Category Archives: RESEARCH ARTICLE

ESG, financial constraint and financing activities: A study in the Chinese market

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Abstract

This paper investigates the impact of Chinese firms' environmental, social, and governance (ESG) performance on their financial constraint and financing activities. We find a negative association between firms' ESG performance and their financial constraint driven by the Chinese government's commitment to tackling climate change. Compared with state-owned enterprises (SOEs), non-SOEs have alleviated their financial constraint through both equity and debt issuance, thanks to the stock price appreciation and green credit. High-pollution firms benefit from both equity and debt issuance, while low-pollution firms mainly finance through equity issuance. Our findings demonstrate the leading role of the Chinese government in its domestic capital markets.

Corporate sexual orientation equality and carbon emission

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Abstract

Does a firm's tolerance and nurturing of its employees with different sexual orientations influence its long-term sustainability? Based on corporate sexual orientation equality (CSOE), we find that firms with higher CSOE ratings emit less greenhouse gases (GHGs) that thereby ensure long-term sustainability. In addition, we report that the CSOE–GHG relationship is stronger for firms with less agency issues (e.g., less powerful CEOs and more monitoring). Finally, we find that carbon emitting firms (CEFs) that invest in more CSOE initiatives do not do it for external rewards (e.g., they suffer from lower valuations and face higher costs of raising capital).

Taking the hunch out of the crunch: A framework to improve variable selection in models to detect financial statement fraud

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Abstract

Financial statement fraud is a costly problem for society. Detection models can help, but a framework to guide variable selection for such models is lacking. A novel Fraud Detection Triangle (FDT) framework is proposed specifically for this purpose. Extending the well-known Fraud Triangle, the FDT framework can facilitate improved detection models. Using Benford's law, we demonstrate the posited framework's utility in aiding variable selection via the element of surprise evoked by suspicious information latent in the data. We call for more research into variables that measure rationalisations for fraud and suspicious phenomena arising as unintended consequences of financial statement fraud.

Let others know who your friends are: The effect of collaborator disclosure on crowdfunding performance

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Abstract

Our analysis of 141,848 campaigns on the Kickstarter crowdfunding platform suggests that collaborator disclosure has a substantial positive impact on crowdfunding performance. This finding is consistently supported by a series of robustness tests. Collaborator disclosure alleviates backers' concerns about campaign risk, the competence of the fundraiser, and the fundraiser's lack of experience. Our findings highlight the significance of disclosing information about collaborators in financial markets with high levels of information asymmetry. In addition, our research adds to the existing literature on voluntary information disclosure and its ability to alleviate market frictions.

Aligning disclosure requirements for managerial assessments of going concern risk: Initial evidence from New Zealand

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Abstract

This study examines the impact of the Financial Reporting Standard No. 44 New Zealand Additional Disclosures (FRS 44) amendment issued by the New Zealand Accounting Standards Board (NZASB). The FRS 44 amendment aligned disclosure requirements for managerial assessments of going concern risk in financial reports with auditing standards for periods ending on or after 30 September 2020. We first present descriptive evidence on the frequency of going concern opinions (GCO), frequency of going concern issues identified as key audit matters (GCKAM), and frequency and content of managerial assessments of going concern risk (GCMA) before and after the FRS 44 amendment. Second, we show lower audit fees and shorter audit lags for financially distressed companies post-FRS 44 implementation. This suggests that the harmonisation of accounting and auditing disclosure requirements alleviates tension during the going concern decision-making process for affected companies, subsequently leading to reduced audit fees.

Motivation and hygiene factors for curriculum (re)development and the embedding of technology in accounting programmes

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Abstract

Using Herzberg's two-factor theory, this paper examines the hygiene and motivation factors that drive (re)development in accounting higher education programmes. Interviews with accounting educators and discipline leaders demonstrate a range of factors at play in the (re)development of accounting programmes in pursuit of embedding relevant technologies and contemporary business acumen into the accounting curriculum. In particular, hygiene elements such as policy and administration, and supervision were central to driving and steering change, coupled with accounting educators motivational desire to do what is right for their graduates and the profession while simultaneously fulfilling their sense of meaningful work, achievement, and responsibility.

Do more children lead to greater blessings? Birth quantity and household economic risk in China

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Abstract

Does the number of births in a family decrease a household's economic risk? We find that in a distribution of households by children's age stages, the economic risk of households in the middle (16–22 years) and late stages (23–38 years) appears to be more significantly affected by the dual nature of children as consumable goods and investment assets than does the risk of households in the early stage (0–15 years). Furthermore, we find that this pattern persists even when we consider China's one-child policy. Our findings also reveal that households with higher parental education levels and education investment expenditures in the middle stage exhibit greater resilience against economic risks in the late stage.

‘Know when to fold ’em’: Policy uncertainty and acquisition abandonment

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Abstract

This study investigates how policy uncertainty affects the acquisition process during the post-announcement period. Utilising a sample of Australian mining project acquisitions over 1998–2017, we find that rising policy uncertainty after initial acquisition announcements is associated with delays in deal completion. In addition, prolonged high policy uncertainty plays an important role in triggering acquisition abandonment. Further, the stock market reacts less negatively to deal abandonment decisions made amid protracted policy uncertainty, and such reactions are associated with managers' explanations for terminating the deals. Overall, our findings highlight the importance of policy uncertainty as a ‘deal-breaker’ in acquisitions.

Self‐sacrifice or empty symbolism: A study of $1 CEOs

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Abstract

We examine whether CEOs' voluntary acceptance of a $1 salary is a credible signal of sacrifice. We find that firms with $1 salary CEOs are: (i) more likely to be associated with income-increasing accrual-based earnings management; (ii) less likely to use real earnings management; and (iii) more likely to engage in corporate tax avoidance. Our results indicate that this performance enhancement is driven by the motivation to restore salaries to their original levels. Our results suggest that extreme salary sacrifice could indicate an empty promise to improve firm performance and should be considered cautiously by investors and regulators.

Do ties still bind? Analyst behaviour after financial restatements

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Abstract

We find that, compared to non-connected analysts, analysts with professional connections to a coverage firm (i.e., connected analysts) are more likely to continue covering the firm after it issues a restatement. Furthermore, connected analysts are more likely to issue pessimistic earnings forecasts and to downgrade stock recommendations for the firm after its financial restatement. Our results also reveal the costs and benefits associated with connected analysts' pessimism – a reduced market reaction to the analysts' pessimistic research on the restating firm, and a positive effect on the market's perception of the quality of the analysts' research on non-restating firms.