The objective of this paper is to investigate how disclosure informativeness of U.S. multinational corporations varies with the informativeness of numbers produced by their…
Abstract
The objective of this paper is to investigate how disclosure informativeness of U.S. multinational corporations varies with the informativeness of numbers produced by their financial accounting systems. We predict that firms whose current accounting numbers do not capture well the effects of the firm's current activities and outcomes on shareholder value proxied by earnings timeliness will institute better disclosure systems and improve their disclosure informativeness to compensate for their less informative accounting numbers. Disclosure informativeness is measured by analyst ratings of corporate disclosures provided in the annual volumes of the Report of The Financial Analysts Federation Corporate Information Committee. The informativeness of accounting numbers is proxied by the timeliness of earnings. We investigate whether the analysts' ratings vary with the timeliness of earnings by examining the cross‐sectional relation between properties of earnings timeliness and subsequent analyst ratings of corporate disclosure of 100 firms included in FORBES' survey of the largest U.S. multinationals. The results support a significant negative relation between the timeliness metrics and subsequent values of disclosure informativeness after controlling for other firm characteristics.
Ahmed Riahi Belkaoui and M. Ali Fekrat
The American Accounting Association (AAA) Committee on Accounting and Auditing Measurement (1991) had recommended that value added be considered for mandatory disclosure in the US…
Abstract
The American Accounting Association (AAA) Committee on Accounting and Auditing Measurement (1991) had recommended that value added be considered for mandatory disclosure in the US in addition to the income and cash flow statements. This study examines empirically the relative merits of derived performance indicator numbers from value added reporting, accrual accounting and cash flow accounting. The results show that the derived performance indicator numbers based on net value added had lower variability and higher persistency than corresponding numbers based on either earnings or cash flows of 673 US firms for the 1981–1990 period. These results and other related considerations argue strongly in favor of the recommendation of the AAA Committee.
Summarizes the effects of globalization on financial markets, and the need for accounting practices to keep up with it. Criticizes the Financial Accounting Standards Board…
Abstract
Summarizes the effects of globalization on financial markets, and the need for accounting practices to keep up with it. Criticizes the Financial Accounting Standards Board Exposure Draft “Accounting for derivatives and similar financial instruments and for hedging activities” for not including the impact of derivative transactions on the risk exposure of a company. Describes Financial Accounting Standards Board collaboration with foreign standard setters, starting with earnings per share and capital structure disclosure. Argues that published financial statements still show the conflict between equity‐holder based accounting and debt‐holder accounting, which has not yet been resolved, despite the EU’s fourth and seventh Directives. Asserts that US and international accounting standards differ in the interpretation by different companies. Predicts that standards will be forced on accountants by the market.
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Samira Joudi, Gholamreza Mansourfar, Saeid Homayoun and Zabihollah Rezaee
Considering the standards developed by the Sustainability Accounting Standards Board (SASB), this study aims to examine whether the link between material sustainability and…
Abstract
Purpose
Considering the standards developed by the Sustainability Accounting Standards Board (SASB), this study aims to examine whether the link between material sustainability and financial performance depends on the extent to which the company is oriented toward stakeholders.
Design/methodology/approach
To test the predictions, 13,942 firm-year observations from 43 different countries are used, covering the period from 2010 to 2019. Using a hand-mapping approach to match the indicators suggested by the SASB with those of the ASSET4, the authors realize that there are 170 material sustainability indicators among 466 indicators of the ASSET4. The authors use three different methods to verify if the materiality matters, including the alphas obtained from the Fama and French factor models, comparing the average abnormal returns of the portfolios and the bootstrapped Cramer technique.
Findings
The findings show that companies investing in material sustainability activities perform better than those investing in immaterial activities. Also, consistent with the theoretical foundations, the authors find that the effect of investing in material sustainability activities is more pronounced in stakeholder-oriented countries than that in shareholder-oriented countries. The results are robust to a battery of sensitivity tests.
Research limitations/implications
Owing to COVID-19 in late 2019, data from 2020 to 2022 have not been used to obtain reliable results.
Practical implications
The results obtained in the current research provide valuable guidance for investors to make investments considering the degree of materiality of sustainability activities in different industries. It also helps managers to increase the company’s financial performance, make efficient decisions related to investment in sustainability activities and find investment strategies on the material sustainability issues in their industries.
Social implications
This study provides a clearer understanding of investment in sustainability activities in different industries by separating material and immaterial sustainability activities in stakeholder and shareholder-oriented countries, and the results obtained can change the perspective of investors and company managers regarding investing in such activities in different countries. Investing in more materiality sustainability activities than the immateriality dimension can be new opportunities for companies to achieve predetermined goals, help retain and attract business partners or be a source of innovation for new product lines or services. Internal morale and employee engagement may increase while increasing productivity and firm performance. This discussion opens the way for future research.
Originality/value
This study provides insight into the effect of investing in material and immaterial sustainability activities in different industries on the company’s performance in shareholder and stakeholder-oriented countries.
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Faisal Hameed, Trevor Wilmshurst and Claire Horner
Studies in corporate social responsibility (CSR) disclosure were initially focused more on disclosure “Quantity” than “Quality” and while they have started to explore “Disclosure…
Abstract
Purpose
Studies in corporate social responsibility (CSR) disclosure were initially focused more on disclosure “Quantity” than “Quality” and while they have started to explore “Disclosure Quality”, their assessment mechanisms are found to be immature. Thus, while a number of papers have sought to assess the quality of CSR disclosure, this paper aims to suggest an approach tied closely to both expectations in assessing “quality” derived from the Conceptual Framework for Financial Reporting (revised 2018) and the global reporting initiative. The outcome is to offer a best practice approach to assessing CSR disclosure quality.
Design/methodology/approach
In this paper, prior literature is reviewed, qualitative characteristics from the Conceptual Framework for Financial Reporting (revised 2018) and globally recognised guidelines such as the GRI are reviewed. The framework for a “CSR disclosure quality index” as an assessment tool to assess CSR disclosure quality is developed from qualitative characteristics and criteria identified.
Findings
The proposed CSR disclosure quality index is developed in stages from the qualitative characteristics identified in the Conceptual Framework for Financial Reporting (revised 2018) and criteria identified from the guidelines discussed. A table was then developed linking the qualitative characteristics to criteria providing a Likert scale approach to assessing the disclosures made by companies to make an assessment of the quality of the companies’ reports. It is argued this provides a robust assessment, being a direct and comprehensive measure of disclosure quality.
Research limitations/implications
As with most qualitative work, there are alternative approaches to establishing an index, but the authors believe this is an approach offering links (and, therefore, credibility) to globally recognised guidelines in the assessment of CSR disclosure quality. Future work could enhance the alignment of this index with the sustainable development goals (SDGs), building on the preliminary connections established in this study.
Practical implications
At a practical level this index offers an approach to reviewing the quality of CSR disclosures which could prove useful to policymakers and in the future development and expansion of this framework offering greater objectivity to assessments and justification for proposed improvement in reporting practice. Also, this index serves as a benchmarking tool for companies to meet the disclosure expectations of stakeholders.
Social implications
This approach has the potential to substantially fulfil stakeholder expectations by addressing the growing demand for transparency in this area, while avoiding practices that could be perceived as superficial or misleading (greenwashing). Focusing on social issues enables stronger connections between companies and their stakeholders. Furthermore, the index helps companies link their CSR efforts with SDGs and show their commitment to long-term social value building in discussion of governance factors to show accountability expectations are being met.
Originality/value
This paper contributes to CSR disclosure quality literature and provides a reliable method of assessing the quality of CSR disclosures. Opportunities for further and broader developments can be envisaged while offering a credible and reliable approach.
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This paper aims to examine the state of research on environmental, social and governance (ESG) performance in the context of multinational business research. This paper discusses…
Abstract
Purpose
This paper aims to examine the state of research on environmental, social and governance (ESG) performance in the context of multinational business research. This paper discusses research progress as well as various issues and complexities associated with using ESG ratings in cross-country studies and for assessing the performance of multinational enterprises (MNE) and emerging market multinationals (EMNEs).
Design/methodology/approach
The paper identifies emerging literature that focuses on tracking the development and uptake of ESG ratings in the international context. It discusses three emerging research streams: Research examining the ESG-financial performance relationship in emerging markets, research tracking the ESG performance of multinationals in the various countries and regions they are operating, and frameworks for assessing ESG-related risks on a country level.
Findings
While the emerging body of work adds an important dimension to the identification and awareness of ESG issues globally, numerous unresolved issues become evident. ESG frameworks have been built to assess corporate sustainability as it relates to firms in their “home” countries (typically with a focus on developed countries), with limited applicability and transferability to emerging markets. International firm activities are often not captured in detail and not comprehensively mapped across firm subsidiaries and a firm’s corporate supply chain where ESG issues are prone to happen, and ESG scores do not comprehensively integrate views and voices from various local stakeholders that are impacted by firm activities, particularly indigenous communities.
Research limitations/implications
Research on ESG ratings in the context of multinational business research is generally sparse and fragmented, thus creating opportunities for future research to expand on existing and emerging findings.
Practical implications
The paper creates awareness of issues to consider when using ESG ratings in cross-country studies and for assessing the ESG performance of MNEs and EMNEs: ESG scores can be subject to bias and are not weighted by materiality, which can be misleading for portfolio construction and performance measurement purposes. Managers need to be aware that ESG scores are often not capturing ESG issues occurring in supply chains and ESG issues affecting local communities.
Originality/value
This study enriches the understanding of ESG in the context of multinational business research practice.
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Charles H. Cho and Dennis M. Patten
This investigation/report/reflection was motivated largely by the occasion of the first Centre for Social and Environmental Accounting Research (CSEAR) “Summer School” in North…
Abstract
This investigation/report/reflection was motivated largely by the occasion of the first Centre for Social and Environmental Accounting Research (CSEAR) “Summer School” in North America.1 But its roots reach down as well to other recent reflection/investigation pieces, in particular, Mathews (1997), Gray (2002, 2006), and Deegan and Soltys (2007). The last of these authors note (p. 82) that CSEAR Summer Schools were initiated in Australasia, at least partly as a means to spur interest and activity in social and environmental accounting (SEA) research. So, too, was the first North American CSEAR Summer School.2 We believe, therefore, that it is worthwhile to attempt in some way to identify where SEA currently stands as a field of interest within the broader academic accounting domain in Canada and the United States.3 As well, however, we believe this is a meaningful time for integrating our views on the future of our chosen academic sub-discipline with those of Gray (2002), Deegan and Soltys (2007), and others. Thus, as the title suggests, we seek to identify (1) who the SEA researchers in North America are; (2) the degree to which North American–based accounting research journals publish SEA-related research; and (3) where we, the SEA sub-discipline within North America, might be headed. We begin with the who.
Ali Ahmadi and Abdelfettah Bouri
An increasing number of business organizations around the world are engaged in the accounting reporting on non-financial performance aspects, mainly within the field of…
Abstract
Purpose
An increasing number of business organizations around the world are engaged in the accounting reporting on non-financial performance aspects, mainly within the field of environmental responsibility. The purpose of this paper is to assess the association between environmental disclosure and environmental performance and examine the financial attributes of companies using a composite disclosure index to investigate the status of the environmental disclosure practices of the top 40 companies operating in France.
Design/methodology/approach
The sample used in this study consists of the 40 largest companies operating in France (index CAC 40).
Findings
The findings of the study show that environmental disclosure is positively associated to environmental performance. Financial attributes, such as firm size, the need for capital, profitability and capital spending, are positively associated with environmental disclosure quality. Equally, a high quality of environmental disclosure will reflect the effectiveness of corporate governance and would tend to face fewer difficulties in accessing capital markets. The authors found that firms revealed on healthcare and gas oil business sector disclose more environmental information than other industries.
Originality/value
A web-based search was performed during the fourth quarter of 2014, locating the corporate websites of the sample firms. The sample period is 2011-2013 (108 firm-year observations).