Environmental, social and governance and creditworthiness: Two contrary evidence from major Asian markets

Assets managed under sustainable investment criteria have been massively growing during the recent years. Among the criteria, environmental, social and governance (ESG) score leads the group as an important indicator of non-financial quality of a firm, which may reflect value to investors either through higher expected profit or lower risk. In this paper, we focus on the latter by exploring whether ESG score has linkage to the credit rating of firms due to the risk mitigation effect. Ordered logistic regressions are applied on a panel dataset of listed companies in Shanghai Stock Exchange and Tokyo Stock Exchange from 2009 to 2018. The results suggest that only in Japan, having ESG coverage is greatly associated with being awarded higher credit rating. However, only the environmental and governance pillars positively link to the Japanese firms’ credit ratings, while the social pillar shows negative correlation. The finding of heterogeneous effects translates to an important implication that investment in ESG should be taken with care as the impact of ESG may depend on different nature or culture of markets.

AN ALTERNATIVE FRAMEWORK FOR SOCIALLY RESPONSIBLE PORTFOLIOS OPTIMIZATION APPLIED TO THE MOROCCAN STOCK EXCHANGE

The purpose of this article is to propose an alternative approach for portfolio optimization combining financial and ethical constraints in one hand, and objective and subjective investor’s preferences in the other hand. This approach intends to support investors in selecting and optimizing financial and social portfolio’s performances. More precisely, we introduce analytic hierarchy process (AHP) to measure the ethical performance (EP) score of each asset considering ethical criteria. For its part, fuzzy multiple criteria decision making (FMCDM) is used to determine the overall financial quality score of assets with respect to key financial criteria i.e., short term return, long term return, and risk. Besides, interactive fuzzy programming approach is applied to support the investor’s decision, considering its subjective preferences. The robustness of our approach is tested through an empirical study involving the case of the Casablanca Stock Exchange (CSE). The results give evidence that the Socially Responsible (SR) Portfolio have performed similar to the conventional one, as no significant differences were found in term of return. However, the SR portfolio allows the investor to achieve his ethical goal, against a slight financial sacrifice.

Pengaruh Kualitas Komite Audit, Workload Dan Rotasi Auditor Terhadap Kualitas Audit

This study aims to determine the effect of audit committee quality, workload, audit rotation on audit quality in financial companies listed on the Indonesia Stock Exchange (idx) for the period 2016-2018. This research is a causative research. The population in this study are financial companies listed on the Indonesia Stock Exchange (BEI) for the period 2016-2018. By using purposive sampling method, obtained 107 companies as research samples. The type of data used is secondary data and multiple regression analysis is used. The results of this study indicate that the quality of the audit committee and audit rotation do not have a significant effect on financial quality, only workload has a significant effect on the financial statements

Do credit ratings influence the demand/supply of audit effort?

PurposeFirm management has an incentive to improve credit ratings to enjoy the reputational and financial benefits associated with higher credit ratings. In this study, the authors question whether audit effort in hours can be considered incrementally increasing with credit ratings. Based on legitimacy theory, the authors conjecture that firms with higher credit ratings will demand higher levels of audit effort to signal audit and financial quality compared to firms with higher levels of credit risk.Design/methodology/approachThe authors conduct empirical tests using a sample of Korean-listed firms using a sample period covering 2001–2015.FindingsThe results show that firms with higher credit ratings demand higher audit effort in hours compared to client firms with lower credit ratings. The authors interpret that firms with higher ratings (lower risk) demand higher levels of audit effort in hours to reduce information asymmetry and to demonstrate that financial reporting systems are robust based on audit effort signaling audit quality. The authors also interpret that firms with lower credit ratings do not have incentives to signal similar audit quality. The authors also capture the “Big4 auditor expertise” effect by demonstrating that client firms audited by nonBig4 auditors demand additional audit effort with increasing credit rating compared to Big4 clients.Research limitations/implicationsAudit effort is considered a signal of firm risk in the literature. This study’s results show evidence that audit effort is inversely related to firm risk.Practical implicationsThe results show that audit hour information is informative and likely managed by firm stakeholders. Internationally, it is not possible to capture the audit demand of clients because listing audit hours on financial statements is not a rule. Given that audit hours can be considered informative, the authors believe that legislators could consider implementing a policy to mandate that audit hours be recorded on international annual reports to enhance transparency.Originality/valueSouth Korea is one of few countries to list audit effort on annual reports. Therefore, the link between audit effort and credit ratings is unique in South Korea because it is one of few countries in which market participants likely monitor audit effort.

Development directions of the audit of organization’s human capital

The article substantiates the relevance of developing a methodology and techniques for auditing the human capital (HC) of an organization, due to the fact that users of company reporting have new needs for nonfinancial data, along with financial reports. This dictated the development of an integrated reporting system (IIRC) and sustainable development reporting (GRI). The author identifies problems and systematizes the main directions of development of the audit of the organization’s HC as an element of integrated reporting. The article proposes the author’s approach to the audit of corporate human capital, which includes such stages as: the formation of a group of specialists in preparing a non-financial report on corporate human capital and approval of the coordination of work of all members of the group; collection and consolidation of the necessary information about the HC, verification of the correctness of the source data, determination of significant indicators; auditor verification of non-financial, quality indicators; publication of an integrated report, preparation of a conclusion on the reliability of the information presented therein.

Low-Fee Private Schools: Case Studies from Ghana

Low-Fee Private Schools (LFPSs) have been controversial globally. This paper examines Christian Low-Fee Private Schools in the Greater Accra region of Ghana. This qualitative study uses four schools as cases. Specifically, the researchers examine how these schools come into existence, who they serve and why parents choose to send their children to these schools. Findings reveal that the school proprietors do not operate schools to make profits and that parents choose Christian LFPSs for spiritual, financial, quality, and proximity reasons. The study demonstrates that these Christian LFPSs provide families with an alternative choice that fits their beliefs, values and perceptions.

The Evaluation of Financial Ecological Environment and Optimization Research in Liaoning Province

This chapter constructs a system of financial ecological environment that is based on the multiple indicators: economic foundation, financial development, and institutional environment of 14 cities in Liaoning Province from 2008 to 2014. In addition, it supplements a measurement of influence of financial quality and uses the factor analysis method and panel threshold model to explore the dynamic evolution characteristics and optimization route of financial ecological environment. The empirical study shows that (1) the whole trend performs as an inversed U shape with the characteristics of rising at first and then declining and its influential mechanisms are disparate in different periods; (2) the financial ecological environment qualities of coastal cities rank in the upper and middle reaches of the overall rankings, while the qualities of inland cities comparatively fall behind; (3) the impact of urban financial ecological environment on economic growth in Liaoning Province presents as a non-linear single threshold, and the threshold values are 0.48, 0.52, 0.46, and 0.41, respectively.

The Contribution of Islamic Banks towards the Achievement of Sustainable Development Goals: The Case of Indonesia

This study aims to strengthen the opinion that the main goal of Islamic banks is not to obtain profit, but rather to improve the standards of living. In this study, the evidence is obtained by processing secondary data on Islamic banks in Indonesia during the period of 2011 to 2017 by using panel data regression model. The results of the data analysis support the hypothesis that banks whose goals are aimed at falah will demand lower payment obligations from customers, allowing the customers to manage funds in the real sector. The implication is also strengthened by good financial quality control, namely low non-performing financing value. Another form of support provided by Islamic banks, namely a more equitable cooperation contract, can also reflect Falah in every policy of Islamic banks.