Corporate Accounting Practices Research Articles

Extrinsic shocks and corporate accounting behaviour: The case of the Great Kanto Earthquake in 1923

This study examines how the Great Kanto Earthquake of 1923 influenced the depreciation disclosure practice adopted by Japanese companies in the years that followed. Prior to World War II, corporate accounting behaviour varied widely in Japan, as there were few substantive rules regulating the contents of financial statements. Assessing how a large-scale extrinsic shock such as a major earthquake affects and shapes corporate accounting practices in an unregulated disclosure environment such as this would seem important to understand the intrinsic impact of exogenous shocks. By statistically analysing the contents of 547 financial statements issued by 51 machinery, electrical and transportation equipment manufacturers during the six years from 1921 to 1926, this study shows that the substantial damage inflicted by the Great Kanto Earthquake discouraged companies from disclosing depreciation expenses by reducing or failing to recognise them at all and rendering them less important in their financial statements.

The Impact of International Financial Reporting Standards (IFRS) on Global Corporate Accounting Practices

The Impact of International Financial Reporting Standards (IFRS) on Global Corporate Accounting Practices

Analysing corporate governance and accountability practices from an African neo-patrimonialism perspective: Insights from Kenya

• We critically examine corporate governance and accountability practices in Kenya. • We investigate how corporate sector reforms are constrained by neo-patrimonialism. • Data includes 29 semi-structured interviews, field observations and documents. • Neo-patrimonialism influences director appointments and board composition. • Neo-patrimonial systems supplant formal institutions leaving them as facades. This paper examines corporate governance (CG) and corporate accountability practices in the African context, by focusing on the case of Kenya. Our data comprises a combination of 29 semi-structured interviews, field observations and archival evidence. We reveal how western-originated CG and accountability reforms are constrained or subverted by a vigorous neo-patrimonial regime. The Kenyan corporate sector has well defined legal-rational structures, including an elaborate corporate sector regulatory framework, professionals (i.e. accountants and auditors) and corporate boards. In contrast, however, informal networks and patronage interfere with the nomination and work of non-executive board members, thereby hindering the possibility of an independent monitoring of executive management. A conflictual and inadequately resourced regulatory framework plays a more symbolic than an effective regulative role in enforcing CG and accountability practices. We also find a widespread rent-seeking culture that significantly hinders the exercise of corporate accountability. Furthermore, external auditor independence is problematic due to conflicts of interest and the auditors’ dependence on advisory fees, thereby favouring a clientelist association with auditee firms. Overall, our findings reveal that CG and accountability practices, while ostensibly present in Kenya, are largely ineffective due to the influence of neo-patrimonial realities on the mind-set and actions of corporate actors.

Strategic Deviance and Accounting Conservatism

This paper considers the influence of corporate strategic positioning on the firm’s accounting conservatism from the perspective of a company’s deviation from the industry’s conventional strategy, and selects China’s A stock market company as an initial research sample for empirical analysis from 2000 to 2016. Research shows that the greater the company’s strategic differences, the lower the accounting conservatism. Further studies have found that the negative correlation between corporate strategic differences and accounting conservatism is even more pronounced in private enterprises. In addition, from the perspective of the intensity of industry rules, this paper compares the degree of strategic deviance between state-owned enterprises and private enterprises, the results show that state-owned enterprises are subject to stronger constraints and the degree of strategic differences will be lower. This article focuses on the perspective of corporate strategic deviance and examines the role of non-accounting information in corporate accounting practices, and compares the strategic differences between state-owned enterprises and private enterprises from the perspective of the strength of industry constraints, which provides an effective means for the company’s external stakeholders, including creditors and investors, to use the company’s strategic information, and enriches the research on the reform of China’s property rights system.

Does the Presence of Female Executives Curb Earnings Management? Evidence from Korea

AbstractWe investigate the role of female executives in curbing earnings management behaviour in Korea, a country known for its strong male‐dominant culture. In a sample of Korean firms from 2002 to 2010, we find that female presence in top management is negatively associated with discretionary accruals, suggesting that gender diversity in senior management deters opportunistic financial reporting even in a highly male‐dominant corporate environment. Further, this association is primarily observed in firms with stronger (weaker) female (male) dominance. This finding is consistent with the idea that female executives can exert more influence on corporate decisions in a more female‐friendly environment. These findings have implications for academics and practitioners seeking to understand the impact of the role of top executive gender diversity in corporate accounting practices.

Using international standards as a complement to overcome the unachieved nature of local GAAPs

Purpose In recent years, Tunisian listed companies have been preparing their financial statements under a hybrid set of accounting standards; a mixture of national and international standards. The purpose of this paper is to empirically verify to what extent this particular form of de facto compliance with IAS/IFRS (which are not authorized in Tunisia) is used among listed companies. The paper further analyzes accounting professionals’ perception of the current state of Tunisian standards and their attitudes in the absence of relevant national Generally Accepted Accounting Principles (GAAPs). Design/methodology/approach Two methodological approaches were used to answer the paper’s research questions: a document analysis approach and a survey questionnaire. Findings The document analysis revealed that a growing number of listed companies complement local GAAPs by standards they select among IAS/IFRS. The perception study indicated that Tunisian Accounting Standards are, indeed, less suitable for listed companies’ needs. Accordingly, when there is no local standard to measure a specific transaction or event, accounting professionals seem to have no problem in using some IAS/IFRS as a complement to overcome the unachieved nature of local GAAPs. However, the overall findings are likely to suggest that international standards used must not conflict with the Tunisian conceptual framework’s provisions. This means that the use of IAS/IFRS in conjunction with local GAAPs is generally perceived as being beneficial to the quality of financial statements. Research limitations/implications This study may be of interest to many developing countries that have not continued the harmonization of their accounting standards with IAS/IFRS. Future research should focus on the reasons which have led to this unachieved harmonization and the consequences of the normative gap which might emerge. Practical implications Previous research has often shown how difficult it is to apply international accounting standards in developing countries, especially when they do not correspond to the companies’ needs. Difficulties could occur when local standard-setters do not accurately know which new international standards are suitable to the market needs. The study gives some insights suggesting that corporate accounting practices should be analyzed to understand the real needs for new standards. Originality/value The paper highlights the beginning of a de facto convergence with international accounting standards without any support of national de jure convergence. Consideration of this phenomenon may contribute to the understanding of the malaise that characterizes the current accounting standard-setting in developing countries.

Developing corporate accounting regulation in Libya past and future challenges

Purpose – The purpose of this paper is to examine the nature and development of corporate accounting regulation in Libya. Design/methodology/approach – Questionnaire survey and semi-structured interview methods were used to collect data. Semi-structured interviews were conducted with external auditors, financial managers, accounting academics and regulators. Findings – This paper found general agreement that the accounting regulation of public corporations and banks is strongly influenced by the Libyan Commercial Code and the Income Tax Law. Although listed companies and the banking sector in Libya are required to comply with International Accounting Standards (IASs), the majority of them still comply with the US Generally Accepted Accounting Principles (US GAAP). Moreover, the conclusion that can be drawn from this study is that the enforcement of IASs through the Libyan Accountants and Auditors Association (LAAA), local auditors and the Libyan Stock Market has not achieved its purpose. The results also indicate that the accounting profession in Libya is still in its infancy and still lacks clear structure in order to develop corporate accounting practice and it appears to play only an important role in retaining external influences on the accounting practice. The empirical results of this research show that the Salter and Niswander (1995) criteria (longevity, setting exam and auditors’ opinion on companies’ financial reports) found that the level of professionalism in Libya is below the required standard. Originality/value – This paper focuses on corporate accounting regulation and practices and the role of the LAAA in the development of corporate accounting in Libya. This paper, therefore, aims to contribute to the literature by examining the corporate accounting regulation in Libya and fills a gap in international accounting research.

Financial reporting quality in international settings: A comparative study of the USA, Japan, Thailand, France and Germany

The purpose of this study is to show the importance of the business contexts of individual countries to understand corporate accounting practices in international settings. Using data from five countries, we show that while agency theory constructs are effective in explaining accounting practices in corporate settings that have a strong agency orientation, such as that of the United States, it is necessary to go beyond such constructs to understand accounting practices in other corporate settings. Given the variety of international business settings, we use a generic theory, institutional theory. To conduct this examination into cross-country accounting practices, we focus on an earnings quality measure based on accrual accounting practices, the abnormal accruals component of accounting earnings. We provide evidence to support the view that with varying business settings we are likely to see diversity in accounting practices that result in different levels of accruals or accruals based earnings quality.

Preventing Sarbanes‐Oxley and other Whistleblower claims

The increased regulatory scrutiny in recent years of public corporations, broker‐dealers, and other investment companies has led to a wave of legislative and regulatory reforms. Central to these reforms is the Sarbanes‐Oxley Act (“SOX” or “the Act”), enacted in July 2002. Intended to restore investor confidence in ailing financial markets reeling from a spate of highly publicized corporate governance scandals, the Act reforms the oversight of corporate accounting practices and addresses a wide range of corporate accountability issues. In addition, the Act significantly raises the protections for employees of public companies who report conduct that they reasonably believe constitutes a violation of federal law relating to financial, securities, or shareholder fraud. Thus, the Act creates new federal administrative and judicial remedies for employees who believe they have been retaliated against for blowing the whistle on corporate fraud.

Corporate governance in the wake of contemporary corporate collapses: Some agenda items for evaluators

The number and scope of corporate collapses in recent times clearly illustrate that corporate accountability practices are failing to match the rhetoric of managers responsible for business probity. The malaise has continued even though regulatory enforcement is empowered by federal and state law and enforced by criminal penalties and civil sanctions. Research is now revealing that regulatory creativity may offer considerable potential for bringing about good corporate governance. New regulatory options are thus becoming increasingly sought after, especially given the inefficiencies of the current legal frameworks and the inadequacies of the traditional official line which suggests that the best response to malfeasance is (simply) more law. This paper reviews some current research agendas and evaluative findings. It sets out some evaluative questions that now need to be explored.

Accounting Standards and German Supplementary Pensions: The Emerging Framework Underpinning Global Finance

In this paper we focus on the current status of German employer-sponsored supplementary pensions in the context of moves towards the harmonization of international accounting standards. We emphasize the changing standards used to measure pension liability, and the consequences of these changes for (firstly) corporate management discretion and (secondly) German under-funded systems of defined benefit pensions. In combination, we show that claimed historical differences between the Anglo-American market for corporate control and the German system of entrenched management within interlocking boards of supervision are now less compelling than assumed. Adoption of international and US financial accounting standards by leading German corporations presages a new era in European capital markets with important implications for the design and management of German supplementary pensions. The reader is introduced to financial accounting standards institutions, the evolution of US accounting standards since the introduction of FASB 87 and recent patterns in US corporate pensions and liabilities. Emphasis is placed upon the concerted campaign of national and international accounting professionals to harmonise corporate accounting practices and the measurement of pension liabilities to accepted international standards. Using data collected from 1998 annual reports for German finns in the DAX 30 index, we report on the adoption of international accounting standards and the scope and significance of reported corporate net pension liabilities. Noting the theoretical literature relevant to adoption, we identify four reasons that may account for the immediate adoption of intemational accounting standards. As well, tests for correlation between

The FAF and Corporate Accounting Practices

W HILE financial statements are by no means the only factors involved in financial analysis and the determination of investment quality and value, it is true that adequate financial statements are a prerequisite the work of the analyst and meaningful decisions of investors. Financial analysts, therefore, have a great responsibility for pointing out where financial statements are deficient or fail provide the true and full information required as background for investment judgment. Financial reports are presented by and must be the responsibility of the officers and directors of the companies. They require certification by independent accountants, not only as accuracy but as the acceptability of the accounting principles used in their preparation. A paramount consideration for both the company and the accountant must be informative disclosure the investor in the enterprise. The Securities and Exchange Commission is charged with the duty of protecting the investor and the public interest. Therefore, it has the basic power insist that financial statements be made truly informative. To the extent that changes in past practices, required in the investor and public interest, fail be made by corporations or fail be insisted upon by the accounting profession or financial analysts, the SEC can be expected fill in any voids. No corporate, accounting or analyst group can be unaware of the increasing tempo of action on the part of the SEC in carrying out its legal responsibilities. If these groups are be effective through assisting in the shaping of decisions as financial reporting which will be made by the SEC, it is obvious that action is required now-inaction in the hope that accounting problems in financial reporting will go away or not be brought up for review will no longer suffice. It is beyond dispute that the SEC has the power decree acceptable accounting principles and practices and, in fact, it has many times been urged take this course. However, the Commission has generally preferred work on a basis of cooperation with corporations, accountants, and analysts, each of whom must assume a share of responsibility for reaching solutions many accounting problems in order provide financial reporting that is fair all segments of society. Failure assume this responsibility can only result in deterioration of confidence in financial statements as a basis for investment judgments. Accountants and analysts obviously should have the greatest interest in accounting methods and procedures that provide realistic disclosures that are fair both investors and corporations, and such as will be in line with the considered requirements of the SEC in discharging its legal function of serving the investor and public interest. In carrying out the varied activities of the Financial Analysts Federation, which now includes 39 member Societies with an overall membership around 10,500, there are three standing committees which have particular responsibilities in the area of financial information, accounting, and government relations. The Corporate Information Committee has the duty to encourage, develop, and improve the quality and quantity of financial information disseminated by corporations . . .. The Financial Accounting Policy Committee, which until a year ago operated as a section of the Corporate Information Committee, now has independent status and the duty to develop, maintain, and improve liaison between the corporation and the accounting profession; study accounting procedures, and make recommendations of proper accounting procedures be used by financial analysts . . .. The Government Relations Committee has the duty to develop and maintain contacts with federal and state agencies which affect financial investment . . ..