Safaa Alsmadi, Ahmad Alkhataybeh and Mohammad Ziad Shakhatreh
This study aims to examine the impact of low-quality financial statements; that is, disclosure violations reported by the Securities Exchange Commission related to the level of…
Abstract
Purpose
This study aims to examine the impact of low-quality financial statements; that is, disclosure violations reported by the Securities Exchange Commission related to the level of cash holdings (CH) of firms listed on the Amman Stock Exchange (ASE).
Design/methodology/approach
Using panel data from 107 ASE-listed companies from 2009 to 2018, the study uses generalized method of moment estimation to examine the research hypothesis. This study hypothesize that disclosure violations can affect the level of CH and control for several variables that affect this level.
Findings
The results show that disclosure violations significantly affect the level of CH and that cash flow, capital expenditure and debt issues have a significantly positive impact on corporate CH. On the other hand, the market to book ratio and sales growth were found to be insignificant.
Research limitations/implications
The limitations of the research include the fact that information on research and development and equity issues were not available, so were not included in the examination.
Practical implications
It is recommended that managers enhance the quality of disclosures since this allows them to hold lower levels of cash and exploit more investment opportunities. Policymakers are recommended to supervise firm disclosures closely and create ratings for disclosure quality.
Originality/value
To the best of the author’s knowledge, this is the first empirical research on the association between proven low-quality disclosures and the level of corporate CH among Jordanian listed companies.
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Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management…
Abstract
Purpose
Optimal application and commitment toward financial management practices enhance organization performance. This study aims to assess the influence of financial management practices on the organizational performance of small- and medium-scale enterprises.
Design/methodology/approach
Data were collected from 45 small-sized and 72 medium-sized firms. Data supported the hypothesized relationships. Construct reliability and validity were established through confirmatory factor analysis. The conceptual model and hypotheses were evaluated by using structural equation modeling.
Findings
The results indicate that working capital significantly influenced organizational performance. Capital budget management significantly influenced organizational performance. A non-significant influence of asset management on organizational performance was observed.
Research limitations/implications
The generalizability of the findings will be constrained due to the research’s SMEs focus and cross-sectional data.
Practical implications
The study’s findings will serve as valuable pointers for stakeholders and decision-makers of SMEs in developing well-articulated and proactive financial management systems to ensure competitiveness, sustainability, viability, and financial competencies.
Originality/value
The study adds to the corpus of literature by evidencing empirically that financial management practices significantly influenced SMEs’ performance.
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Sabeeh Ullah, Muhammad Haroon, Shahzad Hussain and Ajid Ur Rehman
Islamic label of an organization attracts Muslims for investment. There is a rising concern with a huge profile of corporate governance related to the Islamic rules (principles)…
Abstract
Purpose
Islamic label of an organization attracts Muslims for investment. There is a rising concern with a huge profile of corporate governance related to the Islamic rules (principles). In this context, this study aims to examine the effect of Islamic labelling on corporate governance in the Pakistani setting.
Design/methodology/approach
This study used a panel data set comprising 120 non-financial Shariah-compliant and non-Shariah-compliant Islamic firms listed on the Pakistan Stock Exchange over the period 2013–2020. For analysis, this study used static panel data estimation techniques. Moreover, for robustness check, this study also applied the system generalized method of movements procedure.
Findings
The findings deduced from empirical estimations reveal that Islamic labelling is positively associated with corporate governance. Overall, results indicate that Islamic labelling promotes corporate governance practices in Pakistan.
Originality/value
It is of utmost importance in terms of both theoretical and empirical context that Pakistan is a Muslim country having a 96.5% Muslim population, and it is evident that Muslims are allowed to execute their business under the guidance of Shariah principles. This study is unique because most of the previous literature provides empirical support related to the impact of corporate governance on capital structure, profitability and firm performance in conventional and Islamic firms. Practically, there is scarce literature on this issue.
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Brandon Doey and Pieter de Jong
This study investigates the relationship between earnings call sentiment and subsequent media coverage sentiment. Examining these synergistic effects between executive…
Abstract
Purpose
This study investigates the relationship between earnings call sentiment and subsequent media coverage sentiment. Examining these synergistic effects between executive communication style and resulting news narratives provides novel insights. The unscripted qualitative discussions in earnings calls establish perceptions and outlooks that the media echoes in later coverage. Understanding these intricate connections between information channels aids communication experts and market analysts in shaping strategic messaging and predicting market impacts. In addition, the link with the stock return reaction is revisited, and this study shows that the effects on stock returns driven by news information are moderated by earnings call sentiments.
Design/methodology/approach
This study analyzes the interplay between earnings call sentiments and subsequent news sentiments for 30 S&P 500 companies from 2012 to 2022. Utilizing the FinBERT Natural Language Processing (NLP) model, we extract sentiment scores from earnings call transcripts and corresponding news articles. We apply OLS regression models to examine the relationship between negative earnings call sentiments and subsequent negative news sentiments, as well as their combined impact on stock returns. Control variables include financial metrics such as ROA, ROE, firm size, Market-to-Book ratio and liquidity. The methodology allows for a nuanced exploration of sentiment transfer mechanisms in financial communication and their market implications.
Findings
Our study reveals a significant positive correlation between negative sentiment in earnings calls and subsequent negative news sentiment. A 1% increase in negative call sentiment associates with a 0.54% increase in negative news sentiment the following day, supporting Agenda Building and Impression Management hypotheses. We observe a multiplicative effect on stock returns when negative call sentiment coincides with negative news sentiment, supporting signaling theory. Financial metrics like ROE show marginal influence on news sentiment, while others demonstrate insignificant impact. These findings underscore the importance of holistic corporate communication management in mitigating potential negative market reactions.
Research limitations/implications
This study’s primary limitation is its sample size of 30 S&P 500 companies, potentially limiting generalizability. The use of a single sentiment analysis model (FinBERT) could impact results, warranting comparison with alternative methods. The study’s timeframe (2012–2022) may not capture the most recent market dynamics. Future research could expand the sample size, incorporate additional sentiment analysis techniques and explore longer-term effects. Investigating industry-specific variations and the impact of macroeconomic factors could provide further insights. Additionally, qualitative analysis of earnings call content could complement these quantitative findings, offering a more comprehensive understanding of sentiment transfer mechanisms.
Practical implications
This study offers insights for corporate communicators, investor relations professionals and financial analysts. The strong correlation between earnings call sentiment and subsequent news sentiment emphasizes the need for management of corporate messaging during these calls. Companies should be aware that negative sentiments expressed in earnings calls may amplify through news coverage, potentially impacting stock performance. Investors and analysts should consider both earnings call and news sentiments when evaluating market reactions. For regulators, these findings highlight the importance of monitoring information dissemination practices to ensure market fairness. Overall, the study underscores the significance of a holistic approach to financial communication strategy.
Social implications
This research highlights the interconnected nature of corporate communication and media narratives, emphasizing social responsibility of both corporations and news outlets. The findings suggest that negative corporate messaging can perpetuate and amplify through news coverage, potentially affecting public perception and investor sentiment. This underscores the need for transparent and ethical communication practices in the business world. The study also raises awareness about the potential manipulation of public opinion through carefully crafted corporate narratives. It encourages stakeholders to critically evaluate both corporate communications and subsequent media coverage, promoting a more informed and discerning society in the context of financial information dissemination.
Originality/value
This study uniquely explores the interplay between earnings call sentiments and subsequent news sentiments, addressing a significant gap in financial communication research. By examining the sentiment transfer mechanism from corporate messaging to media narratives, it provides novel insights into information dissemination in financial markets. The research demonstrates how negative sentiments in earnings calls can amplify through news coverage, offering valuable implications for corporate communication strategies. This multifaceted analysis contributes to a deeper understanding of the complex relationships between corporate communication, media coverage and market behavior.
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The current paper aims at exploring the audit committee characteristics’ effect on impression management.
Abstract
Purpose
The current paper aims at exploring the audit committee characteristics’ effect on impression management.
Design/methodology/approach
The methodology is based on the use of the content analysis of financial annual reports, as data of a 69-company sample study from 2015 to 2019 attained from “Amman Stock Exchange” has been analyzed. Moreover, multiple regression analysis on panel data was employed.
Findings
The results show that the independence of the audit committee, the financial expertise of the audit committee and female members negatively affect impression management, implying that these characteristics mitigate financial reporting manipulation and decrease the practices of impression management. However, the findings detect no significant influence for committee meetings on impression management.
Research limitations/implications
Notably, the current work is applicable and useful for understanding the audit committee’s role in enhancing the financial reporting’s quality, along with the significance of the audit committee in growing the stakeholder’s confidence in financial reporting. In light of these results, regulatory bodies’ efforts are encouraged to create additional strategies and instructions to ensure the trustiness and credibility of financial reporting.
Originality/value
This paper will be useful to companies that want to improve the quality of financial reporting and decrease the impression of management’s effect on financial reporting’s readers. Moreover, this paper contributes to the literature on impression management by exploring the effect of audit committees on impression management of annual financial reports of the users in the context of emerging markets and Middle East countries, particularly Jordan.