Do the Attributes of Audit Committee Explain Non-Performing Loans? Evidence from an Emerging Economy

This study examined whether various attributes of the audit committee of listed banks in Bangladesh explain the level of non-performing loans (NPLs). This study used a panel data set comprising all 30 listed banks with 250 bank-year observations for the period 2013–2017. It employed the random-effects GLS regression model with cluster robust standard error and AR (1) disturbance to examine the effect of several audit committee attributes on NPLs. We found that holding audit committee meetings frequently and a higher number of independent members in the audit committee facilitate to reduce NPLs. We, however, find no explicit evidence that the other attributes of the audit committee examined (audit committee size, financial experience and financial literacy of the audit committee members, professional qualifications of the audit committee Chairman) contribute in reducing NPLs. The findings will be useful for policymakers of the banking sector in Bangladesh and the relevant regulatory bodies in enabling them to understand the role of the various attributes of the audit committee in the incidence of NPLs. Keywords: attributes, audit committee, non-performing loans (NPLs), listed banks, Bangladesh

Do Capital Market Training, Online Facilities and Social Environment Matter in Investment Decision

This study aimed to determine if capital market training, on-line facilities, social environment, and a minimum amount of investment affect Indonesian and Malaysian university-students’ decisions in investing in the capital markets of each country, as they are potential smart investors. Based on 229 respondents from both countries, a survey was conducted comprising 24 questions. Respondents were selected using they random sampling method. The results found that capital market training and on-line facilities were not factors that influenced university students’ decisions in Indonesia and Malaysia in making investment in the capital markets. The other two variables, social environment and a minimum amount of investment proved influential. The mediating variable, investment interest partially influenced the relationship between social environment and a minimum amount of investment-to-investment decision, but did not mediate capital market training and on-line facilities to the investment decision. Keywords: capital market training, on-line facilities, social environment, minimum amount of investment, university-students

Unparalleled Volatility in Sector-Wise Return in the Chittagong Stock Exchange: A Covid-19 Perspective

This study examined the effect of the Covid-19 health crisis on the volatility of sector-wise securities return listed in the Chittagong Stock Exchange (CSE) and compared this volatility with the pre-pandemic context. This study focused on the Chittagong Stock Exchange because this bourse offers a platform for negotiability and transferability of securities to investors in Chittagong and also plays a significant role in capital mobilization and the industrial development of Bangladesh. A sample of 90 securities under 19 sectors listed in the CSE were examined. The trend analysis indicated that Bank, Food, Footwear, Leasing, Life Insurance, Electrical and Engineering and Mutual Funds had same level of volatility between the Pre-Covid and Post-Covid time periods. Only four sectors, including Energy, Telecommunication, General Insurance and Miscellaneous sectors displayed a higher Post-Covid volatility relative to the Pre-Covid context. The result indicated that volatility of return was not the same for 19 sectors in the CSE over the selected time period. The researcher discovered that high and low periods of deaths had a significant impact on weekly volatility of return on 19 sectors of the CSE. However, the difference in volatility of return across all sectors between the Pre-Covid and Post-Covid time periods were not statistically significant from each other. Keywords: volatility of return, stock market, covid-19

Does Real Earnings Management Explain Cost of Debt? Evidence from an Emerging Economy

This study tested the relationship between real earnings management and debt cost in Vietnam, a developing market. We used the Generalized Method of Moments (GMM) Technique on a sample of 241 listed firms in Vietnam for 7 years from 2010 to 2016, with a total of 1687 observations collected. The regression result showed a positive association between real earnings management and cost of debt. The results of the study revealed that real earnings management is shown through the rising transactions and directly affected financial reports, thereby affecting creditors by affecting their cost of debt. This can be seen as the driving force for listed companies to increase the quality of their financial information. Our study only focussed on earnings manipulation through real earnings management (REM) to affect transaction costs in Vietnam. The research explains the relationship between managerial behavior (real earnings management) and direct influence on creditors' behavior (cost of debt capital). The result would give outside stakeholders an overall view about the usage of REM in Vietnamese listed firms, the reasonable action of investors, financial institutions, banks, etc on the debt market to reduce risk and the signal of warning for regulators and policy-makers. Keywords: real activities earnings management, cost of debt capital

Financial and Economic Factors Affecting Foreign Direct Investment - A Panel Estimation Study of the ASEAN-5 Countries

ASEAN's strength stems from its diversity, which generates a plethora of diverse market opportunities. Over the last few decades, Foreign Direct Investment (FDI) has risen significantly as a major source of international capital transfer, but the COVID-19 pandemic had a detrimental effect on FDI flows, with the outlook for ASEAN remaining highly unpredictable and contingent on the length of the crisis, the efficacy of policy efforts to encourage investment and to mitigate the economic consequences of the pandemic. This study examines the long-run relationships and short-run dynamic interactions between FDI and its determinants comprising of market size, trade openness, stock market capitalisation and financial development over the period 1970 to 2019. The study applies the dynamic heterogeneous panel estimation techniques of Mean Group (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effects (DFE) to analyse a set of macro panel data of the ASEAN-5 countries, to establish the possible relationships between these variables. An analysis of the results reveals the existence of a long-run causality between FDI and its predictors, indicated by the significant error correction terms for the models tested in this study. There is evidence that market size and stock market capitalization significantly contribute to FDI, with market size being the most dominant contributor. Interestingly, the study also reveals that trade openness and financial development are not significant in determining FDI in the selected countries. The study concludes with an examination of policy implications and also sheds some light on the outlook of FDI in ASEAN-5 post Covid 19. Keywords: foreign direct investment, financial development, pooled mean group, ASEAN-5

Tax Compliance for Sustainable Development by Private Health Practitioners in Malaysia

Tax non-compliance leads to tax evasion and low tax collection, which ultimately may hamper the achievement of Sustainable Development Goals (SDGs). Prior studies suggest that tax compliance is influenced by taxpayers’ attitude, quality of public governance and cost of tax compliance. However, studies that focus on tax compliance among health practitioners are still sparse. Given that potential tax evasion among private health practitioners may lead to a significant loss in government revenue, this study aimed to examine the factors influencing tax compliance among private health practitioners. Data was gathered through a survey involving 271 health practitioners in Malaysia. The findings indicated that only the quality of public governance had a significant relationship with tax compliance while attitude of taxpayers and cost of tax compliance did not significantly influence tax compliance among private health practitioners. This study contributes to the body of knowledge by providing current evidence of tax compliance among health practitioners. By highlighting the importance of educating health practitioners on tax compliance, the study also provides guidance to regulators in planning for more effective tax education and awareness programs. Keywords: tax compliance, attitude of taxpayer, quality of public governance, tax compliance cost, health practitioners

Does the Equity Market Reward “Superior” Management Earnings Forecast? Evidence from the U.S. Quarterly Earnings Guidance

This paper examines whether equity markets reward the controversial practice of issuing short-term management earnings forecasts. Using a large sample of quarterly earnings forecasts, this research found that firms may temporarily reduce stock price volatility by issuing quarterly earnings forecasts. Furthermore, the analysis showed that not all guidance issuers are equally rewarded by equity capital markets. The benefits of reduced stock price volatility and favorable market valuation primarily accrue to firms with a track record of supplying accurate and timely short-term earnings forecasts. Findings suggest that superior short-term earnings guidance, which fosters transparent financial information environments and reduces investor information uncertainty, is indeed rewarded by equity capital markets. As limited research examines the association between forecast attributes and the capital market consequences of quarterly earnings guidance, this study aimed to provide empirical evidence on equity capital market rewards by issuing high-quality quarterly earnings guidance. A practical implication is that firms need to invest in accounting information systems and accounting talent in order to achieve capital market benefits of supplying high-quality short-term earnings forecasts. Keywords: quarterly earnings guidance, forecast attributes, accounting information system, equity market rewards, United States

Perception of the Controllability Principle and its Consequences for Budgetary Control

In this study, we empirically examined the following three relationships through quantitative analysis of web-based survey data collected from managers of Japanese firms. First, we examined the relationship between managers’ perceptions of controllability and budget use. Second, we examined the relationship between budget use and altruistic behavior. Third, based on managers’ perceptions of controllability, we examined the relationship between altruistic behavior and managerial performance. Structural equation modeling revealed that not only did perception of low controllability by managers promoted the use of budgeting, it also promoted organizational citizenship behavior through increased trust in superiors, which subsequently enhanced managerial performance. Keywords: managerial perception, controllability principle, altruistic behavior, organizational citizenship behavior, trust, managerial performance

The Impact of the Quality of Integrated Reporting Disclosure on Corporate Reputation

In 2013, the International Integrated Reporting Council (IIRC) issued the Integrated Reporting (IR) Framework to improve corporate reporting. The purpose of IR is to integrate financial and non-financial information to explain how the organisation creates value and improves firm performance over time. Since the introduction of IR, a company weighs the benefits over the costs of changing to IR. Recent trends in IR have heightened the need to examine the actual contents of IR. The objective of this study was to find the relationship between preparing a high-quality IR and corporate reputation. Corporate reputation is one of the main objectives for the preparation of IR, and preparing a high-quality IR can positively impact corporate reputation. Data was collected from a sample of 120 companies from the IIRC websites for three years (360 firm-year observations) to examine the quality of following the 2013 Framework. An index was developed, and the corporate reputation score was collected from the RepTrak websites. The finding showed that companies preparing high-quality IR reports had a significant positive relationship with corporate reputation. Preparing a high-quality IR sends a signal to users of annual reports as a connotation of the company (good product or services, ethical management reporting), which will help build trust towards the company and improve its reputation. This study contributes by providing empirical evidence for a company, which is uncertain about the benefits of IR. The IR disclosure score can be used as a reference by IIRC and policymakers to prepare the IR. Keywords: integrated reporting, disclosure quality, corporate reputation

Corporate Governance and Operational Risk Disclosure: Evidence from Shariah-Compliant Companies in Malaysia

This study aimed to examine the level of operational risk disclosure among Shariah-compliant companies in Malaysia. The relationship between corporate governance characteristics and operational risk disclosure was also examined by focusing on board characteristics, i.e. independent directors, audit committee meetings, Muslim directors, women directors and education levels of the directors. The sample comprised of 285 Shariah-compliant companies listed in the ACE Market of Bursa Malaysia for the financial years 2014 to 2018. The study used content analysis to assess operational risk disclosure. The information disclosure was scored using an adapted disclosure index. Findings revealed that the disclosure of operational risk information in Shariah-compliant companies was at a moderate level, specifically not more than sixty per cent. More importantly, the analysis showed a positive significant relationship between a woman director and operational risk disclosure. However, a negative significant relationship was found between Muslim directors and operational risk disclosure. Other independent variables were found to have no relationship with the operational risk disclosure. The findings may provide future researchers and regulators with references for assessing the level of operational risk disclosure among public listed companies in Malaysia and are expected to deliver some improvement in examining other characteristics to strengthen the governance practices in Malaysia. Keywords: operational risk disclosure, women director, Muslim director, Shariah-compliant companies