Mohammad S. Bazaz and David L. Senteney
This study uses an equity valuation model to investigate the extent to which SFAS No. 52 unrealized foreign currency translation gains and losses are reflected in levels of equity…
Abstract
This study uses an equity valuation model to investigate the extent to which SFAS No. 52 unrealized foreign currency translation gains and losses are reflected in levels of equity security prices. Equity security price is used as the dependent variable in our selected model. Book value of equity (adjusted for the cumulative translation gain or loss), earnings, and cumulative translation gains and losses are used as independent variables. Our results indicate that, generally, translation gains and losses are valued, but losses have a greater impact than gains and the value seems to change over time in setting the levels of equity share prices of USbased MNCs. On a pooled basis, the results are clearly statistically significant, although the statistical significance of the results appears to vary with the annual time period examined. Our results are consistent with the SFAS No. 52 intention that these gains and losses be treated as unrealized as the net exposure is considered long‐term in nature for foreign currency functional currency subsidiaries. Our results appear consistent with extant literature suggesting that unrealized foreign currency translation gains and losses are directly valued ‐ although not dollar for dollar ‐ in a manner similar to earnings (i.e., unrealized gains are associated with positive equity returns and unrealized losses are associated with negative equity returns).
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This study investigates how investors perceive the impact of U.S.‐based MNCs geographic and business segment diversification upon their earnings performance. Pooled…
Abstract
This study investigates how investors perceive the impact of U.S.‐based MNCs geographic and business segment diversification upon their earnings performance. Pooled cross‐sectional annual earnings response regressions for the years 1993 through 1997 are used for this investigation. Our results show that geographic segment diversification is valued by investors more than the business segment diversification especially in two cases: 1) when the business segmentation is low; and 2) when geographic segmentation is high. These results imply that business segment diversification is only valued when it takes place in international markets where it is relatively more difficult for individual investors to replicate industry diversified portfolio for themselves. Our research illuminates the contextual aspects of investors' perceptions of geographic and business segment diversification for multinational corporations by explicitly controlling for one dimension of corporate diversification while examining the earning‐returns impact of the other type of corporate diversification.
Iraj Noravesh, Zahra Dianati Dilami and Mohammad S. Bazaz
The purpose of this paper is to examine the relationships between cultural values (as defined by Hofstede) and accounting values (as described by Gray) in Iran.
Abstract
Purpose
The purpose of this paper is to examine the relationships between cultural values (as defined by Hofstede) and accounting values (as described by Gray) in Iran.
Design/methodology/approach
The appropriate data for a period of ten years (1993‐2002) were compiled from economical magazines, the Iran Statistical Yearbook, financial statements, and auditors’ reports of the firms listed in Tehran Stock Exchange. LISREL was used to analyze the data.
Findings
The results of this research show the relationships among cultural and accounting values in Iran and found support for more than one‐half of Gray's hypotheses. Numerous issues, such as the abnormal evolution of accounting in Iran, the impact of unstable economics, inappropriate use of accounting methods and procedures which are common among developing countries, the impact of governmental ownership, and the lack of well developed capital market tradition may be some determining factors as to why several of Gray's hypotheses were not supported through this research.
Originality/value
This paper analyzes the effect of Iran's cultural changes on accounting practice and encourages research that examines all dimensions of accounting in Iran and other developing countries.
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David L. Senteney, Grace H. Gao and Mohammad S. Bazaz
This paper aims to investigate the impact of the filing of Form 20-F to the Securities and Exchange Commission (SEC) on short-term trading volume and return by those foreign firms…
Abstract
Purpose
This paper aims to investigate the impact of the filing of Form 20-F to the Securities and Exchange Commission (SEC) on short-term trading volume and return by those foreign firms which list their securities in the US Stock Exchanges.
Design/methodology/approach
The authors collected 402 American depository receipt (ADR) firms from 38 different countries that listed their securities in the US Stock Exchanges over a 10-year period of 2000-2009. A regression model was used to examine such impact, including the post year 2007 SEC elimination of reconciliation.
Findings
This paper found significant abnormal trading volumes and abnormal returns one day, two days and three days following the 20-F report for the sample firms whose financial statements were prepared under both home-country accounting principles and US generally accepted accounting principles (GAAP). Firms originally using international financial reporting standards (IFRS) do not present abnormal return and abnormal trading volume. This indicates that US investors view IFRS to be as high-quality as US GAAP.
Research limitations/implications
The findings might be limited to this period and might not draw statistical inference for the future period. This evidence offers support for the SEC’s elimination of the reconciliation requirement to US GAAP.
Practical implications
This study was carried out with the aim to investigate whether the release of Form 20-F by ADR firms offers any additional information useful to investors incorporating both abnormal return and trading volume, which is thought to be more sensitive.
Originality/value
This paper investigates the short-term return and volume reactions caused by the earnings and equity reconciliation from home-country accounting standards or IFRS to US GAAP for foreign cross-listed firms in the USA.
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Satyavir Singh, Mohammad Abid Bazaz and Shahkar Ahmad Nahvi
The purpose of this paper is to demonstrate the applicability of the Discrete Empirical Interpolation method (DEIM) for simulating the swing dynamics of benchmark power system…
Abstract
Purpose
The purpose of this paper is to demonstrate the applicability of the Discrete Empirical Interpolation method (DEIM) for simulating the swing dynamics of benchmark power system problems. The authors demonstrate that considerable savings in computational time and resources are obtained using this methodology. Another purpose is to apply a recently developed modified DEIM strategy with a reduced on-line computational burden on this problem.
Design/methodology/approach
On-line computational cost of the power system dynamics problem is reduced by using DEIM, which reduces the complexity of the evaluation of the nonlinear function in the reduced model to a cost proportional to the number of reduced modes. The on-line computational cost is reduced by using an approximate snap-shot ensemble to construct the reduced basis.
Findings
Considerable savings in computational resources and time are obtained when DEIM is used for simulating swing dynamics. The on-line cost implications of DEIM are also reduced considerably by using approximate snapshots to construct the reduced basis.
Originality/value
Applicability of DEIM (with and without approximate ensemble) to a large-scale power system dynamics problem is demonstrated for the first time.
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Zabihollah Rezaee and Mohammad Hossein Safarzadeh
This study aims to examine the relationship between corporate governance (CG) and various measures of earnings quality in listed companies on Tehran Stock Exchange (TSE). The…
Abstract
Purpose
This study aims to examine the relationship between corporate governance (CG) and various measures of earnings quality in listed companies on Tehran Stock Exchange (TSE). The theoretical intuition for prediction of any relationship between earnings quality and CG is based on the behavioral theory and the institutional settings in Iran.
Design/methodology/approach
This study used the data of 117 listed companies on the TSE for the period from 2005 to 2019. The authors use panel data regression as the main methodology, along with principal component analysis, t-test and rank-sum test.
Findings
This study finds that the CG has a positive association with earnings quality. More precisely, better CG mechanisms cause lower earnings smoothness, more predictable and persistent earnings, and higher levels of timeliness, conservatism and value relevance. The relationship between CG and earnings quality is statistically and economically significant for all models.
Originality/value
The findings further the understanding of the role of CG in improving earnings quality in an Islamic and emerging country. First, this study provides evidence on the relation between CG and earnings quality by focusing on the behavioral theory, which suggests that corporate decision-making is not only influenced by formal CG mechanisms, but also by informal CG arrangements. In this case, this study departs from the restrictive theories (specifically, agency theory) that are widely used in past literature. Second, this study constructs an index that fits to corporate context of Iran rather than applying indexes introduced in Anglo-American environments.
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Mohammad Alipour, Mehrdad Ghanbari, Babak Jamshidinavid and Aliasghar Taherabadi
This study aims to link environmental disclosure quality (EDQ) to firm performance and examine the moderating role of board independence in this relationship.
Abstract
Purpose
This study aims to link environmental disclosure quality (EDQ) to firm performance and examine the moderating role of board independence in this relationship.
Design/methodology/approach
Drawing on agency theory and stakeholder theory, the authors developed and tested hypotheses using original survey data from 720 firm-year observations collected from 120 Iranian companies over six years between 2011 and 2016. In this paper, they conducted static and dynamic panel data analysis.
Findings
After correcting for endogeneity bias, the results showed that there is a significant positive relationship between EDQ and firm performance. The results also showed that board independence significantly reinforces the positive effect of EDQ on performance, and firms with more independent board members are involved environmental disclosure for improved performance. This is consistent with agency theory, which posits that a more independent board of directors can better monitor the CEO and reduce incentives for pursuing personal interests, which in turn improves performance. The results are robust after performing sensitivity tests.
Research limitations/implications
This paper takes the perspective of corporate governance to empirically examine the effect of EDQ on firm performance. This study makes a contribution to the literature by showing that board independence moderates the effects of EDQ on firm performance.
Practical implications
The evidence supports the emphasis that recent policy statements have put on increasing the number of independent directors on corporate boards. This study offers insights to policymakers interested in enhancing the monitoring role of corporate boards.
Originality/value
The study adds value to the understanding of the effect of the EDQ on performance and how board independence influences this relationship, particularly in an emerging economy like Iran.
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Zabihollah Rezaee, Mohammad Alipour, Omid Faraji, Mehrdad Ghanbari and Babak Jamshidinavid
The purpose of this article is to investigate the relationship between environmental disclosure quality (EDQ) and risk and to further examine whether corporate governance (CG…
Abstract
Purpose
The purpose of this article is to investigate the relationship between environmental disclosure quality (EDQ) and risk and to further examine whether corporate governance (CG) practices moderate this relationship.
Design/methodology/approach
This study uses a set of unique, hand collected data (from 2011 to 2016) to measure EDQ for a sample of 762 firm-years Iranian listed companies. Ordinary least squares regression analysis is performed in testing hypotheses after controlling for a variety of firm, industry and year effects. Moreover, several analyses are performed to establish the robustness of the findings.
Findings
The results indicate a negative association between EDQ and firm risk. While board independence moderates this relationship, other CG practices such as CEO duality and board size do not show any effects on the relationship between EDQ and risk. The results remain robust after performing sensitivity tests and under various specifications, including the fixed-effects panel data and Heckman two-stage regressions.
Research limitations/implications
Results are from a sample of firms from one country.
Practical implications
The results have implications for policymakers, legislators and corporate executives, as environmental initiatives are gaining more attention worldwide.
Social implications
Sustainability initiatives in the areas of environmental and social performance and disclosure are gaining global attention. This study addresses the link between firm risk and EDQ.
Originality/value
This study contributes to the literature by shedding light on the relationship between corporate risk-taking and EDQ in the context of a developing economy.
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The objective of this study aims at reviewing a synthesis of the economic impact of the implementation of International Financial Reporting Standards (IFRS) in an attempt to…
Abstract
The objective of this study aims at reviewing a synthesis of the economic impact of the implementation of International Financial Reporting Standards (IFRS) in an attempt to provide directions for future research. There are significant evidences of adopting a high-quality set of harmonised accounting standards (i.e. IFRS) fosters trade and foreign direct investment (FDI), financial transparency, and comparability and reduces information asymmetries. From the extensive structured review of literature using the Scopus database tool, the study reviewed 108 articles, and in particular, the topic-related 41 articles were analysed. Seven journals contribute to 39% of the articles (The Accounting Review; European Accounting Review; International Journal of Accounting; Journal of Accounting Research; Revista Espanola de Financiacion y Contabilidad; Asian Review of Accounting; and International Journal of Economics and Management). However, most of the cited journals were Journal of Accounting Research, The Accounting Review, European Accounting Review, and International Journal of Accounting (Armstrong, Barth, Jagolinzer, & Riedl, 2010; Brüggemann, Hitz, & Sellhorn, 2013; Christensen, Lee, & Walker, 2007; Daske, Hail, Leuz, & Verdi, 2008, 2013). Most of the studies did not use any theory, and most of the articles utilised quantitative approach. The study calls for future research on the theoretical impactions on the economic impact of IFRS implementation in a country-specific study, cross-country study, and global study. Future studies should also focus on the policymaking agenda for the local and international standard setters.
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The purpose of this study is to review a synthesis of International Financial Reporting Standards (IFRS) implementation in developing countries in an attempt to provide directions…
Abstract
The purpose of this study is to review a synthesis of International Financial Reporting Standards (IFRS) implementation in developing countries in an attempt to provide directions for future research. The in-depth analysis was performed with the use of the data analysis tool available in the Scopus databases. The study initially reviewed 145 papers and in particular 35 papers were analysed. Fifteen articles (43%) were published in seven journals including International Journal of Accounting, Critical Perspectives on Accounting, Advances in Accounting, International Journal of Accounting and Information Management, Asian Review of Accounting, Journal of Applied Accounting Research, and Asian Journal of Business and Accounting. Specifically, 89% citations were from 14 articles, but 9 (25%) articles were without any citations. Most of the studies focus on qualitative followed by quantitative, and very few studies were based on mixed methods. Researchers should focus on few areas for future research on IFRS implementation in developing countries including theory implications, policy prescriptions, and case of particular standard.