scholarly journals Political connections and earnings quality

2016 ◽  
Vol 24 (4) ◽  
pp. 339-356 ◽  
Author(s):  
Iman Harymawan ◽  
John Nowland
Keyword(s):  
Design Methodology ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Political Stability ◽  
Political Connections ◽  
Content Type ◽  
Government Effectiveness ◽  
Different Dimensions ◽  
Market Pressures

Purpose The purpose of this study is to investigate how the earnings quality of politically connected firms is affected by changes in political stability and government effectiveness in a developing country. Design/methodology/approach This study uses a sample of 2,073 firm-year observations from 349 firms listed on the Indonesian Stock Exchange from 2003 to 2012 to examine how political stability and government effectiveness affect the earnings quality of politically connected firms, relative to non-politically connected firms. A two-stage model is used to address self-selection issues in the choice of firms to establish political connections. Findings This study finds that increased government effectiveness reduces the benefits of political connections, requiring politically connected firms to be more responsive to market pressures and resulting in higher earnings quality. However, increased political stability enhances the certainty of benefits from political connections, reducing the need for politically connected firms to respond to market pressures and resulting in lower earnings quality. Research limitations/implications For policymakers, these results indicate that different dimensions of political and economic development can affect the incentives of firms with political connections in different ways. Originality/value This study finds that the earnings quality of politically connected firms increases as government effectiveness improves, but it decreases as the political environment becomes more stable.

Choice of governance structure and earnings quality

2016 ◽  
Vol 29 (4) ◽  
pp. 372-390 ◽  
Author(s):  
Pamela Kent ◽  
Richard Anthony Kent ◽  
James Routledge ◽  
Jenny Stewart
Keyword(s):  
Cluster Analysis ◽  
Corporate Governance ◽  
Firm Size ◽  
Design Methodology ◽  
Best Practice ◽  
Earnings Quality ◽  
Governance Structure ◽  
Governance Mechanisms ◽  
Content Type

Purpose The purpose of this paper is to examine the effectiveness of voluntary governance mechanisms in Australia. Design/methodology/approach This study identifies similar choices of corporate governance by Australian firms and tests the effectiveness of the choices made based on the earnings quality of reported firms. Cluster analysis is conducted using governance best practice variables, firm size and an earnings quality variable. Findings This paper’s results support the voluntary governance approach for smaller firms, but suggest that mandatory governance requirements could be beneficial for larger firms. Evidence suggests that a benefit accrues for larger firms with the adoption of governance best practice. Cluster analysis indicates that larger firms tend to exhibit higher levels of adoption of governance best practice than smaller firms. Originality/value This paper adds to the literature by providing important information regarding the suitability of adoption of voluntary governance mechanisms in Australia.

Dividend payment and earnings quality: evidence from Indonesia

2014 ◽  
Vol 22 (2) ◽  
pp. 103-117 ◽  
Author(s):  
Febriela Sirait ◽  
Sylvia Veronica Siregar
Keyword(s):  
Emerging Markets ◽  
Design Methodology ◽  
Manufacturing Industry ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Positive Association ◽  
Significant Positive Association ◽  
Dividend Payment ◽  
Content Type ◽  
The Relationship

Purpose – This research aims to examine the relationship between dividend payment and earnings quality. Design/methodology/approach – The authors examine four dividend features: dividend-paying status, dividend size, dividend changes, and dividend persistence. The samples consist of 90 firms from the manufacturing industry in the years 2005-2009. Multiple regression is used for testing hypotheses. Findings – The results show that dividend-paying status, dividend increase, and persistence in dividend payment have significant positive association with earnings quality. However, the authors do not find evidence that larger dividend size is an indicator of higher earnings quality. Overall, the results show that dividend-paying status, increase in dividend size, and persistence in dividend payment are indicators or signals of higher earnings quality. Research limitations/implications – This study examines only the manufacturing firms listed on the Indonesia Stock Exchange. Further study based on different industries and/or different emerging markets is needed before generalizing results. Originality/value – Few studies have examined dividend payment in emerging markets. This study fills the void.

scholarly journals Managing quality of cost information in clinical costing: evidence across seven countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Christopher S. Chapman ◽  
Anja Kern ◽  
Aziza Laguecir ◽  
Gerardine Doyle ◽  
Nathalie Angelé-Halgand ◽  
...  
Keyword(s):  
Design Methodology ◽  
Cost Information ◽  
Content Type ◽  
Regulatory Guidance ◽  
Trade Offs ◽  
Similar Range ◽  
Different Dimensions ◽  
The Cost ◽  
The Impact

PurposeThe purpose is to assess the impact of clinical costing approaches on the quality of cost information in seven countries (Denmark, England, France, Germany, Ireland, the Netherlands and Portugal).Design/methodology/approachCosting practices in seven countries were analysed via questionnaires, interviews and relevant published material.FindingsAlthough clinical costing is intended to support a similar range of purposes, countries display considerable diversity in their approaches to costing in terms of the level of detail contained in regulatory guidance and the percentage of providers subject to such guidance for tariff setting. Guidance in all countries involves a mix of costing methods.Research limitations/implicationsThe authors propose a two-dimensional Materiality and Quality Score (2D MAQS) of costing systems that can support the complex trade-offs in managing the quality of cost information at both policy and provider level, and between financial and clinical concerns.Originality/valueThe authors explore the trade-offs between different dimensions of the quality (accuracy, decision relevance and standardization) and the cost of collecting and analysing cost information for disparate purposes.

scholarly journals Political ties and corporate performance: why efficiency matters?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rabia Najaf ◽  
Khakan Najaf
Keyword(s):  
Political Theory ◽  
Design Methodology ◽  
Corporate Performance ◽  
Political Connections ◽  
Stewardship Theory ◽  
Content Type ◽  
Political Ties ◽  
And Performance ◽  
Practical Implications

PurposeThe purpose of this paper is to examine and explain the complex interrelationships which influence the performance of politically connected firms to create value for their providers of finance and other stakeholders. In doing so, it examines the interrelationships between efficiency and delivering on corporate performance of a firm with political ties.Design/methodology/approachThe authors gathered the literature from the Scopus website. They reviewed the literature of 58 manuscripts about the efficiency and performance of politically connected firms.FindingsThe research finds that the better quality of efficiency of politically connected firms is positively related to the corporate performance of politically connected firms. The authors’ theoretical findings corroborate the political theory, agency theory, stakeholder theory, resource dependency theory and stewardship theory. These theories prove that political connections have an impact on firm performance as a politician reinforces the efficacy. To better understand the effect of political connections on solid performance due to efficiency, this study classifies various efficiencies and links them with political ties.Research limitations/implicationsSeveral avenues of research are suggested to examine further the interrelationships identified.Practical implicationsThe authors’ conceptual findings are valuable for institutional investors, policymakers and stakeholders. To sum up, all theoretical shreds of evidence prove that politically connected firms can enhance performance via efficiency.Originality/valueThe paper conceptualizes the efficiency and performance interrelationships of politically connected firms. The extant literature comparison allows an assessment of the extent to which different efficiency contexts lead to differences in performance.

Earnings quality and managerial access to debt financing: empirical evidence from Iran

2018 ◽  
Vol 34 (1) ◽  
pp. 48-70 ◽  
Author(s):  
Mahdi Salehi ◽  
Maryam Timachi ◽  
Shayan Farhangdoust
Keyword(s):  
Institutional Environment ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Panel Data Analysis ◽  
Debt Financing ◽  
Bank Debt ◽  
Content Type ◽  
Retained Earnings ◽  
Internal Debt

Purpose The purpose of this paper is to establish a linkage between two rarely researched areas, i.e. earnings quality (EQ) and access to external and internal debt financing. Specifically, the authors aim to examine whether the quality of a firm’s reported earnings is significantly associated with its access to both private and bank debt financing. Design/methodology/approach The authors test the hypotheses by employing panel data analysis for a sample of 108 companies listed on the Tehran Stock Exchange (TSE) during 2006-2015. The tests were conducted by using R econometric software. Findings After controlling for some firm-specific factors and consistent with the primary expectations, the results reveal a significant and positive relationship between EQ and managerial access to external (bank) debt financing. In addition, the findings indicate that EQ is negatively associated with internal debt financing which is measured as the changes in firm retained earnings. Research limitations/implications Although the authors cautiously conducted the present study, there are some limitations that merit further consideration. First, the authors collected the data manually from 14 categories of industries in the TSE and, accordingly, an aggregate analysis across multiple categories of industries might have missed industry-specific and unique issues. Second, the authors used a narrow conceptualization of accruals quality which merely assesses a firm’s EQ. The measures can be enhanced by including more actionable proxies. Third, since the data on debt financing were collected from two different sources, this might have caused common method variance in the results procedurally. Originality/value Since the fundamental institutional assumptions underpinning the Western and even East Asia debt contracting and EQ models are not valid in the institutional environment of Iran, the findings could provide substantial implications for the understanding of both debt financing and the quality of earnings. These significant institutional and ownership differences are the factors affecting firms’ leverage and capital choice decisions. Indeed, the study has laid some groundwork upon which a more detailed evaluation of the Iranian firms’ financial structure could be based.

The effect of reporting quality on stock returns of listed companies on the Tehran Stock Exchange

2018 ◽  
Vol 67 (1) ◽  
pp. 4-19 ◽  
Author(s):  
Mahdi Salehi ◽  
Masomeh Tagribi ◽  
Shayan Farhangdoust
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Unit Root ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Reporting Quality ◽  
Ordinary Least Squares ◽  
Institutional Setting ◽  
Content Type

Purpose The purpose of this paper is to examine the effect of earnings quality (as a proxy for financial reporting quality) of companies listed on the Tehran Stock Exchange (TSE) and the quality of their financial information disclosure on stock returns. Design/methodology/approach The authors test the hypotheses by conducting panel data analysis on a sample of 1,680 firm-year observations from companies listed on the TSE during 2009-2014. The authors also conduct the variance inflation factor and unit root tests to control for the severity of multicollinearity in their ordinary least squares regression analysis and whether the time series variables are non-stationary and possess a unit root. Findings Using Francis et al. (2005) and modified Jones (1991) models as measures for earnings quality, the results are indicative of a significant and positive relationship between firms’ earnings quality and their stock returns. However, the research findings suggest that earnings management as well as disclosure quality (DQ) is not significantly associated with firms’ stock return. Research limitations/implications Although the authors controlled for some of the factors affecting stock returns, there are still some other factors such as the operating environment, institutional setting and/or information uncertainty that could influence stock returns, and accordingly, the authors were not able to exclude their possibility and get the most robust results. Moreover, there are several models proposed in different studies for measuring earnings quality which have led to mixed results particularly without a general consensus on what a good model is, and whether earnings quality is a priced risk factor. Originality/value Taken as a whole, the paper could provide new insights into the determinants of stock returns which has rarely been considered by prior finance literature. Furthermore, the unique institutional context of the paper could contribute substantially to the literature on the relationship between financial reporting and DQ and stock returns.

Political connections, family firms and earnings quality

2018 ◽  
Vol 41 (4) ◽  
pp. 414-432 ◽  
Author(s):  
Muhammad Arsalan Hashmi ◽  
Rayenda Khresna Brahmana ◽  
Evan Lau
Keyword(s):  
Agency Theory ◽  
Family Firms ◽  
Earnings Quality ◽  
Business Environment ◽  
Ownership Concentration ◽  
Political Connections ◽  
Family Ownership ◽  
Data Set ◽  
Content Type

PurposeThis paper aims to investigate the effect of political connections on earnings quality by simultaneously controlling the firm characteristics; to test whether Pakistani firms’ ownership, specifically family ownership, plays a significant role in political connections–earnings quality association; to draw a conclusion about the agency theory in the context of Pakistan.Design/methodology/approachA quantitative approach was used to examine the influence of political connections and family ownership on the earnings quality of listed firms in Pakistan. The study uses historical data from 238 active non-financial firms listed on the Pakistan Stock Exchange during the period of 2009-2015. The final data set comprises more than 1,600 firm-year observations from ten major non-financial industry classifications. To enhance the robustness of the empirical relationship, the study used several proxies of earnings quality in conjunction with robust regression methods and diagnostic checks.FindingsThe present study’s findings are consistent with the findings of the studies on agency theory previous literature, where politically connected firms have significantly lower earnings quality as compared to non-connected firms. The results also indicate that family firms have superior earnings quality than non-family–controlled firms. Furthermore, family ownership moderates the negative influence of political connections on earnings quality. This implies that family ownership diminishes the costs of political connections and improves the earnings quality of the firm.Originality/valueThis study is different from previous research in three respects. First, it examines whether family ownership concentration has a moderating influence on the relationship between political connections and earnings quality. Second, it uses a robust methodology and extensive data set to examine the influence of political connections and family ownership concentration on earnings quality. Further, this study is the first to analyze the nexus between financial reporting quality and the political business environment in the context of Pakistan.

The UK Stewardship Code and investee earnings quality

2018 ◽  
Vol 31 (3) ◽  
pp. 388-404 ◽  
Author(s):  
Chun Lu ◽  
Jacqui Christensen ◽  
Janice Hollindale ◽  
James Routledge
Keyword(s):  
Institutional Investors ◽  
Design Methodology ◽  
Earnings Quality ◽  
Institutional Investor ◽  
Content Type ◽  
Accruals Quality ◽  
The Uk ◽  
Code Compliance

Purpose The UK Stewardship Code was the first voluntary governance code specifically for institutional investors. The Code sets out the principles of effective stewardship by institutional investors toward their investee companies with the aim of improving long-term risk-adjusted returns to shareholders. This paper aims to examine whether compliance by institutional investors with UK Stewardship Code is related to the earnings quality of their investee companies. Design/methodology/approach The association between institutional investor Code compliance and Code compliance quality and investee company accruals quality is investigated. Findings For a sample of large UK listed companies from 2013, the authors find reasonably high levels of compliance with the Code by institutional investors. The analysis does not suggest that Code compliance is positively related to investee company earnings quality. Rather, the finding is that substantial or long-term investments are more likely to result in effective stewardship regardless of Code compliance. Originality/value This study offers valuable insights regarding the efficacy of the Stewardship Code’s policy approach to improving corporate governance by institutional investors.

Why do investors not punish politically connected firms for financial misrepresentation?

2020 ◽  
Vol 33 (1) ◽  
pp. 92-107
Author(s):  
Xin Yu ◽  
Ying Zheng
Keyword(s):  
Market Reaction ◽  
Earnings Quality ◽  
Bank Loans ◽  
Political Connections ◽  
Market Reactions ◽  
Content Type ◽  
Listed Firms ◽  
Event Study Method ◽  
The Government

Purpose The purpose of this paper is to examine whether the political connections of listed firms in China affect how the market reacts to cases of financial misrepresentation investigated by the regulatory authorities. Design/methodology/approach The authors use an event study method and the financial misrepresentation events in China stock markets as research setting and empirically test the association between market reactions to the announcement of financial misrepresentations and the presence of political connections. Findings The results show that on average, there is no significant market reaction to financial misrepresentation for politically connected firms. In contrast, however, there is a significantly negative market reaction for non-connected firms, which suggests that investors do not punish politically connected firms for financial misrepresentation. The authors argue that politically connected companies use the altered financial information to gain legitimacy and obtain benefits from the government. Consistent with the argument, the authors find that in the years after they disclose their financial misrepresentation, firms with political connections are more likely to increase their bank loans than firms without political connections. Originality/value The authors provide a new explanation for the low-earnings quality of politically connected firms.

The evolution of the monitoring board in Japan: how the board performs monitoring function in Japanese corporate governance

2019 ◽  
Vol 19 (5) ◽  
pp. 999-1014
Author(s):  
Kohei Miyamoto
Keyword(s):  
Corporate Governance ◽  
Design Methodology ◽  
Stock Exchange ◽  
White Paper ◽  
Lifetime Employment ◽  
Content Type ◽  
Legal Reforms ◽  
Legal Evolution ◽  
Commercial Code ◽  
Governance Institutions

Purpose The purpose of this paper is to trace a legal evolution of the monitoring board and to reveal what brought the evolution and what is expected to emerge. The paper points to unique complementarities in Japanese corporate governance institutions and norms which will affect how the monitoring board performs its functions. Design/Methodology/Approach Analysis is based on texts on corporate governance legislations in Japan from the revision of Commercial Code in 1950 to the revision of Companies Act in 2014. Other sources include Tokyo Stock Exchange regulations, White Paper on Corporate Governance and other academic literatures on Japanese corporate governance. Findings Changes of non-legal institutions and norms in Japanese corporate governance necessitated legal reforms toward the monitoring board. Persisting institutions and norms, in particular lifetime employment, influences how the monitoring board performs its functions in Japan. Originality/Value This paper explains how the evolution of the monitoring board in Japan emerged and what will cause different expected functions of the monitoring board in Japan and other jurisdictions.

Sign in / Sign up

Export Citation Format

Share Document