PurposeThe purpose of this study is to examine whether institutional investors monitoring attenuate (exacerbate) weaker earnings persistence in politically connected firms (PCFs). In addition, it investigates whether earnings persistence do vary according to different types of political connections.Design/methodology/approachThis study employs earnings persistence as measure of earnings quality and ordinary least squares (OLS) model to examine: (1) the moderating effect of institutional investors’ ownership on the association between earnings persistence and PCFs and (2) the association between different types of political connections and earnings persistence.FindingsThis study finds that institutional investors' ownership attenuates weaker earnings quality in PCFs, indicating effective monitoring. However, stronger earnings persistence is associated with PCFs with longer political ties, audited by big four audit firm and with higher CEO power.Originality/valueThis study reveals the lower earnings persistence in PCFs can be attenuated by institutional investors monitoring. However, findings also suggest that earnings persistence in PCFs is affected by duration of political ties, big four audit firm and CEO power. This suggests that PCFs should not be viewed as a homogeneous group of firms.

PurposeVega et al. (2020) find that incentives in executive compensation result in higher earnings informativeness. The discussion focuses on two areas for improvement. First, the authors could look into additional measures of earnings quality. This further analysis could help us understand whether the enhanced earning informativeness stems from capital market effects or real effects. Second, the authors could consider replacing their main earnings response coefficient (ERC) model with one of the alternative ERC models in the literature. Three different ERC models are discussed.Design/methodology/approachThis paper discusses capital market effects versus real effects and illustrates different ERC models.FindingsThe discussed paper could differentiate between capital market effects and real effects and use an alternative ERC model.Originality/valueAn accounting audience could be interested in the discussion on capital market effects versus real effects and the illustration on various ERC models.

Purpose The purpose of this paper is to examine how a firm’s mergers and acquisitions (M&A) goals influence its voluntary disclosure policy. Specifically, this paper examines how a firm’s M&A financing intentions influence the degree of aggregation in management guidance prior to and after the M&A transaction. Design/methodology/approach Using a logistic model, this study tests the relation between M&A financing and the decision to issue disaggregate earnings guidance for 3,929 acquiring firms from 2007 to 2011. Findings The logistic regression results show that firms are more likely to provide disaggregate earnings guidance when using mostly stock to finance M&A and that the incentives to disaggregate guidance vary throughout the M&A transactional window. Alternatively, because the value of cash is independent of the true value of the acquirer, the results show that firms offering mostly cash to finance M&A are less likely to issue disaggregate earnings forecasts. Additional analysis reveals that the decision to issue disaggregate earnings guidance also influences post-merger outcomes such as CEO turnover. Research limitations/implications The choice to disaggregate earnings guidance and the choice to use stock as a means to finance an acquisition is made by management, thus are endogenous which could introduce bias. Originality/value This study provides insights into management’s incentives and attitudes toward the use of management forecasts to effect a potential merger and acquisition. Given the flexibility management has in issuing voluntary forecasts, management can tailor a financial message toward investors and potential targets in attempt to facilitate a merger and acquisition and to further the firm’s goals.

PurposeThe purpose of this paper is to examine the perceptions of independent directors in Vietnam about their roles and challenges when sitting on the boards of listed companies.Design/methodology/approachThe study uses mailed questionnaires to collect data. The authors sent surveys to 810 independent directors from 354 listed companies and received feedback from 170 respondents.FindingsThe authors examine several aspects of independent directors’ work on the board (such as the roles of and challenges for independent directors) as well as board environment (such as information provision or board interaction). Findings suggest that independent directors in Vietnam place more emphasis on their advisory role than their monitoring role. In addition, they also point out their challenges including information asymmetries and the influence of controlling shareholders. These challenges are significant and they prevent independent directors to properly execute their independent role on the board. These findings reflect the unique features of corporate governance in transition economies.Originality/valueThe authors contribute to the literature through providing an insightful view about the nature of the work performed by this type of director in a transition economy. The study is also one of the first studies to use a qualitative instrument to provide an explanation of how controlling shareholders influence independent directors on boards of directors.

PurposeThe purpose of this paper is to examine the disclosure pattern of corporate sustainability (CS) and the influence of sustainability reporting on firm performance of four countries in Asia – Japan, South Korea, Indonesia and India.Design/methodology/approachThe authors have collected the sustainability reports and annual reports of 111 firms from four Asian countries for a period of six years. Based on the framework of Global Reporting Initiatives (GRI, 3 and 3.1), content analysis is used for calculating the disclosure score of corporate sustainability performance (CSP). These scores are further used to examine the impact on firm performance by employing a panel data regression model.FindingsThe study finds that the average level and quality of disclosure are the highest for Japanese firms, followed by India and South Korea. However, in the case of Indonesia, the average score is very low. Further, the study finds a significant difference in the disclosure of overall sustainability as well as components of sustainability between the countries. The regression results indicate the positive impact of CSP (both in terms of level and quality) on MBR. Specifically, the outcome of the regression model reveals that both the level and quality disclosure of CS are crucial for enhancing firm value for both the developed and developing countries of Asia. Moreover, the relative influence of CSP (both in terms of level and quality) on firm performance is found to be more in developed countries than the developing countries of Asia.Originality/valueThis is the first comprehensive study in the Asian context to investigate the disclosure pattern of CSP and also examine the association between CSP and firm performance by employing the panel data model. The outcome of this study is useful for policy implication.

PurposeThe purpose of this paper is to examine the relationship between accounting conservatism, corporate governance and political connection in listed firms in Malaysia where political influence plays a significant role in the capital market and in many business dealings.Design/methodology/approachBy utilizing 824 firm-year observations comprising large listed companies over a period of four years from 2004, this study uses ordinary least squares regression models to investigate the relationship between accounting conservatism, corporate governance and political connections in Malaysia. Multiple measures of conservatism developed by Basu (1997) and Khan and Watts (2009) are employed.FindingsThe results show evidence of accounting conservatism (bad news being recognized earlier than good news) in Malaysia. Further, the results reveal that better corporate governance structure in terms of board independence is positively associated with accounting conservatism while management ownership is negatively associated with it. However, political connection has a negative moderating effect on the positive relationship between accounting conservatism and board independence. The results also suggest political connections have a positive association with firm’s future performance.Originality/valueThis study is the first in investigating the effect of political connections on accounting conservatism in Malaysian context and how political connections negatively affect the monitoring role of the corporate boards. By directly measuring political connection and controlling for various corporate governance mechanisms and firm-specific attributes, this study contributes to enhance the authors’ understanding of the political influence in financial reporting quality and firm performance in an emerging market setting.

Purpose The recent significant economic growth and development in Cambodia has created a growing demand for qualified and professional accountants. Despite such demand, there are still inadequate number of students enrolling in accounting major, which lefts the National Accounting Council (NAC), Kampucha Institute of Certified Public Accountants and Auditors (KICPAA), and academic institutions with question on how to develop strategies and plans for attracting students and in turn meeting the level required. This paper attempts to determine factors that influence Cambodian business students’ decision to choose accounting as a major for their tertiary education. Design/methodology/approach The paper hypothesizes that Guidance, Career Expectation, Perception, Personal Characteristic as factors that would influence students selection of accounting study. With a sample size of 240 business students, Turkey HSD Post Hoc Test and logistic regression methods are employed to ascertain the influential factors. Findings The results from ANOVA Turkey HSD Post Hoc Test showed that there is a statistically significant difference among universities with respect to Guidance, Career Expectation, and Personal Characteristic factor, but no significant difference was found among universities in terms of Perception factor. The logistic regression result indicated that students’ choice of accounting major has a positive and significant relationship with Guidance, Personal Characteristic factor, and age. Conversely, the results demonstrated that choice of accounting major has a negative but significant relationship with Career Expectation factor, and a negative but insignificant relationship with Perception factor. Finally, the results revealed a positive but insignificant relationship between accounting major and individual gender. Originality/value This paper contributes to the limited study on accounting education in Cambodia. Furthermore, it provides insights for the NAC and KICPAA and universities in Cambodia to develop strategies and plans to create a balance market of professional accountants.

Purpose– The purpose of this paper is to examine whether and how auditors’ and audit clients’ IFRS-related experience alters auditors’ pricing decisions in the initial years of IFRS adoption in China.Design/methodology/approach– The authors conduct the analysis by examining audit fees from 4,129 sample observations that issued A-shares in the Shanghai and Shenzhen stock exchanges from 2005 to 2008. The authors empirically test the association between audit premiums and auditors’ and auditees’ IFRS experience.Findings– The authors find that auditors with IFRS experience charged significantly higher audit premiums in the initial years of IFRS adoption. The authors also find that audit clients’ with IFRS experience paid significantly lower incremental fees. The authors further find that the increased fees charged by audit firms with IFRS experience are independent of the degree of changes in the financial reporting complexity of their clients. In contrast, audit clients with IFRS experience paid lower incremental fees only when they underwent a high degree of changes in financial reporting complexity.Originality/value– First, it is the understanding that this study is the first to provide evidence on the effect of audit clients’ experience on audit fees. Second, the measure of auditors’ expertise is independent of audit clients’ decisions and is a less noisy measure. Third, the findings complement the existing evidence from other countries regarding the effects of IFRS convergence on audit fees. Finally, this study empirically tests the effects of changes in financial reporting complexity on audit fees.

Purpose – The purpose of this paper is to examine the relationship between Bumiputra (in reference to Malay indigenous race) directors, a proxy for culture and analysts forecast. In addition, the study investigates whether corporate governance affects that relationship. Design/methodology/approach – The sample of this study is based on 664 firm-year observations from 193 firms during the 1999-2009 periods. The authors employ a panel least square regression with both period and industry fixed effects. The authors retrieved of analyst data from the Institutional Broker Estimate System (I/B/E/S) database while the authors hand collected the corporate governance variables. The remaining data were collected from Compustat Global. Findings – The authors find a positive relationship between the proxy of culture, Bumiputra directors and analysts forecast error suggesting that cultural values influences the level of information in the Malaysian capital market. Research limitations/implications – The research is dependent on the data availability from I/B/E/S database. Originality/value – The authors extend the work of Haniffa and Cooke (2002) in investigating how cultural values influence the capital market. In addition, this is the first study that investigates culture values and the analysts forecast.

Purpose – The purpose of this paper is to investigate the relationship between “political competition” and “environmental reporting” by New Zealand local governments. Design/methodology/approach – The research method includes a longitudinal analysis of environmental reporting by New Zealand local governments in their annual reports for the financial years 2005-2006 to 2009-2010. “Content analysis” was used to attach scores to the extent of environmental reporting. The “number of candidates divided by the number of available positions at the previous election” was used as the proxy for “political competition”. Findings – The study reports a positive relationship between “political competition” and “environmental reporting” in 2007-2008. The number of local governments reporting voluntary environmental information increased in 2006-2007 and 2007-2008 compared to 2005-2006, followed by a reduction in such numbers following the 2007-2008 financial year. This trend in disclosure can be attributed to the local government elections in October 2007. This finding is consistent with the expectation of “agency theory” and provides insight into the pattern of perceived agency costs. The study also finds a dearth in reporting “monetary” and “bad” news. Originality/value – The study contributes towards the previous literature on environmental reporting by concentrating on the public sector and New Zealand, together with investigating the relationship of such reporting with “political competition” through a longitudinal analysis. The theoretical contribution of this study is the adoption of “agency theory” in the context of public sector voluntary reporting and investigating the significance attached by agents to environmental reporting to minimise agency cost. The practical contribution of the study is in the area of future development of reporting standards in regards to environmental reporting.