Xiaojun Lin, Ming Liu, Simon So and Desmond Yuen
The purpose of this study is to investigate whether corporate social responsibility (CSR) can lower tax risk. Previous studies have demonstrated a negative link between CSR and…
Abstract
Purpose
The purpose of this study is to investigate whether corporate social responsibility (CSR) can lower tax risk. Previous studies have demonstrated a negative link between CSR and tax aggressiveness. Generally, corporations engaging in social irresponsibility tend to undertake aggressive tax planning; whereas socially responsible firms enjoy tax savings. Because several recent studies have suggested that lower tax payments do not necessarily create higher tax risk, an exploration of the relationship between CSR and tax risk was not only interesting but also important.
Design/methodology/approach
Using an ethical perspective of CSR, this paper argues that executives who are nourished by an ethical climate tend to make responsible and reliable operating decisions. Therefore, their corporations would have better control of tax administration, and the corresponding tax risk would be constrained. Such corporations would enjoy greater tax savings while keeping their tax risk at relatively low levels. However, this reasoning ignores the fact that limited economic resources would constrain a firm from practicing CSR in the form of donations. This situation would also influence its attitude toward tax strategies. Specifically, when a firm’s performance is unsatisfactory, the cultural effect of CSR may diminish or even disappear.
Findings
Firms donating additional resources to CSR activities can construct a more ethical work climate that encourages executives to control tax risk while lowering tax expenses. For firms with unsatisfactory performance, the ethical benefits of CSR could disappear, thus suggesting a relationship with firm performance. This finding contributes to the knowledge on the ethical implications of CSR and proposes that the culture argument is conditional on satisfactory firm performance.
Originality/value
This study explores the association between corporate culture (CSR) and tax risk. The empirical results help shareholders, analysts and other investors to make their business decision better because CSR or corporate culture is less likely to change suddenly or dramatically in an abbreviated time. The finding of this study shed light on the importance of corporate culture on making an investment evaluation or decision. In addition, this study extends the research on CSR by demonstrating that the effects of CSR are conditioned on firm performance. The beneficial effect of CSR on tax risk would disappear when firms have unfavorable financial performance.
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Rong Huang, Xiaojun Lin, Xunzhuo Xi and Desmond Chun Yip Yuen
This paper aims to explore how external creditors assess firms’ financial aggressiveness in China.
Abstract
Purpose
This paper aims to explore how external creditors assess firms’ financial aggressiveness in China.
Design/methodology/approach
Using bank loan-specific data, the authors investigate whether firms exhibit greater costs of bank loans when they engage in earnings manipulation and whether this association changes when restrictions on lenders’ compensation are promulgated.
Findings
The authors find compelling evidence that bank executives charge higher premiums on firms with accrual earnings management to compensate for additional financial risk but do not charge extra loan prices for firms conducting real earnings management (REM). The authors also find that the enactment of Robust Bank Executive Compensation (REBC) enhances the vigilance of bank executives on the overall client firms’ earnings manipulation, with the exception of REM conducted by state-owned firms.
Originality/value
The authors extend the current literature on the cost of external loans by focusing on bank loans and the influence of REBC. This study offers implications for policymakers in China and other emerging economics to control loan default and financial risk.
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Numerous accounting studies have investigated the effects of participatory budgetary processes. The job satisfaction of participating employees is one of the most frequently…
Abstract
Purpose
Numerous accounting studies have investigated the effects of participatory budgetary processes. The job satisfaction of participating employees is one of the most frequently researched issues. Increased employee participation in budgeting widens the responsibilities and experience of employees. However, it might also increase the level of task difficulty and reduce task clarity. The purpose of this study is to design an improved budgeting system for subordinates so as to enhance job satisfaction in a working environment of difficult task setting and low goal clarity.
Design/methodology/approach
The present paper employs two models (direct and indirect) to investigate the level of employee satisfaction during budgetary participation, focusing on the hotel industry in Macau.
Findings
The direct model suggests that task difficulty and clarity do not directly affect satisfaction levels among employees during budgetary participation. However, the indirect model suggests that, under conditions of increased task difficulty and unclear goal situations, the level of job satisfaction is mediated indirectly through the influence of four core dimensions (budget variety, autonomy, task identity, and feedback). The study thus finds that improved design of budgetary processes, taking account of four core dimensions (budget variety, autonomy, task identity, and feedback), produces greater job satisfaction among employees who are desirous of satisfying higher‐order needs. Moreover, these employees are rated by superiors as performing higher‐quality work during the budgetary process.
Originality/value
The paper contributes to the budgeting literature in several ways. It confirms the beneficial effect of improved budgetary design in enhancing employees' job satisfaction in a working environment of task difficulty and unclear goal setting, which is particularly important in the hotel industry and other service sectors. The paper also extends the literature that has hitherto typically focused on the examination of factors that affect the level of employees' job satisfaction, and recognizes the importance of budgetary design to job satisfaction.
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This study aims to investigate two antecedents to participation in budgetary activities – a need for a sense of achievement and a positive work attitude – and then to assess the…
Abstract
Purpose
This study aims to investigate two antecedents to participation in budgetary activities – a need for a sense of achievement and a positive work attitude – and then to assess the impact of these two variables on job performance in the context of public‐sector organizations in Macau.
Design/methodology/approach
Data for the study were collected by a survey questionnaire administered to a sample of 216 managers in three departments of the Macau public service.
Findings
This paper demonstrates that the two antecedent factors – a positive work attitude and a need for achievement – have a significant positive relationship with budgetary participation. It is concluded that indirect relationships exist between the two antecedent variables (work attitude and a need for achievement) and the dependent variable (job performance), with participation in budgeting as an intervening variable.
Research limitations/implications
The results should be interpreted within the usual limitations of survey research. The participants volunteered to participate in the present study, and the sample was thus not strictly random. Because, less than 100 per cent of the questionnaires were returned, non‐response bias might exist.
Practical implications
The results of the study have implications for the design of effective budgeting planning control process in public‐sector organizations in Macau. In providing a formal conceptual framework, the paper argues that the interactive process of budgeting systems means that individual‐level factors are crucial to the achievement of budget plans.
Originality/value
The results provide an improved understanding of the effect of individual‐level behaviour on job performance in a budgetary context on the basis of the current study's findings.
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The purpose of this study is to examine the influence of factors affecting students’ choice of accounting as a study major in Hong Kong.
Abstract
Purpose
The purpose of this study is to examine the influence of factors affecting students’ choice of accounting as a study major in Hong Kong.
Design/methodology/approach
Multinomial logistic regression and Hierarchical Generalized Linear Modeling (HGLM) are used to analyze the survey data for the level one and level two data, which is the first time such an approach has been used in the literature. Twenty semi‐structured interviews are conducted.
Findings
Results reveal that parental influence has the highest explanatory power among all three groups of students (i.e. accounting major, accounting minor, and other majors). This finding reflects the inculcation in students of the Confucian cultural norms ingrained in Chinese societies. Intrinsic interest is the second most important influencing factor reported by students. Two factors, “intrinsic interest” (attitude towards the behavior) and “parental influence” (subjective norm) in the multinomial logistic regressions and HGLM make significant contributions to predicting a student's decision to major in accounting for the level one (undergraduate) and level two model (master's students). The results support the theory of reasoned action (TRA) model. “First accounting course,” “high school accounting,” and “financial rewards” are not found to be factors influencing the decision to major in accounting, in contrast to the findings of the literature prior to the Enron scandal. Females are more likely to choose accounting as a major or minor than are males in the level one and level two models.
Practical implications
The findings indicate that Hong Kong universities and the Hong Kong Institute of Certified Public Accountants (HKICPA) need to promote accounting to improve the current negative image of the profession to attract more bright students, who traditionally might choose a non‐accounting major.
Originality/value
The findings of this study extend the application of the TRA model to the accounting profession. Besides, results provide insights for employers to better understand the mindsets of potential accounting graduates.
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This study examines the relationship between a number of goal characteristics and the propensity of divisional managers to create budgetary slack. These goal characteristics are…
Abstract
This study examines the relationship between a number of goal characteristics and the propensity of divisional managers to create budgetary slack. These goal characteristics are variables in goal clarity and goal difficulty. Managers also consider communication and reward systems – which are significant factors affecting the relationship between goal characteristics and propensity to create budget slack. The communication and reward systems are affected by influencing power of managers, required explanation of budget variance, budgetary feedback, peer relations, and relationship between superiors and subordinates. Using a sample of 108 hotel managers in Macau, the findings indicate that the clear communication and reward systems can result in goal clarity and can help to solve budgeting problems under difficult goal situations. The implications of these findings are discussed in relation to the design of budgeting systems. The need to integrate results and develop frameworks for future research is noted.
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Desmond C.Y. Yuen, Philip K.F. Law, Chan Lu and Jie Qi Guan
The purpose of the study is to investigate the factors that may result in a high turnover rate of auditors in Macau. The factors considered include client importance, task…
Abstract
Purpose
The purpose of the study is to investigate the factors that may result in a high turnover rate of auditors in Macau. The factors considered include client importance, task complexity, time budget constraints, auditor independence and acceptance of dysfunctional behaviour by Macau's audit firms.
Design/methodology/approach
This study involved three stages. In the first stage, interviews were carried out with auditors from Big‐4 (seven interviewees) and local non‐Big‐4 firms (three interviewees) in Macau to investigate the reasons for the high turnover rate amongst auditors in Macau. They were asked to speculate about common explanatory factors. The second stage involved 141 auditors from Big‐4 and local non‐Big‐4 accounting firms who were asked to complete a questionnaire survey for the explanatory factors. A total of 135 usable questionnaires were included in the multiple regression data analysis. The third stage of research comprised follow‐up interviews aimed at learning more about the reasons for dysfunctional behaviour.
Findings
This research provides valuable information for audit firms in Macau and will potentially help them to reduce their turnover rate and identify the factors affecting dysfunctional behaviour amongst auditors. The results extend the literature by focusing on the effect of perceived responsibility on professional responses to time budget pressures, task complexity, pressure from clients, and professional and ethical issues.
Practical implications
The challenge facing auditors today is to expand their auditing practices and evolve standards for adequately monitoring the operations of business entities. The current high turnover rate alarms audit firms, which are concerned with training and the provision of sufficient resources to solve the problems that auditors face in the workplace.
Originality/value
This is the first paper to examine the reason for turnover intentions in Macau. This study sheds light on the factors that contribute to individual auditor differences in the acceptance of dysfunctional behaviour that may result from the stressful nature of their duties.
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Philip K.F. Law and Desmond C.Y. Yuen
This study aims to examine the potential factors influencing the hiring decisions of experienced auditors in public accounting practices in Hong Kong.
Abstract
Purpose
This study aims to examine the potential factors influencing the hiring decisions of experienced auditors in public accounting practices in Hong Kong.
Design/methodology/approach
Multinomial logistic regression is used to analyze the survey data, which is the first time such an approach has been used in the literature. A total of 337 interview rating forms are collected in actual employment interviews from two Big 4 firms. Graves and Powell's hiring model is adapted to this Hong Kong study. Interpersonal attraction theory is employed to assist in analyzing the results.
Findings
The results indicate that subjective qualifications have the highest explanatory power. Big 4 recruiters regard subjective qualifications as important considerations in the evaluation of experienced auditors. Interpersonal attraction is the second most important factor. These findings are consistent with the theory of interpersonal attraction. Perceived similarity and objective qualifications are also perceived as significant factors. Physical attractiveness, dress effect and gender are not found to be factors influencing the hiring decisions, in contrast to the findings of earlier literature in the USA.
Originality/value
These findings indicate that recruiters would look for attributes other than those primarily based on objective qualifications. Job relevant skills, knowledge and demonstrated initiatives are important. The accounting profession could conduct more training programs for auditors to improve and demonstrate their “soft skills” in the interview process so as to enhance their chances of employment, particularly during a recessionary environment.
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Razana Juhaida Johari, Nurul Afifah Mohd Hairudin and Ayub Khan Dawood
The financial scandals in Malaysia have caused auditors to be convicted of such failure and led to the claims that they were involved in dysfunctional audit behavior. The…
Abstract
Purpose
The financial scandals in Malaysia have caused auditors to be convicted of such failure and led to the claims that they were involved in dysfunctional audit behavior. The incidences have worsened the profession’s credibility and deteriorated the public confidence on the profession. This study aims to examine the influence of professional skills, independence, work experience, time budget pressure on dysfunctional audit behavior.
Design/methodology/approach
This study collected primary data based on a questionnaire survey among audit firms in the Klang Valley area and registered with Malaysian Institutes of Accountants.
Findings
The findings from a survey conducted on 130 Malaysian auditors proved that time budget pressure is significantly influenced the dysfunctional audit behavior. However, this study did not support the relationship between professional skills, independence, work experience and dysfunctional audit behavior.
Originality/value
This study contributed to the researchers, auditors as well as educators in further understanding the factors that might influence the dysfunctional audit behavior. The findings are expected to help in improving the auditors’ credibility and uphold the public confidence on the auditing profession.
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Xunzhuo Xi, Can Chen, Rong Huang and Feng Tang
This study aims to examine whether Chinese firms increase their concerns about analysts’ earnings forecasts following the split-share structure reform (SSR) in 2005, which removed…
Abstract
Purpose
This study aims to examine whether Chinese firms increase their concerns about analysts’ earnings forecasts following the split-share structure reform (SSR) in 2005, which removed trading restrictions on approximately 70% of the shares of listed firms.
Design/methodology/approach
Using data from 2002 to 2019, the authors empirically test the association between meeting or beating analysts’ earnings expectations and the implementation of SSR.
Findings
The authors find that firms are more inclined to meet analysts’ earnings expectations after the introduction of SSR. Further analysis shows that firms guide analysts to walk their forecasts down by manipulating third-quarter earnings, suggesting enhanced value relevance between analysts’ forecasts and third-quarter earnings management in the postreform period.
Practical implications
The findings reveal an undesirable side effect of SSR and suggest that policymakers and regulators should consider and carefully manage the complex relationships between firms and analysts.
Originality/value
In contrast to prior studies that predominantly focus on the positive effects of the reform, this study reveals the side effects of SSR and provides new evidence on the mechanisms of meeting or beating analysts’ earnings expectations.