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Article
Publication date: 5 August 2021

Ajay Adhikari and Haiyan Zhou

This paper aims to exploit the varying level of responses to the carbon disclosure project (CDP) to assess the economic consequences of carbon emission disclosure by disclosure…

1929

Abstract

Purpose

This paper aims to exploit the varying level of responses to the carbon disclosure project (CDP) to assess the economic consequences of carbon emission disclosure by disclosure level. Economic theory suggests that increased disclosures by a firm should lower the information asymmetry component of the firm’s cost of capital. Using CDP disclosures by US firms, the authors study the effect of voluntary carbon emission on the information asymmetry risk in capital markets.

Design/methodology/approach

The authors conduct cross-sectional analyses to examine whether, from the investor perspective, firms with varying CDP disclosure levels experience differential information asymmetric risk. The authors also conduct a pre- and post-disclosure comparison to examine whether the market responds to first-time carbon emission disclosure with decreases in the relative bid-ask spread.

Findings

In the cross-sectional analysis, the authors find that firms that decline to disclose carbon emission information, firms that provide incomplete information and firms that do not respond to the CDP survey have higher information asymmetry than firms that provide complete information and opt to make it available to the public. Using a pre- and post-disclosure comparison, the authors find that the market responds to first-time carbon emission disclosure with decreases in the relative bid-ask spread. Additionally, only firms that participate, provide complete disclosures and opt to make it available to the public enjoy the largest reduction in bid-ask spreads, which is followed by firms that provide incomplete information. Other firms do not experience a reduction in information asymmetry.

Research limitations/implications

This study examines the impact of CDP disclosures on information asymmetry using a US sample. The results of the study may not be generalizable to other countries that have different institutional arrangements and settings.

Practical implications

The study has important social and policy implications. The findings on the role of carbon emission disclosures in reducing information asymmetry in the capital markets suggest the need for policymakers to promote greater carbon emission disclosures in the USA and other countries where such disclosures have been traditionally less emphasized. As to stakeholders, bringing corporate carbon emission disclosure in line with recommended guidelines will require them to exercise more direct stakeholder pressure to encourage firms to fully participate in the CDP project. This is particularly critical in settings of regulatory inaction and weak enforcement with respect to environmental policies and disclosure such as the USA.

Social implications

The results span the current gap between two broad perspectives on corporate social responsibilities. The traditional shareholder perspective argues that companies only participate in socially responsible activities which increase shareholder value, while an alternate perspective argues that companies also undertake social responsibilities to benefit society even at the cost of shareholders (Moser and Martin, 2012). The study demonstrates that the two perspectives are not always at odds, carbon emission disclosure not only provides important information on the corporate social responsibility of the firm but also contributes to enriching the information environment leading to reduced information asymmetry in the equity markets for US firms. Thus, from both a stakeholder and capital market perspective, firms have incentives to provide carbon emission disclosures voluntarily. More direct stakeholder pressure may be helpful to encourage more firms to provide complete carbon emission information and opt to make it available to the public.

Originality/value

Few studies investigate the impact of CDP disclosure on the information environment of public companies. The lack of research on this key connection between new disclosures on carbon emissions and information asymmetry in the capital markets is the primary motivation for the paper. The study also provides important insights on disclosure level; just participating in the CDP survey is not enough, the degree of participation is also important. The results of the study suggest that the varying level of disclosure matters, the greatest benefits in terms of reduction of information asymmetry accrue to firms that provide complete information and opt to make it available to the public.

Details

Sustainability Accounting, Management and Policy Journal, vol. 13 no. 1
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 18 February 2025

Parveen P. Gupta, Heibatollah Sami, Joseph H. Zhang and Haiyan Zhou

SOX Section 404 requires that public companies evaluate and have their auditors attest to the effectiveness of their internal control over financial reporting (ICFR). These…

3

Abstract

Purpose

SOX Section 404 requires that public companies evaluate and have their auditors attest to the effectiveness of their internal control over financial reporting (ICFR). These companies compare their ICFR effectiveness to the Internal Control Frameworks issued by Committee of the Sponsoring Organizations of the Treadway Commission (COSO). This paper aims to examine whether the implementation of the 2013 Control Framework has a positive impact on the information environment of U.S. public companies.

Design/methodology/approach

The study sample comprises firms from the S&P 1500 index and the Russell 2000 index firms that filed their annual reports after December 15, 2014. This paper uses bid-ask spread as a primary measure of information asymmetry, while controlling for the simultaneous effects of the new COSO framework on trading volumes and price volatility.

Findings

This paper finds a significant reduction in bid-ask spreads – a proxy for an improved information environment – among our sample firms following the adoption of the 2013 Control Framework, leading us to conclude that the 2013 Control Framework represents a substantial improvement.

Research limitations/implications

This study specifically examines the impact of control frameworks on the information environment under SOX 404. Future research could explore other economic consequences associated with the adoption of the new COSO Framework. Additionally, it would be valuable to investigate whether the Cadbury model, which also qualifies as a “suitable” control framework under the SEC rules for ICFR assessments, produces similar or different outcomes. Future studies could also analyze the implementation details across all five components concerning the three types of objectives.

Practical implications

The findings will provide valuable insights for policymakers on the effectiveness of the COSO 2013 Framework in enhancing internal control reporting.

Social implications

The findings will also contribute to improving the information environment in the capital markets by guiding policymakers and regulators in assessing the effectiveness of the new COSO framework.

Originality/value

While extensive research has focused on the consequences of accounting and related internal control disclosures, there has been limited examination of how the underlying internal control benchmarks affect the quality and reliability of ICFR assessments and disclosures. This research aims to address this gap.

Details

Managerial Auditing Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0268-6902

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Article
Publication date: 2 December 2019

Hanwen Chen, Liquan Xing and Haiyan Zhou

Product market competition may have various impacts on audit fees. On the one hand, according to the agency theory, product market competition can mitigate agency problems between…

851

Abstract

Purpose

Product market competition may have various impacts on audit fees. On the one hand, according to the agency theory, product market competition can mitigate agency problems between management and shareholders. For clients with higher product market competition, auditors will lower the level of engagement risk assessment and reduce the required level of audit evidence, and hence audit fees will be lower. On the other hand, according to the audit risk model, product market competition will increase client business risk and audit engagement risk. Moreover, for clients with competition advantage, client business risk and audit engagement risk will be lower, and hence a lower audit fee. The paper aims to discuss this issue.

Design/methodology/approach

In this paper, the authors collect financial accounting data and audit fee data from CSMAR database. Our sample selection starts with all available observations on the Chinese listed companies during 2006–2011. Since there is a big difference in accounting practices between financial companies and other industries, the authors delete observations on financial companies. The authors further remove observations with missing data, yielding 6,709 observations for the final analysis. To define the industry, the authors use the first two digits of standard industry classification code set by China Securities Regulatory Commission. In order to reduce the effect of extreme observations, the authors also truncate the data at 1 and 99 percent. The authors use the Herfindahl–Hirschman index (HHI) and the natural logarithm of the number of listed companies within the industry to measure product market competition intensity. HHI is calculated as the sum of the squared percentage of revenues of the client firm among the total revenues of all public companies, i.e. HHI = i = 1 N ( s i / S )2. N is the number of listed companies in the industry, Si is the revenues for an individual firm and S is the total revenues of all public companies within the same industry. A higher HHI score indicates fewer companies dominate the industry and hence lower intensity of competition in the product market. The second measure of industry competition intensity is LNN, the natural logarithm of the total number of public companies in the same industry of a client firm. A larger value of LNN indicates a larger number of competitors in the industry, and a higher level of competition intensity. Following the literature (Kale and Loon, 2011), the authors use Lerner index (or price-cost margin (PCM)) to measure the listed company’s competitive advantage. It is actually a measure of a firm’s power to influence product prices in the industry. The authors adopt the Peress (2010) method to estimate Lerner index as net operating income, divided by sales, i.e. PCM=(Sales–COGS–Selling expenses–Administrative expenses)/Sales. A higher value of PCM indicates more product pricing power and a higher competitive advantage of a company. The authors also use Lerner index ranking (R_PCM) to measure the competitive advantage of a company in the industry. The authors sort PCM values in ascending order in each industry and divide into ten groups. Then, the authors assign a value from one to ten to each listed company within each group in each industry. A higher R_PCM value represents higher market power and higher competitive advantage of a company. Based on Simunic (1980) framework, the authors develop the following model to test the relationship between product market competition, competition advantage and audit fees: LNAFit01 PMCit2 SIZEit3 INVit4 RECit5 GROWTHit6 PRELOSSit7 LEVit8 QUICKit9 OPINit10 IBIG4it11 DBIG10it12 SWITCHit13 LOCATEit14 STATEit+∑β YearDummiesit.

Findings

Using a sample of 6,709 firm-year observations from the Chinese stock market for the period of 2007–2011, the authors find that the product market competition intensity has a negative impact on audit fees, which means that agency cost effect is dominant in audit pricing at industry level. In addition, a company’s competitive advantage in the industry has a significant and negative impact on audit fees, which means that business risk effect also plays a critical role in audit pricing of individual engagement. The findings indicate that, in determining audit fees, auditors in the emerging market of China consider both the competition intensity of their clients’ product market at the industry level and the competitive advantage of the specific clients within the industry.

Originality/value

The findings indicate that, in determining audit fees, auditors in the emerging market of China consider both the competition intensity of their clients’ product market at the industry level and the competitive advantage of the specific clients within the industry.

Details

Asian Review of Accounting, vol. 28 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 13 January 2022

Parveen P. Gupta, Kevin C.K. Lam, Heibatollah Sami and Haiyan Zhou

In this paper, the authors examine how religious and political factors affect a firm's corporate governance diversity policies.

533

Abstract

Purpose

In this paper, the authors examine how religious and political factors affect a firm's corporate governance diversity policies.

Design/methodology/approach

The authors develop five basic empirical models. Model 1 examines how religious beliefs and political affiliation determine whether a firm will establish diversity incentive in its senior executives' performance assessment. Model 2 investigates how the diversity goal, religious beliefs and political affiliation separately affect the level of actual diversity achieved. Model 3 examines how the diversity goal and environmental factors interact to affect the level of actual diversity achieved. Model 4 and Model 5 examine whether the diversity incentive in senior executives' compensation plan and the environmental factors (religious belief and political affiliation) help to reduce the compensation differentials between male and female executives.

Findings

The authors find that firms located in more liberal counties with more Mainline Protestants and less Republican voters in the United States are more likely to include workforce diversity as a criterion in evaluating their senior executives. The authors also provide evidence that firms with diversity goals have more female directors, more female senior executives and more minority directors. However, they find no evidence that the compensation differentials between male and female executives are smaller in these firms. Finally, they find that external environment affects the effectiveness of the implementation of the diversity goals.

Originality/value

In line withthis branch of research, the authors expand the literate on the link between corporate culture and corporate decision-making by investigating the non-financial performance measures. Besides the corporate decision-making in investment, financial reporting and social responsibilities as documented in prior studies, the authors argue that the religious beliefs and political affiliations could also affect the development and implementation of corporate non-financial performance goals in executive incentive contracts.

Details

Asian Review of Accounting, vol. 30 no. 1
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 18 March 2016

Lim Chhoung Tang and Cheaseth Seng

The recent significant economic growth and development in Cambodia has created a growing demand for qualified and professional accountants. Despite such demand, there are still…

2436

Abstract

Purpose

The recent significant economic growth and development in Cambodia has created a growing demand for qualified and professional accountants. Despite such demand, there are still inadequate number of students enrolling in accounting major, which lefts the National Accounting Council (NAC), Kampucha Institute of Certified Public Accountants and Auditors (KICPAA), and academic institutions with question on how to develop strategies and plans for attracting students and in turn meeting the level required. This paper attempts to determine factors that influence Cambodian business students’ decision to choose accounting as a major for their tertiary education.

Design/methodology/approach

The paper hypothesizes that Guidance, Career Expectation, Perception, Personal Characteristic as factors that would influence students selection of accounting study. With a sample size of 240 business students, Turkey HSD Post Hoc Test and logistic regression methods are employed to ascertain the influential factors.

Findings

The results from ANOVA Turkey HSD Post Hoc Test showed that there is a statistically significant difference among universities with respect to Guidance, Career Expectation, and Personal Characteristic factor, but no significant difference was found among universities in terms of Perception factor. The logistic regression result indicated that students’ choice of accounting major has a positive and significant relationship with Guidance, Personal Characteristic factor, and age. Conversely, the results demonstrated that choice of accounting major has a negative but significant relationship with Career Expectation factor, and a negative but insignificant relationship with Perception factor. Finally, the results revealed a positive but insignificant relationship between accounting major and individual gender.

Originality/value

This paper contributes to the limited study on accounting education in Cambodia. Furthermore, it provides insights for the NAC and KICPAA and universities in Cambodia to develop strategies and plans to create a balance market of professional accountants.

Details

Asian Review of Accounting, vol. 24 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 18 March 2016

Nadana Abayadeera and Kim Watty

The purpose of this exploratory study is to investigate the generic skills developed during the undergraduate degree from the perspectives of final year undergraduates and…

1868

Abstract

Purpose

The purpose of this exploratory study is to investigate the generic skills developed during the undergraduate degree from the perspectives of final year undergraduates and graduate employers.

Design/methodology/approach

The list of generic skills tested in this study was contextualised to Sri Lanka and developed based on prior studies. Data obtained from stakeholders via a questionnaire survey was analysed using paired-sample t-test; independent sample t-test; principal component analysis; and one-way-analysis of variance (ANOVA), with a view to explore, evaluate and compare respondents’ perspectives.

Findings

Our findings revealed both stakeholders believe that most of the generic skills tested in this study are important for graduates’ career success. Consistent with prior studies, respondents prioritised generic skills for career success above technical skills. Final year accounting undergraduates are aware of the skill expectations in the employment market. However, they perceive that most of the important generic skills are not adequately developed during the degree.

Practical implications

Findings of this study inform the importance of adopting a holistic approach to the redesign of the accounting curricula to accommodate generic skill development during the degree. Suggestions include: establishing strong links between universities, professional accounting institutions and employers; introducing participatory methods of curriculum design; and assimilating continuous reviews and frequent updates to curricula.

Originality/value

Sri Lanka, a developing country, was selected for this research given that little has been reported in the literature in terms of generic skills development of accounting graduates in developing countries.

Details

Asian Review of Accounting, vol. 24 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 18 March 2016

Azrul Ihsan Husnin, Anuar Nawawi and Ahmad Saiful Azlin Puteh Salin

The purpose of this paper is to conduct an investigation into the relationship between a firm’s corporate governance mechanisms (audit committee composition and operation, block…

4147

Abstract

Purpose

The purpose of this paper is to conduct an investigation into the relationship between a firm’s corporate governance mechanisms (audit committee composition and operation, block shareholder, CEO duality, financial state, ownership dominance, political connection, share price, and family control) and auditor quality selection in Malaysia, for periods before and after the introduction of Malaysian Code of Corporate Governance in 2007 (MCCG 2007).

Design/methodology/approach

300 companies listed on the Malaysian Stock Exchange from 2006 to 2008 were selected. A Binary regression method was used to analyse the data collected from both annual reports and financial databases.

Findings

The study has found that in general, MCCG 2007 influenced auditor selection through restructuring of corporate governance tools, such as audit committees and internal audit functions.

Research limitations/implications

Results have provided evidence that the restructuring of corporate governance may contribute and drive company to enhance the quality of the audit performed by selecting better quality auditor and/or improvising the audit related functions within the company such as formalising internal audit function. This study, however, employed an archival method of study and only used three years (2006, 2007 and 2008) of data analysis. Future research should analyse data from a longer period and utilize a field survey to understand reasons for auditor selection from the company perspective.

Originality/value

Building on previous studies, this study contributes to the current body of knowledge as it also considers the objective from the perspective of the revised MCCG 2007. It examines whether the introduction of new or revised corporate governance guidelines may immediately impact company auditor selection. Therefore, it compares the auditor quality of the company from pre-MCCG 2007 (2006) and post-MCCG 2007 (2008).

Details

Asian Review of Accounting, vol. 24 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 18 March 2016

Luckmika Perera, Sutharson Kanapathippillai and Graeme Wines

This study investigates the alternative study load measures (dichotomous full-time/part-time classification and the number of units enrolled) and their association to student…

574

Abstract

Purpose

This study investigates the alternative study load measures (dichotomous full-time/part-time classification and the number of units enrolled) and their association to student performance by using student data from a final year accounting unit in a large Australian university.

Design/methodology/approach

Using regression analysis, we compare the two measures to ascertain the explanatory power of the two approaches in explaining student performance.

Findings

A positive association is found between study loads and student performance when using the ‘number of units enrolled’ measure. This relationship was not found when the dichotomous measure (full-time versus part-time) was used. The results suggest that a scaled measure of study loads is a better measure compared to a binary (dichotomous) measure.

Research limitations/implications

The study will assist future researchers to better control for study loads, and also to gain a better understanding of the association between study loads and student performance. This may possibly assist educational institutions and academics to use a more appropriate pedagogical design in the structure of courses when determining study load allocations across the different cohorts.

Practical implications

This study will help in methodology of future researchers controlling for study loads and student performance.

Originality/value

The study adds to existing literature by providing an alternate study load measure in methodology for controlling for student performance.

Details

Asian Review of Accounting, vol. 24 no. 2
Type: Research Article
ISSN: 1321-7348

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Article
Publication date: 18 March 2016

Tubagus Ismail

The purpose of this study is to investigate the relationship between culture control, capability and creative industries’ performance. Capability which is used in this study is…

1477

Abstract

Purpose

The purpose of this study is to investigate the relationship between culture control, capability and creative industries’ performance. Capability which is used in this study is organizational creativity and innovation.

Design/methodology/approach

This study uses the owner and the manager of creative industries as samples. Total amount of the questionnaires which are used in this data are 270. Data for this study is primary data in respondents’ perceptions which are collected via mail to all respondents . AMOS 16 program used as an aid tool to solve any problems that may emerge in structural equation modeling (SEM).

Findings

The result from hypotheses testing showed that cultural control positively influenced the capabilities of an organization, creativity facilitated the innovation formation. Finally organizational creativity and innovation influenced the SME’s performance.

Research limitations/implications

This study has a drawback that inherently attached with the chosen method. This study tests the relationship among variables that have a large amount of samples at a given point of time

Practical implications

The result from this study is expected to be a reference in management in using its control that will influence the firm’s capability and furthermore it will influence the SME’s performance to maintain its competitive advantage.

Originality/value

How MCS influence the creativity is still limited. This study investigated innovation not only as an outcome variable, but also as part of consequences of organizational creativity.

Details

Asian Review of Accounting, vol. 24 no. 2
Type: Research Article
ISSN: 1321-7348

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Book part
Publication date: 12 November 2016

Haiyan Zhou, Hanwen Chen and Zhirong Cheng

In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

Abstract

Purpose

In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

Methodology/approach

We use Chen, Dong, Han, and Zhou’s (2013) internal control index on the effectiveness of internal control and Dickinson’s (2011) definition on firm life cycle. We use multivariate regression analysis.

Findings

We find that the internal control improves corporate performance. When dividing firm life cycle into five stages: introduction, growth, mature, shake-out and decline, we find that the impacts of internal control on firm performance vary with different stages. The positive impact of internal control on firm performance is more significant in maturity and shake-out stages than other stages.

Research limitations/implications

Our findings would have implications for the regulators and policy makers with regards to the importance of internal control in corporate governance and the effectiveness of implementing standards and guidelines on internal control in public firms.

Practical implications

In addition, our findings on the various roles of internal control at different stages of firm life cycle would help managers and board of directors find more focus in risk management and board monitoring, respectively.

Originality/value

Although the prior literature have examined the link between internal control, information quality and cost of equity capital (Ashbaugh-Skaife, Collins, Kinney, & LaFond, 2009; Ogneva, Subramanyam, & Raghunandan, 2007), our study would be the first attempt to investigate the link between internal control and firm performance during different stages of firm life cycles.

Details

The Political Economy of Chinese Finance
Type: Book
ISBN: 978-1-78560-957-2

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