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Article
Publication date: 5 September 2008

Hamadi Fakhfakh, Mondher Fakhfakh and María Consuelo Pucheta‐Martínez

The purpose of this paper is to examine the impact of the new, revised International Standard on Auditing (Revised ISA700) in terms of the wording characteristics of Tunisian…

1997

Abstract

Purpose

The purpose of this paper is to examine the impact of the new, revised International Standard on Auditing (Revised ISA700) in terms of the wording characteristics of Tunisian auditors' reports.

Design/methodology/approach

Measurement of the compliance of auditors' reports issued by Tunisian auditors with the new revised International Standard on Auditing (Revised ISA700).

Findings

It was found that the audit reports examined are not fully compliant with all the elements enumerated by the new standard issued by the International Federation of Accountants (IFAC).

Originality/value

This paper provides new empirical evidence about the level of compliance with the revised ISA700. It discusses the limits on standardisation efforts for national auditors' reports, and the implications for accounting firms and their audit clients.

Details

Managerial Auditing Journal, vol. 23 no. 8
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 29 April 2014

Habib Jouber and Hamadi Fakhfakh

The purpose of this paper is to investigate whether or not there is a link between CEO incentive-based compensation and earnings management and to examine how institutional…

1416

Abstract

Purpose

The purpose of this paper is to investigate whether or not there is a link between CEO incentive-based compensation and earnings management and to examine how institutional environment's features influence such link.

Design/methodology/approach

To test the predictions, the authors use a panel of 1,500 American, Canadian, British, and French firm-year observation over the period 2004-2008.

Findings

The authors find a significant association between earnings management and CEO incentive-based compensation. Moreover, the analysis provides evidence that institutional factors are strong determinants of this association. Specifically, the results show that firms from countries within the Anglo-American corporate governance model, which provides greater protection of shareholder rights, ensures strict enforcement of law, and scores high on board oversight, tend to have lower level of earnings management. The analysis shows however, that beside the formal corporate governance quality, it is relevant to consider weaker shareholder protection and lower law enforcement indexes to explain earnings management in firms from countries within the Euro-Continental corporate governance model.

Originality/value

This paper is the first to provide insights regarding the extent to which CEO incentive rewards imply management discretion and to indicate how much institutional features matter. The analysis contributes to two distinct strands of research. It extends prior research on the association between executive compensation and earnings management and adds to the literature demonstrating a relationship between institutional factors and financial decisions.

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Article
Publication date: 1 January 2012

Habib Jouber and Hamadi Fakhfakh

This paper attempts to investigate the relationships between the board of directors' characteristics and earnings management being a proxy of earnings quality in two separate…

4007

Abstract

Purpose

This paper attempts to investigate the relationships between the board of directors' characteristics and earnings management being a proxy of earnings quality in two separate countries, France and Canada. Specifically, it aims to investigate how certain contextual features affect differently earnings management behavior, and to reveal which factors are the most prominent incentives of management discretion in both cases.

Design/methodology/approach

The paper uses a performance matched discretionary accruals (PMDA) measure as a proxy for earnings management. Three separate panel‐regressions are then performed on a full sample, comprising a French sub‐sample and a Canadian sub‐sample, to detect board characteristics and institutional features' impacts on the PMDA. Regressions are based on a panel of 180 French and Canadian listed firms' data over the period 2006‐2008.

Findings

Evidence shows that CEO stock ownership, independent monitoring and institutional investor's property are strong earnings management determinants in both the French and Canadian frameworks. Nevertheless, leadership structure and board size seem to be neutral. Furthermore, French firms show specific earnings management incentives which are related to high ownership concentration, low equity widespread and high contractual debt costs. Dominant minority ownership and capital market forces are the key earnings management incentives in the Canadian context. These findings are robust to alternative sensitivity tests.

Research limitations/implications

Even though the findings answer some questions, earnings management incentives are still to be decided. Future research could further highlight the impact of contractual, legal, cultural, ethical and political country‐specific factors related to financial reporting.

Originality/value

This paper investigates how an effective board of directors is able to provide a monitoring mechanism to ensure high quality of earnings. Moreover, it builds on cross‐country variations in corporate governance features and contextual‐specific factors to reveal earnings management behavior's incentives in two separate environments, namely French and Canadian ones. The underlying promise is that poor corporate governance (weak board monitoring), high ownership concentration, and intensive financial market forces create incentives that largely influence manager's willingness to report earnings that don't reflect a firm's true performance.

Details

Managerial Auditing Journal, vol. 27 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 6 April 2012

Hamadi Fakhfakh, Ghazi Zouari and Rim Zouari‐Hadiji

This research attempts to explain the decentralization of investment decision. To do so, it highlights the role of the internal capital market in the allocation of decision rights

2480

Abstract

Purpose

This research attempts to explain the decentralization of investment decision. To do so, it highlights the role of the internal capital market in the allocation of decision rights and control as a factor explaining the effectiveness of investment management. The authors aim to apply the theory of the organizational architecture to the investment decision to understand its complexity and its efficiency.

Design/methodology/approach

An empirical test was realized on a sample of 63 Tunisian firms using the methods of canonical correlation and cross tabulations.

Findings

Even if organizational complexity has a linear and negative impact (opposite sign to what is expected) on the investment decision decentralization, which creates value, it appears that there is a positive association with the uncertainty of the environment, and a negative one with the scarcity and sharing of financial resources between units on the internal capital market.

Originality/value

The authors show that the role played by the internal capital market in the value creating requires the setting of a centralized organizational structure.

Details

Corporate Governance: The international journal of business in society, vol. 12 no. 2
Type: Research Article
ISSN: 1472-0701

Keywords

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Article
Publication date: 9 November 2012

Habib Jouber and Hamadi Fakhfakh

The optimal contracting view assumes that compensation arrangements should not reward performance upward that is beyond the management's control. Critics to this view assert…

1408

Abstract

Purpose

The optimal contracting view assumes that compensation arrangements should not reward performance upward that is beyond the management's control. Critics to this view assert, however that unearned compensation boom may be suggestive of pay for luck. Hence, the authors ask if CEOs' incentive pay is sensitive to lucky as to purely corporate performance. If such, one could question: Are CEOs rewarded for luck? Do institutional features matter for CEOs pay‐for‐luck? How does systematic incentive effect sensitive to luck's nature? Accepting the premises of both contacting and skimming agency's approaches, this paper aims to answer these questions.

Design/methodology/approach

General and separate ordinary least squares (OLS) and instrumental variables (IV) estimations have been run to estimate the general sensitivity of CEOs' pay, respectively, to performance and luck. These estimations are based on a sample of 300 publicly traded firms covering four countries from the Anglo‐American and Euro‐Continental corporate governance models for the period 2004 to 2008.

Findings

In support of the paper's theorizing, it was found that CEOs pay to be positively related to outside contingencies as well as to shareholders' interests. Positive pay sensitivity to exogenous shocks, which we label systematic incentive effect, shows that management take advantage of lucky external events. Further analyses show, moreover, two stylized facts. First, this effect is asymmetric as executives are rewarded more for good luck than penalized for bad luck. Second, it is less generous under stronger corporate governance, higher investor rights protection, and stricter law enforcement rules. The latter institutional factors seem to be overwhelmingly influential variables in explaining the differences in such effect across countries.

Research limitations/implications

The paper contributes to the CEO compensation research by: showing that a simple contracting view can mislead shareholders about the effective CEOs' skills and efforts; and filling the lack of consensus within the empirical literature as to whether pay for luck depends on institutional features such as the law enforcement level, the degree of investors' right protection, and the corporate governance system's quality.

Originality/value

The paper's findings offer insights to shareholders, pay consultants, and regulators about the effects that unobservable macroeconomic shocks can have towards the design and the efficiency of a CEO pay contract. The findings help, however, academics understanding the international pay gap's causes.

Details

International Journal of Law and Management, vol. 54 no. 6
Type: Research Article
ISSN: 1754-243X

Keywords

Available. Content available
Article
Publication date: 9 November 2012

Chris Gale

162

Abstract

Details

International Journal of Law and Management, vol. 54 no. 6
Type: Research Article
ISSN: 1754-243X

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