Regulatory changes and audit fees: the moderating effect of overlapping directorship and financial reporting quality

2020 ◽  
Author(s):  
Salau Olarinoye Abdulmalik ◽  
Ayoib Che-Ahmad
Keyword(s):  
Financial Reporting ◽  
Perceived Risk ◽  
Reporting Quality ◽  
Regulatory Reform ◽  
Audit Fees ◽  
Moderating Effect ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Regulatory Changes ◽  
The Relationship

PurposeThis study examines the contemporaneous changes in the reporting regime in Nigeria by investigating the effect of regulatory changes on audit fees as well as the moderating effect of overlapping directorship and financial reporting quality.Design/methodology/approachThis study utilises a longitudinal sample of 409 firm-year observations, from 2008 to 2013, of nonfinancial companies listed on the Nigerian stock exchange. The study uses the general method of moments (GMM) to control for endogeneity concerns.FindingsThe results reveal that, without the moderating effect of overlapping directorship and financial reporting quality, the relationship between regulatory changes and audit fees is positive but weak, which suggests that regulatory changes drive cost. Similarly, the interaction of overlapping directorship did not reverse the positive relationship, which suggests the perceived risk associated with overlapping directorship. However, the improvement in financial reporting quality reverses the relationship, as evidenced by the negative and significant coefficient on the interacted terms.Practical implicationsThis study provides useful insights about committee membership overlap to regulatory authorities concerning the weakness of the monitoring ability of such committees.Originality/valueThe results of this study contribute to the growing literature on regulatory reform, audit fees and corporate governance. Specifically, the study provides empirical evidence on the effect of committee overlap on audit fees, which, to the best of the researchers' knowledge, has received no empirical attention in the Nigerian context.

Audit committee and financial reporting quality: the moderating effect of audit quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sana Mardessi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Moderating Effect ◽  
Real Earnings Management ◽  
Financial Reporting Quality ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this study is to address the impact of audit quality on financial reporting quality proxied by real earnings management. To further clarify the mentioned links, this study empirically assesses the moderating effect of audit quality. Design/methodology/approach The study is based on a sample consisting of 90 non-financial companies that are listed in the Amsterdam stock exchange in AEX all share index over the 2010–2017 period. This study applies a quantitative approach and secondary data as the main source of information for analysis. This paper performs an ordinary least squares regression to examine the moderating effect of audit quality on the relationship between financial reporting quality. Findings Empirical findings demonstrate that corporate governance mechanism, mainly independence members, financial expert and audit committee size has a statistically significant relationship with real earnings management. However, the effect of audit committee meetings on real earnings management is not significant. There is also evidence that audit quality moderates the audit committee – real earnings management links. Originality/value This study extends the existing literature by examining the moderating effect of audit quality on the relationship between financial reporting quality proxied by real earnings management in the Dutch context.

The relationship between cost stickiness and financial reporting quality in Tehran Stock Exchange

2018 ◽  
Vol 67 (9) ◽  
pp. 1550-1565 ◽  
Author(s):  
Mahdi Salehi ◽  
Nasrin Ziba ◽  
Ali Daemi Gah
Keyword(s):  
Financial Reporting ◽  
Design Methodology ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Statistical Software ◽  
Testing Hypotheses ◽  
Content Type ◽  
The Relationship ◽  
Cost Stickiness

Purpose The purpose of this paper is to investigate the relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange. Design/methodology/approach Data of all Iranian manufacturing listed companies gathered for testing hypotheses during 2010–2016 and R statistical software are employed in order to analyzing data. Findings The results of this study indicate that there is a significant relationship between administrative, sale, material, labor and overhead costs and the financial reporting qualities of the companies under study. Originality/value The study focuses on relationship between financial reporting and cost stickiness in companies listed on the Tehran Stock Exchange, which is the first study of its type in Iran.

Family ownership and financial reporting quality: Iranian evidence

2018 ◽  
Vol 8 (3) ◽  
pp. 339-356 ◽  
Author(s):  
Mahmoud Mousavi Shiri ◽  
Mahdi Salehi ◽  
Fatemeh Abbasi ◽  
Shayan Farhangdoust
Keyword(s):  
Financial Reporting ◽  
Family Firms ◽  
Stock Exchange ◽  
Accounting Information ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Reporting Quality ◽  
Family Ownership ◽  
Content Type

PurposeIn the process of reporting accounting information, the auditor’s objective is to detect possible misstatements and errors in accounting information. Audit evidence aids auditors in providing reasonable assurance about the quality of financial reporting. Studying the quality of family firms’ financial reporting is of higher importance relative to non-family firms due to lower risk of accounting manipulation. Therefore, the purpose of this paper is to examine the relationship between family ownership structure and financial reporting quality from an auditing perspective.Design/methodology/approachTo analyze the research hypotheses, the authors use a sample data consisted of 221 companies listed on the Tehran Stock Exchange (including 52 family and 169 non-family firms) over a five-year span from 2011 to 2015.FindingsUsing multivariate regression analysis of panel data, our results indicate that audit risk in family firms is lower than their counterparts. Likewise, the findings are indicative of lower audit fees paid by family firms as compared to non-family ones. The authors also find that auditors put more effort in family firms and thus audit effort is more significant for these kinds of firms.Originality/valueThe study focuses on family ownership and financial reporting quality in a developing country like Iran and the results of the study may be beneficial to other developing nations, as Iran stock market possesses some unique features which are not normally prevailing in other equity markets, even in the Middle East.

Financial reporting quality and firms’ information environment: a case of Iranian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yasser Rezaei Pitenoei ◽  
Mehdi Safari Gerayli ◽  
Ahmad Abdollahi
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Information Environment ◽  
Financial Reporting Quality ◽  
Multivariate Regression Model ◽  
Content Type ◽  
Composite Measures ◽  
The Relationship

Purpose The purpose of this study is to investigate the relationship between financial reporting quality and information environment (IE) in firms listed on the Tehran Stock Exchange (TSE). Design/methodology/approach In this study, composite measures were used as the proxy to measure financial reporting quality and IE. In this regard, a sample of 1,490 firm-year observations of the firms listed on the TSE during the years 2008 to 2017 and a multivariate regression model was used to examine the research hypothesis. Findings Findings indicate that financial reporting quality has a positive relationship with firms’ IE. This result is robust to the alternate measure of financial reporting quality and endogeneity problem. Originality/value The present study is the first study to develop a composite measure for the firms’ IE in the Iranian capital market. As a result, it not only expands the theoretical literature on the firms’ IE but also helps policymakers, regulators, investors and financial reporting users make informed decisions.

The relationship between board leadership structure and earnings management in Asia-Pacific

2016 ◽  
Vol 29 (4) ◽  
pp. 413-428 ◽  
Author(s):  
Qaiser Rafique Yasser ◽  
Abdullah Al Mamun
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Reporting Quality ◽  
The Philippines ◽  
Asia Pacific ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Leadership Structure ◽  
Board Leadership Structure ◽  
The Relationship

Purpose This study aims to review the growing research area of behavioral corporate governance; it explores the relationship between CEO duality attributes and earning management in the context of Asia-Pacific countries. Over time, the use by boards of chief executive officer (CEO) duality has fluctuated, and the scholarly conceptualizations of the phenomenon have become more complex. Design/methodology/approach This paper uses panel data from 330 firm years from Australia, Malaysia, The Philippines and Pakistan by taking a sample of three years from 2011 to 2013. Findings The results of the analysis reveal that the board leadership structure was not associated with firm performance and financial reporting quality. However, female CEOs impacted negatively on firm performance in Malaysia, The Philippines and Pakistan. Further analyses expose that the firm size was negatively related with performance, whereas established firms in Australia had strong reporting quality. However, large boards assured healthier reporting quality in Australia and Malaysia. Practical implications This paper provides empirical evidence that a unitary leadership pattern has no significant impact on companies in the Asia-Pacific, and it would be of interest to regulatory bodies, business practitioners and academic researchers. Originality/value This paper contributes to the literature on corporate governance and earnings management by introducing a framework for identifying and analyzing moderating variables that affect the relationship between the leadership structure and a firm’s financial reporting quality.

Financial reporting quality, audit fees and risk committees

2020 ◽  
Vol 28 (3) ◽  
pp. 423-444 ◽  
Author(s):  
Md. Borhan Uddin Bhuiyan ◽  
Ummya Salma ◽  
Jamal Roudaki ◽  
Siata Tavite
Keyword(s):  
Financial Reporting ◽  
Financial Risk ◽  
Investment Decision ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Reporting Quality ◽  
Audit Pricing ◽  
Content Type ◽  
The Impact ◽  
Matching Techniques

PurposeThe purpose of this paper is to examine the association between the existence of a risk committee (RC) in a firm and financial reporting quality. We also investigate whether having an RC has an effect on audit pricing. We argue that the existence of an RC in a firm contributes to higher financial reporting quality and this, eventually, affects audit pricing.Design/methodology/approachThis study uses two different proxies for RC measures and investigates the impact on financial reporting quality and audit pricing. Multivariate regression analysis and propensity score matching techniques are both applied to data from the Australian Stock Exchange's listed companies for the years 2001–2013.FindingsThe results indicate that the existence of an RC reduces the discretionary accruals; this means the financial reporting quality improves when RCs are in operation. Our findings also indicate that the existence of an RC increases audit fees.Practical implicationsThe findings from this study will be beneficial to the regulatory authorities responsible for improving the compliance of corporate governance (CG). An RC can serve as a risk-mitigating tool in the investment decision-making process. Finally, the results are beneficial for the development of best practices in CG by promoting the existence of an RC.Originality/valueThis study goes beyond the traditional focus on CG as we use the existence of an RC as an indicator of better governance practices to mitigate financial and non-financial risk factors. To the best of our knowledge, this paper is among the first to investigate the consequences for firms operating with RCs. This issue has implications for investors, auditors, directors and regulators.

scholarly journals Regulatory changes and reporting quality: the moderating role of firm characteristics

2019 ◽  
Vol 17 (2) ◽  
pp. 32-50 ◽  
Author(s):  
Salau Abdulmalik ◽  
Ayoib Che-Ahmad
Keyword(s):  
Financial Reporting ◽  
Unobserved Heterogeneity ◽  
Generalized Method Of Moments ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Reporting Quality ◽  
Regulatory Change ◽  
Political Connection ◽  
Firm Characteristics ◽  
Regulatory Changes

The objective of this study is to investigate the effect of regulatory changes on financial reporting quality and audit fees and to further test whether this effect was moderated by firm characteristics (i.e. abnormal audit fees, political connections and overlapping directorship) in Nigeria. This study utilized the data of 90 companies listed on the Nigerian stock exchange over the period 2008–2013. Using Generalized Method of Moments (GMM) technique that takes into account the endogeneity nature of financial reporting quality and audit fees model, the results indicated that financial reporting quality improved in the regulatory changes period. However, abnormal audit fees, political connection and overlapping directorship deteriorated the effect. Accordingly, future regulatory reforms must be cognizant of these factors. Even though there are abundant empirical studies on financial regulatory changes and their effects on financial reporting quality, this study provides additional insights into the regulatory change literature by investigating how firm characteristics (abnormal audit fees, political connection and overlapping directorship) moderate the effect of regulatory changes particularly in Nigeria, one of the less developed and underresearched capital markets in the world. Further, the findings of this study are robust with respect to the issues of unobserved heterogeneity and endogeneity, which previous studies had failed to consider.

The impact of corporate governance and IFRS on the relationship between financial reporting quality and investment efficiency in a continental accounting system

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Asma Houcine ◽  
Mouna Zitouni ◽  
Samir Srairi
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Investment Efficiency ◽  
Accounting System ◽  
Governance Mechanism ◽  
Content Type ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this paper is to investigate whether Financial Reporting Quality (FRQ), Corporate Governance and IFRS affect investment efficiency of French listed companies.Design/methodology/approachBased on a sample of 125 French firms listed on the CAC All Tradable index between 2008 and 2017, the study uses Feasible Generalized Least Squares (FGLS) regressions to examine the relationship between FRQ and firms' investment efficiency.FindingsThe findings show that FRQ plays a role in reducing overinvestment and does not affect underinvestment, suggesting that in a code-law country, informal and personal relationships tend to replace the role of financial reports in mitigating information asymmetry. The results also reveal that the relationship between FRQ and investment efficiency increases with better corporate governance and with the implementation of IFRS. However, the results provide no evidence between incentives to minimize profits for tax purposes and firms' underinvestment and continues to be negative for overinvesting companies that have more incentives to manage their earnings for tax purposes.Research limitations/implicationsOur study has some limitations. First, we only examine listed firms, so the results cannot be generalized to unlisted companies that represent the vast majority of French economic activity. Second, this research does not distinguish between government companies and private companies. The two types of companies have different governance mechanisms, financial reporting, disclosure environment and concentration of ownership.Practical implicationsThis study suggests that in a code-law country with weak investor protection, FRQ acts as a governance mechanism by mitigating asymmetric information and improving firms' investment decisions.Originality/valueThe relationship between FRQ and investment efficiency has been widely examined for companies in “common law” countries. This study extends the scarce evidence of this relation to companies in a code-law country. It also builds on previous research by introducing new factors never discussed before that could change this relationship, namely corporate governance, IFRS implementation and tax purposes.

Audit committee attributes and cosmetic accounting in Nigeria

2019 ◽  
Vol 35 (2) ◽  
pp. 177-206
Author(s):  
Hussaini Bala ◽  
Noor Afza Amran ◽  
Hasnah Shaari
Keyword(s):  
Financial Reporting ◽  
Audit Committee ◽  
Negative Relationship ◽  
Reporting Quality ◽  
Audit Fees ◽  
Financial Accounting ◽  
Audit Committees ◽  
Financial Reporting Quality ◽  
Content Type ◽  
Accounting Expertise

Purpose The literature on the influence of audit committees (ACs) and cosmetic accounting (CSA) is scarce. This paper aims to examine the influence of AC attributes on CSA and how this relationship is moderated by the audit price (AUPR). Design/methodology/approach The study used pooled logistic regressions to analyse 624 firm-year observations of listed companies in Nigeria from 2008 to 2016. Findings The results show that AC financial accounting expertise, AC legal expertise and female AC membership were negatively related to CSA. The negative relationship is highly pronounced when a firm incurs higher audit fees. Results for the robustness checks were similar, even with changes to the measurements of dependent and independent variables and alternative estimation. Practical implications This study can benefit policymakers and regulators, enabling them to better appreciate the importance of AC attributes and AUPR in curtailing artificial manipulation and enhancing financial reporting quality. Social implications This study can benefit policymakers and regulators, enabling them to better appreciate the importance of AC attributes and AUPR in curtailing artificial manipulation and enhancing financial reporting quality. Originality/value The findings provide an initial insight into the moderating effect of AUPR on the relationship between AC attributes and CSA.

Is integrated reporting associated with corporate financing decisions? Some empirical evidence

2019 ◽  
Vol 27 (3) ◽  
pp. 425-443 ◽  
Author(s):  
Tesfaye T. Lemma ◽  
Arifur Khan ◽  
Mohammad Badrul Muttakin ◽  
Dessalegn Getie Mihret
Keyword(s):  
Financial Reporting ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Integrated Reporting ◽  
Equity Financing ◽  
Corporate Financing ◽  
Content Type ◽  
Financing Decisions ◽  
Financing Strategy ◽  
The Relationship

Purpose The emerging practice of integrated reporting (IR) has raised curiosity regarding how it impacts on firms and their stakeholders. The purpose of this paper is to examine whether a firm’s decision to provide integrated reports is associated with its financing decisions and whether financial reporting quality mediates the relationship. Design/methodology/approach A usable sample of 832 firm-year observations was employed based on a dataset drawn from companies listed on the Johannesburg Securities Exchange (JSE) for the period between 2009 and 2015. Findings The findings show that firms that provide integrated reports tend to have lower levels of leverage, and this effect is partially mediated through financial reporting quality. We further document that the partial effect of financial reporting quality on leverage is stronger for firms that provide integrated reports than is the case for other firms. The findings suggest that IR enables firms to employ equity financing, which is a more informationally-sensitive source of capital than debt financing. Originality/value This study is the first to document evidence suggesting that management can draw on IR in devising optimal financing strategy.

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