Michael De Martinis, Mehdi Khedmati, Farshid Navissi, Mohammed Aminu Sualihu and Zakiya Tofik-Abu
The purpose of this paper is to examine whether and how firm's agency costs played a role in the voluntary adoption of the eXtensible Business Reporting Language (XBRL) under theā¦
Abstract
Purpose
The purpose of this paper is to examine whether and how firm's agency costs played a role in the voluntary adoption of the eXtensible Business Reporting Language (XBRL) under the SEC's voluntary filing program (VFP) that encouraged the voluntary adoption of the XBRL.
Design/methodology/approach
This study employs a logistics regression and a sample of 140 firms that voluntarily participated in the VFP during its entire existence in the United States, and 140 matched-pair counterparts that did not voluntarily adopt the XBRL to investigate the role of agency costs in the voluntary adoption of XBRL-based financial reporting.
Findings
We find evidence consistent with the conjecture that a firm's low magnitude of agency costs plays a significant motivating role in the voluntary adoption of XBRL-based financial reporting. Our results continue to hold after using an alternative measure of agency costs and conducting two-stage least squares regressions. Supplementing these results, the study also shows that the level of agency costs of voluntary XBRL adopters remains statistically unchanged after the adoption while the level of agency costs associated with the firms that did not participate in SEC's VFP significantly decline after the adoption during the XBRL mandate.
Practical implications
The findings of this study suggest that based on a firm's level of agency costs, regulators and policymakers, especially those in countries that are yet to mandate XBRL reporting, can, in advance, identify firms that are more likely to comply with their new financial reporting initiatives.
Originality/value
This paper provides first evidence on the role of agency costs in the voluntary adoption of XBRL using data from the United States.
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Farshid Navissi and Vic Naiker
Prior studies examining the relation between the shareholdings by institutional investors and firm value have produced mixed results. These studies have assumed that a linearā¦
Abstract
Purpose
Prior studies examining the relation between the shareholdings by institutional investors and firm value have produced mixed results. These studies have assumed that a linear relation exists between corporate value and institutional shareholdings. The purpose of this study is to further investigate the nature of this relationship and by partitioning institutional investors into institutions that have appointed a representative to the board of directors of the firms in which they have a block investment and institutions with a similar holding but without a representative on the board of directors.
Design/methodology/approach
The study is based on a sample of 123 firms with available financial and institutional ownership data. A crossāsectional regression analysis is used to test the relation between corporate value and institutional ownership with and without board representation.
Findings
The results of the study suggest that share ownership by investors with board representation is positively related to the value of the firm at lower levels of ownership. However, as the share ownership increases, the impact on the value of the firm becomes negative, giving rise to a nonālinear relation. The extent of shareholding by institutions without board representation, on the other hand, is not related to the value of the firm.
Research limitations/implications
The findings show that institutions with board representation have greater incentives to monitor management, and therefore their presence should have a positive influence on firm value. However, at high levels of ownership, institutional investors with board representation may induce boards of directors to make subāoptimal decisions.
Originality/value
The study provides a deeper understanding of the relationship between firm value and institutional ownership. That is, the effect of shareholding by institutions with board representation is likely to have a nonālinear relation with firm value.
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Kamran Ahmed, A. John Goodwin and Kim R. Sawyer
This study examines the value relevance of recognised and disclosed revaluations of land and buildings for a large sample of Australian firms from 1993 through 1997. In contrastā¦
Abstract
This study examines the value relevance of recognised and disclosed revaluations of land and buildings for a large sample of Australian firms from 1993 through 1997. In contrast to prior research, we control for risk and cyclical effects and find no difference between recognised and disclosed revaluations, using yearlyācrossāsectional and pooled regressions and using both market and nonāmarket dependent variables. We also find only weak evidence that revaluations of recognised and disclosed land and buildings are value relevant.
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Bart Frijns, Farshid Navissi, Alireza TouraniāRad and Lana Tsai
This paper aims to investigate whether completed vs withdrawn equity offerings result in different stock price performance prior to announcement and between announcement andā¦
Abstract
Purpose
This paper aims to investigate whether completed vs withdrawn equity offerings result in different stock price performance prior to announcement and between announcement and withdrawal or completion.
Design/methodology/approach
Investigates stock price performance prior to equity offerings announcements and between the announcement and actual completion or withdrawal. Stock price performance is measured by cumulative abnormal returns (CARs).
Findings
It was found that stock price performance is strong only for firms that later complete the offerings. Firms that withdraw their offerings have poor stock price performance even before the announcement. Additionally, it was found that stock price performance for both the completed and the withdrawn offerings is poor after the announcement. Contrasting with prior research, the results show that firms complete their equity offerings, even though their stock price performance deteriorates. The fact that this deterioration is significantly smaller (approximately oneāthird) than that of withdrawn offerings indicates that there is an acceptable level of deterioration that firms tolerate.
Originality/value
The paper evaluates shortārun stock price performance for a number of firms in the period 1984ā2000.
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Keryn Chalmers, Farshid Navissi and Wen Qu
This paper aims to investigate whether the accounting reform in China has improved the relevance of China's accounting information. It seeks to investigate the association betweenā¦
Abstract
Purpose
This paper aims to investigate whether the accounting reform in China has improved the relevance of China's accounting information. It seeks to investigate the association between earnings and book value of equity to share returns before and after the introduction of the Accounting System for Business Enterprises (ASBE) in 2001 for Aā and A&Bāshare firms.
Design/methodology/approach
The paper employs the return regression model. The preāASBE period is designated as 1997 through to 2000, and the postāASBE period is designated as 2002 through to 2004. All firms listed on the Chinese stock market during the investigation period constitute the sample.
Findings
It is found that accounting information better explains share returns for both Aāshare firms and A&Bāshare firms in the postāASBE period. The paper also finds that the book value of equity for A&Bāshare firms is incrementally value relevant to that of Aāshare firms in the postāASBE period.
Research limitations/implications
Further studies will contribute to understanding how governance mechanisms and liquidity influence the association between accounting information and share returns in the Chinese Aāshare market.
Practical implications
The findings provide empirical evidence regarding the relevance of accounting information in emerging markets.
Originality/value
The paper contributes to the extant value relevance literature by investigating time periods surrounding the issue of ASBE in 2001 in the Chinese stock market.
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Hai Wu and Neil Fargher
Recent research examines the implications of components of accruals for future profitability. Because the persistence of earnings varies with the level of company profitabilityā¦
Abstract
Recent research examines the implications of components of accruals for future profitability. Because the persistence of earnings varies with the level of company profitability, we expect differences between profitable and lossāmaking companies in the association between components of accruals and future profitability. Using the approach adopted by Richardson, Sloan, Soliman and Tuna (2006) we find evidence suggesting that the components of accruals related to revenue growth and to change in asset turnover are less persistent than the cash flow component of earnings for profitable Australian companies. For lossāmaking companies, however, the persistence of the accrual component of earnings is found to be higher than for the cash flow component of earnings, suggesting that the accrual component is more informative than the cash flow component in explaining period ahead profitability for many currently unprofitable companies.