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March 2017 (Global Review of Accounting and Finance)

March

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March 2017 (Global Review of Accounting and Finance)

Total Articles - 9

Pages 1 – 9

Author: Kanukuntla Shankaraiah and Seyed Masoud Sajjadian Amiri

The study focuses on the association between audit committee quality characteristics and corporate governance quality, so as to improve the quality of corporate governance by understanding and managing the audit committee characteristics. It is found in the study that in most of the equity based listed companies at Bombay Stock Exchange (BSE) under study, have complied with the legal formalities like appointment of independent directors, number of meetings, size of the audit committee, legal qualifications and financial qualifications of the directors, as they were required for the listing at a stock exchange in India. Further, the analysis and tests stated that though the audit committee quality characteristics have association with corporate governance quality, except the proportion of independent directors on audit committee and number of audit committee meetings, other attributes have shown no impact on later, thus it may be suggested that the companies may improve the corporate governance, by taking more independent directors and conducting more number of audit committee meetings.

Pages 10 - 26

Author: Yalan Feng, Mohinder Parkash and Sha Zhao

On December 22, 1999, SEC adopted a new rule mandating companies to have independent auditors review the financial information on Form 10-Q (or 10-QSB) prior to filing the form with the SEC. This paper investigates whether mandatory timely auditor review on quarterly reports increases accounting conservatism. Using data of a large pool of US companies, a number of regressional models provide evidence for more conservative timely reviewed earnings. The result continues to hold when we analyze earnings variability and use subsamples.

Pages 27 – 44

Author: Alex Ng

Although pre bid run ups and illegal insider trading on takeovers is studied in several countries, there is no study on this phenomenon in Chinese corporations. Amidst the very few studies which do examine Chinese mergers and acquisitions, this unique aspect is studied by looking at pre-bid run up of prices / returns for both acquirers and target. A distinct pattern and magnitude of run ups is found in a sample of Chinese firms. Surprisingly, the pattern shows run ups occurring a relatively long time before announcement (90 days), and that the magnitude of the run up is much higher for the acquirer firm compared to the target. Furthermore, conditional analyses show that state and legal ownership has negative effects on insider return profits in acquirers as hypothesized. This is consistent with the rationale that state/legal owners tend to avoid insider trading to avoid personal prosecution and liability and to comply with state regulations. Mixed control firms show positive effects on insider return profits for targets as hypothesized.

Pages 45 – 55

Author: Muhamad Khalil Omar, Shakerin Ismail, Lee Pei Ying and Toh Chin Yau

Investors evaluate their decisions based on the financial statements, thus they will always concern about the quality of accounting information. However, some users were of the opinion that the financial statements fail to satisfy their information needs. Therefore, this study emphasizes on the factors that will influence the quality of accounting information i.e. organizational structure, organizational culture and internal control system. This study was conducted among 100 accounting information systems users in Malaysia and results indicated that all factors shall predict the quality of accounting information system. The research is beneficial to organizations in implementing a quality accounting information system.

Pages 56 – 71

Author: Mohamed Abualhaija

The financial performance of European airlines appears to be improving faster under International Financial Reporting Standards (IFRS) when compared with local European Union Generally Accepted Accounting Principles (GAAP). This paper examines how the accounting standards impact the financial performance of the selected EU airlines. Each of the eleven EU airlines operated in European countries and joined the European Union before 2001. The researcher collected data from the financial statements for the years 2001-2008. As the year of IFRS convergence was 2005, the years 2001-2004 represent the pre- IFRS convergence period, and the years 2005-2008 represent the post-IFRS convergence period. The selected profitability indicators were employed to measure the efficiency, productivity, and return on investments for these entities. The resulting data analysis provides evidence that the accounting system does not impact the profitability of the selected airlines.

Pages 72 – 83

Author: Raja Rizal Iskandar Raja Hisham, Mohd Rizal Palil and Wan Aishah Wan Mohd Nowalid

This study was undertaken to examine the relationship between the charismatic and democratic style of leadership on organizational transparency evidenced from Islamic insurance organizations in Malaysia. This study aims to investigate the extent of transparency practices based on the adoption of certain leadership styles namely charismatic and democratic. 185 employees of the Islamic insurance companies participated in this study. For the analysis procedures, Smart-PLS version 3.1 was used to assess the instrument and test the research hypothesis. The results of path modelling analysis indicated that both charismatic and democratic approach have a significant effect on organizational transparency. It could be described that a leader with high level of charisma and democracy are likely to practice high level of transparency in his/her leadership in the organization. This study further suggest that this area to be extended in the context of Malaysia as it has yet been undertaken in the scope of leadership and governance specifically. This study contributes to the theoretical body of knowledge as it provides further empirical literature to the factors contributing to the improvement of transparency practice in an organization.

Pages 84 – 94

Author: Angelito C. Descalzo, Stephany. Cabaccan, Jonathan Dob, Ralph Fermante, Christian Reyes, Adrian Simangan and Judy Ann Tuzon

This study examines how the presence of an accountant in the Board of Directors of a particular corporation is correlated to the discretionary accruals recognized in its financial statements. The discretionary accruals of the top twenty publicly listed firms in the Philippines from years 2009 to 2014 were calculated using the Healy and Modified Jones Models, and board compositions of the firms were evaluated and reviewed. Thereafter, a correlation analysis is applied to determine whether or not there is an association between the two variables. Results suggest that the amount of income-decreasing discretionary accruals and total discretionary accruals are negatively correlated to the percentage of accountants in the board, while there is no correlation between the percentage of accountants in the board and income-increasing discretionary accruals recognized in the financial statements.

Pages 95 – 103

Author: Guler Aras and Ozlem Kutlu Furtuna

Corporate savings has become a significant issue in contemporary international debates. Several studies have stressed the pros and cons of corporate cash holding in developed countries. As for the developing countries, the literature for the topic is scarce which contradicts to the significance of the topic due to the growing economic activities of Brazil, Russia, India and China (BRIC) and Turkey. This study proposes to highlight this issue for firms operating in BRIC countries and Turkey by determining corporate cash holding across different firm sizes and industries. The sample contains 5.840 firm-year observations across these countries for the period 2005–2014. Findings provide support for the notion that related firms is under financial constraint and propose to hold more cash within precautionary motive for cash management.

Pages 104 – 114

Author: Mohinder Parkash and Rajeev Singhal

For a sample of US firms, Goyal and Santa-Clara (2003) find that the average stock variance is positively associated with higher returns in the subsequent month. The authors interpret the evidence as supporting the hypothesis that idiosyncratic risk matters. Several subsequent papers employing different methodologies present evidence conflicting with the findings of Goyal and Santa-Clara. We adopt the approach of Goyal and Santa-Clara in the Indian context. The results we obtain when we measure volatility on a monthly basis do not offer support for evidence documented in Goyal and Santa-Clara. However, when we compute volatility over weekly intervals, we find results consistent with those presented by Goyal and Santa- Clara. Our results in the Indian context are in line with the generally supportive evidence obtained using international data about the positive relationship between conditional volatilities and expected returns with an important difference. Supporting the arguments of Andersen, Bollerslev, Diebold, and Labys (2003), our results suggest that higher frequency data is more powerful in predicting future volatilities.

Total Articles- 9

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