Category Archives: Accounting & Finance

Cultural tightness–looseness and inter‐regional mergers and acquisitions: Evidence from China

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Abstract

We investigated the role of culture in inter-regional mergers and acquisitions (M&As) within national borders, using a dataset that includes M&As conducted by Chinese listed firms from 2005 to 2019. Our research provides compelling evidence that the likelihood of an acquirer initiating a merger proposal – and the subsequent probability of reaching an agreement – decreases as the cultural tightness gap between the acquiring and target firms widens. Furthermore, we found that this negative impact of cultural tightness distance is more pronounced in non-state-owned firms and firms led by younger CEOs.

Performance evaluation of academics: A social influence theory perspective

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Abstract

This study examines the associations between academics' perceptions of their institutions' performance management systems, and in particular their performance evaluation, and academics' attitudes and behaviours. Responses from over 1000 New Zealand academics reveal that those who perceive their performance evaluation as outcomes-focused and process-focused are more likely to exhibit compliance-based behaviour. In contrast, when performance evaluation is perceived as being values-driven and supportive of collegiality, the academics exhibit internalised behaviours. This study further shows that academics with internalised attitudes score higher in research assessment exercises than academics with compliance-based attitudes.

Strategic earnings management in family firms

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Abstract

We examine how family firms strategically manage earnings by using discretionary accruals (AEM) and real activities (REM). Using a sample of privately controlled but publicly listed firms in China between 2007 and 2018, we find that, under normal circumstances, family firms are less (more) likely than nonfamily firms to use REM (AEM) for earnings management, and they use REM and AEM as substitutes. However, when firms are under pressure to meet important earnings benchmarks that are critical to the survival of their businesses, family firms increase their use of REM more than do nonfamily firms. Finally, family firms strategically use REM to improve their future firm performance. This study challenges the unidirectional relationship between family firms and earnings management that is typically documented in existing studies.

Do innovator CEOs matter in IPOs?

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Abstract

This paper examines the impact of innovator CEOs on their firms' IPO underpricing, long-run performance and post-IPO innovation. Firstly, we find that IPO firms led by innovator CEOs experience lower first-day returns (indicating lower IPO underpricing). This phenomenon can be attributed to a CEO's innovative ability, as it plays a pivotal role in mitigating information asymmetry within the IPO market. Secondly, we observe that IPO firms with innovator CEOs have greater IPO long-run performance. Lastly, our analysis reveals that IPO firms led by innovator CEOs demonstrate greater firm-wide innovation up to 4 years after the IPO. Overall, our study highlights the effect of CEO characteristics on firm performance in the IPO market.

Family control, institutional investors, and financial distress: Evidence from China

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Abstract

The effect of family control on corporate governance and risk-taking behaviours remains disputed worldwide. We examine how family control affects the financial distress of firms listed on the Chinese stock market. Our empirical findings suggest that family firms, particularly those with descendant CEOs, face significantly higher financial distress risk. Higher debt levels and more diversified acquisitions of family firms can partially explain their higher financial risk. Further analysis indicates that institutional investors help reduce the financial distress risk of Chinese family firms. We contend that institutional investors play vital roles in enhancing the corporate governance of family firms in China. Taken together, our study urges attention to the financial distress risk of family firms in a transient economy.

Exit as governance: The effect of stock liquidity on firm productivity

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Abstract

This study examines the effect of stock liquidity on firm productivity. Our findings indicate that stock liquidity positively affects firm productivity. Our study provides several pieces of evidence to show that stock liquidity enhances firm productivity through facilitation of corporate governance by shareholders and stock price efficiency. Additionally, we confirm that the impact of stock liquidity on productivity is more pronounced for firms with lower attendance at shareholder meetings, with less financial constraints and that are state-owned enterprises. This study makes a valuable contribution to the existing literature by presenting novel evidence regarding the influence of stock liquidity on firm productivity in emerging markets.

Influence of the cash conversion cycle on firm’s financial performance: Evidence from publicly traded firms in the Latin American context

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Abstract

This study investigates the relationship between the cash conversion cycle (CCC) and the financial and market performances of publicly traded” firms in six Latin American (LatAm) countries: Argentina, Brazil, Chile, Colombia, Mexico, and Peru. The analysis covers the period from 2000 to 2018. The results indicate that increases in CCC negatively impact the generation of operating cash flows and long-term investments, and increase financial risk. Other findings suggest that the mechanisms through which CCC affects a firm's financial performance can provide a satisfactory explanation of its market performance. The evidence is consistent with the hypothesis that CCC is a relevant driver of value in working capital management in undeveloped or emerging economies.

Transparency or ambiguity? Voluntary IFRS adoption and earnings management in Japan

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Abstract

This study examines the mechanism of voluntary IFRS adoption on earnings management in Japan. Limited research clarifies how IFRS adoption influences earnings management. Using data from listed firms between 2011 and 2018, the multivariate regression results suggest that voluntary IFRS adoption in Japan increases the extent of discretionary accruals. Furthermore, the relation becomes more pronounced when firms have greater accounting opportunities and stronger cost incentives. The main findings hold after various robustness tests. This study fills the gap in the literature by investigating the mechanism that IFRS adoption enhances opportunities and motivation for earnings management through accounting ambiguity.

Labelling in financial reporting: An examination of “other comprehensive income” and non‐professional investors’ judgements

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Abstract

Other comprehensive income (OCI) is often confusing for financial statement users and the International Accounting Standards Board has proposed new labelling to improve its presentation. Using an experimental method, we find that OCI labelling influences non-professional investors' evaluation and judgements on financial performance. Non-professional investors place greater weight on OCI information presented with explicit labels when assessing both the current and future performance of a company. Our results indicate that improving the presentation of OCI information enhances their perceived relevance in investors' decision-making. The results have practical implications for standard setters and financial statement users.

The influence of organisational learning capability on the organisational use of SMA practices: The mediating role of employee creativity and empowerment

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Abstract

This study extends the strategic management accounting (SMA) and organisational learning literature by examining the role of organisational learning capability in facilitating the organisational use of SMA practices. Further, we consider the role of two employee behavioural factors – employee empowerment of SMA practices and employee creativity – in mediating this relationship. Data was collected from 332 accountants in Australian business organisations using an online survey questionnaire, with structural equation modelling applied to analyse the data. The findings highlight the direct and indirect (through employee empowerment of SMA practices and employee creativity) influence that organisational learning capability has on the organisational use of SMA practices.