Proximity to broad bond rating change and annual report readability

2021 ◽  
Vol 29 (2) ◽  
pp. 227-250
Author(s):  
Wray Bradley ◽  
Li Sun
Keyword(s):  
Annual Report ◽  
Economic Consequences ◽  
Reading Difficulty ◽  
Annual Reports ◽  
Disclosure Quality ◽  
Bond Rating ◽  
Content Type ◽  
Large Panel ◽  
The Impact ◽  
Rating Change

PurposeThe purpose of this study is to examine the impact of proximity to broad bond rating change on annual report reading difficulty.Design/methodology/approachWe use regression analysis to examine the association between proximity to broad bond rating change and reading difficulty of annual report.FindingsUsing a large panel sample with 11,767 firm-year observations representing 1,474 unique US companies from 1994 to 2016, we find a significant positive relation between proximity to broad bond rating change and annual report reading difficulty, which suggests that the annual reports of borderline firms are difficult for stakeholders to read and understand.Originality/valueBy investigating whether and how borderline firms manipulate readability of annual reports, our study contributes to bond rating research in finance literature and disclosure quality research in accounting literature. To the best of our knowledge, this study is perhaps the first empirical study that directly tests the link between proximity to broad bond rating change and annual report readability. In particular, the majority of prior studies concentrate on the economic consequences of annual report readability, but few studies investigate the determinants of readability. Therefore, examining the impact of proximity to broad bond rating change on readability contributes to a more comprehensive understanding of annual report readability.

Human resources disclosure: an exploratory study of the quality in Qatar

2019 ◽  
Vol 15 (1) ◽  
pp. 84-95
Author(s):  
Nahg Abdulmajid Alawi ◽  
Husam Mohammed Belfaqih
Keyword(s):  
Real Estate ◽  
Stock Exchange ◽  
Ordinary Least Squares ◽  
Annual Reports ◽  
Narrative Form ◽  
Quality Level ◽  
Exchange Market ◽  
Disclosure Quality ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to determine the quality of HR disclosure of companies listed in Qatari Exchange Market and identify factors that influence the level of this HR disclosure quality. Design/methodology/approach Content analysis of annual reports and sustainability reports of 12 companies from industrial and real estate sectors over the period 2013–2015 had been analyzed using the three-point scale (0–2, numerical disclosure 2, 1 for narrative form and 0 for not disclosed). This research employed also multiple regressions, in order to examine the impact of profitability and employee expenses on HR disclosure quality. Findings The results point out that HR disclosure quality level is very low among the sample companies. The ordinary least squares (OLS) regression analysis results indicate that the level of HR disclosure quality is associated with company’s employees expenses as a proportion of its total operating expenses, whereas profitability does not have a significant influence on its level of HR disclosure quality. Research limitations/implications The current study has two important limitations. First, the sample of the study consists of only 12 leading Qatari industrial and real estate sectors firms listed on the Qatar Stock Exchange Market. Second, the study used an unweighted index which implies equal importance of the selected information items. Originality/value The study has bridged the literature gaps by offering empirical evidence and new insights on the HR disclosure quality in Qatar and the factors that affect, which have not been examined before.

Female board participation and annual report readability in firms with boardroom connections

2018 ◽  
Vol 33 (4) ◽  
pp. 296-314 ◽  
Author(s):  
Gianluca Ginesti ◽  
Carlo Drago ◽  
Riccardo Macchioni ◽  
Giuseppe Sannino
Keyword(s):  
Opposite Effect ◽  
Annual Report ◽  
Positive Impact ◽  
Policy Implications ◽  
Annual Reports ◽  
Disclosure Quality ◽  
Content Type ◽  
The Relationship ◽  
Practical Implications ◽  
Different Levels

Purpose This paper aims to investigate the relationship between the female board participation and the readability of annual report. Design/methodology/approach Using hand-collected data from a “network-oriented market”, as exists in Italy, which includes 435 annual reports, this study uses a regression analysis to test whether female board participation affects the annual report readability. Findings Female board participation is found to have a positive impact on disclosure readability in firms with small boardroom connections but the opposite effect in firms with large boardroom connections. Research limitations/implications This paper responds to recent calls in the corporate governance literature by investigating whether the female board participation affects the transparency of the disclosure practices. Practical implications This study has policy implications, as it helps to improve evaluations of how, and under which circumstances, female board participation may lead to higher disclosure quality and thus benefit investors. Originality/value This paper shows that female board participation has different effects on the disclosure readability at different levels of board positions in inter-firm networks.

scholarly journals Corporate governance and risk disclosure quality: Tunisian evidence

2019 ◽  
Vol 9 (4) ◽  
pp. 567-602 ◽  
Author(s):  
Issal Haj Salem ◽  
Salma Damak Ayadi ◽  
Khaled Hussainey
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Annual Reports ◽  
Risk Disclosure ◽  
Disclosure Quality ◽  
Governance Mechanisms ◽  
Content Type ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to investigate the potential influence of corporate governance mechanisms on risk disclosure quality in Tunisia. Design/methodology/approach The authors examine 152 annual reports of Tunisian non-financial-listed firms during 2008–2013, and use the manual content analysis method to measure the risk disclosure quality. Findings The authors find that the quality of risk disclosure in Tunisian companies is relatively low, and also find that the quality of risk disclosure is positively associated with institutional ownership, board independence, the presence of women on the board, the presence of family members on the board and the independence of audit committee. Managerial ownership has a negative effect on risk disclosure quality. Finally, the authors find that the revolution decreases the influence of concentration ownership, government ownership, family ownership and audit committee size on risk disclosure quality. Originality/value Using a comprehensive set of corporate governance mechanisms and a new measure for risk disclosure quality in Tunisia, the authors provide the first empirical evidence on the impact of corporate governance mechanisms on risk disclosure quality in a developing country. The study has theoretical and practical implications for both developed and developing countries.

Responding to “Discrediting” Events: Annual Report Disclosure Responses to Environmental Fines

2002 ◽  
Vol 2 (1) ◽  
pp. 22-40 ◽  
Author(s):  
Hussein Warsame ◽  
Cynthia V. Simmons ◽  
Dean Neu
Keyword(s):  
Impression Management ◽  
Annual Report ◽  
Annual Reports ◽  
Matched Pair ◽  
Disclosure Quality ◽  
Publicly Traded ◽  
Environmental Disclosure ◽  
Environmental Disclosures ◽  
Disclosure Responses

In this study we consider how a discrediting event such as an environmental fine influences the quality of environmental disclosures in subsequent annual reports. Starting from prior work in the areas of impression management along with environmental and social responsibility disclosures, we propose that environmental disclosures provide organizations with a method of “managing” such discrediting events. Using a matched-pair sample of publicly traded Canadian companies that have been subject to environmental fines and those that have not; we analyze changes in pre-fine and post-fine environmental disclosure quality. After controlling for firm-specific characteristics, the provided results are consistent with this explanation.

Influence of human resource capital information disclosure on investors’ share investment intentions

2017 ◽  
Vol 46 (3) ◽  
pp. 551-571 ◽  
Author(s):  
Sugumar Mariappanadar ◽  
Alma Kairouz
Keyword(s):  
Performance Management ◽  
Human Resource ◽  
Information Disclosure ◽  
Banking Sector ◽  
Strategic Human Resource Management ◽  
Annual Reports ◽  
Individual Investors ◽  
Content Type ◽  
Investment Intentions ◽  
The Impact

Purpose The purpose of this paper is to apply the strategic human resource management (HRM) perspective to investigate the schematic relationship between the dimensions of human resource (HR) capital information and intentions to use such information in individual investors’ decisions relating to investing equities in the banking industry. Design/methodology/approach A two-stage empirical study was conducted in 2010 using a four-part HR capital disclosure questionnaire, which was developed and validated in stage 1 (n=145) of the study. In stage 2 (n=157), current or previous shareholders in one of the Australian banking sector corporations participated in the study. The collected data were analyzed using confirmatory factor and logistic regression analyses. Findings The findings of this explorative study highlight that the individual investors’ perception on the importance of performance management dimension of HR capital information has varied impacts on their intentions to use such information in investment decisions to buy, hold on to, or sell stocks. Practical implications This study has made an important contribution to the strategic HRM and behavioral finance literature that the human capital information facilitates the propensity to avoid regrets in selling shares too early (dispositional effect bias) to achieve utility benefits in future which is different from the findings of financial information disclosure study. Originality/value A recent critical review of HR disclosure indicated that most of the published articles on HR capital have used company annual reports for data source. However, this is the first study that attempts to understand the impact of HR capital disclosure information on investment intentions from individual investors’ schema rather than drawing data from company annual reports.

Board structure changes after accounting fraud: the case of Schneider Electric

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Benedicte Millet-Reyes ◽  
Nancy Uddin
Keyword(s):  
Corporate Governance ◽  
Internal Control ◽  
Multinational Corporation ◽  
Business Case ◽  
Annual Reports ◽  
Board Structure ◽  
Control Mechanisms ◽  
Accounting Fraud ◽  
Content Type ◽  
The Impact

Theoretical basis The impact of corporate governance on internal controls and quality of financial disclosures. Research methodology Analysis of a real financial fraud event for a non-US multinational corporation. The case relies on accessing and analyzing annual reports for the firm, both before and after the fraud. Additional information on industry governance characteristics are provided in the case itself so that students can compare the firm to the industry. Case overview/synopsis This business case is centered on the analysis of Schneider Electric, a French multinational corporation, which had to restate their financial statements in 2011 because of accounting fraud. Following this event, Schneider undertook major changes in their board structure to improve internal control mechanisms. This pedagogical business case familiarizes students with international differences in ownership and board structure and emphasizes potential corporate governance changes after financial statement fraud. Complexity academic level Managerial finance, corporate finance, international finance, auditing. This case is more appropriate for upper-level undergraduate and graduate courses.

Proximity to broad bond rating change and CEO power

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Akhilesh Bajaj ◽  
Li Sun
Keyword(s):  
Corporate Governance ◽  
Personal Characteristics ◽  
Chief Executive ◽  
Negative Consequences ◽  
Ceo Power ◽  
Bond Ratings ◽  
Rating Data ◽  
Bond Rating ◽  
Content Type ◽  
Rating Change

PurposeBorderline firms whose bond rating has a plus or minus specification by a rating agency face a greater potential for an upgrade or downgrade by the agency. The authors examine the level of chief executive officer (CEO) power in firms with a plus or minus bond rating. The authors test whether CEOs of these firms become more or less powerful, along with the effect of corporate governance and existing bond rating.Design/methodology/approachThe authors use a panel sample with 16,429 observations from 1992 to 2016 from the ExecuComp database.FindingsThe authors find that CEOs of borderline-rated firms tend to be less powerful, relative to firms with a non-proximate rating. This result is largely present in firms with a plus rating. The authors also find that our primary findings are mainly driven by firms with low bond ratings (i.e. below investment grade) or by firms with weak corporate governance. Lastly, the authors document that CEO personal characteristics (i.e. CEO age, gender and tenure) impact our findings.Research limitations/implicationsFirst, firms in our sample are large public companies, and the external validity of our results to smaller firms that may also be private is unknown. Second, the Compustat database discontinued reporting bond rating data (i.e. S&P bond ratings) in 2017. Hence, the authors are unable to analyze the CEO power of borderline firms in years after 2016.Practical implicationsThe study contributes to the larger debate on whether having powerful CEOs is beneficial to an organization or not, because prior research has examined the consequences of CEO power with mixed results. The authors document evidence to support the research stream that links CEO power to negative consequences.Social implicationsThe authors find that our primary results are enhanced in firms with weak corporate governance, which is consistent with prior research that finds effective governance may mitigate CEO power and agency problems between the CEO and the Board.Originality/valuePrior research primarily uses CEO power as a driver for performance. Our study focuses on CEO power as a dependent variable, with the bond rating change proximity as a driver of CEO power. The authors believe that this helps develop a more comprehensive understanding of CEO power.

Enterprise risk management and sustainability of banks performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Babajide Oyewo
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Management Practice ◽  
Enterprise Risk Management ◽  
Annual Reports ◽  
Banking Reform ◽  
Content Type ◽  
Enterprise Risk ◽  
The Impact

PurposeThis study investigates firm attributes (namely level of capitalisation, scope of operation, organisational structure, organisational lifecycle, systemic importance and size) affecting the robustness of enterprise risk management (ERM) practice, the extent to which ERM affects the performance of banks and the impact of ERM on the long-term sustainability of banks in Nigeria. This was against the backdrop that the 2012 banking reform was a major regulatory intervention that mainstreamed ERM in the Nigerian banking sector.Design/methodology/approachThe study employed a mixed methodology of content, trend and quantitative analyses. Ex post facto research design was deployed to analyse performance differential of banks, with respect to the implementation of ERM, over a 10-year period (2008–2017). A disclosure checklist developed from the COSO ERM integrated framework was used to assess the robustness of ERM by content-analysing divulgence on risk management in published annual reports. The banking reform periods were dichotomised into pre- (2008–2012) and post- (2013–2017) reform periods. Jonckheere–Terpstra test, independent sample t-test and Mann–Whitney test were applied to analyse a total of 1,036 firm-year observations over the period 2008–2017.FindingsResult shows that bank attributes significantly affecting the robustness of risk management practice are level of capitalisation, scope of operation, systemic importance and size. Performance of banks improved slightly during the post-2012 banking reform period. This suggests that as banks consolidate on the gains of ERM, benefits of the regulatory policy on risk management may be realised in the long run. Result also shows that ERM enhances long-term performance, connoting that effective risk management could serve as a competitive strategy for surviving turbulence that typically characterises the banking sector.Practical implicationsThe emergence of level of capitalisation, scope of operation, systemic importance and size as determinants of ERM provides empirical evidence to support the practice of reviewing the capital requirements for banking business from time to time by regulatory authorities (i.e. recapitalisation policy) as a strategy for managing systemic risk. Top management of banks may consider instituting mechanisms that will ensure risk management is given prominence. A proactive approach must be taken to convert risks to opportunities by banks and other financial institutions, going forward, to cope with the vicissitudes of financial intermediation.Originality/valueThe originality of the study stems from the consideration that it provides some new insights into the impact of ERM on banks long-term sustainability in a developing country. The study also contributes to knowledge by exposing the factors determining the robustness of risk management practice. The study developed a checklist for assessing ERM practice from annual reports and other risk management disclosure documents. The paper also adds to the scarce literature on risk governance and risk management.

The impact of audit committee characteristics on internal audit professionalization: empirical evidence from Greece

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christina Vadasi ◽  
Michalis Bekiaris ◽  
Andreas G. Koutoupis
Keyword(s):  
Empirical Evidence ◽  
Audit Committee ◽  
Audit Quality ◽  
Research Question ◽  
Internal Audit ◽  
Audit Committees ◽  
Annual Reports ◽  
Substantial Impact ◽  
Content Type ◽  
The Impact

Purpose This paper aims to provide empirical evidence of the association between audit committee characteristics and internal audit quality through internal audit professionalization. Design/methodology/approach The investigation of the research question was based on 45 usable responses that were received from a survey of chief audit executives from firms listed on the Athens Stock Exchange and combined with publicly available information from annual reports. Findings The results indicate that audit committee characteristics (independence, diligence through frequent meetings and interaction with internal audit through valuation) influence internal audit professionalization. In addition, they demonstrate that internal audit professionalization is also influenced by CEO duality and firm’s external auditor. Practical implications The findings of this study have implications for audit committees wishing to improve their overall effectiveness, by identifying areas with substantial impact on internal audit quality. Moreover, regulators of corporate governance bodies can also benefit from the results to strengthen audit committee’s efficiency regarding internal audit function oversight. Originality/value The results add to the literature on the discussion of internal audit professionalization and complement the work of other researchers in the field of audit committee’s impact on internal audit quality/effectiveness. This study attempts to fill a gap in the literature on the effect of audit committee characteristics on internal audit professionalization, an element introduced from an institutional theory perspective.

scholarly journals Visual trends in the annual report: the case of Ericsson 1947-2016

2018 ◽  
Vol 23 (3) ◽  
pp. 312-325 ◽  
Author(s):  
Emelie Havemo
Keyword(s):  
Impression Management ◽  
Design Methodology ◽  
Annual Report ◽  
Annual Reports ◽  
Corporate Disclosure ◽  
Content Type ◽  
Visual Research ◽  
Visual Research Methods ◽  
Visual Elements ◽  
Reporting Practice

PurposeDisclosure research has argued that visuals are increasingly used in annual reports as a way to increase readability of the annual report, but comparatively little is known about of diagrams compared to graphs and photographs. The purpose of this paper is to provide a historical account of visuals use in corporate disclosure, with an emphasis on diagrams, to show changes from the 1940s until present-day reporting.Design/methodology/approachVisual research methods were applied to analyze how diagrams, photographs and graphs were used in 69 annual reports of the Swedish telecom company Ericsson.FindingsPhotographs have been used with increasing frequency since the 1950s. Graph and diagram use has increased significantly since the 1990s while photograph use remained stable, suggesting that graphs and diagrams increasingly complement photographs for visually representing the organization in corporate disclosure. Factors explaining the case company’s development include both internal (performance, individual preferences, shifting from a manufacturing-based strategy to a service-based strategy) and external (legislation, transformation of the telecom industry).Originality/valueVisual elements in annual reports are increasingly oriented toward immaterial representations of the organization’s standings and identity and diagrams are increasingly used and contribute to this. This finding motivates further research about diagram use in corporate communication, such as how different diagram types convey accounting messages, and whether diagrams serve as impression management devices. For regulators, it will be important to follow the emerging trend of diagram use, since it is becoming part of reporting practice.

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