Agency Theory Research Articles

Relationship between Auditor Independence and Financial Statement Quality in Rwanda

Purpose: The aim of the study was to assess the relationship between auditor independence and financial statement quality in Rwanda. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study demonstrated that when auditors maintain a high level of independence, they are more likely to detect and report financial misstatements or irregularities accurately. This leads to higher-quality financial statements that investors and stakeholders can rely on for decision-making purposes. Conversely, when auditor independence is compromised, such as through close relationships with management or financial incentives, there is a greater risk of overlooking errors or fraudulent activities, ultimately reducing the quality of financial reporting. Regulatory bodies and professional standards, such as the Sarbanes-Oxley Act and the International Standards on Auditing, emphasize the importance of auditor independence to safeguard the integrity of financial information. Companies that prioritize auditor independence and engage independent audit firms tend to have stronger financial statement quality, which contributes to market confidence and investor trust in the transparency and accuracy of financial reporting. Implications to Theory, Practice and Policy: Agency theory, institutional theory and stakeholder theory may be used to anchor future studies on assessing the relationship between auditor independence and financial statement quality in Rwanda. In terms of practical implications, it is essential to encourage audit firms and companies to adopt best practices that ensure auditor independence. From a policy perspective, collaboration with regulatory bodies is essential to review and enhance existing audit regulations, standards, and guidelines.

Influence of Executive Compensation on Firm Risk-Taking Behavior in Qatar

Purpose: The aim of the study was to assess the influence of executive compensation on firm risk-taking behavior in Qatar. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study indicated that the structure and magnitude of executive compensation can significantly impact the risk profile of a firm. When executives are rewarded with substantial stock options and performance-based incentives, they are often motivated to pursue riskier strategies that have the potential for higher returns, aligning their interests with those of shareholders. However, this can also lead to excessive risk-taking, which may jeopardize the firm's stability if not managed properly. Conversely, fixed salaries and lower levels of variable compensation tend to promote more conservative decision-making, reducing the propensity for risk. The balance and design of executive compensation packages are thus crucial in ensuring that executives take calculated risks that contribute to sustainable firm growth rather than engaging in hazardous financial behaviors that could lead to adverse outcomes. Implications to Theory, Practice and Policy: Agency theory, tournament theory and stewardship theory may be used to anchor future studies on assessing the influence of executive compensation on firm risk-taking behavior in Qatar. Implement compensation structures that strategically align executive incentives with organizational risk strategies. Collaborate with regulatory bodies to enhance governance frameworks that govern executive compensation.

Impact of Blockchain Technology on Financial Reporting in Small and Medium-Sized Enterprises (SMEs) in Pakistan

Purpose: The aim of the study was to assess the impact of blockchain technology on financial reporting in small and medium-sized enterprises (SMEs) in Pakistan. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study indicated that blockchain's decentralized ledger system enhances transparency and accuracy in financial data recording and reporting. It reduces the risk of fraud and manipulation due to its immutable nature, ensuring that transactions are securely recorded and traceable. This technology streamlines processes, such as auditing and reconciliation, leading to cost savings and increased efficiency for SMEs. Additionally, blockchain's real-time data availability improves decision-making capabilities and enhances trust among stakeholders. However, challenges such as regulatory compliance and implementation costs remain, requiring careful consideration for SMEs looking to adopt blockchain for financial reporting. Implications to Theory, Practice and Policy: Diffusion of innovations theory, agency theory and resource-based view may be used to anchor future studies on assessing the impact of blockchain technology on financial reporting in small and medium-sized enterprises (SMEs) in Pakistan. In practice, SMEs are encouraged to initiate pilot projects that leverage blockchain-based financial reporting solutions. On the policy front, advocating for regulatory clarity and supportive frameworks is essential to promote blockchain adoption among SMEs.

Ethical Leadership and Financial Reporting Practices in Chad

Purpose: The aim of the study was to assess the ethical leadership and financial reporting practices in Chad. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study indicated that when leaders prioritize ethical conduct and integrity, it positively influences how financial information is reported and communicated to stakeholders. Ethical leaders foster a culture of transparency, accountability, and honesty, which leads to more accurate and reliable financial reporting. This, in turn, enhances investor confidence, reduces the risk of financial fraud, and promotes long-term sustainability for the organization. Studies also highlight the importance of ethical leadership in regulatory compliance, as leaders who prioritize ethics are more likely to ensure that financial reporting practices adhere to legal and ethical standards. Overall, the link between ethical leadership and financial reporting practices underscores the significant impact that leaders have on the integrity and credibility of financial information within companies. Implications to Theory, Practice and Policy: Transformational leadership theory, stakeholder theory and agency theory may be used to anchor future studies on assessing the ethical leadership and financial reporting practices in Chad. Organizations should implement comprehensive ethics training programs for leaders and employees to enhance ethical awareness, decision-making, and behavior related to financial reporting. Policymakers and regulators should strengthen regulatory oversight and enforcement mechanisms related to financial reporting practices.

Effect of Corporate Governance on Financial Performance in China

Purpose: The aim of the study was to assess the effect of corporate governance on financial performance in China. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study indicated a positive correlation between strong corporate governance practices and improved financial outcomes for companies. These practices typically include transparent decision-making processes, effective board oversight, and alignment of management incentives with long-term shareholder value. Study suggests that companies with robust corporate governance structures tend to experience higher profitability, better risk management, increased investor confidence, and enhanced access to capital. Additionally, strong corporate governance is associated with lower instances of financial misconduct and improved overall corporate reputation, which can further contribute to sustainable financial performance over time. Implications to Theory, Practice and Policy: Agency theory, stewardship theory and resource dependency theory may be used to anchor future studies on assessing the effect of corporate governance on financial performance in China. Implement best practices in corporate governance that align with empirical findings and theoretical insights to optimize financial performance. Advocate for regulatory frameworks and policies that incentivize effective corporate governance practices and align them with desired financial performance outcomes.

Impact of Financial Regulations on Bank Profitability in Uganda

Purpose: The aim of the study was to assess the impact of financial regulations on bank profitability in Uganda. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Financial regulations significantly influence bank profitability, primarily by affecting operational costs, risk management practices, and lending activities. Stricter capital requirements, such as those imposed by Basel III, generally enhance financial stability but may reduce profitability by limiting leverage and increasing the cost of compliance. Regulatory measures aimed at consumer protection and transparency, while beneficial for market integrity, can also impose additional administrative burdens and costs on banks. Conversely, deregulation periods often see increased profitability due to relaxed constraints on lending and investment activities. However, this can come at the expense of higher risk exposure and potential financial instability. Overall, the balance between regulatory stringency and bank profitability hinges on the specific regulations in place and the banks' ability to adapt and innovate within those frameworks. Implications to Theory, Practice and Policy: Agency theory, capital structure theory and information asymmetry theory may be used to anchor future studies on assessing the impact of financial regulations on bank profitability in Uganda. Practitioners should advocate for risk-based regulation that tailors regulatory requirements to banks' risk profiles and systemic importance. Policymakers should prioritize efforts to harmonize financial regulations across jurisdictions, especially in global banking hubs.

Stuffing the refugee education pipeline: the integration process and the exclusion of refugees from knowledge production in a Western destination country

The number of forcibly displaced people, including refugees, has been increasing exponentially over the last few decades. Refugees settled in Western destination countries face several challenges in successfully accessing and participating in higher education and in becoming knowledge producers. This is in sharp contrast to uncritical assumptions that refugees settled in these countries are better off in terms of pursing higher education. To shed more light on this issue, I aim to address the research question ‘How does the integration process in a Western destination country contribute to the exclusion of refugees from knowledge production?’ The article uses an education pipeline analogy and human agency theory as the theoretical framework. I conduct narrative interviews with six refugees who planned to pursue higher education but could not realize their plans in Norway. The findings indicate that the refugee education pipeline is broken and stuffed with various restrictive factors that weaken the refugees’ agency to make informed decisions. These factors included a long waiting time for settlement, withholding relevant information about higher education, demotivating and misplaced advice about higher education and language training programmes for non-academic purposes. The article ends with a conclusion and several implications.

CEO stock option pay and risk‐taking investment in the hospitality industry: The moderating effects of situational factors

AbstractBased upon behavioral perspective and agency theory, this paper attempts to investigate the effect of CEO stock option pay on firms' risk‐taking investments in the restaurant sector. Specifically, this paper proposes that option‐loaded CEOs tend to make risky investments. In addition, we investigate how the prior stock performance of a firm and its CEOs' characteristics moderate this relationship. The findings of this paper show that option‐loaded CEOs are more likely to engage in risk‐taking investments. However, this positive main relationship is diminished when a firm has a good prior stock performance, when a CEO has a longer tenure, and when he or she becomes aged. Given the lack of empirical literature that explores the corporate governance in the hospitality literature, this study adds value to the existing research by further investigating the effect of CEO stock option pay scheme on restaurant firms' risk‐taking behavior.

Agency conflicts in innovation adoption: Lessons from the airline industry

Introducing an innovation does not end, but rather starts, with adoption. In fact, some innovations display network elements and require more than one firm to take them up in order to be successful and deliver the intended results. Such is the case of NDC (new distribution capability), an airline-fostered enhancement of the way air travel services are conveyed and distributed from carriers to travel agents. The promise behind NDC is that travel services will be sold more richly and within a more open and inclusive framework. We draw on the diffusion of innovations, institutional theory, and agency theory to review the determinants of adoption and its effects on performance for service providers. We use the International Air Transport Association (IATA) ticket database to establish the role that institutional pressure plays on innovation behaviours and firms’ results. We find that institutional pressure, not just innovation attributes, influence outcomes. Also, given each player's different incentives and the asymmetry of information, ticket sales are selectively distributed in ways that fit the agent and only occasionally the airline principal. Thus, we conclude that travel intermediaries assess outcomes wholistically and that the innovation's revenue uplift depends on such assessment.

Effect of capital structure, company size, profitability and liquidity on company value: evidence from Indonesia manufacturing companies

This research was conducted to determine whether PBV is influenced by capital structure, company size, profitability and liquidity. This research uses two kinds of theories: signaling theory and agency theory. The data used is secondary data from the Financial Statements of Manufacturing Industry Companies listed in the Indonesia Capital Market Directory in 2018-2021. This study used panel data with a sample of 74 from 135 companies during 2018-2021. Sampling technique using purposive sampling. The results were obtained in IDX manufacturing sector the debt equity ratio and firm size has a negative and insignificant effect on price book value. Return on equity negative and significant to price book value. Current ratio has a positive and insignificant effect on price book value. The purpose of this study also to determine the significance of the effect of debt equity ratio, firm size, return on equity and current ratio on price book value.

The Impact of Institutional and Managerial Ownership, Dividend Policy, and Company Size on the Financial Performance and Their Consequences for Firm Valuation

Objectives: The objective of this study is guided by agency theory, which seeks to reduce conflicts of interest between business owners and agents. Institutional ownership, management ownership, and dividend payout ratio are regarded as the primary determinants of a company's financial success, as measured by Return on Equity (ROE). Finally, financial performance can affect firm value, as measured by Price to Book Value (PBV).Methodology: The research population consists of manufacturing sector enterprises that registered with the BEI between 2017 and 2021. The analysis approach utilized is Moderated Regression Analysis (MRA), which is a multivariate linear regression model with interaction (multiplication of more than one independent variable). Finding: H1 and H2 are rejected as the computed t is less than the t table and the sig value exceeds α 0.05. H3 and H4 are valid since the projected t value surpasses the t table and the sign value is less than 0.05. H5 is also regarded as an MRA, despite its negative consequences.Conclusion: Institutional ownership and managerial ownership do not affect financial performance or return on equity. Meanwhile, the dividend payout ratio has a favorable and large impact on financial performance. This shows that if the choice of dividend policy is of good quality and in line with the company's interests, it will have a beneficial influence on financial success. ROE has a positive and significant effect on company value/price book value (PBV). Meanwhile, company size (M) has a significant moderating value but the effect is negative. This means that variable M has a negative moderating influence on the effect of ROE on PBV.

Manobo, Bagobo, and Mansaka Indigenous Cosmology: Rediscovering Culture through Dramatist Pentad Structures of Folk Heroes

This study investigates the culture of Manobo, Bagobo, and Mansaka Indigenous Peoples in Mindanao. It utilizes the qualitative-descriptive method to describe culture based on the practices of folk heroes in the collected oral narratives. Furthermore, the study uses the dramatist pentad theory of Kenneth Burke, including act, scene, agent, agency, and purpose, to produce cultural interpretations. Hence, the study reveals the culture mirrored in the oral narratives such as: (1) Manobo, pangayaw (hunting of enemies) and transcendental belief in Tubaran (magical instrument); (2) Bagobo, hunting of wild chickens and encountering Busaw (evil spirits); and, (3) Mansaka, courtship and marriage to a mythical creature and hunting of birds. This research facilitates critical discourses on culture through oral narratives. It may foster a sense of place and cultural identity among academic scholars to rediscover the epistemological and ontological knowledge of Indigenous Peoples in Mindanao.

The Influence of Profitability, Liquidity, Solvency and Company Growth on Going Audit Opinion

This study aims to assess empirically the partial effect of Profitability, Liquidity, Solvability, and Growth of the Company on Going Concern Audit Opinion. This research is a type of quantitative research. Withdrawal of research hypotheses using the basis of Agency Theory, supported by previous studies that have variable similarities. Research Samples are 12 Mining Companies listed on the Indonesia Stock Exchange. Research variables include Profitability, Liquidity, Solvability, Company Growth and Going Concern Audit Opinion. The type of data used is secondary data from the collection of financial report documents. Using descriptive statistical techniques and assisted logistic regression SPSS 25.0 for data analysis. In addition, this study uses the feasibility test of the Regression model. The results showed that partially Profitability, Solvability and Company Growth had an effect on Going Concern Audit Opinion. While Leverage partially has a positive effect on Going Concern Audit Opinion. Based on the simultaneous test of KAP Reputation, Profitability, Leverage, Solvability, Leverage and Company Growth have a positive effect on Going Concern Audit Opinion. Determination, Profitability, Solvability and Sub -idiaries Growth is 26.6%. One suggestion that is given is that you need to add another variable that can complement the variable gab. So that it can produce 100% of Going Concern Audit Opinion indicators.

Impact of Audit Committee Quality on the Financial Performance of the Iraqi Banking Sector

Purpose: The purpose of this study is to examine the impact of Audit Committee Quality on Financial Performance in the Iraqi Banking Sector to improve Financial Performance. The agency theory serves as the study’s theoretical underpinning. Design/methodology/approach: The major research design was a quantitative method employing Structural Equation Modelling (SEM). SmartPLS3 was utilized to examine data from a set of respondents who were chosen using a purpose random sampling technique which included the CEO, CFO, accountants, and auditors. The survey questionnaire was disseminated to 386 people, and the collected data were evaluated using a measurement model. Findings: According to the findings, the Audit Committee Components have a considerable impact on financial performance. The relationships were found to be positive and significant whereby Expertise (β =7.422, p0.05), Independence (β =4.549, p 0.05), Size (β=3.736, p0.05), and Meetings (β=3.064, p0.05). The Audit Committee component of Expertise was found to have the most significant impact on financial performance. Research, Practical & Social implications: Implications-wise, this study indicates the need for Iraqi banks to improve the quality of their audit committees towards enhancing their financial performance, also Central Bank should work side by side with Iraqi universities to continue research on the role of Audit Committees. Originality/value: This study provides an overview of the impact of the quality of the audit committee on financial performance and the extent of its importance in the Iraqi banking sector to reduce cases of manipulation and errors in the financial statements of banks. The study recommends the use of independent audit committees to improve financial performance in the Iraqi liquidation sector.

Supplier–buyer (in)congruence in environmental management accounting for sustainable development in the context of Japan

AbstractThis study provides a comprehensive perspective on the integration of Environmental Management Accounting (EMA) in translating environmental management strategies into corporate outcomes, both at the firm and supply chain levels. Grounded in legitimacy theory and agency theory, we introduce a conceptual framework to comprehensively investigate the impact of EMA implementation on corporate environmental performance (CEP) and corporate financial performance (CFP). Additionally, by considering the dynamics of supplier–buyer relationships, this research delves into the influence of supplier–buyer alignment in EMA on corporate performance, encompassing CEP and CFP within a supply network. To collect empirical data, we partnered with two prominent information firms in Japan, Toyo Keizai Inc. and., Nikkei Inc and gathered EMA data from chief financial officers of publicly listed companies spanning multiple industries in Japan. We manually paired these public firms with their business partners, including industry buyers and suppliers, to establish focal firm‐business partner pairs. Our findings indicate a positive correlation between the extent of EMA implementation and both CEP and CFP. Furthermore, we observe that board gender diversity enhances the relationship between EMA implementation and CFP, while it exerts no influence on the connection between EMA implementation and CEP. Lastly, our study reveals that supplier–buyer congruence in EMA implementation yields positive effects on the performance of focal firms operating within a supply chain network.

Conceptual principles of interorganizational (network) accounting in clusters based on the provisions of institutional theory

Purpose: The purpose of the article is to study the key theoretical principles of institutional theory as the basis for shaping an accounting system of interorganizational (network) linkages in the cluster and to propose directions for their solution. Methodology/approach: The methodological tool is a systematic analysis of the fundamental provisions of economic teachings and scientific works of accounting researchers. Bibliometric analysis was applied to scientific publications indexed in Scopus, which made it possible to determine the most popular economic theories as thematic guidelines. We also used methods of learning induction and deduction for contextual research of keywords in scientific publications and to establish links between the research characteristics of each of the selected theories. The abstract-logical method was used to formulate scientific-theoretical generalizations and conclusions. Findings: The problem of interorganizational accounting in the cluster is outlined based on the provisions of the institutional theory. Development directions are proposed, and recommendations are given for improving accounting within the framework of agency theory, transaction cost theory, contract theory, and actor-network theory. Originality/value: The results of the study contribute to the analysis of changes and directions of development of interorganizational accounting in the cluster and also complement accounting theory. The article fills a research gap by presenting the development of interorganizational accounting based on agency theory, transaction cost theory, con-tract theory, and actor-network theory. The originality of the research lies in its creation of a foundational framework and its introduction of a novel perspective on the role of accounting in interorganizational (network and cluster) relations, allowing for a more comprehensive understanding of their developmental peculiarities.

Do family ownership and supervisory board characteristics influence audit report lag? A view from a two-tier board context

This study investigates the impact of family ownership and supervisory board characteristics on audit report lag in Indonesia. The study relies on a balanced panel dataset and matched-pair sample of 124 listed non-financial firms (2017–2019) in a two-tier board context, drawing on Type II agency theory and the entrenchment/alignment implications of ownership concentration. First, we find a positive and significant association between family ownership and audit report lag. Second, we find evidence that the size of the supervisory board (locally referred to as the board of commissioners) and the frequency of meetings are negatively associated with audit report lag. Further analyses reveal that firms with a larger proportion of family members on the supervisory board experience longer reporting lag. This finding highlights the family’s entrenchment and their domination of the board of commissioners. Additional analysis considering the commissioners’ backgrounds reveals that audit report timeliness worsens when there is a larger proportion of community leadership. This suggests that some commissioner profiles could further lead to entrenchment behaviors. Our findings contribute to the literature and to policy by highlighting the potential and limits of a two-tier board policy on accounting outcomes, particularly in the context of dominant family structures in emerging economies.

From home to boardroom: Marital status and its influence on ESG disclosure

AbstractThis research article investigates the relationship between the marital status of board members and organizations' environmental, social, and governance (ESG) disclosure, with Jordan as the study context. The investigation, grounded in established governance theories, primarily agency theory, stewardship theory, and social identity theory, adds a novel dimension to the discourse on corporate governance perspective. The study sample included 81 nonfinancial companies listed on the Amman stoke exchange from 2012 to 2021. The findings disclose a pronounced positive relationship between married board members and ESG disclosure separately and collectively, pointing to a normative commitment emanating from their personal lives that extends into their roles as corporate stewards, influencing corporate sustainability, and ethical governance. Conversely, the results did not indicate a relationship between single board members and ESG disclosure. The study underscores the importance of considering the personal attributes of board members in shaping corporate governance and ESG practices. Also, it encourages a broader perspective on how diverse personal backgrounds can enhance sustainability and ethical values within organizations by advocating for boards that reflect diverse marital statuses and a commitment to family values, benefitting not only shareholders but also society at large.

The Influence of Implementation and Financial Management on Village Financial Performance (A Study in the Villages of Lolayan Subdistrict, Bolaang Mongondow Regency)

Several factors impact the effectiveness of financial management in village governments, as stated in Bolaang Mongondow Regent Regulation No. 4 of 2019. These factors include preparation, allocation, execution, oversight, and responsibility. The main objective of this study is to determine whether administration and execution significantly affect the financial performance of villages in the Lolayan District of Bolaang Mongondow Regency. Quantitative research methods, which involve numerical and statistical techniques, were used. Secondary data was collected through surveys, interviews, and literature reviews. A total of 133 samples were used for this study. The applied theory is agency theory, which helps understand the interaction between principals (those with an interest) and agents (those who act on their behalf). The research findings suggest that implementation does not significantly impact the financial performance of villages in the Lolayan District. This may be due to various factors, including a lack of transparency in the allocation of village funds and the treasurer's inability to adjust program implementation according to current regulations. Consequently, many activities funded by the village fund lack the necessary proof documents or receipts.

The Influence of Accountability and Human Resource Quality on Village Financial Management (A Study in the Villages of Biau District, North Gorontalo Regency)

This study aims to determine the impact of accountability and human resource quality on village financial management in the villages of Biau District, North Gorontalo Regency. The study utilizes a quantitative methodology, collecting data through in-depth interviews and questionnaires. A total of 102 samples were used for this research. The study employs SEM AMOS, which stands for Structural Equation Analysis. The findings of this study indicate that accountability and human resource quality have a positive influence on village financial management in the villages of Biau District, North Gorontalo Regency. The theoretical framework used in this study is agency theory, which provides insights into the relationship between principals (those with interests) and agents (those who act on their behalf). The study concludes that accountability and human resource quality have a positive effect on village financial management in the villages of Biau District, North Gorontalo Regency.