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Pretending to be sustainable: Is ESG disparity a symptom? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2024-03-21 Gabriel de la Fuente, Pilar Velasco
This study investigates a novel dimension of ESG (environmental, social, and governance), namely the degree of inequality in the distribution of a firm’s overall ESG performance across the three pillars. By grounding our arguments on the agency theory, we argue that such a dimension can discern the degree of authenticity of managers’ ESG awareness. A more unequal distribution might be due to a discretionary
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Impact of target firm’s social performance on acquisition premiums J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2024-03-21 Mahfuja Malik, Md Al Mamun
This study investigates whether a target firm’s corporate social responsibility (CSR) influences the acquisition premium paid by an acquirer. Using the US public mergers and acquisitions (M&A) deals, this study finds that acquisition premium increases as targets’ perceived CSR quality increases, an effect incremental to previously documented drivers of such premiums. Additional findings reveal that
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Corporate carbon reduction and tax avoidance: International evidence J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2024-03-15 Zhi-Yuan Feng, Ying-Chieh Wang, Wen-Gine Wang
Using data on firms’ carbon emissions in 28 countries, we document that a firm’s initiation of carbon reduction activities relates to lower tax payments. This result endorses a perception of legitimacy theory suggesting that companies can gain legitimacy with tax authorities by adopting carbon reduction strategies. Our study also shows that the positive relationship between lower tax payments and a
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Lending corruption and bank loan contracting: Cross-Country evidence J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2024-03-08 Liangliang Jiang, Chong Wang
Using World Bank survey data, we document that banks extend more favorable loan terms to borrowers in countries with more lending corruption. This relation is stronger when borrowers have financing constraints but weaker in countries with stronger monitoring of foreign bank ownership or with stronger religiosity. We also find that banks in countries with high lending corruption have poor loan quality
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Managerial ability and supply chain power J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2024-03-04 G M Wali Ullah, Juan Luo, Alfred Yawson
This paper investigates how major customer firms, managed by highly capable managers, can gain bargaining power over their suppliers. Our results document a positive association between managerial ability and the supply chain power a major customer firm holds over its suppliers. The results are robust to endogeneity concerns, tested through two-stage least squares (2SLS) regressions and difference-in-differences
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Covenant violation concern and investors’ pricing of Level 3 fair value adjustments J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-10-13 Laura Mehnaz, Asheq Rahman, Humayun Kabir
We examine the influence of concerns relating to violation of the borrowing covenant on the investors’ valuation of Level 3 fair value adjustments. We reason that managerial bias in Level 3 fair value estimation is greater for firms approaching violation of the borrowing covenant. Based on a sample of Australian real estate firms, we find that managers report upward adjustments to Level 3 investment
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Brand capital on debt maturity structure J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-10-06 Tongxia Li, Chun Lu, James Routledge
This study examines whether brand capital is associated with debt maturity choice. For listed firms in the U.S. over the period from 1975 to 2019, we find that investment in brand capital through ongoing advertising outlays is positively related to the use of short-term debt. The result is consistent with the hypothesis that high brand capital firms use short-term debt because of beneficial signaling
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Uncertain tone, asset volatility and credit default swap spreads J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-09-22 Hitesh Doshi, Saurin Patel, Srikanth Ramani, Matthew Sooy
We examine the relationship between uncertain linguistic tone and credit default swap (CDS) spreads. Using an event study approach, we first show that uncertain linguistic tone in 10-Q/K filings is positively associated with CDS spread changes incremental to positive and negative tone and incremental to the response implied by equity market reactions to the same information. We further demonstrate
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Pre-and-aftermarket IPO underpricing: Does use of proceeds disclosure matter? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-09-17 Kavitha Ranganathan, Madhu Veeraraghavan
Exploiting a unique regulatory framework for IPO pricing in India, which allows us to estimate voluntary and aftermarket underpricing, we answer whether specific use of proceeds explains underpricing in the pre- and aftermarket. Our main findings are as follows. First, we document that disclosure of specific use of proceeds increases actual voluntary underpricing (i.e., offer price being lower) in
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Financial reporting quality and investment efficiency: The role of strategic alliances J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-09-07 Huichi Huang, David Weinbaum, Nir Yehuda
We study firms that engage in strategic alliances and investigate the link between a firm’s investment and the accounting quality of its partners. Given the view of the firm as a nexus of contractual relationships, we expect that alliance partner information will help investors monitor the firm. In line with this expectation, we show that partner firms’ accounting quality reduces both over- and underinvestment
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CEO overconfidence: A dual-detriment to investment-price sensitivity via market negligence and reduced informed trading J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-09-02 Heung-Jae Jeon
This study investigates the impact of the direct and indirect effects of CEO overconfidence on investment-price sensitivity (IPS). Using a large sample of U.S. S&P 1500 firms from 1993 to 2020, I find a significant negative relationship between CEO overconfidence and investment-price sensitivity. Furthermore, the findings demonstrate that the relationship is partially mediated by the level of informed
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Redrawing the line: Narrowly beating analyst forecasts and journalists’ co-coverage choices in earnings-related news articles J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-08-06 Jingjing Xia
Do journalists use editorial tools to help investors clarify uncertain earnings performance? This study examines this question in the context of WSJ reporters’ co-coverage choices. Using narrowly beating consensus analyst forecasts as a proxy for earnings evaluation uncertainty, I find that journalists tend to co-cover peers that are more economically related to the announcing firm when it reported
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CEO regulatory focus and management earnings forecasts J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-07-29 Sidharth Murthy, Ferdinand A. Gul, Jun Yao
In this study we examine the association between CEO Regulatory focus (RF) and likelihood, frequency, and accuracy of management earnings forecasts (MEFs). RF theory suggests that an individual makes decisions and pursues goals through either a promotion focus or prevention focus. A promotion focus individual is regulated towards achievements, success, growth, and advancement while a prevention focus
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Annual report readability and equity mispricing J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-06-05 Chen Chen, Dean Hanlon, Mehdi Khedmati, James Wake
This study examines the association between annual report readability and equity mispricing. Consistent with low annual report readability impeding the efficient and accurate assimilation of information into stock prices, less readable annual reports are associated with greater equity mispricing. This association extends to both equity underpricing and equity overpricing. Cross-sectional analysis indicates
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Modeling board governance, environmental expertise, and social engagement effects on firm environmental performance: Panel data evidence J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-05-03 Daehyun Kim, Michael J. Marin, Gordon D. Richardson, Steven E. Salterio, Albert Tsang
Prior research establishes that board governance quality measures positively impact firm environmental performance. In this study, we propose an empirical model using structural equation modeling (SEM) to explore additional enhancements to board governance, namely board environmental expertise (BEE) and board social engagement (BSE) and show that they incrementally improve firm environmental performance
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Top executive gender diversity and financial reporting quality J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-04-25 Karel Hrazdil, Dan A. Simunic, Stephen Spector, Nattavut Suwanyangyuan
We examine whether gender diversity of chief executive and chief financial officers (CEOs and CFOs) is associated with financial reporting quality. The CEOs and CFOs of publicly traded companies are both required to certify the appropriateness of their financial statements and annual disclosures. We argue that gender diverse dyads (groups) of executives can bring different perspectives and professional
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Tax avoidance and the cost of debt for SMEs: Evidence from Spain J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-04-15 Juan Pedro Sánchez-Ballesta, José Yagüe
We investigate the effect of tax avoidance on the cost of debt for SMEs. Tax avoidance may increase a firm’s cash flows on one hand, but also increase the agency costs, the information risk, and the risk of scrutiny by tax authorities on the other, affecting the cost of debt in opposing ways. Using a sample of Spanish SMEs for the period 2007–2019, our findings show that tax-avoiding SMEs face lower
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Corporate governance, compensation mechanisms, and voluntary disclosure of carbon emissions: Evidence from Korea J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-04-10 Jiyoung Park, Jiyoon Lee, Jewon Shin
We investigate the effects of incentive-alignment mechanisms on voluntary disclosure of carbon emissions in Korea, a latecomer in incorporating environmental practices into business operations. We consider in particular the effects of corporate governance and compensation mechanisms. We find that international aspects of governance mechanisms, measured by foreign ownership and foreign subsidiaries
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Auditor specialization in R&D and clients’ R&D investment-q sensitivity J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-03-20 Eugenia Y. Lee, Wonsuk Ha, Sunyoung Park
While research and development (R&D) activities contribute to economic growth via technological innovations, they impose significant uncertainty and agency costs. In this study, we examine the governance role of R&D specialist auditors in affecting clients’ R&D investment decisions. Using a sample of U.S. firms during 2001–2016, we find that R&D specialist auditors’ clients make more efficient investments
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Tournament-based incentives and media sentiment J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-03-13 Jiayi Zheng, Hasibul Chowdhury, Md Safayat Hossain, Kartick Gupta
We find that promotion-based tournament incentives of executives are positively associated with firms’ media sentiment. This effect is more pronounced among firms with greater need for media favourability, captured by higher information opacity, lower analyst coverage, lower industry homogeneity, lower investment sentiment and lower managerial ability. Furthermore, we identify better financial performance
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Loss expectation and income shifting J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-03-04 Ye Ji Lee, Ji Seon Yoo
This study examines the effects of expected losses on the income-shifting strategies of multinational corporations (MNCs). Using a set of worldwide MNC affiliates, this study first finds empirical evidence for ex ante adjustments of income-shifting strategies according to reverse incentives for potential losses. The results also support the existence of limited flexibility introduced by Hopland et
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Disclosure strategies for management earnings forecasts: The role of managerial compensation structures, overoptimism, and effort J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2023-02-14 Hao-Chang Sung, Shirley J. Ho
Management earnings forecasts have received significant attention as an important source for setting firm expectations. Our paper argues that how these forecasts are presented to the public is important for managing these expectations. We present both analytical and empirical analyses demonstrating that managers’ disclosure framing choices will depend on the information type, managerial overoptimism
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Do insiders trade on innovation? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-12-09 Ibrahim Bostan, G. Mujtaba Mian
We find that pure insider share purchases—which we define as insider purchases over two successive years without any corresponding sales—are a strong predictor of a firm’s patent applications. The predictability increases with the quality of the patent: Applications for the highest-quality, breakthrough patents increase by 21% in the year following pure insider purchases in our sample. These purchases
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Corporate lobbying: Resource-seeking or rent-seeking? Evidence from audit fees J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-10-26 Steven Yik-Pui Low, Yee-Boon Foo, Ferdinand A Gul
Theory and prior research suggest that corporate lobbying is a primary means that corporations use to influence government policies either for improving firm performance (i.e., strategic decisions) or for rent-seeking activities (i.e., agency costs) but the evidence between lobbying activities and auditor assessments of audit risk remains unclear. Our results show that lobbying firms are associated
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Perpetual securities and stock prices: Korean evidence J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-10-22 Young Jun Kim, Sera Choi, Eugenia Y. Lee, Su Jeong Lee
Perpetual securities are classified as equity under the International Financial Reporting Standards, but various contract terms embedded in the securities create additional debt- and equity-like characteristics. This study examines whether stock market investors differentiate between diverse contract attributes. Using quarterly data on listed non-financial firms in the Korea Exchange that issued perpetual
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Predictors of revenue shifting and expense shifting: Evidence from an emerging economy J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-08-17 Manish Bansal, Ashish Kumar, Asit Bhattacharyya, Hajam Abid Bashir
Prior literature established that managers engage in Revenue Shifting (RS) and Expense Shifting (ES) with an intent to report favourable operating performance; our paper extends such research in a new direction by investigating both forms based on the need, ease, and advantage of each form of shifting strategy. The study identifies firm-specific factors that incentivize firms to prefer RS over ES and
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The unintended consequence of collateral-based financing: Evidence from corporate cost behavior J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-08-11 Tongxia Li, Chun Lu, Zhihua Chen
This paper examines how real estate appreciation correspondingly changes collateral value, which affects debt structure choices and consequent operating decisions. Specifically, we explore whether collateral-based financing provides a link between real estate values and corporate cost behavior. Our baseline results show that an appreciation of a firm’s real estate assets alleviates its cost stickiness
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CEO inside debt holdings and credit ratings J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-08-06 Mostafa Monzur Hasan, Ashrafee Hossain, Takdir Hossain
In this paper we investigate the relationship between chief executive officer (CEO) inside debt holdings (pension benefits and deferred compensation) and long-term credit ratings. We provide evidence that firms with a higher level of inside debt holdings enjoy better credit ratings. Our results are robust to the use of alternative regression estimation and alternative measures of key variables. We
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Does Form 20-F reconciliation elimination for IFRS filers affect the risk forecasting ability of accounting numbers? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-07-15 She-Chih Chiu, Hsuan-Chu Lin, Chin-Chen Chien, Chia-Chen Liang
This study investigates the effect of the elimination of Form 20-F reconciliation items on the risk relevance of accounting information. Using a sample of U.S. companies and American depositary receipts adopting domestic standards that are generally in accordance or fully compliant with IFRS, this paper finds that IFRS better reflect macroeconomic fluctuations after Form 20-F reconciliation elimination
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Goodwill or “No-will”: Hubris in the tone at the top J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-07-13 Emmeli Runesson, Niuosha Samani
In this study, we examine the effect of hubris in the “tone at the top” on goodwill accounting, specifically the proportion of the purchase price allocated to goodwill following a business combination, and subsequent decisions to write down goodwill. Using a sample of CEO letters to shareholders from firms listed on the Stockholm Stock Exchange, we carry out textual analysis of CEO letters to identify
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Organizational form and access to capital: The role of regulatory interventions J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-07-12 Debarati Basu, Kaustav Sen
We examine how regulatory nudges mandating only disclosure of ownership information and no structural change impact a firm’s access to capital based on its organizational form. As a first of its kind, Clause 35 in India (characterized by weak enforcement and concentrated ownership) only required classifying shareholders into insiders and outsiders. Pre-regulation, group-affiliated firms exhibited lesser
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Risk management committees and readability of risk management disclosure J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-07-11 Jing Jia, Zhongtian Li
This paper examines whether the presence of risk management committees is associated with the readability of risk management disclosure. Specifically, we consider the presence and the effectiveness of risk management committees. We measure the readability of risk management disclosure using six different readability indices, namely: Bog index; Flesch Reading Ease score; Coleman–Liau index; Flesch–Kincaid
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Corporate transparency and firm value: Does market competition play an external governance role? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-07-11 Chengcheng Liu, Qing Li, Yu-En Lin
We investigate whether market competition affects the relationship between corporate transparency and firm value in the United States using a sample of 12,665 firm-year observations, representing 1,644 individual firms for the period 1996–2018. The results show that stronger transparency enhances firm value, and market competition has a significantly positive effect on that relationship. More importantly
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Financial distress and the accrual anomaly J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-06-30 Hang Thu Nguyen, Pascal Alphonse, Hiep Manh Nguyen
We find that the accrual anomaly is concentrated in healthy firms and is absent in financially distressed firms. The differential persistence between accruals and cash flows is the main driver of the relationship. Prior studies propose two explanations for the accrual anomaly: (1) accounting distortions of accruals and (2) investment mispricing. Our empirical evidence supports the former and challenges
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Aggressive CEOs and bank mergers and acquisitions J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-06-27 Mingming Ji, Liangliang Jiang
The U.S. banking industry has seen waves of mergers since the 1980s. Despite a significant body of research on the determinants of these waves, there are few studies of how CEOs influence banks’ mergers and acquisitions (M&As). This paper studies the effect of CEO aggressiveness on bank M&As. We construct a new measure of bank CEO aggressiveness based on CEOs’ ancestral countries of origin and data
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Corporate social responsibility committees and the use of corporate social responsibility assurance services J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-06-20 Michael Bradbury, Jing Jia, Zhongtian Li
This study examines whether corporate social responsibility (CSR) committees associate with the external assurance of CSR reports. Specifically, we consider the presence and effectiveness of CSR committees. Using a sample of Australian firms over the period 2004–2016, we show the mere presence of a CSR committee is not related to the external assurance of CSR. However, CSR committee effectiveness is
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Debt contracting and the goodwill debate J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-06-18 Chandrani Chatterjee, Arpita A. Shroff, K. Sivaramakrishnan
Extant literature offers mixed evidence on the quality of goodwill after the promulgation of SFAS 141/2 (Li and Sloan, 2017; Lee, 2011; Chen et al., 2008). We reconcile these conflicting findings by examining the role of managerial incentives in determining the efficacy of SFAS 141/2 in improving the quality of goodwill reporting. Using the context of debt contracting, we find that the value-relevance
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Policy and oversight of corporate political activities and the cost of equity capital J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-05-30 Christofer Adrian, Mukesh Garg, Anh Viet Pham, Soon-Yeow Phang, Cameron Truong
This paper investigates the effect of voluntary adoption and disclosure of policies/oversight of corporate political activities/spending on the cost of equity capital for S&P 500 firms over the period 2015–2018. Using the CPA-Zicklin Index to measure the level of policies, oversight, and disclosure of corporate political activities, we find that firms with a greater level of policies and oversight
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CEO power and annual report reading difficulty J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-05-30 Li Sun, Grace Johnson, Wray Bradley
We examine the impact of CEO power on reading difficulty of corporate annual reports. We find that CEO power is positively related to reading difficulty, implying that annual reports of corporations with powerful CEOs are difficult to read and understand. More importantly, we find that the relation between CEO power and reading difficulty is moderated by earnings performance or corporate governance
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Role of corporate governance in moderating the risk-return paradox: Cross country evidence J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-04-27 Ranjan DasGupta, Soumya G. Deb
This paper investigates the possible nexus between the 'risk-return paradox' and corporate-governance of firms in a cross-country cross-cultural setup. We use corporate governance as well as accounting risk and return data for a large dataset of 45,322 firm-years from 27 countries and show that the firm-level risk-return association may be a non-linear one, contingent on the firm performance. Firms
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Cultural tightness and accounting conservatism J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2022-01-05 Minyoung Noh, Moon Kyung Cho
This study investigates the effect of intrastate cultural tightness-looseness (CTL) on accounting conservatism, using firms located in 50 states of the United States, from 1988 to 2016. It finds that firms located in culturally tight states prefer to take a cautious approach to reduce uncertainty of future economic events by increasing accounting conservatism compared to those located in culturally
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Managerial ability and debt maturity J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-12-24 Joye Khoo, Adrian (Wai Kong) Cheung
We examine whether and how managerial ability affects corporate debt maturity decisions. The demand for shorter maturity debt is expected to be higher in firms operated by high-ability managers, who possess the superior skills needed to anticipate firms’ economic prospects and communicate their private information, thereby alleviating information asymmetry and bolstering their reputation. We document
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Does corporate tax avoidance promote managerial empire building? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-11-27 Syed Shams, Sudipta Bose, Abeyratna Gunasekarage
We examine the association between corporate tax avoidance and empire building using 35,060 firm-year observations from the United States (US) for the period 1991–2015. We build a composite empire building measure by conducting a factor analysis on four popular empire building proxies used in the literature. We find a positive association between this composite measure and the four proxies used to
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Did mandatory CSR compliance impact accounting Conservatism? Evidence from the Indian Companies Act 2013 J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-08-27 Tara Shankar Shaw, Mehul Raithatha, Gopal V. Krishnan, James J. Cordeiro
In 2013, India became the first country in the world to require firms to spend two percent of their average profit on corporate social responsibility (CSR) activities. Taking advantage of this unique event, we examine how the mandatory CSR compliance impacts conditional accounting conservatism of Indian firms. We find a positive relation between CSR compliance and conditional accounting conservatism
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Macroeconomic uncertainty and management forecast accuracy J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-08-28 Norio Kitagawa
This study examines the effect of macroeconomic uncertainty on the accuracy of management earnings forecasts. Focusing on Japanese management earnings forecasts, which are effectively mandated, I find that during periods of high macroeconomic uncertainty, firms tend to report accurate earnings forecasts. I also find that macroeconomic uncertainty lessens optimistic but not pessimistic errors. These
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Are gender diverse boards more cautious? The impact of board gender diversity on sentiment in earnings press releases J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-07-16 Paul Mather, Dinithi Ranasinghe, Luisa A. Unda
We examine the impact of board gender diversity on the sentiment in earnings press releases. Managers may use press releases to manage readers’ perceptions of corporate performance and we posit that gender diverse boards actively monitor managerial disclosures and tend to favour more cautious language in the press releases. Using a sample from ASX top 200 company voluntary disclosures and natural language
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Multiple directorships and the extent of loan loss provisions: Evidence from banks in South Asia J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-07-18 Shawgat S. Kutubi, Kamran Ahmed, Hayat Khan, Mukesh Garg
This paper examines whether directors with multiple directorships affect extent of banks' loan loss provisions in South Asia. Our results indicate that directors with multiple directorships tend to delay the recognition of loan loss provisions. Specifically, we find the existence of a U-shaped relationship between directors with multiple directorships and loan loss provisions, indicating that the delay
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Determinants of the duration of the voluntary administration process: An unconditional quantile regression analysis J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-07-14 John Goodwin, James Routledge
This study explores determinants of voluntary administration (VA) and deed of company arrangement (DOCA) durations using unconditional quantile regression (UQR). Determinants’ effects are heterogeneous across the VA and DOCA distributions. Determinants related to complexity and negotiation, including size and debt restructuring existence, are positively and negatively related respectively to VA duration
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Do co-opted boards increase insider profitability? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-06-08 Dewan Rahman, Ihtisham Malik, Searat Ali, Jamshed Iqbal
Using a sample of U.S. firms over the period 1996–2014, this paper examines whether insider trading profitability increases with high board co-option. Indeed, we find that firms with a higher level of co-opted directors exhibit higher insider trading profitability, largely due to a lower level of managerial ability and analyst coverage. Co-opted boards are also unlikely to implement self-imposed insider
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Do firms anticipate security issues by conservative reporting? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-06-09 Sereeparp Anantavrasilp, Carel Huijgen, Martien Lubberink
We examine the importance of debtholders’ and shareholders’ concern for conservative accounting. We use the concept of conditional conservatism and study a firm’s earnings behavior around important capital structure decisions, i.e. debt and equity issues. We employ a large sample of US debt and equity issues, which allows us to investigate the timing of conservatism. Our results show that firms issuing
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Does religiosity matter for corporate labor investment decisions? J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-06-12 Mehdi Khedmati, Mohammed Aminu Sualihu, Alfred Yawson
We examine the effect of county-level religiosity on labor investment decisions. Drawing on the social norm theory, we hypothesize that firms located in religious counties are less likely to engage in inefficient labor investment decisions. Consistent with this prediction, we find that county-level religiosity reduces inefficient labor investment. Using the exogenous shock of the 2002 revelation of
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Tax haven Use, the pricing of audit and Non-audit Services, suspicious matters reporting obligations and whistle blower hotline Facilities: Evidence from Australian financial corporations J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-06-09 Baban Eulaiwi, Ahmed Al-Hadi, Grantley Taylor, Saurav Dutta, Lien Duong, Grant Richardson
This study examines whether tax haven use by Australian financial corporations is associated with the pricing of audit and non-audit services. It also analyzes whether the existence of financial corporations’ suspicious matters reports (SMRs) and whistle blower hotline facilities moderate the association between tax haven use and pricing of audit and non-audit services. We find a positive association
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Do family firms engage in less tax avoidance than non-family firms? The corporate opacity perspective J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-06-08 Cheng-Hsun Lee, Sudipta Bose
We examine the moderating effect of corporate opacity on the relationship between family firms and tax avoidance. We find, ceteris paribus, that family firms and tax avoidance are negatively associated. However, the negative association is attenuated when corporate opacity increases. Our results indicate that corporate opacity affects firms’ tax avoidance, with this effect stronger for family firms
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The impact of economic sanctions on audit pricing J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-05-06 Oksana Kim
This study extends the literature on the association between business risk and audit pricing by exploring the economic sanctions of 2014 imposed by the Western community on Russia. The sanctions targeted predominantly Russian companies with state ownership, potentially leading to increased business risk for these companies. I find support for the notion that, post-2014, audit fees increased in the
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Impact of Basel III on the discretion and timeliness of Banks’ loan loss provisions J. Contemp. Account. Econ. (IF 2.944) Pub Date : 2021-03-30 Pearpilai Jutasompakorn, Chu Yeong Lim, Tharindra Ranasinghe, Kevin Ow Yong
The Basel III Accord tightens capital adequacy requirements for banks by increasing the minimum Tier 1 regulatory capital threshold from 4 to 6 percent. It also emphasizes the need to improve timeliness of loan loss provisions. Using a sample of European banks, we examine the impact of this regulation on banks’ discretionary loan loss provisioning behavior. Underscoring banks’ increased incentives