effect of increasing return on equity and return on assets (ROE-ROA) gaps on CG adherence, which results from agency conflicts and insider ownership, is likely behind the weak association between CG and firm performance.\u0000\u0000\u0000Originality/value\u0000The findings in this study provide evidence that hybrid systems weaken the nexus between CG and firm performance. The propensity to prefer banking and bond debt to issuing stocks, as indicated by a greater ROE-ROA gap, points to favorable provisions for majority shareholders, adverse normative environments for minority shareholders and a low level of compliance with CG measures, among other problems.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2022-02-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42396172","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 credit rating downgrades along the supply chain","authors":"Dallin M. Alldredge, Yinfei Chen, Steve Liu, Lan Luo","doi":"10.1108/raf-10-2020-0295","DOIUrl":"https://doi.org/10.1108/raf-10-2020-0295","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the information transfer effects of customers’ credit rating downgrades on supplier firms.\u0000\u0000\u0000Design/methodology/approach\u0000In this study, the authors use suppliers’ cumulative abnormal returns around customers’ credit rating downgrade events to identify how shocks to customer credit impact supplier equity prices. The authors also incorporate ordinary least squares and weighted least squares regressions regression analysis of the determinants of supplier market response to customer downgrades.\u0000\u0000\u0000Findings\u0000The authors find that customer credit rating downgrades present significant negative shocks to the stock prices of supplier firms. Moreover, the authors show that the information transfer effects are determined by both firm- and industry-level factors, including the market anticipation of downgrades, the strength of the customer–supplier linkage, the industry rivals’ reactions to the downgrades and investor attention. The authors also find that the likelihood that a supplier will receive a rating downgrade is significantly higher following its primary customer firm’s downgrade.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this paper is the first to explore the information transfer effects of credit rating downgrades on primary stakeholders within the supply chain. The authors document that customer–supplier networks have valuable implications for the spillover effect across debt and equity holders. Information about customers’ financial stress is incorporated into suppliers’ equity prices outside of the context of customer bankruptcy.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45423813","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":"Reporting of discontinued operations and dividend payout policy","authors":"Binod Guragai, T. Henke, GL Young","doi":"10.1108/raf-11-2020-0326","DOIUrl":"https://doi.org/10.1108/raf-11-2020-0326","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine the relationship between the types of discontinued operations (i.e. income-increasing versus income-decreasing) and a firm’s dividend payout policy. The authors extend our analysis to examine whether equity investors react differently to dividend payout changes that are preceded by the reporting of different types of discontinued operations.\u0000\u0000\u0000Design/methodology/approach\u0000Ordinary least squares regressions are used to test the association between discontinued operations and dividend payouts. The investor response test uses cumulative abnormal return around the announcement of dividend payout changes.\u0000\u0000\u0000Findings\u0000The authors find that firms temporarily increase (decrease) their dividend payout in the quarter following the reporting of income-increasing (income-decreasing) discontinued operations. The authors further find that these results are stronger when the magnitude of the income increase or income decrease is larger and when firms report disposal gains or losses. Although prior literature finds evidence that dividend increases are associated with a significant positive market reaction, the results show that investors do not react positively to dividend increases that are preceded by reporting income-increasing discontinued operations.\u0000\u0000\u0000Originality/value\u0000This study adds to the literature on the effects of financial reporting (i.e. the types of discontinued operations) on a firm’s payout policy (i.e. dividend payout). The authors also add to the literature that examines investors’ perceptions of a firm’s payout changes when such changes are transitory in nature.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-11-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44525911","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":"Chinese securities investment funds: the role of luck in performance","authors":"Jun Gao, Niall O’Sullivan, Meadhbh Sherman","doi":"10.1108/raf-07-2020-0182","DOIUrl":"https://doi.org/10.1108/raf-07-2020-0182","url":null,"abstract":"\u0000Purpose\u0000The Chinese fund market has witnessed significant developments in recent years. However, although there has been a range of studies assessing fund performance in developed industries, the rapidly developing fund industry in China has received very little attention. This study aims to examine the performance of open-end securities investment funds investing in Chinese domestic equity during the period May 2003 to September 2020. Specifically, applying a non-parametric bootstrap methodology from the literature on fund performance, the authors investigate the role of skill versus luck in this rapidly evolving investment funds industry.\u0000\u0000\u0000Design/methodology/approach\u0000This study evaluates the performance of Chinese equity securities investment funds from 2003–2020 using a bootstrap methodology to distinguish skill from luck in performance. The authors consider unconditional and conditional performance models.\u0000\u0000\u0000Findings\u0000The bootstrap methodology incorporates non-normality in the idiosyncratic risk of fund returns, which is a major drawback in “conventional” performance statistics. The evidence does not support the existence of “genuine” skilled fund managers. In addition, it indicates that poor performance is mainly attributable to bad stock picking skills.\u0000\u0000\u0000Practical implications\u0000The authors find that the top-ranked funds with positive abnormal performance are attributed to “good luck” not “good skill” while the negative abnormal performance of bottom funds is mainly due to “bad skill.” Therefore, sensible advice for most Chinese equity investors would be against trying to “pick winners funds” among Chinese securities investment funds but it would be recommended to avoid holding “losers.” At the present time, investors should consider other types of funds, such as index/tracker funds with lower transactions. In addition, less risk-averse investors may consider Chinese hedge funds [Zhao (2012)] or exchange-traded fund [Han (2012)].\u0000\u0000\u0000Originality/value\u0000The paper makes several contributions to the literature. First, the authors examine a wide range (over 50) of risk-adjusted performance models, which account for both unconditional and conditional risk factors. The authors also control for the profitability and investment risks in Fama and French (2015). Second, the authors select the “best-fit” model across all risk-adjusted models examined and a single “best-fit” model from each of the three classes. Therefore, the bootstrap analysis, which is mainly based on the selected best-fit models, is more precise and robust. Third, the authors reduce the possibility that findings may be sample-period specific or may be a survivor (upward) biased. Fourth, the authors consider further analysis based on sub-periods and compare fund performance in different market conditions to provide more implications to investors and practitioners. Fifth, the authors carry out extensive robustness checks and show that the findings are robust in relation to different min","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48192199","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":"Different tenure phases of executives and audit fees","authors":"Rachana Kalelkar, Qiao Xu","doi":"10.1108/raf-08-2020-0232","DOIUrl":"https://doi.org/10.1108/raf-08-2020-0232","url":null,"abstract":"\u0000Purpose\u0000The authors investigate whether the different tenure phases of executives have a differential effect on audit pricing. Two alternate views – career concern and power – can explain the effect of executives’ tenure on audit pricing. This paper aims to determine, which viewpoint dominates in explaining the relationship between audit pricing and executive tenure phases.\u0000\u0000\u0000Design/methodology/approach\u0000Using a sample of 11,198 firm-year observations from 2007 to 2016, the authors adopt an ordinary least squares regression model to assess the impact of the middle and long phases of executives’ tenure on audit fees.\u0000\u0000\u0000Findings\u0000Audit fees are significantly lower when executives enter the middle and long phases of tenure. The reduction in audit fees is greatest as both chief executive officers and chief financial officers enter the long tenure phase. Although audit fees gradually decrease as executive tenure is extended, they start increasing two years before the end of executive tenure. Furthermore, the negative association between the executive tenure phase and audit fees is greater when the executive is appointed externally. Finally, the long phase of executive tenure also mitigates the positive relationship between audit fees and internal control weaknesses.\u0000\u0000\u0000Research limitations/implications\u0000This study is based on US data. Future research may extend this study to other countries.\u0000\u0000\u0000Practical implications\u0000The findings are important to firms, practitioners and academicians, particularly, as the length of tenure of top executives has increased in recent years. By documenting that executives’ middle and long tenure phases reduce audit fees, the findings highlight the importance of maintaining executives in the firm. Finally, the findings have implications for investors, policymakers and auditors to identify companies with high audit risk.\u0000\u0000\u0000Originality/value\u0000This study is the first to document the impact of executives’ middle and long tenure phases on audit fees.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47842420","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":"Accounting comparability and cash flows versus accruals","authors":"Meng-Tse Cheng","doi":"10.1108/raf-06-2020-0144","DOIUrl":"https://doi.org/10.1108/raf-06-2020-0144","url":null,"abstract":"\u0000Purpose\u0000This study aims to examine whether accounting comparability between two firms, as measured by De Franco et al. (2011), reflects closeness in the amounts of cash flows and accruals between the firms.\u0000\u0000\u0000Design/methodology/approach\u0000Using 278,452 pair-year observations over the years 2003–2019, the author evaluates the research question using regression models.\u0000\u0000\u0000Findings\u0000Closeness in cash flows and closeness in accruals both increase accounting comparability and the effect of closeness in cash flows is greater. The effect of closeness in earnings is greater than the combined effects of closeness in cash flows and accruals. Earnings quality strengthens, while product closeness weakens, the effects of closeness in earnings and closeness in cash flows.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this study is the first to empirically test the link between the closeness in earnings components and accounting comparability. This study is also the first to examine cash flows versus accruals in the context of accounting comparability.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47267929","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":"Predicting equity premium with adjusted dividend-price ratio: the USA and international evidence","authors":"Mahtab Athari, Atsuyuki Naka, Abdullah M. Noman","doi":"10.1108/raf-10-2020-0311","DOIUrl":"https://doi.org/10.1108/raf-10-2020-0311","url":null,"abstract":"Purpose This paper aims to achieve two main objectives. The first is to introduce a suitable adjustment to the conventional dividend-price ratio, which would address econometric concerns and improve the predictability of the equity premium. The second is to compare the predictive performance of the newly introduced adjusted dividend-price ratio with the conventional dividend-price ratio. Design/methodology/approach The authors hypothesize that the adjusted dividend-price ratio will have better predictive power and forecasting quality for equity premium compared to the conventional dividend-price ratio. To test the hypothesis, the authors predict equity premium with both variables on a sample of 11 developed and emerging market indexes over a period spanning June 1995 to March 2017. To accommodate time variation in parameter values or structural breaks in the data, the authors conducted a fixed window rolling regressions using both variables. A variety of forecast techniques including magnitude and sign accuracy measures are applied to compare the performance of forecasts. Findings The adjusted dividend-price ratio is shown to be stationary and has both lower persistence and variability compared with the conventional dividend-price ratio. The authors find that the adjusted dividend-price ratio provides superior out-of-sample (OOS) performance compared to the conventional dividend-price ratio, for both size and sign accuracy, in forecasting equity premium for the majority of the countries in the sample. Research limitations/implications This paper introduces an easy-to-follow modification in the conventional dividend-price ratio that can be replicated by researchers and practitioners alike. However, the study has a limitation in that it does not capture the impact of dividend-paying firms within each index on the predictive ability of the adjusted dividend-price ratio. Practical implications The knowledge of equity premium predictability is important in implementing market-timing strategies and could be beneficial for portfolio and risk management. The newly introduced variable is easy to construct using widely available data without the need for complex econometric estimation. Investors can use this variable to predict equity premiums in international markets, both developed and emerging. The findings of this paper will be relevant to financial analysts, portfolio managers, investors and researchers in international finance. For example, by using the adjusted dividend-price ratio, investors would see up to 0.5% improvement in their OOS monthly forecasts of the equity premium. Originality/value To the best of the authors’ knowledge, this is the first paper that proposes adjustment in the conventional dividend-price ratio based on the past observations of the most recent quarter. In this way, the paper offers fresh insight that dividend-price ratio is still useful to predict equity premium albeit, after some adjustment","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49306877","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":"Forcing responsibility? Examining earnings management induced by mandatory corporate social responsibility: evidence from India","authors":"Manish K. Bansal, Vivek Kumar","doi":"10.1108/raf-06-2020-0151","DOIUrl":"https://doi.org/10.1108/raf-06-2020-0151","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the impact of mandatory corporate social responsibility (CSR) spending legislation on the earnings management strategies of firms.\u0000\u0000\u0000Design/methodology/approach\u0000The authors use panel data regression models to analyze the data for this study. This study covers the post-legislation period, which spans over five years from the financial year ending March 2015 to the financial year ending March 2019.\u0000\u0000\u0000Findings\u0000The results show that firms manipulate accounting measures to avoid breaching the cut-off criteria for mandatory CSR. In particular, the results show that firms operating around the operating revenue threshold misclassify operating revenue as non-operating revenue. In contrast, firms operating around the net worth and net profit thresholds do downward real and accrual earnings management. These results are consistent with several robustness measures.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study that examines the impact of mandatory CSR spending on earnings management.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-09-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44636800","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":"Managerial ability and stock price crash risk – the role of managerial overconfidence","authors":"Jiaxin Liu, Dongliang Lei","doi":"10.1108/raf-05-2020-0111","DOIUrl":"https://doi.org/10.1108/raf-05-2020-0111","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine the relation between managerial ability and stock price crash risk, conditional on managerial overconfidence. In addition, conditional on managerial overconfidence, the authors investigate the effect of managerial ability on firms’ choice of bad news hoarding channels, which result in a stock price crash.\u0000\u0000\u0000Design/methodology/approach\u0000Using a sample of 24,289 firm-years from companies listed on Compustat and CRSP from 1994 to 2018, the authors conduct panel regression analysis.\u0000\u0000\u0000Findings\u0000The authors find that managerial ability is positively associated with stock price crash risk only when managerial overconfidence is high. Furthermore, the authors find that managerial ability seems to exacerbate (attenuate) the bad news withholding by the overconfident managers using the earnings guidance (earnings management) channel. The authors find limited evidence that high-ability managers are likely to withhold bad news through the overinvestment channel and “other channels” when managers are overconfident. Finally, the authors find that the joint effect of managerial overconfidence and managerial ability on firms’ crash risk is more pronounced when there is a material weakness in firms’ internal controls, high investor belief heterogeneity and high information asymmetry. However, this effect appears to dissipate during the recent financial crisis in 2008.\u0000\u0000\u0000Originality/value\u0000This research reveals that managerial ability is costly to firms by engendering bad news hoardings and stock price crash risk when managers are overconfident. It also sheds light on how managerial overconfidence and managerial ability affect managers’ choice of bad news withholding channels and stock price crash risk. Finally, the paper is of practical value to the board of directors in selecting the prospective executives.\u0000","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":2.4,"publicationDate":"2021-08-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43020757","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}