scholarly journals The effect of institutional ownership on the reporting of conservative earnings

2007 ◽  
Vol 4 (4) ◽  
pp. 338-344
Author(s):  
Uma Velury ◽  
David S. Jenkins
Keyword(s):  
Financial Reporting ◽  
Private Information ◽  
Institutional Ownership ◽  
Stock Market Crash ◽  
Asymmetric Timeliness ◽  
Institutional Holdings ◽  
Sarbanes Oxley ◽  
Institutional Monitoring ◽  
Reported Earnings

Given the spate of financial reporting scandals and enactment of the Sarbanes-Oxley Act of 2002 following the stock market crash of 1999, we examine the role of institutional monitoring as it pertains to reporting conservatism. Using the Basu (1997) asymmetric timeliness models, we examine the relation between institutional ownership and the conservatism of reported earnings, as defined by the asymmetric timeliness measures. Our results indicate that larger institutional holdings are associated with a decrease in earnings conservatism. We attribute these findings in part to the incentives of large institutional investors to capitalize on private information obtained through their role as corporate monitors. As such, it may be unlikely that large investors would not encourage the timely reporting of bad news

scholarly journals The quality of reported earnings and the monitoring role of the board: Evidence from small and medium companies

2019 ◽  
Vol 19 ◽  
pp. 52-73
Author(s):  
A Smith
Keyword(s):  
South African ◽  
Financial Reporting ◽  
Earnings Quality ◽  
Executive Directors ◽  
Corporate Boards ◽  
Asymmetric Timeliness ◽  
Conservative Accounting ◽  
Reported Earnings

The purpose of this paper is to investigate whether corporate governance initiatives in South Africa that relate to the monitoring ability of the non-executive directors on the board of small and medium companies have improved earnings quality by adopting conservative accounting practices. The sample construct includes the 2008 – 2011 reporting periods of South African companies listed on the Alternative Exchange (AltX). A reverse regression of earnings on returns was used to examine the market-based attributes of earnings quality, i.e. conservatism and the timeliness of earnings. No evidence was found that the boards of small and medium-sized companies are inclined to adopt conservative accounting practices that will result in the asymmetric timeliness of earnings. There is also no evidence that the quality of reported earnings improved as a result of the monitoring ability of the board with reference to the representation of non-executive directors on the board. The findings can be of interest to investors, managers and regulators as the efficiency of corporate boards and the transparency of financial reporting have implications for all of them.

scholarly journals Earnings Smoothing as Information Signaling or Garbling: A Review of Literature

2018 ◽  
Vol 10 (1) ◽  
pp. 131
Author(s):  
Nor Afifah Shabani ◽  
Saudah Sofian
Keyword(s):  
Private Information ◽  
Firm Value ◽  
Future Research ◽  
Journal Articles ◽  
Actual Performance ◽  
Future Earnings ◽  
Information Signaling ◽  
Earnings Smoothing ◽  
Reported Earnings

Earnings smoothing, which refers to the action of managers managing earnings to reduce fluctuations of reported earnings, is a special type of earnings management because while earnings smoothing may be used to distort shareholders and creditors’ view of corporate actual performance, it may also serve as a tool to communicate corporate private information of future earnings to the aforementioned stakeholders. Hence, it comes to no surprise when prior literatures reveal that the studies on the role of earnings smoothing are divided into two streams: as information signaling and information garbling. This paper aims to review prior literatures, specifically on the role of earnings smoothing either as information signaling or garbling based on four themes: firm value, financing need, compensation contract and outsiders’ intervention. This paper reviews journal articles gathered from Web of Science database. Based on the shortcomings of prior literatures, this paper highlights avenue for future research.

Meeting Individual Analyst Expectations

2014 ◽  
Vol 89 (6) ◽  
pp. 2203-2231 ◽  
Author(s):  
Marcus P. Kirk ◽  
David A. Reppenhagen ◽  
Jennifer Wu Tucker
Keyword(s):  
Private Information ◽  
Explanatory Power ◽  
Analyst Forecasts ◽  
Data Availability ◽  
Analyst Forecast ◽  
Analyst Expectations ◽  
Management Literature ◽  
Two Measures ◽  
Reported Earnings

ABSTRACT The expectations management literature has so far focused on firms meeting the analyst consensus forecast—the expectations of analysts as a group—at earnings announcements. In this study we argue that investors may use individual analyst forecasts as additional benchmarks in evaluating reported earnings because the consensus forecast underutilizes private information contained in individual analyst forecasts. We predict that measures reflecting such private information have incremental explanatory power over the consensus forecast for the market's reaction to earnings news. We find results consistent with this prediction by examining two measures: (1) the percentage of individual forecasts met and (2) meeting the key analyst forecast. We extend the literature by documenting the role of individual analyst forecasts in investors' evaluations of reported earnings. JEL Classifications: G10; G11; G17; G14; G24. Data Availability: Data are publicly available from the sources identified in the paper.

scholarly journals The role of Internet Financial Reporting (IFR) in mediating manufacturing firm value on Indonesia Stock Exchange (IDX)

2020 ◽  
Vol 2 (2) ◽  
pp. 169
Author(s):  
Khoirul Fuad ◽  
Nurlita Dwi Ariyani ◽  
Retno Tri Handayani
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Sampling Method ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Manufacturing Companies ◽  
Manufacturing Firm ◽  
Purposive Sampling ◽  
The Relationship

<p class="IABSSS"><strong>Purpose</strong> - This research aimed to determine the role of Internet Financial Reporting application for manufacturing companies on Indonesia stock exchange in the increase of firm value both directly and indirectly.</p><p class="IABSSS"><strong>Method </strong>- This research used a purposive sampling method. The number of data collected was 95 company samples. This research employed SPSS 25 for testing the data.  </p><p class="IABSSS"><strong>Result</strong> - The results of this study indicated that Internet Financial Reporting can mediate the relationship between institutional ownership and profitability on firm value.</p><p class="IABSSS"><strong>Implication</strong> - Internet Financial Reporting application for companies today attracts investors to invest their capital to the companies because of the ease in getting the information needed at any time.</p><strong>Originality</strong> - This study used Internet Financial Reporting as mediation and source of the data year 2018.

Investor reactions to restatements conditional on disclosure of internal control weaknesses

2018 ◽  
Vol 19 (3) ◽  
pp. 423-439 ◽  
Author(s):  
Yiwen Li ◽  
You-il Park ◽  
Jinyoung Wynn
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Internal Control ◽  
Private Information ◽  
Abnormal Returns ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Financial Restatements ◽  
Abnormal Stock Returns ◽  
Internal Control Weaknesses

Purpose The purpose of this paper is to investigate investor reactions to financial restatements conditional on disclosures of internal control weaknesses under Section 404 of the Sarbanes-Oxley Act. Design/methodology/approach The research uses cumulative abnormal stock returns (CARs) as a proxy for investor reactions. Restatements and internal control reports are available on audit analytics. Multivariate regression analyses were used for testing. Findings Using a sample of restating firms whose original misstatements are linked to underlying internal control weaknesses, the research finds that cumulative abnormal returns for firms disclosing internal control weaknesses in a timely manner is negative in a three-day window around the restatement announcements. The finding indicates that restatements with early disclosure of internal control weaknesses provide more persuasive evidence of the ineffectiveness of a firm’s internal control over financial reporting, rather than early disclosure lowering the information asymmetry between a firm and investors. Research limitations/implications This study employs CARs to examine the market reaction to restatements conditional on disclosure of internal control weaknesses. Practical implications Further study on reactions by creditors who have access to private information on firms could extend the implications of the finding. Originality/value The study contributes to the existing research by documenting that early disclosure of material weaknesses in internal control affects investors’ reactions to financial restatements.

CFO/CEO-Board Social Ties, Sarbanes-Oxley, and Earnings Management

2011 ◽  
Vol 25 (3) ◽  
pp. 537-557 ◽  
Author(s):  
Gopal V. Krishnan ◽  
K. K. Raman ◽  
Ke Yang ◽  
Wei Yu
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Social Ties ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Board Independence ◽  
Sarbanes Oxley ◽  
Time Period ◽  
The Board Of Directors

SYNOPSIS Prior research suggests that the efficacy of a formally independent member of the board of directors could be undermined by social ties with the CEO. In this study, we examine the relation between CFO/CEO-board social ties and earnings management over the 2000–2007 time period. Our results suggest that CFOs/CEOs picked more socially connected directors in the post-Sarbanes-Oxley Act (SOX) time period (possibly as a way out of the mandated independence requirements). Our results also suggest a positive relation between CFO/CEO-board social ties and earnings management. Still, the increase in managerial/board risk aversion since SOX appears to have negated the effect of social ties on earnings management in the post-SOX period. Board independence and financial reporting quality remain topics of ongoing interest. The study is important in advancing our understanding of the role of social ties in earnings management.

The Role of the Internal Audit Function in the Disclosure of Material Weaknesses

2011 ◽  
Vol 86 (1) ◽  
pp. 287-323 ◽  
Author(s):  
Shu Lin ◽  
Mina Pizzini ◽  
Mark Vargus ◽  
Indranil R. Bardhan
Keyword(s):  
Financial Reporting ◽  
Internal Audit ◽  
Section 404 ◽  
Material Weakness ◽  
Internal Auditor ◽  
Internal Audit Function ◽  
Sarbanes Oxley ◽  
Material Weaknesses ◽  
Using Data

ABSTRACT: This study investigates the role that a firm’s internal audit function (IAF) plays in the disclosure of material weaknesses reported under Section 404 of the Sarbanes-Oxley Act of 2002 (U.S. Congress 2002). Using data from 214 firms, we examine the relation between material weakness (MW) disclosures and various IAF attributes and activities. Our results indicate that MW disclosures are negatively associated with the education level of the IAF and the extent to which the IAF incorporates quality assurance techniques into fieldwork, audits activities related to financial reporting, and monitors the remediation of previously identified control problems. The timing of Section 404 work and the nature of follow-up monitoring suggests that these aspects of IAF quality help prevent MWs from occurring. We find that MW disclosures are positively associated with the IAF practice of grading audit engagements and external-internal auditor coordination, suggesting that these activities increase the effectiveness of Section 404 compliance processes.

scholarly journals Opini Audit Pemoderasi Pengaruh Profitabilitas, Ukuran Perusahaan, Kepemilikan Institusional, Dan Komite Audit Terhadap Ketepatanwaktuan

2019 ◽  
Author(s):  
Fadhli Azhari ◽  
Muhammad Nuryatno
Keyword(s):  
Logistic Regression ◽  
Financial Reporting ◽  
Firm Size ◽  
Audit Committee ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Manufacturing Companies ◽  
Audit Opinion ◽  
Analysis Technique

The purpose of this research is to find the role of audit opinion as a moderator of the effects of profitability, firm size, institutional ownership, and audit committee on the timeliness of financial reporting on manufacturing companies listed on the Indonesia Stock Exchange between 2012 and 2016. Purposive sampling was used in this research to obtain 96 sample manufacturing companies. The data analysis technique that was used in this research is logistic regression. The hypothesis testing showed that profitability and firm size positively affects the timeliness of financial reporting. Meanwhile, institutional ownership and audit committee does not affect the timeliness of financial reporting. Audit opinion cannot moderate the effect of profitability, firm size, institutional ownership, and audit committee on the timeliness of financial reporting. Keywords: profitability, firm size, institutional ownership, audit committee, audit opinion, timeliness

Political connections, institutional investors monitoring and stock price synchronicity

2017 ◽  
Vol 43 (11) ◽  
pp. 1236-1253 ◽  
Author(s):  
Chwee Ming Tee
Keyword(s):  
Institutional Investors ◽  
Stock Price ◽  
Agency Problems ◽  
Institutional Ownership ◽  
Political Connections ◽  
Stock Price Synchronicity ◽  
Content Type ◽  
Institutional Monitoring ◽  
Moderating Role

Purpose The purpose of this paper is to examine the association between politically connected (POLCON) firms and stock price synchronicity, and whether this association can be attenuated by institutional investors. Design/methodology/approach This paper uses an ordinary least square regression model to examine the association between POLCON firms and stock price synchronicity; institutional ownership and stock price synchronicity; the moderating role of institutional ownership on the association between POLCON firms and stock price synchronicity; institutional domiciles and stock price synchronicity; and the moderating role of institutional domiciles on the association between POLCON firms and stock price synchronicity. Findings The result shows that POLCON firms are positively associated with stock price synchronicity. Further, the author also finds that institutional monitoring, through higher ownership by local institutional investors is associated with lower stock price synchronicity. In addition, this study documents evidence that institutional investors, particularly local institutional investors can improve stock price informativeness in POLCON firms. Research limitations/implications The results suggest that POLCON firms are plagued by severe agency problems, resulting in limited flow of firm-specific information to the capital markets. However, the author shows that POLCON firm’s agency problems can be attenuated through effective monitoring by institutional investors. Further, institutional domiciles are shown to be significantly associated with stock price synchronocity. However, effective monitoring is largely driven by local institutional investors, in line with the geographical proximity theory. Practical implications The results suggest that regulators should increase their surveillance and monitoring effort, particularly on firms with close ties to the government. In particular, POLCON firms should be required to be more transparent in their corporate dealings. Additionally, auditors should intensify their audit efforts on POLCON firm to provide more reliable financial information to minority shareholders, investors and analysts. Finally, institutional investors should be incentivized by the Malaysian Securities Commission, via, the code of governance to play an effective monitoring role in Malaysian firms. Originality/value This study reveals that POLCON firms’ severe agency problems can be alleviated by effective institutional monitoring. Further result identifies institutional domiciles as a significant factor in influencing monitoring effectiveness in POLCON firms. This paper provides insights into the dynamic interaction between political connections, institutional monitoring, firm governance and capital markets behavior of an emerging market.

scholarly journals CORPORATE GOVERNANCE AND PROFITABILITY ON THE TIMELINESS OF FINANCIAL REPORTING: AN EMPIRICAL STUDY OF THE MINING SECTOR

2020 ◽  
Vol 1 (4) ◽  
pp. 669-681
Author(s):  
Putri Dwi Wahyuni
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Return On Assets ◽  
Mining Sector ◽  
The Public ◽  
Method Analysis

The research objective to be achieved is to provide understanding and knowledge to the public, especially investors and creditors about the role of corporate governance (independent commissioners, the audit committee and institutional ownership) and return on assets (ROA) on the timeliness of financial reporting and can use as a reference for further researchers and stakeholders in making relevant and reliable decisions. The Population in this study is a listed mining sector issuer on the Indonesia Stock Exchange conducted for 3 years of observation in 2016 - 2018. Data collection techniques using a purposive sampling method. Analysis of the data used is logistic regression The results showed that only return on assets had a positive and significant effect on the timeliness of financial reporting. While the independent commissioner variable, the size of the audit committee and institutional ownership have an influence but are not significant

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