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This paper aims to investigate the association between the corporate social responsibility (CSR) and the cost of equity (COE) and cost of debt (COD).

The authors use the multivariate regression analysis approach to address the developed hypotheses.

Using a sample of 230 Australian listed firms from 2004 to 2016, the authors document that firms complying with higher CSR affect both COE and COD negatively, which means that CSR disclosure reduces financing cost.

These results support the risk mitigation perspective of CSR compliance, showing that both the investors and creditors may lower their expected returns because they find that CSR can mitigate potential business risk.

The authors extend the CSR research with both COE and COD.

This paper aims to examine the information content of changes in fair values of investment property reported under international accounting standards (IAS) 40 and International Financial Reporting Standards (IFRS) 13 to debtholders. This study further examines the effect of fair value hierarchy inputs, valuer types and the quality of fair value measurement-related disclosure on the information usefulness of changes in fair value.

This paper performs a panel regression on the cost of debt capital and changes in fair value of investment properties, and fair value measurement features using data covering periods 2007–2015 from Australian real estate companies.

The findings suggest that changes in fair value of investment property are informative about the real estate firm’s future cash flow to debtholders. Also, the findings show that the use of unobservable inputs in an active market (Level 3 inputs) and Level 2 has no different impacts on the cost of debts. Also, this paper documents that employing the directors solely in valuation may lead to a higher cost of debts. Furthermore, this paper reports that an extensive fair value disclosure appears no additional value in the debt decision.

Collectively, the findings indicate that although the use of unobservable inputs is common in the real estate sector, information on the changes of the fair value of investment properties are informative to debtholders. The findings have important implications for accounting standard setters to consider revisiting the IAS 40 and IFRS 13 on whether the independent valuation should be required and whether the extensive disclosure requirement is worthwhile.

The paper aims to investigate the value-relevance of changes in fair values of investment property reported under International Accounting Standards (IAS) 40 and International Financial Reporting Standards (IFRS) 13.

Multivariate regression models are used to regress cumulative market-adjusted stock returns of real estate firms on changes in fair values, along with control variables and corporate governance variables, in order to examine the research question.

Using hand-collected data from the Australian Real Estate Industry (AREI), the authors find that changes in fair values of investment property are value-relevant for equity investors. The authors further find that using unobservable inputs in an active market (Level 3 inputs) does not diminish the information content of fair values. The authors document that properties valued exclusively by directors have a significantly reduced value-relevance, whereas property valuations made collectively by both directors and independent valuers have superior value-relevance, possibly owing to the combination of inside knowledge and externally imposed monitoring. Collectively, the findings suggest that in the real estate industry, where unobservable inputs are commonly used to determine fair values of properties, the fair values determined subjectively are perceived to be sufficiently informative and relevant.

The authors' findings have important implications for accounting standard-setters in considering whether an external valuation should be required and whether the extensive measurement-related fair value disclosure requirements are useful.

The study extends previous archival evidence and complements prior commentaries on experimental and analytical work in the Australian regulatory environment.

This study aims to examine whether the presence of advisory directors affects firm discretionary accruals (DACC), a widely used proxy for financial reporting quality. The authors argue that the advisory director weakens the board monitoring role and impairs the firm financial reporting quality by increasing DACC.

The sample consists of listed firms on the Australian Stock Exchange from 2001 to 2015 using 7,649 firm-year observations. The authors perform descriptive statistics, regression and propensity score matching analyses to examine the research hypothesis.

The research evidence that firms with a higher presence of advisory directors have more DACC, indicating poor financial reporting quality. Furthermore, the authors categorize the DACC and find that the firm has higher income-increasing DACC in the presence of higher advisory directors. The findings are robust concerning endogeneity issues.

The research evidence that firms with a higher presence of advisory directors have more DACC, indicating poor financial reporting quality. Furthermore, the authors categorize the DACC and find that the firm has higher income-increasing DACC in the presence of higher advisory directors. The findings are robust concerning endogeneity issues.

The research contributes valuable insights for regulators and policymakers seeking to comprehend the implications of firms using more advisory directors. Additionally, the authors recognize the potential significance of the findings for the institution of directors, as they can provide a nuanced understanding of the specific roles played by advisory directors in organizational dynamics.

While the extensive body of literature on corporate governance and financial reporting quality has been well-established, a noticeable void exists in academic research delving into the relationship between advisory directors and DACC management. This study seeks to fill this gap, making a distinctive and original contribution to the existing literature on corporate governance.

The new audit regulation for disclosure of key audit matters (KAMs) in financial reporting has been introduced in both developed and developing countries. This study investigates the influence of three distinctive sets of variables, namely industry features, firm characteristics and auditor attributes, on the extent, pattern and level of disclosure of KAMs by companies listed in Bangladesh, an emerging economy.

The study uses qualitative and quantitative research approaches to investigate the pattern of disclosure of KAMs and their determinants. With a sample of 447 firm-year observations from companies listed on the Dhaka Stock Exchange over 2018–2020, the study reveals industry-level, firm-level and auditor-specific characteristics that affect KAMs' communication in the new audit reporting model.

The findings suggest that significant differences exist between firms in the number and types of KAMs reported and the extent of their disclosure. The study findings also observed variations both within and across different industry sectors. Highly regulated firms disclose a greater number of KAMs, while environmentally sensitive firms are found to provide a greater detail of the issues presented as KAMs. Further, both firm size and age positively impact the number of KAMs disclosed and the extent of the disclosure provided. Big-4-affiliated auditors do not issue a significantly higher number of KAMs but deliver extensive details to their KAMs description, compared to non-Big-4 auditors. In addition, while auditors, in general, tend to issue boilerplate KAMs, Big-4 associates are found to disclose more new KAMs. However, audit fees and auditor rotation do not influence KAMs disclosure.

This study is based on two years of publicly available data. However, future studies could consider in-depth interviews to explore the motivation behind KAMs' disclosure in Bangladesh and other developing countries with similar cultural and contextual values.

These findings have substantial policy considerations for improving firms' audit quality and, thus, their financial reporting quality, with implications for national and international standard-setters, regulators and other stakeholders.

This study is one of the earliest endeavours to investigate KAMs in a context of an emerging country, such as Bangladesh, which adopted KAMs' disclosure in 2018.

This research examines the influence of financial secrecy culture on audit fees. Additionally, we investigate the potential moderating effect of adopting International Financial Reporting Standards (IFRS) on the relationship between financial secrecy culture and audit fees.

We use an international dataset comprising 249,217 firm-year observations from 30 countries/regions listed between 1996 and 2022. Our analysis includes regression analysis, the Heckman self-selection bias test, change analysis and various robustness tests.

Our results reveal a significant positive association between audit fees and firms listed in secretive jurisdictions, suggesting that auditors charge higher fees to accommodate additional audit effort or risk premiums. Furthermore, our empirical findings indicate that implementing IFRS in countries/regions with higher levels of secrecy introduces complexities or ambiguities in audit procedures, leading to increased audit fees. These results hold up under rigorous endogeneity tests and remain consistent across alternative measures and tests.

Our findings establish a direct link between financial secrecy and audit fees, demonstrating higher costs for firms with greater secrecy. Additionally, they show that implementing IFRS in secretive jurisdictions intensifies audit complexities, resulting in higher fees. These findings emphasize the critical importance of transparency, regulatory compliance and risk management in financial reporting, with implications for investor confidence and regulatory strategies.

This study contributes to the literature by exploring the previously unexamined relationship between financial secrecy culture and audit fees while also assessing the moderating effect of IFRS adoption. By utilizing a comprehensive international dataset spanning multiple jurisdictions and years, our research provides valuable insights into cross-border variations in audit practices and their broader implications.

This research investigates the effect of audit report lag on the cost of equity capital. We argue that an extended audit report lag reduces the value of information and raises concerns for investors, resulting in an increased cost of equity capital.

We hypothesize that audit report lag increases the firm cost of equity capital. We conduct ordinary least squares (OLS) regression analyses to examine our hypothesis. Finally, we also perform a range of sensitivity tests to examine the hypothesis and robustness of findings.

Using a sample of the listed US firms from 2003 to 2018, we find that firms with higher audit report lag have a higher cost of equity capital. Our findings are economically significant as one standard deviation increase in audit report lag raises 3.82 basis points of cost of equity capital. Furthermore, our results remain robust to endogeneity concerns and alternative proxies for the cost of equity capital measures. Finally, we confirm that audit report lag increases the firm cost of equity capital through increasing information asymmetry and future financial restatement as a mediating channel.

We contribute to the theoretical discussion about the role of audit report lag and investors' perceptions. Overall, our results suggest that audit report lag affects a firm cost of equity capital.

This paper aims to examine whether audit committee ownership affects audit report lag. Independent audit committees are responsible for overseeing the financial reporting process, to ensure that financial statements are both credible and released to external stakeholders in a timely manner. To date, however, the extent to which audit committee ownership strengthens or compromises member independence, and hence, influences audit report lag, has remained unexplored.

This paper hypothesizes that audit committee ownership is associated with audit report lag. Further, the author hypothesize that both the financial reporting quality and the going concern opinions of a firm mediate the effect of audit committee ownership on audit report lag.

Using data from Australian listed companies, the author find that audit committee ownership increases audit report lag. The author further document that financial reporting quality and modified audit opinions rendered by external auditors mediate this positive relationship. The results are robust to endogeneity concerns emanating from firms’ deliberate decisions to grant shares to the audit committee members.

The study contributes to both the audit report timeliness and the corporate governance literatures, by documenting an adverse effect of audit committee ownership.

The way in which a firm’s actions are perceived by others is driven by the individual values and ethics of directors (Ntim and Soobaroyen, 2013). The purpose of this paper is to examine the effects of “problem” directors on the environmental performance of firms. The authors argue that if a board member has a tainted reputation, then environmental performance will be higher as the problem director seeks to rebuild his/her reputation.

The authors use a sample of the top 500 US companies for 2010 and 2011 and an ordinary least square (OLS) model to capture the impact of “problem” directors on environmental performance. The authors use an independent measure of environmental performance which includes three categories: environmental impact, environmental management (green policies) and environmental reputation (which is affected by disclosure).

The findings of this paper show that the average environmental impact score is 53.32 per cent, the environmental management green policy score is 35.39 per cent and environmental reputation is 49.86 per cent. A firm which is operated by a problem director has a higher score for environmental management and environmental reputation than non-problem director-affiliated firms. Firms which are managed by a problem director(s) have lower scores for environmental impact than non-problem director-affiliated firms in the USA, indicating a higher level of emissions, water use, waste disposal, etc.

The authors posit that problem directors promote environmental performance as a means to enhance their reputation and divert attention from allegations of previous poor professional behaviour. Regulators and investors should interpret the environmental performance of a firm with caution when a problem director is on the board.

Prior research on the relationship between environmental performance and corporate governance has been based on board composition and characteristics. However, board decision-making reflects the professional experience and personal values of the directors. These factors have not been addressed in the literature to-date and, hence, form this paper’s contribution.

This paper aims to examine the question of whether external auditors incorporate equity holdings by overlapping audit committee members as a priced governance factor and tests whether this attribute, as a mechanism for ensuring good governance, affects the propensity for external auditors to issue modified audit opinions.

Overlapping membership in this context refers to the arrangement where at least one audit committee member also sits on the compensation committee. Both ordinarily least square and logistic regression are used to capture the impact of overlapping committee members and equity holding of those overlapping committee members.

Using archival data from Australian Stock Exchange listed companies, the authors find support for the beneficial effect of having overlapping audit committee members with equity holdings. The authors also find that auditor propensity to issue modified audit opinions is lower for firms with equity holdings by overlapping audit committee members.

The finding has practical implication to the investors and regulators as overlapping audit committee members with equity holdings may provide especially effective oversight by monitoring opportunistic accounting policy choices for maximizing compensation pay. To the extent that this occurs, audit risk will decrease, requiring less audit effort and lower audit fees than would otherwise be necessary. Similarly, such oversight is likely to make financial reporting more credible and will reduce the possibility of receiving modified audit opinions by reporting organizations.

Both audit and compensation committees are equally important in modern organizations. While both of the committee have distinctive responsibilities, questions remain on the desirability of overlapping audit committee. Also, this is the first study to the authors’ knowledge that incorporates overlapping membership on audit and compensation committee as an important component of auditor risk perception which regards in pricing the audit fees.