Salim Chouaibi and Habib Affes
Given the rising global interest in the environmental, social and governance (ESG) index, the purpose of this paper is to investigate the impact of social and ethical practices on…
Abstract
Purpose
Given the rising global interest in the environmental, social and governance (ESG) index, the purpose of this paper is to investigate the impact of social and ethical practices on the firm’s environmental disclosure level.
Design/methodology/approach
To test the study’s hypotheses, the authors applied linear regressions with a data panel using the Thomson Reuters ASSET4 and Bloomberg database from seven countries in analyzing data of 523 listed companies selected from the ESG index between 2005 and 2017. Similarly, as an extension of the research and to address the potential unobserved heterogeneity and the dynamic endogeneity, the authors exploited the dynamic dimension of the data set through the generalized moment method (GMM) and estimated the impact of the one-year lagged value of the environmental disclosure.
Findings
The empirical results indicate a growing interest in corporate social responsibility (CSR) and ethical practices over the past decade. Besides, companies with a strong social and ethical commitment obtain significantly higher environmental disclosure scores. The results found with the GMM technique indicate the existence of dependence and continuity in environmental disclosure over time.
Practical implications
The research enables the information user to assess the transparency of the company as well as the quality of the information disclosed on its environment and its future growth opportunities in a context where the approach of business ethics occupies a central position in business valuation. The reached results suggest that the institutional and/or cultural factors affect top management’s environmental reporting behavior regarding the quality of published information.
Originality/value
This paper explores, for the first time, the effect of the social and ethical practices of ESG companies with seven different nationalities as well as its dynamic effect on the adoption of an environmental transparency strategy.
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Mohammed Abdullah Ammer and Nurwati A. Ahmad-Zaluki
Presently, one of the major governance issues faced by management and shareholders of organizations is the gender composition of the boards of directors and audit committees. This…
Abstract
Purpose
Presently, one of the major governance issues faced by management and shareholders of organizations is the gender composition of the boards of directors and audit committees. This study aims to examine the impact of gender diversity in audit committees on the accuracy of management earnings forecasts disclosure in initial public offering (IPO) prospectuses.
Design/methodology/approach
The study sample comprises 190 Malaysian companies issuing IPOs that transformed into public companies during the period 2002-2012. Earnings forecasts accuracy (quality) is proxied by absolute forecast error and the study model is developed based on the frameworks of the signalling theory, the agency theory and the resource-dependence theory.
Findings
The study proposes that female directors introduce a set of specific features in the boardroom that serve to improve investor protection and efficient monitoring of management. However, findings reveal an insignificantly positive relationship between gender diversity in audit committees and absolute forecast error, which shows that more female directors in audit committees could translate into more errors and less accuracy in earnings forecasts.
Practical implications
Considering the recent regulatory developments that encourage the number of women on the board of directors, the findings obtained have significant implications for policymakers. The study findings can also be invaluable to investors, investment analysts, market players and researchers.
Originality/value
The composition of the board of directors and audit committees in terms of gender plays a significant role in the promotion of effective corporate governance practices. This study is one of the pioneering studies that examines the advantages of gender diversity in the board of directors. It is also the first study to extend IPO literature by investigating the role of gender diversity in audit committees in the enhancement of accurate management earnings forecasts included in the IPO prospectuses.
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Even though the gender literature has addressed the independent effects of female audit committee members and female audit partners on audit quality, this research primary…
Abstract
Purpose
Even though the gender literature has addressed the independent effects of female audit committee members and female audit partners on audit quality, this research primary analyses whether the association between the presence of a female audit partner and audit quality depends on (fe)male participation on the audit committee of the audited client-firm. It further examines whether the relationship between female participation on the company's audit committee and audit quality is contingent on having a (fe)male audit partner.
Design/methodology/approach
A large sample of firm-year observations from the Swedish Corporation has been analyzed for the period that covers the years 2010–2019. The research hypotheses have been analyzed using the year and the industry fixed effect estimations clustered at the firm level.
Findings
In accordance with “the similarity-attraction theory”, the research findings provide support for a positively (negatively) significant relationship between female audit committee female representation and both audit fees and the audit reporting lag (earnings management) in client-firms of female audit partners, albeit insignificant in client-firms of male audit partners. This underscores that the presence of a female audit partner leads the beneficial link between female audit committee directorship and audit quality. Regression results on whether the relationship between female audit committee directorship and audit fees is contingent on having a (fe)male audit partner indicate that female audit partners earn higher (lower) audit fees in companies with gender-diverse (all male) audit committees. This corroborates (in somewhat) the male-female disparities in compensation within the public-audit firms' leading ranks, regarded as a male-dominated workplace worldwide. In conjunction with the argument that (compared to their male rivals) female auditors face more difficulties to reach partnership positions in the public-audit firms and are, thereby, more cautious about the loss of these positions through (in almost cases) exerting more audit efforts, and preventing their audited client-firms from manipulating earnings, the authors reveal that female audit partners are associated with longer (lower) audit reporting lags (earnings management) in both companies with gender-diverse and companies with all-male audit committees. The authors therefore conjuncture that the beneficial female auditor effect on audit quality is not contingent (in somewhat) on (fe)male participation on the company's audit committee. Collectively, the baseline reported results seem sound as they dissipate for a host of alternative metrics for both the dependent and the independent variables. Collectively, the baseline reported results seem sound as they dissipate for a host of alternative metrics for both the dependent and the independent variables.
Originality/value
This study heeds the recent claim for examining the gender effect on the interpersonal interaction between the main participants in the company's auditing process.
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Mitchell Van der Zahn and Imen Tebourbi
Statistical analysis is based on annual data collected from 132 Boursa Kuwait listed firms from 2016 to 2019 (i.e. yielding 528 firm-year observations). During the observation…
Abstract
Purpose
Statistical analysis is based on annual data collected from 132 Boursa Kuwait listed firms from 2016 to 2019 (i.e. yielding 528 firm-year observations). During the observation window (i.e. 2016 to 2019) 116 firms switched from joint-to solo-audits. Level and change models test if audit quality (proxied by abnormal accruals) is impacted by joint-/solo-audit switching. Therefore this paper explores the audit quality following abolition of mandated joint-audits in Kuwait.
Design/methodology/approach
This paper investigates the impact on audit quality following abolition of mandated joint-audit requirements in 2016 in Kuwait. The study is differentiated from prior analysis by focusing on an emerging economy setting, and by considering a more expansive set of joint-audit pairings, solo-audit types and switching options.
Findings
Abolition of mandated joint-audit requirements prompted a majority of Boursa Kuwait listed firms to switch to solo-audits. Analysis indicates that switch does not significantly decrease audit quality. Also, audit quality changes are not dependent on the specific joint-audit pairing/solo-audit type switch.
Research limitations/implications
Analysis is based on a single national setting comprising a small set of firms. Nonetheless, results imply the impact of joint-/solo-audit switching following abolition of mandated requirements is more universal with generalizability to different economic settings.
Practical implications
Results indicate that following elimination of mandated joint-audit requirements, firms have a propensity to favor solo-audits. Irrespective of the joint-audit pairing and solo-audit type, findings show a joint-/solo-audit switch does not compromise audit quality.
Originality/value
Analysis is the first to investigate the impact of joint/solo-audit switches on audit quality in an emerging economy with tests considering more joint-audit pairings than assessed previously.
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Shailesh Rastogi and Jagjeevan Kanoujiya
The study aims to explore the impact of ownership concentration (OC) on bank financial distress (FD). Furthermore, the bank’s financial stability levels determine the association…
Abstract
Purpose
The study aims to explore the impact of ownership concentration (OC) on bank financial distress (FD). Furthermore, the bank’s financial stability levels determine the association between the two.
Design/methodology/approach
Bank data of 33 Indian commercial banks are procured for ten years (2013–2022). The panel data econometrics is applied for empirical estimations. The quantile regression approach is used to determine the association between OC and FD at different quantiles of the FD. Non-normalcy of the data is checked and ensured before applying the quantile regression.
Findings
Surprisingly, it is found that promoters have a nonlinear impact on the firm’s stability. The inverted U-shape result implies that as promoters cross a threshold level, the benefit of increasing promoters’ stake takes a beating and a further increase in promoters’ stakes adversely impacts the stability of the banks. Moreover, this threshold value increases while moving from low to high levels of stability in a quantile regression application.
Research limitations/implications
This study uses promoters as the proxy for OC. Other existing definitions of OC are not used in the study, which can further improve the robustness of the results. Additionally, the use of the type of ownership (private, public or foreign) is also not adopted in the present study. Both the limitations can be the study’s future scope on the topic.
Practical implications
The high OC is supposed to influence corporate governance adversely. Therefore, policymakers recommend low OC for better governance. However, the present study finds evidence that a higher OC (high threshold of OC as the stability increases) would be better for financial stability. This situation demands a trade-off between governance and financial stability regarding OC.
Originality/value
The authors do not observe any study having the nonlinear impact of OC on financial stability (opposite of FD). Moreover, the threshold of OC for the optimum level of financial stability increases as stability goes high. This evidence using quantile regression and finding the turning point using a quadratic equation is also not seen in the literature.
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Ali Meftah Gerged, Shaojie Yao and Khaldoon Albitar
This study aims to investigate the possible implications of compliance with corporate governance (CG) provisions, including board composition and ownership structures, on the…
Abstract
Purpose
This study aims to investigate the possible implications of compliance with corporate governance (CG) provisions, including board composition and ownership structures, on the firm’s likelihood of falling into financial distress.
Design/methodology/approach
The study applies a random-effects logistic regression model as a baseline analysis using a sample of 110 FTSE 350 manufacturing companies from 2014 to 2019. This technique is supported by conducting a two-stage Heckman regression model to overcome the potential existence of endogeneity problems.
Findings
The empirical evidence suggests that board composition and ownership structure are heterogeneously associated with financial distress probabilities in that they might have either reduced or increased the financial distress of the sampled firms. Specifically, board independence, board gender diversity, audit committee independence and institutional ownership negatively influence the likelihood of financial distress. In contrast, and consistent with the expectations, ownership concentration is positively attributed to financial distress, while the board size, audit committee size and managerial ownership have insignificant impacts on financial distress.
Originality/value
The study extends the existing body of knowledge by examining the collective effect of board characteristics and ownership structures on firms’ financial distress likelihood among a sample of manufacturing firms within the FTSE 350 index post the 2008 global financial crisis and following the recent CG reforms in the UK during the study period from 2014 to 2019.
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Luca Menicacci and Lorenzo Simoni
This study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media…
Abstract
Purpose
This study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media agenda-setting theory and legitimacy theory, this study hypothesises that an increase in ESG negative media coverage should cause a reputational drawback, leading companies to reduce tax avoidance to regain their legitimacy. Hence, this study examines a novel channel that links ESG and taxation.
Design/methodology/approach
This study uses panel regression analysis to examine the relationship between negative media coverage of ESG issues and tax avoidance among the largest European entities. This study considers different measures of tax avoidance and negative media coverage.
Findings
The results show that negative media coverage of ESG issues is negatively associated with tax avoidance, suggesting that media can act as an external monitor for corporate taxation.
Practical implications
The findings have implications for policymakers and regulators, which should consider tax transparency when dealing with ESG disclosure requirements. Tax disclosure should be integrated into ESG reporting.
Social implications
The study has social implications related to the media, which act as watchdogs for firms’ irresponsible practices. According to this study’s findings, increased media pressure has the power to induce a better alignment between declared ESG policies and tax strategies.
Originality/value
This study contributes to the literature on the mechanisms that discourage tax avoidance and the literature on the relationship between ESG and taxation by shedding light on the role of media coverage.
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Amr S. Abdallah, Hala M.G. Amin, Mohammed Abdelghany and Ahmed A. Elamer
The purpose of this study is to undertake a systematic literature review (SLR) on intellectual capital disclosure (ICD), focusing on its role in fostering competitive advantage.
Abstract
Purpose
The purpose of this study is to undertake a systematic literature review (SLR) on intellectual capital disclosure (ICD), focusing on its role in fostering competitive advantage.
Design/methodology/approach
Following the SLR process, the study identified 84 papers published in high-ranking journals over a 19-year span, providing insights into descriptive outcomes, research limitations and future research directions.
Findings
The results show that ICD research peaked in 2022, with the Journal of Intellectual Capital leading with the highest number of ICD publications. Resource-based theory was found to be the most applied theoretical framework, with developed country-specific research receiving the most attention. The use of small sample size, a lack of longitudinal studies, reliance on a single source of data, unsuitability of control variables and a lack of comparative studies with firms operating in developing countries are the main limitations that have been noted.
Research limitations/implications
This study faces constraints, primarily stemming from the selective keyword utilization and exclusive Scopus database reliance. It omits non-English papers, conference proceedings and books, potentially overlooking relevant insights.
Practical implications
The findings offer valuable insight for researchers, emphasizing the need for research on intellectual capital (IC) across diverse industries. Furthermore, our findings urge regulators to mandate global IC reporting to mitigate information asymmetry, while also prompting managers to enhance IC-related practices and reporting for more stakeholders’ trust.
Originality/value
This study provides a comprehensive overview of over two decades of ICD literature, synthesizing previous studies, identifying gaps and outlining potential directions for scholars and industry professionals in the context of competitiveness.