Cristina Gaio, Tiago Gonçalves and Maria Verónica Sousa
This study aims to examine the association between earnings management (EM) and corporate social responsibility (CSR), as well as whether a firm's CSR orientation moderates the…
Abstract
Purpose
This study aims to examine the association between earnings management (EM) and corporate social responsibility (CSR), as well as whether a firm's CSR orientation moderates the trade-off between accruals earnings management (AEM) and real earnings management (REM).
Design/methodology/approach
Firm-year pooled regressions, based on unbalanced panel data and controlling for country, year and sector fixed effects, were estimated using a sample composed of European companies from 16 countries.
Findings
Results suggest a negative relationship between EM and CSR, consistent with the idea that socially responsible activities are associated with more ethical behavior. Moreover, social responsibility orientation seems to mitigate strongly ERM, which may suggest that managers use less REM in order to protect firm's long-term profitability.
Practical implications
The authors' findings have practical implications for a large group of stakeholders, such as regulators, investors and business partners. Thus, from an ethical perspective, more socially responsible firms present more trustworthy financial information and more sustainable economic performance, which decreases risk assessment from their business partners and remaining stakeholders.
Originality/value
Prior literature focuses mainly on discretionary accruals to study the association between EM and CSR. The authors contribute to the literature by considering both EM strategies, accruals and real operations in a European context, which allows for a better understanding of the relationship between CSR and financial information transparency and quality.
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Keywords
José Almeida, Cristina Gaio and Tiago Cruz Gonçalves
This study aims to investigate the interconnectedness of sustainability-linked and AI-based cryptocurrencies returns and volatility over five years (2018–2024). It aims to uncover…
Abstract
Purpose
This study aims to investigate the interconnectedness of sustainability-linked and AI-based cryptocurrencies returns and volatility over five years (2018–2024). It aims to uncover the dynamic relationships between these two sectors under various market conditions, providing insights into their behavior and influence within the broader cryptocurrency market.
Design/methodology/approach
The research employs a Time-Varying Parameter Vector Autoregression (TVP-VAR) model to analyze key cryptocurrencies associated with AI and sustainability. This approach is complemented by a quantile-based perspective, allowing for an in-depth examination of return and volatility spillovers across different market conditions. Thus, facilitating an understanding of the intricate dynamics between sustainability-linked and AI-based cryptocurrencies.
Findings
The findings reveal distinct market dynamics with the Sustainable sector consistently acting as a net transmitter, while the AI sector predominantly as a net receiver, indicating its reactive nature. In bearish markets, both sectors display high interconnectedness, with the Sustainable sector shaping dynamics. In bullish markets, the Sustainable sector maintains influence, while the AI sector adopts a more proactive role, influencing the market more than in bearish conditions. Post-Chat GPT 3 the Sustainable sector decreases influence, becoming a net receiver in bullish markets. In contrast, the AI sector strengthens as a net transmitter, signaling growing investor confidence and prominence.
Originality/value
This study explores the interconnectedness of sustainability-linked and AI-based cryptocurrencies through a TVP-VAR model and a quantile-based analysis. It provides insights into how these sectors interact and influence each other across different market conditions, especially highlighting the significant shifts in dynamics following the advent of advanced technologies like Chat GPT 3. This contributes to a deeper understanding of the evolving landscape of the cryptocurrency market in the context of sustainability and AI.
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Inês Pinto, Cristina Gaio and Tiago Gonçalves
The purpose of this paper is to investigate the role of corporate governance mechanisms and foreign direct investment (FDI) to restrain or stimulate the use of loan loss…
Abstract
Purpose
The purpose of this paper is to investigate the role of corporate governance mechanisms and foreign direct investment (FDI) to restrain or stimulate the use of loan loss provisions (LLPs) by managers to smooth earnings in African banks.
Design/methodology/approach
This study uses a sample of 112 listed and non-listed banks from 20 African countries, covering the period 2011–2017. Models are estimated using the pooled ordinary least squares regression, as well as Blundell and Bond (1998) system GMM.
Findings
The results suggest that bank managers use LLPs to reduce income volatility and that ownership concentration increases income smoothing. The findings also show that FDI plays a fundamental role to restrain managerial discretion in developing countries, increasing corporate governance practices in the host country.
Practical implications
These findings are relevant for banking regulators and supervisors in order to determine which corporate governance mechanisms can be used in developing countries to increase the quality of financial reporting. A policy model that promotes FDI boosts financial reporting transparency, contributing to greater financial markets development.
Originality/value
The authors extend the existing literature on the influence of corporate governance mechanisms in limiting managerial discretion by focusing on the role that foreign shareholders may have in disciplining banks financial reporting quality in countries with weak institutional quality.
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The purpose of this paper is to examine the role of state ownership on financial reporting quality regarding the characteristics of conservatism and earnings management.
Abstract
Purpose
The purpose of this paper is to examine the role of state ownership on financial reporting quality regarding the characteristics of conservatism and earnings management.
Design/methodology/approach
Using a large sample of public and private European firms during the period 2003-2010, the authors test the hypotheses following Ball and Shivakumar’s (2005) model for conservatism and the modified Jones (1991) model proposed by Dechow and Sloan (1995) for earnings management. To ensure that the results are robust, the authors conduct sensitivity analysis with regard to potential endogeneity and selection bias.
Findings
The authors find that state-owned firms are less conservative than non-state-owned firms, which is consistent with the idea that there is less need for accounting conservatism due to government protection. The authors also show that capital markets play an important role in shaping the relation between state ownership and earnings management. Among public firms, the authors find that state-owned firms have higher abnormal accruals and worse accruals quality than non-state-owned firms, which suggests that state-owned firms are not immune to capital market pressures.
Research limitations/implications
The study has two limitations. First, as state-owned and non-state-owned firms face quite different incentive structures, management behavior might be determined by factors that have yet to be identified. Second, prior research results suggest an inverted U-shape relation between ownership concentration and earnings management (Ding et al., 2007). It would be interesting to investigate the impact of different levels of state ownership on earnings quality.
Practical implications
As the paper investigates the role of state ownership on earnings quality using a sample of European firms, it brings new insights regarding the role of state ownership in accounting quality and firm performance. In addition, it considers the role of capital markets in the relation between the quality of financial reporting and ownership by considering a sample with both public and private firms.
Originality/value
The study contributes to the debate about state intervention in the corporate sector, by extending the knowledge of the effects of government ownership on earnings quality by using a large sample of European firms. Furthermore, the authors also introduce the effect of capital market forces on managers’ behavior in state-owned and non-state-owned companies by analyzing private and publicly listed firms.