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Although the previous literature considers independent directors as an internal mechanism for good corporate governance and higher financial disclosure quality, in contexts characterized by high ownership concentration, they may lack the mandate, the incentives and the ability to be an effective monitoring mechanism. Therefore, this study aims to focus on minority directors and investigate their impact on the earnings management activities for firms with concentrated ownership structures.

As the slate voting system is a peculiar feature of Italian corporate governance regulations, which gives minority shareholders the right to appoint at least one member of the board of directors (minority directors), this paper carries out a quantitative empirical analysis based on a sample of non-financial companies listed on the Italian Stock Exchange to test the role played by minority directors in increasing incentives towards higher financial reporting quality.

Robust to different model specifications, including the endogeneity test, empirical findings show a negative relationship between minority directors and earnings management, while no relationship holds between the latter and independent directors, suggesting that minority directors might promote greater directors’ accountability than independent directors in highly concentrated ownership structures.

Relying on the empirical findings, this paper offers new insights on a peculiar internal corporate governance mechanism related to one of the most debated issues among financial market practitioners and regulators, namely, the protection of minority shareholders. Moreover, this paper offers new insights for academics and practitioners on a peculiar governance mechanism that could soon be widely adopted.

Grounded in the legitimacy theory and framed within the context of European Union’s (EU's) endorsement process, this paper analyses the International Accounting Standards Board’s (IASB's) response to the COVID-19 crisis and the impact of its practical expedient COVID-19-Related Rent Concession on the IASB's output legitimacy.

This study uses a qualitative process-tracing approach and combines inductive historical narratives and deductive reasoning to draw theoretical implications concerning the COVID-19 crisis' impact on the standard-setting process.

The paper shows a growing reliance on practical expedients in International Financial Reporting Standards (IFRS) to maintain the IASB's output legitimacy. While introducing some theoretical flaws, practical expedients increase the standards' flexibility and strengthen the IASB's ability to respond to the European political bodies' concerns. Indeed, an analysis of the IASB's response to the COVID-19 outbreak reveals the role practical expedients might play not only in reducing (ex ante) new IFRS transition costs but also in dealing (ex-post) with the broader economic impact of unexpected systemic crises to limit criticisms and controversies surrounding IFRS.

This study reveals a causal relationship between the rise of the European public good criterion in the EU endorsement process and the wider use of practical expedients in IFRS. An analysis of the latest amendment to IFRS 16 in response to the COVID-19 crisis also confirms the role of practical expedients in strengthening the acceptance of IFRS in an increasingly complex economic reality and sheds some light on the new strategies adopted by the IASB to preserve its legitimacy in the EU.

Recent accounting literature claims that private firms’ heterogeneity influences the quality of earnings. Along with certain drivers of heterogeneity, private firms get involved in specific programs aimed at fostering their access to capital, competencies and networks (CCN programs). Such programs can enhance private firms’ exposure to stakeholders that demand higher reporting quality, affecting their financial reporting choices. Therefore, this study investigated whether membership in CCN programs affects private firms’ earnings quality.

Focusing on the ELITE program, an international platform that since 2012 aims to support the growth of the most promising SMEs, and employing different econometric specifications facing endogeneity concerns, this paper carries out a quantitative empirical analysis to test the effect of CCN programs on private firms’ earnings quality.

Employing different earnings quality measures, empirical evidence reveals that firms belonging to CCN programs experienced an improvement in their earnings quality.

Even though endogeneity concerns have been addressed, we are nevertheless aware that they might, at least partially, have affected our results.

Although the contributions of the study are mostly academic, the empirical evidence obtained also carries practical implications. CCN programs not only act, as one might assume, as catalysts for economic and dimensional growth but also contribute to better earnings quality, mitigating the information asymmetries between firms and their stakeholders.

By adding new evidence to the literature concerning the impact of private firms’ heterogeneity on earnings quality, this is the first study to analyze the impact of specific programs aimed at supporting the affiliated SMEs to foster their access to capital, competencies and networks.

By analyzing the relationship between discretionary accruals and information asymmetry throughout the latest global financial crisis, this paper deepens our understanding of the effect of managerial discretion on the informativeness of earnings in the case of a negative exogenous shock in business fundamentals.

This paper examines the relationship between discretionary accruals and the bid–ask spread within the Italian Stock Exchange over the period of 2007–2012. The authors focus on one country in order to avoid systematic cross-country performance variation in discretionary accruals models, and they use the bid–ask spread as a proxy for information asymmetry.

This paper shows the role played by discretionary accruals in unblocking private information in the case of a negative exogenous shock in business fundamentals and finds a significant negative relationship between discretionary accruals and the bid–ask spread during the global financial crisis, although only limited to firms with strong corporate governance.

Since the paper focuses on one country, the findings might not be necessarily generalizable. Moreover, the relatively small sample size could be another limitation.

This paper offers useful evidence to identify settings in which discretionary accruals increase the informativeness of earnings. Further, it suggests controlling for macroeconomic variables to mitigate the risk of an erroneous interpretation of discretionary accruals models.

This paper extends knowledge and collects new evidence on the information content of discretionary accruals by investigating the relationship between discretionary accruals and information asymmetry during a systemic crisis.

This paper presents a systematic literature review, including content and bibliometric analyses, of the impact of blockchain technology (BT) in auditing, to identify trends, research areas and construct an agenda for future research.

The authors include studies from 2010 to 2020 in their structured literature review (SLR), using accounting journals on the Scopus database, which yielded 40 articles with blockchain and auditing at its core.

One of the contributions of the authors’ analyses is to group the prior research, and therefore also the agenda for future research, into three main research areas: (1) Blockchain as a tool for auditing professionals to improve business information systems to save time and prevent fraud; (2) Smart contracts enabling Audit 4.0 efficiency, reporting, disclosure and transparency; (3) Cryptocurrency and initial coin offerings (ICOs) as a springboard for corporate governance and new venture financing. The authors’ findings have several important implications for practice and theory.

The results of this study emphasise that (1) the disruption of blockchain in auditing is in a nascent phase and there is a need for compelling empirical studies and potential for the involvement of practitioners; (2) there may be a need to reconsider audit procedures especially suited for digitalisation and BT adoption; (3) standards, guidelines and training are required to pivot towards and confront the challenge BT will represent for auditing; and (4) there are two sides to the BT coin for auditing, enthusiasm about the potential and risk upon implementation. These practical implications can also be seen as a template for future research in a quest to align theory and practice.

The authors’ SLR facilitates the identification of research areas and implications, forming a useful baseline for practitioners, professionals and academics, as they draft the state of the art on the disruption of blockchain in auditing, highlighting how BT is changing auditing activities and traditions.

The purpose of this study is to analyse the impact of two different financial reporting models (revenue-expense vs asset-liability) on several earnings attributes.

The analysis compares the earnings attributes of non-financial private firms using the Italian generally accepted accounting principles (Italian GAAP, based on a revenue-expense model) with those of the Italian non-financial private firms voluntarily adopting the international financial reporting standards (IFRS, based on the asset-liability model). To address major methodological concerns, the research design is based on a single-country analysis and on three different samples as follows: firms voluntarily adopting IFRS; a matched sample of Italian GAAP firms; Italian GAAP firms belonging to the Elite programme, and therefore, comparable to the IFRS adopters in terms of incentives towards financial reporting transparency.

The results show that firms reporting under a revenue-expense model are characterized by a stronger revenue-expense matching degree, along with higher earnings’ persistence, earnings’ predictability and conditional conservatism than firms adopting an asset-liability model. In addition, contrary to the expectations, Italian GAAP firms do not present smoother earnings and do not report greater abnormal accruals than IFRS adopters do. Overall, the findings suggest that the switch from a revenue-expense model to an asset-liability model negatively affects several earnings attributes of non-financial private companies, shedding new light on the drawbacks associated with the adoption of the IFRS accounting model.

This study addresses a theme characterized by sparse research efforts, adding new insights to the debate on the decline in the quality of earnings and on the drawbacks associated with the adoption of the IFRS accounting model.

Purpose – This study investigates the relationship between the ownership structure and the corporate social responsibility (CSR) policies of the Italian listed banks. In particular, it focuses on the impact that institutional investors characterized by a philanthropic orientation (banking foundations) exert on the socially oriented management of the Italian financial institutions.

Methodology – This chapter adopts a case study approach. It examines the CSR of the bank Monte dei Paschi di Siena and the role that its controlling shareholder (Fondazione MPS) plays in promoting the social strategy implemented by the Italian bank.

Findings – The Monte dei Paschi di Siena CSR strategy appears to be strongly influenced by the activity of its institutional investor. The skills, knowledge, and the cultural proneness toward social issues of the Fondazione MPS are successfully transferred to the bank and shape its social strategy.

Research limitations – This chapter suffers of the limitations generally associated to the case study research methodology. In particular, the findings of this study can be extended to other cases only after a detailed examination of market wide, institutional and corporate governance differences.

Social implications – The positive relationship between nonprofit institutional investors and the CSR strategy effectiveness unveils corporate governance mechanisms useful to increase the overall value creation process of the organizations.

Originality/value of the chapter – This study contributes to the CSR literature by analyzing if and how the philanthropic nature of the blockholders affect the CSR policies carried out by the entities they control.

Purpose – This chapter introduces this book’s topics, purpose, and key themes. It summarizes the purpose of the book which is to explore through both descriptive and conceptual means the use of power by institutional investors in bringing about changes to corporate behavior, so that corporations engage in improved environmental, social, and governance actions.

Methodology/approach – This chapter reviews literature and chapters and offers conceptual development.

Findings – The forces driving the actions of institutional investors are different from many other shareholders being determined by a unique set of costs, benefits, and objectives. As such three general categories of institutional elements constrain and guide this behavior: regulative elements which include constitutions, laws, and property rights; normative elements which include informal norms, values, and codes of conduct; and cultural-cognitive elements which include shared beliefs, identities, and mental models. It highlights the role of regulation and “soft” law, the impact of values and customs, and the way sense-making and cognition impacts on decisions and actions.

Practical/social implications – The chapter highlights the interplay between hard and soft law in progressing the agenda. It seems that hard law is a hygiene factor forming the base on which initial gains can be made in the application of institutional shareholder power. Moreover, the use of soft law such as the Global Reporting Initiative and the newly founded Sustainability Accounting Standards Board, institutional investors can gain improved disclosure of sustainability performance to incorporate into their investment decisions. Moreover, it highlights the gaps in the use of the power that exists. The movement is still emerging with the focus on corporate governance and environmental considerations primarily. There are still improvements to be made for institutional investors in the social aspects of the responsibility agenda as well in pushing companies to be more transparent, improve reporting, and engage in more long-term decision-making.

Originality/value – The chapter contributes to the debate on governance convergence between liberal market economies (LMEs) and coordinated market economies (CMEs). It is important to look beyond national characteristics alone and demonstrate that organizations, even though they are impacted by institutions, are not necessarily passive acceptors of their fate. Hence this chapter highlights that in expanding from a dyadic approach comparing LMEs and CMEs, the strategic choice of decision-makers, the power of the actors, and the processes used by institutional investors in changing corporate behavior are important considerations.