CEO age and analysts forecast properties

2019 ◽  
Vol 28 (1) ◽  
pp. 1-23
Author(s):  
Imran Haider ◽  
Nigar Sultana ◽  
Harjinder Singh ◽  
Yeut Hong Tham
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Empirical Studies ◽  
Forecast Accuracy ◽  
Information Environment ◽  
Analyst Forecast ◽  
Content Type ◽  
Negative Effect ◽  
Ceo Age ◽  
The Relationship

Purpose The purpose of this paper is to assess whether there is an association between CEO age and analysts forecast properties (particularly forecast accuracy and bias/optimism). CEOs, having the central role in managing firms, can significantly influence the financial and non-financial decisions in an organisation. Furthermore, having been identified as key culprits in past major accounting scandals, it is also important to identify the CEO characteristics that affect financial reporting decisions. Design/methodology/approach This study adopts the upper echelon theory on the relationship between CEO age and analysts forecast properties. The authors use a sample of 2,730 Australian firm-year observations for the period 2004–2013 drawn from IBES, Connect 4 and SIRCA databases. Findings The authors find that analyst forecast accuracy increases and bias (optimism) reduces with the CEO age. The authors conclude that earnings and related information provided to analysts improves with the CEO age, which increases the forecast accuracy and reduces bias (optimism). Additional results suggest that the positive (negative) effect of CEO age on forecast accuracy (bias) remains until the CEOs reach the age of their retirement age (65 years). The results remain consistent with a number of sensitivity tests and provide implication for stakeholders such as firms, analysts, auditors, financial statements users and regulators. Practical implications The authors demonstrate that the relationship between CEO age and analyst forecast properties is not linear but is, in fact, curvilinear substantiating concerns that CEOs that are much younger or much older do not help increase the quality of the information environment. Consequently, firms hiring CEOs in the right age bracket also benefit by having higher-quality information environment leading possibly to reduce costs such as those relating to debt and/or equity ultimately increasing firm value. Originality/value Empirical studies on the association between CEO age and analysts earnings properties in Australia are scarce and this paper contributes to the determinants of the analysts forecast accuracy and bias (optimism) and the CEO age literature.

Are earnings strings restrained after SOX?

2018 ◽  
Vol 17 (1) ◽  
pp. 18-40 ◽  
Author(s):  
Mark Kohlbeck ◽  
Jomo Sankara ◽  
Errol G. Stewart
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Firm Value ◽  
Information Environment ◽  
Content Type ◽  
External Monitoring ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Reporting Environment ◽  
The Impact

Purpose This paper aims to examine whether external monitors (auditors and analysts) constrain earnings strings, an indicator of earnings management, and whether this monitoring is more effective after the implementation of the Sarbanes-Oxley Act of 2002 (SOX), given the emphasis of SOX on improving auditing, financial reporting and the information environment. Design/methodology/approach Agency theory establishes the premise between external monitoring and earnings strings. Auditor tenure and number of analysts following provide measures for external monitoring quality. Using prior research, empirical models explaining the presence of an earnings strings and earnings strings trend are developed to test the hypotheses. Findings Pre-SOX, extreme auditor tenure, indicating lower quality external monitoring, is associated with greater earnings strings trend, and analyst coverage is associated with increased likelihood of earnings strings and greater earnings strings trend consistent with analyst pressure on management. More effective auditor and analyst monitoring occurs post-SOX in terms of reduced likelihood of earnings strings and earnings strings trend. Originality/value The authors provide evidence on how elements of external monitoring are associated with increased earnings strings pre-SOX. Further, they contribute to the debate on the impact of SOX on external firm monitoring and the overall financial information environment. By focusing on earnings strings, the outcome of earnings management, the authors provide a unique understanding of external monitoring that also provides insight on the overvaluation of equity and ultimate destruction of firm value. The evidence demonstrates how regulation has contributed to an improved financial reporting environment and external monitoring.

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 influence of CEOs’ equity-based compensation on restaurant firms’ CSR initiatives

2019 ◽  
Vol 31 (9) ◽  
pp. 3664-3682
Author(s):  
Sungbeen Park ◽  
Sujin Song ◽  
Seoki Lee
Keyword(s):  
Risk Management ◽  
Agency Theory ◽  
Fixed Effects ◽  
Empirical Studies ◽  
Institutional Ownership ◽  
Content Type ◽  
Management Perspective ◽  
Negative Effect ◽  
Restaurant Firms ◽  
The Relationship

Purpose Based on the agency theory and risk management perspective, this study aims to examine the relationship between CEOs’ pay schemes and corporate social responsibility (CSR) activities in the restaurant industry. Specifically, the authors propose that CEOs with a higher proportion of equity-based compensation (EBC), which induces a greater propensity for risk-taking, are prone to indulge less in CSR. In addition, the authors investigate how institutional ownership moderates the proposed main relationship. Design/methodology/approach This study performs two-way fixed-effects models and clustered standard errors to test the proposed hypotheses. Findings The results of the panel analysis show a significant negative effect of CEOs’ EBC on CSR. Also, the authors found a significant positive moderating effect of institutional ownership between CEOs’ EBC and CSR. Originality/value Given the lack of empirical studies that incorporate both agency theory and the risk management perspective, and given the importance of understanding the determinants of restaurant firms’ CSR activities, this study expands upon the existing literature by showing the relationship between CEOs’ compensation schemes and restaurant firms’ CSR activities.

scholarly journals The effect of the CEO’s characteristics on EM: evidence from Jordan

2017 ◽  
Vol 25 (3) ◽  
pp. 356-375 ◽  
Author(s):  
Rateb Mohammmad Alqatamin ◽  
Zakaria Ali Aribi ◽  
Thankom Arun
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Random Effect ◽  
Personal Characteristics ◽  
Content Type ◽  
Amman Stock Exchange ◽  
Ceo Age ◽  
The Relationship ◽  
Random Effect Models ◽  
Ceo Characteristics

Purpose This study aims to examine the effect of CEO’s personal characteristics on earnings management (EM) practices. Design/methodology/approach The authors use panel data for 201 non-financial companies listed on the Amman Stock Exchange (ASE) for the period 2008-2013. The authors use random effect models to test the hypothesis of this study and extent the analysis to family versus non-family. Findings The study finds a positive relation between CEO’s overconfidence and EM practices in Jordan. Moreover, the findings reveal that managers in family companies are more likely to engage in EM practices than non-family companies. The findings shed more light on the intricate relationship between CEO’s characteristics, the decision-making process and financial reporting. Practical implications Results of this study could be beneficial for a number of users of financial information such as investors, auditors, regulators, lenders, as well other players in the capital market to make right decisions. Originality/value A literature review finds that much less studies have investigated the relationship between EM practices and personal CEO characteristics (gender and overconfidence) in developing countries such as Jordan. Furthermore, no study yet has examined the influence of CEO age on EM practices. The authors extend previous literature by providing empirical evidence about effect of some personal CEO’s characteristics on EM practices.

On the impact of outside blockholders’ voting power

2016 ◽  
Vol 16 (2) ◽  
pp. 330-346
Author(s):  
Zhonghui Hugo Wang
Keyword(s):  
Firm Value ◽  
Empirical Studies ◽  
Necessary Condition ◽  
Theoretical Argument ◽  
Private Benefits ◽  
Voting Power ◽  
Content Type ◽  
Private Benefits Of Control ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to complement existing research of the relationship between concentrated ownership and firm performance by theoretically exploring the impact of outside blockholders on the firm, primarily from the perspective of voting power. Design/methodology/approach This paper proposes theoretical propositions based on analyses and logical extension of results of the existing theoretical and empirical studies. Findings This paper proposes three theoretical predictions: First, voting power provides outside blockholders a necessary condition to pursue shared and private benefits of control, and it is positively correlated with blockholders’ capability of influencing firm value. Second, everything else being equal, an outside blockholder is more (less) likely to pursue private benefits than shared benefits when the equity market is efficient and when the blockholder’s voting power is less (more) than 50 per cent. Third, controlling outside blockholders can capitalize on their voting power to appoint managerial delegates and board representatives to the invested firms for the purpose of pursuing private benefits of control. Originality/value This paper tries to make two contributions to the corporate governance literature. First, this research relies on a new perspective to explore the relationship between ownership structure and firm value. Second, this paper presents the first theoretical argument which states that controlling outside blockholders rely on their managerial delegates and board representatives to pursue their private benefits of control.

Re-examination of the internet financial reporting determinants

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Foued Khlifi
Keyword(s):  
Financial Reporting ◽  
Research Methodology ◽  
Fuzzy System ◽  
Empirical Studies ◽  
The Internet ◽  
Corporate Disclosure ◽  
Content Type ◽  
Genetic Fuzzy System ◽  
Starting Point ◽  
The Relationship

PurposeThe purpose of this paper is to shed light on the relationship between the Internet Financial Reporting (IFR) levels and corporate characteristics. It is assumed that the relationship between the disclosure level and its determinants is known. Nevertheless, the results of the empirical studies confirm that it is a naive assumption. As a result, the author suggests refusing the conventional methods of econometric analysis.Design/methodology/approachThe research methodology consisted of four stages: First, the author tried to select the “best” model using the Akaike Information Criterion (AIC). Second, the author checked out the stability of the relationship between corporate disclosure level and its determinants. Third, the regression analysis was used. Finally, the author proposed a “genetic-fuzzy system” for studying the determinants of corporate disclosure. The firms' yearly data collected consisted of a random sample of 152 Tunisian companies' websites.FindingsThe results show that the variables that should be used to explain the level of IFR are firm size, ownership concentration, firm performance and liquidity. The Chow forecast test shows that there is a significant and large difference between the actual and the predicted values. Consequently, the author suggests using non-parametric methods, particularly a methodology based on fuzzy logic concepts and genetic algorithms. This technique would allow the author to discover the true form of the relationship between the disclosure level and its determinants. Regarding the hypotheses of this study, the findings of the “genetic-fuzzy system” validate all the hypotheses. Indeed, the arguments of the agency theory, the signaling theory, and the political cost hypothesis were supported using the “genetic-fuzzy system.”Originality/valueThe originality of the paper lies in providing a new research methodology based on several statistical tools for dealing with an important research topic in accounting and finance, i.e. the determinants of IFR. The results of this study can be considered as a starting point to develop a unified methodology.

Analysts issuing forecasts on weekends

2017 ◽  
Vol 25 (2) ◽  
pp. 201-216 ◽  
Author(s):  
Ling Liu
Keyword(s):  
Capital Market ◽  
Forecast Accuracy ◽  
Ordinary Least Squares ◽  
Analyst Forecast ◽  
Content Type ◽  
Information Release ◽  
Emerging Trends ◽  
Negative Effect ◽  
The Right ◽  
The Impact

Purpose This study aims to investigate the motivation of financial analysts issuing forecasts on weekends and the impact of such behavior on forecast accuracy and analysts’ careers. Design/methodology/approach Logistic regression and ordinary least squares models with Huber–White standard errors were used in this study. Findings This paper first documented the emerging trends of the weekend forecasts after 2000. Longitudinal data from 2002 to 2011 validated that analysts’ conscientious timing of information release in line with their workload and confidence level gives more accurate forecasts. Further, given the same accuracy, analysts exhibiting diffident behaviors (analysts who are predicted to work on weekdays but in fact work on weekends) are not fired or demoted by brokerage houses, but those exhibiting inactive behaviors (analysts who are predicted to work on weekends but did not do so) are more likely to be dismissed or demoted by brokerage houses, indicating that brokerage houses are aware of the negative effect of both behaviors, but treat them differently. Research limitations/implications Weekend versus weekday proxies for an analyst’s timing of information release consider only one of many timing options. Other timing proxies, the nature and the composition of the information release of analysts are not examined in this study. Practical implications For practitioners, the results indicate that depending on the alignment, capital market can predict analysts’ future forecast accuracy, and hence, respond accordingly. For example, in addition to analyst forecast level or change, investors could pay attention to when the information is released to the market and possible reasons behind the choice of timing. Investors can thus better assess the forecast accuracy of one specific forecast and respond with the right action. Furthermore, analysts can better project their own forecast accuracy and career potential by assessing to what extent their forecasts are released conscientiously. Social implications This study examines analysts’ forecast behavior, but generate some insights on linking the analysts and investors in the capital market. Originality/value This study is the author’s original work.

scholarly journals EARNINGS AND FIRM VALUE: THE MODERATING IMPACT OF LARGE DEFERRED TAXES AND LARGE ACCRUALS IN INDONESIA

2021 ◽  
Vol 22 (2) ◽  
pp. 241-248
Author(s):  
Bambang Sutopo ◽  
Arum Kusumaningdyah Adiati ◽  
Purnama Siddi
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Stock Exchange ◽  
Financial Information ◽  
Deferred Taxes ◽  
Conservative Accounting ◽  
Negative Effect ◽  
Deferred Tax ◽  
Reported Earnings ◽  
The Relationship

Deferred tax and accruals have the characteristic of causing reported earnings to be above or below normal. Both are permitted to be used by companies in financial reporting. This study examines whether large deferred taxes and large accruals have an impact on the relationship between earnings and firm value. Using a sample that includes 1938 company-year observations for the 2007−2017 periods listed on the Indonesia Stock Exchange (IDX), this study found that large positive deferred taxes with large positive accruals had weakened the relationship between earnings and firm value. In contrast to these results, a large negative deferred tax with a large negative accrual does not have an impact on the relationship between earnings and the firm value. This finding suggests that “liberal” accounting policies that cause reported “above normal” earnings have a negative effect on the association between earnings and firm value. However, “below normal” earnings resulting from “conservative” accounting policies do not affect the association between earnings and firm value. The uniqueness of this study is the incorporation of deferred taxes with accruals with variations in the form of positive versus negative and large versus small. The findings imply that the presentation of financial information with small deferred taxes and small accruals is more beneficial for investors compared to financial information with large positive deferred taxes and large positive accruals. However, results of this study indicate that large negative deferred taxes and large negative accruals, indicating conservative accounting, are not responded differently by investors.

Climate change, responsible leadership and organizational commitment

2019 ◽  
Vol 30 (5) ◽  
pp. 945-962 ◽  
Author(s):  
Mohamed Mousa ◽  
Vesa Puhakka ◽  
Hala A. Abdelgaffar
Keyword(s):  
Climate Change ◽  
Organizational Commitment ◽  
Empirical Studies ◽  
Public Hospitals ◽  
Responsible Leadership ◽  
Normative Commitment ◽  
Content Type ◽  
Negative Effect ◽  
The Relationship

Purpose The purpose of this paper is to focus on physicians in the four public hospitals located in the October province of Egypt in an attempt to explore the effect of climate change on physicians’ affective, continuance and normative commitment with and without mediating the role of responsible leadership. Design/methodology/approach A total of 360 physicians were contacted and all of them received a set of questionnaires. After two follow-ups, a total of 240 responses were collected with a response rate of 66.67 percent. Multiple regressions were employed to show how much variation in affective, continuance and normative commitment can be explained by climate change with and without the mediation of responsible leadership. Findings The findings show a statistically negative effect for climate change on physicians’ three approaches of organizational commitment (affective, continuance and normative). Furthermore, the statistical analysis proved that having responsible leaders in hospitals has a negligible effect on the relationship between climate change and the affective, continuance and normative commitment. Originality/value This paper contributes by filling a gap in environment and organization literature, in which empirical studies on the relationship between climate change and organizational commitment have been limited until now.

Information Technology Capability, Management Forecast Accuracy, and Analyst Forecast Revisions

2018 ◽  
Vol 32 (3) ◽  
pp. 49-70 ◽  
Author(s):  
Feiqi Huang ◽  
He Li ◽  
Tawei Wang
Keyword(s):  
Forecast Accuracy ◽  
Analyst Forecast ◽  
Management Forecasts ◽  
Forecast Revisions ◽  
It Capability ◽  
Management Forecast ◽  
Prior Literature ◽  
Technology Capability ◽  
Information Technology Capability ◽  
The Relationship

SYNOPSISPrior literature has firmly established the relationship between IT capability and firm performance. In this paper, we extend the research in this field and investigate (1) whether IT capability contributes to management forecast accuracy, and (2) whether IT capability improves the informativeness of management forecasts and enhances the extent to which analysts incorporate management forecasts in their revisions. Using firms listed on InformationWeek 500 as our high IT capability group, we empirically demonstrate that firms with high IT capability are able to increase management forecast accuracy, and that analysts incorporate more information from management forecasts in their revisions if the firm has high IT capability.

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