Khamoussi Halioui, Souhir Neifar and Fouad Ben Abdelaziz
The purpose of this paper is to examine the effect of corporate governance structure and CEO compensation on the level of tax aggressiveness.
Abstract
Purpose
The purpose of this paper is to examine the effect of corporate governance structure and CEO compensation on the level of tax aggressiveness.
Design/methodology/approach
This work analyzes a sample of 471 observations of 100 companies listed on the NASDAQ 100 for the period 2008-2012. It uses a fixed-effect panel model to analyze the effect of different model variables on the tax aggressiveness level.
Findings
The main finding of this study is the great influence of corporate governance structure and CEO compensation on reducing tax aggressiveness. Indeed, it finds a significant negative relation between board size, CEO salary, CEO stock options and tax aggressiveness. In addition, the study reveals that there is a direct negative relation between CEO duality, tax fees and tax aggressiveness.
Research limitations/implications
The study was conducted using robust methods to test the effect of corporate governance structure and CEO compensation on tax aggressiveness level. The generalized least squares method was used to fit panel data and overcome heteroscedasticity and autocorrelation problems. The aim of the study was to prove the great effect of both corporate governance structure and CEO compensation on reducing tax aggressiveness. As this study was based on data from American companies, the results cannot be generalized to all contexts.
Originality/value
This paper differs from previous work and tests the effect of corporate governance structure, CEO compensation, CEO characteristics and audit fees on tax aggressiveness. The findings of this study will enrich the literature on tax aggressiveness by suggesting that corporate governance structure and CEO compensation can significantly limit tax aggressiveness behavior. Therefore, shareholders must be aware of these two variables. They need to limit tax aggressiveness behavior, as it is usually accompanied by rent diversion, as reported by Desai and Dharmapala (2006). Therefore, these findings will be helpful to investors, managers and regulators because they have implications for the interactive decision-making process.
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Abir Jerbi Maatougui and Khamoussi Halioui
The purpose of this study is to test the effect of the presence of outside blockholders on earnings management around seasoned equity offerings (SEOs).
Abstract
Purpose
The purpose of this study is to test the effect of the presence of outside blockholders on earnings management around seasoned equity offerings (SEOs).
Design/methodology/approach
Given that SEO can be one of motivations for earnings management, the authors examined the role of outside blockholders in monitoring the opportunistic behavior of managers around 50 SEOs realized by 45 French companies during the 2005-2009 period based on panel data model.
Findings
The authors found that issuing firms are used for upward earnings management during the pre-offering period. Indeed, the discretionary accruals know a continuous evolution during the three years preceding SEO and peaked in the year prior to the SEO. This result led us to examine the role played by the outside blockholders on earnings management. The results provided empirical evidence that the presence of outside blockholders in SEO firms is able to restrain earnings management practices.
Research limitations/implications
This study allows to inform investors that French issuing firms are less overvalued in the presence of outside blockholders than in their absence. As a result, investors have an interest in participating in the SEO of firms that hold outside blockholders in their capital structure. Again, based on this study, users of financial statements can trust the reliability of the financial statements published by companies with outside blockholders because of the careful control exercised by these shareholders in the process of producing financial information. However, similar to how any research may suffer from some limitations, this work has two major limitations. Firstly, the authors examined the impact of outside blockholders on earnings management without distinguishing between the different types of blockholders (such as individual investors, pension funds, mutual funds, banks and trusts). Secondly, they have estimated the discretionary accruals by referring to a single model (Kothari et al., 2007). However, the use of two or more models for estimating accruals will lead to more robust results.
Originality/value
The empirical literature emphasizes the monitoring role played by these shareholders on earnings management. However, it does not distinguish between the circumstances when the monitors either lose or win from exaggerations. This research completes this lack by studying the impact of outside blockholders on earnings management around SEOs.
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Souhir Neifar, Khamoussi Halioui and Fouad Ben Abdelaziz
The purpose of this paper is to examine the motivations of earnings management and financial aggressiveness levels in the big 100 companies listed on the NASDAQ 100 after the 2007…
Abstract
Purpose
The purpose of this paper is to examine the motivations of earnings management and financial aggressiveness levels in the big 100 companies listed on the NASDAQ 100 after the 2007 financial crisis.
Design/methodology/approach
This paper uses two samples. The first contains 471 observations of 100 companies listed on the NASDAQ 100 for the period 2008-2012 and is used to examine the motivations of earnings management. The second represents 282 observations of companies listed on the NASDAQ 100 that use financial aggressiveness. The authors use a panel data model to analyze the effects of four explanatory variables (corporate governance structure, CEO compensation, CEO characteristics and audit fees) on both earnings management and financial aggressiveness levels.
Findings
The results of the investigation show the significant impact of corporate governance structure, CEO compensation, CEO characteristics and audit fees on reducing the earnings management and financial aggressiveness levels.
Research limitations/implications
The findings can be valuable to both investors and researchers. For researchers, the present work may help in explaining the motivations of earnings management and financial aggressiveness practices used by large American firms after the 2007 US financial crisis. For investors, this study serves to highlight the critical importance of corporate governance, CEO compensation and CEO characteristics in limiting such behaviors. Thus, investors are recommended to account for such variables in order to make effective investment decisions. As an extension to this study, researchers might consider other CEO psychological variables. Other market indices could also be considered in order to generalize and validate the results of the research.
Practical implications
Investors must take into consideration the corporate governance structure and ask for supplementary information about CEO characteristics to ensure better investment decisions.
Originality/value
In this paper, and in contrast to previous research, the authors test the impact of corporate governance structure, CEO compensation, CEO characteristics and audit fees together on the level of both earnings management and financial aggressiveness behavior for large US non-financial firms after the 2007 financial crisis. The authors show that older CEOs use less earnings management and financial aggressiveness. The findings can be valuable to investors, managers and regulators because they have implications for their interactive decision-making process.
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Walid Guermazi and Halioui Khamoussi
The purpose of this paper is to investigate how the mandatory shift from domestic standards to International Financial Reporting Standards (IFRS) in Europe affects the…
Abstract
Purpose
The purpose of this paper is to investigate how the mandatory shift from domestic standards to International Financial Reporting Standards (IFRS) in Europe affects the conservatism level of reported accounting earnings (i.e. conditional conservatism), with the objective of gaining insights that are relevant for standard setters, capital providers and other users of financial accounting information.
Design/methodology/approach
Various models have been used in the literature to capture conditional conservatism. In the main tests in this paper, the authors use the Basu’s (1997) earnings-return specification. The authors use a panel data methodology to carry out the paper.
Findings
In contrast to previous international research studies, it is found that conditional conservatism has increased after the mandatory adoption of IFRS in Europe in 2005, with this increase being dependent on the extent of the accounting changes involved in switching from domestic accounting standards to IFRS reporting.
Practical/implications
These findings are expected to be particularly relevant to some countries which have not yet adopted IFRS, such as the USA, Japan, Columbia, etc., but have announced their intention to adopt IFRS and to regulators in different jurisdictions who are interested in the impact of IFRS conversion.
Originality/value
The research to date, based on a multi-country setting, consistently shows a significant decrease in conditional conservatism after adopting IFRS. Based on a sample of firms from the European Union over a long period, the authors provide novel evidence for potentially unintended consequences of IFRS adoption, finding an increase in conditional conservatism behavior.
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Leila Gharbi and Halioui Khamoussi
This paper aims to explore empirically the impact of fair value accounting on banking contagion in a comparative context between Islamic banks and conventional banks.
Abstract
Purpose
This paper aims to explore empirically the impact of fair value accounting on banking contagion in a comparative context between Islamic banks and conventional banks.
Design/methodology/approach
The analysis of the impact of fair value changes on banking contagion is carried out through a panel data model. This study covers 20 Islamic banks and 40 conventional banks operating in the Gulf Cooperation Council (GCC) countries during nine years from 2003 to 2011.
Findings
Empirical evidence shows that there is a significant change in dynamic volatility in GCC banking sector because of financial crisis 2008. However, results fail to confirm the hypothesis that fair value accounting is significantly associated with an increase of banking contagion for both Islamic and conventional banks operating in GCC countries.
Originality/value
The outcome of this study provides some insights for academicians, accountants as well as regulators in terms of enhancing the effectiveness of accounting practices.
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Zgarni Inaam and Halioui Khamoussi
Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management…
Abstract
Purpose
Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management, and empirical evidence is rather inconsistent.
Design/methodology/approach
The aim of this paper is to meta-analyze the results of 58 prior studies that examined whether differences in results are related to moderating effects associated with corporate governance mechanisms or measures of earnings management.
Findings
The findings show that the meta-analysis identifies many significant relationships. The independence of the audit committee, its size, expertise and the number of meetings have a negative relationship with earnings management. Similar negative relationships exist between auditor size, specialization and earnings management.
Research limitations/implications
This study contributes to the corporate governance literature. Further, recognizing the function of an audit committee and audit quality shows the value of considering an institutional setting in governance research. This study is significant to academic and practitioner literatures, policy makers and professional accounting bodies as it shows that governance reforms promote companies to adopt good governance practices. The results also give useful information to investors in examining the effect of audit committee characteristics and audit quality on earnings quality.
Originality/value
This study extends existing research on audit committee and audit quality to oversee both accrual and real earnings management using meta-analysis. Thus, this study has the potential to help stakeholders, board of directors, regulators and auditors, who are related with enhancing the supervision of firms and reducing the opportunities given to managers, to engage in earnings management.