Egyptian Firms Research Articles

The Effect of Financial Microeconomics and Macroeconomics Factors on the Sustainable Growth of the Listed Egyptian Firms

The Effect of Financial Microeconomics and Macroeconomics Factors on the Sustainable Growth of the Listed Egyptian Firms

Business strategy and stock price crash risk: The mediating role of financial constraints

The global financial crisis increased uncertainty in economic policy. Firms manage challenges through business strategies and financial constraints and deal with crash risk more proactively to overcome these impediments. This paper investigates the mediating role of financial constraints in the association between business strategy and crash risk, and the type of business strategy that influenced crash risk in Egyptian firms from 2014 to 2021. Data were obtained from financial statements and reports available in the Thomson Reuters database. A total of 792 observations were collected, representing 99 Egyptian firms. The statistical techniques employed in the analysis included ordinary least squares, modified least squares, and path analysis. The results indicate that a higher financial constraint ratio increases crash risk and has a mediating effect on business strategy and crash risk. Results show a positive impact of prospector strategy on crash risk using OLS and GLS, in line with the bad news hoarding hypothesis. Further research shows that prospector strategies have a positive effect on financial constraints. Egyptian firms have higher levels of information asymmetry, which leads to adopting a prospector business strategy and exerts a more pronounced positive influence on the likelihood of crash risk. A robustness check confirms the positive effect of financial constraints as a mediator variable on the relationship between prospector business strategy and crash risk.

The moderating role of board gender diversity on the association between audit committee attributes and integrated reporting quality

PurposeThe main objective of the research is to examine the influence of audit committee attributes on the integrated reporting quality (IRQ) and to investigate whether this association is moderated by board gender diversity in the manufacturing and non-manufacturing sectors. The study specifically investigates the association between audit committee independence, meetings frequency, financial expertise, audit committee size, and integrated reporting quality.Design/methodology/approachThe data collection was from the financial statements and corporate governance reports of 54 Egyptian firms listed on the stock market [EGX100] for the period of 2018–2022. The study used pooled effect modelling and performed data analysis using the STATA software.FindingsFor the manufacturing sector, the results showed a significant impact of audit committee independence and meetings frequency on IRQ, while audit committee size and financial expertise showed insignificant association with IRQ. Board gender diversity moderates the association between audit committee meetings only and IRQ. In contrast, audit committee financial expertise and meetings frequency significantly impact IRQ, while audit committee independence and size showed an insignificant impact on IRQ in the non-manufacturing sector. Also, board gender diversity moderates the association between audit committee and IRQ. The findings highlight the significance of AC attributes and provide guidance to firms to strengthen their audit committees in order to provide high quality of integrated reports to increase investor trust in the Egyptian business environment as it is now mandatory by the government.Originality/valueThis research offers unique perspectives on the association between variables in Egypt. This study is one of the first investigations on the impact of audit committee attributes and board diversity on integrated reporting quality within the context of Egyptian listed companies. Comprehending the ways in which audit committee attributes impact the integrated reporting quality in the manufacturing and non-manufacturing sectors can enable organizations to devise focused approaches that comply to the unique operational, regulatory, and investor demands in each sector.

The Effect of Corporate Social Responsibility on Market and Operating Performance ff Egyptian Firms: The Role of Board Gender Diversity

The Effect of Corporate Social Responsibility on Market and Operating Performance ff Egyptian Firms: The Role of Board Gender Diversity

Do perfectionism types matter? Auditors' ability to detect fraud and the moderating role of time budget pressure: evidence from Egypt

Purpose This study aims to examine how auditors' perfectionism types and time budget pressure (TBP) influence fraud detection in Egypt. Design/methodology/approach We utilize a mixed-methods approach, combining questionnaires with an experimental case study in a within-subjects quasi-experimental design. Based on Almost Perfect Scale-Revised (APS-R), perfectionism traits were categorized using cluster analysis into adaptive, maladaptive, and non-perfectionism. Auditors from Egyptian firms performed fraud-related tasks with TBP manipulated. Findings Auditors' perfectionism types significantly influence fraud detection capabilities. Adaptive perfectionists demonstrated higher relevance in identifying fraud factors and excelled in accurately assessing fraud risks and audit procedures planning. Conversely, maladaptive perfectionists identified more but less relevant factors. TBP notably impacted maladaptive and non-perfectionist auditors' planning quality, unlike adaptive perfectionists, who showed resilience. Practical implications Findings provide insights to audit firms to bolster audit quality through team formations and task assignments, harnessing the strengths of adaptive and maladaptive perfectionists. Regulatory entities are positioned to integrate safeguards that recognize auditor capabilities and vulnerabilities, particularly under TBP. Considering psychological assessments in auditor selection and development assures alignment of traits with audit tasks, enhancing audit quality. Originality/value This study breaks new ground in the effects of auditor perfectionism on fraud detection, considering situational factors like TBP in emerging markets. Through a mixed-methods approach and cluster analysis, it reveals how different perfectionism traits influence audit effectiveness, offering insights not previously considered in auditing literature and suggesting practical applications for enhancing fraud detection in similar contexts.

How female leadership and auditor affiliations shape audit fees: evidence from Egypt

Purpose This study aims to examine how female directors on corporate boards and audit committees, and auditor affiliations (Big 4 versus Egyptian firms affiliated with foreign auditors), influence audit fees. This examination is driven by the global call for increased female representation in leadership roles and its potential implications for audit quality and financial transparency. Design/methodology/approach A sample of non-financial companies listed on the Egyptian Stock Exchange is used for the period 2011–2020. The authors used multivariate regression models, the Heckman two-stage and tokenism to support the analysis. Findings The results are threefold. First, this analysis reveals that female directors, whether on corporate boards or audit committees, are more likely to choose higher-quality audits in the form of high audit fees. Second, both Big 4 firms and Egyptian audit firms affiliated with foreign auditors are positively associated with audit fees and earn significant audit fee premiums. Third, a minor difference in audit fee premiums could be attributed to the existence of female directors. Research limitations/implications Future research may expand the analysis performed in this study by investigating the characteristics related to female directors (e.g. education, experience and age) on audit fees. Practical implications This study suggests insights for regulatory bodies, corporate decision-makers, auditors and corporate governance researchers. For instance, this study reveals that the Big 4 are not homogenous and provide different audit quality levels along with significant audit fee premiums. Originality/value This study extends and contributes to the growing literature on female representation in corporate leadership. First, this study adds to the limited research in Egypt by examining the effect of female board representation on audit quality. Second, this study adds to the extant literature on the gender of financial experts by demonstrating that female financial expert is more likely to demand high-quality audits. Finally, the results have significant implications for policymakers. For instance, this study reveals that the Big 4 are not homogenous and provide different audit quality levels along with significant audit fee premiums.

The Effect of Risk Disclosure on Investment Efficiency: An Applied Study

The purpose of the research: This study aims to investigate the effect of corporate risk disclosure (RD) on investment efficiency in the Egyptian environment. Data and materials and methodology: The researcher conducts an applied study using a sample of 376 firm-year observation from Egyptian firms listed on EGX100 after excluding the banking sector and insurance companies due to their special accounting nature in the time period 2017-2022 in order to avoid the negative effects of inflation in the Egyptian market. The researcher uses content analysis to calculate a risk disclosure index (RDI) from annual reports and studies how it impacts the efficiency of investment in companies. Results: The results demonstrated a significant positive effect of RD on investment efficiency, where RD decreases the underinvestment and increases the overinvestment which leads in sum to more investment efficiency. These results are consistent with some of the theories and previous studies that confirmed the role of RD in enhancing investment efficiency. Keywords: Risk disclosure- Investment Efficiency- Overinvestment- Underinvestment.

The Relationship between Accounting Comparability and Earnings Management Practices under IFRS: An Empirical Study for Egyptian Firms listed on Egy

The Relationship between Accounting Comparability and Earnings Management Practices under IFRS: An Empirical Study for Egyptian Firms listed on Egy

The impact of forward-looking disclosure on the performance-related variables in the annual reports of Egyptian firms registered in the stock Exchange.

The impact of forward-looking disclosure on the performance-related variables in the annual reports of Egyptian firms registered in the stock Exchange.

Cash holdings, board governance characteristics, and Egyptian firms’ performance

Cash holdings, board governance characteristics, and Egyptian firms’ performance

Climate Change Disclosure in Egyptian firms and its Key-Determinants Following the Implementation of Financial Regulatory Authority Decree No.108

Climate Change Disclosure in Egyptian firms and its Key-Determinants Following the Implementation of Financial Regulatory Authority Decree No.108

Entrepreneurial Leadership and Enterprise Performance: A Way Out of Sustainability

Purpose: Developing enterprise performance and sustainability is essential for firms’ survival. This study explores the effect of accountability, responsibility and analytical thinking on enterprise among Egyptian firms. Design/Methodology/ Approach: We applied quantitative methods to detect this problem by collecting data from entrepreneurs working in different firms in Egypt. The study concludes the results based on 304 valid samples. Findings: Employing path analysis through analysis of moment structures (AMOS) version 26.0, the findings suggest a positive and significant effect of responsibility and analytical thinking on enterprise performance. On the other hand, accountability negatively affects enterprise performance. Finally, the effect of enterprise performance on enterprise sustainability is positive and significant. Research, practical and social implications: The findings of the study may be helpful for investors to Invest in training for accountability, responsibility, and analytical thinking to optimize venture success. They may foster a corporate culture balancing accountability, risk-taking, and innovation for enduring success. Finally, they Align performance metrics with sustainability goals and integrate ethical practices for resilient business outcomes. Originality/ value: This study addresses the lacunae in the empirical evaluation of enterprise performance and sustainability among Egyptian entrepreneurs by emphasizing accountability, responsibility, and analytical thinking. Doing so contributes to a more comprehensive understanding of the factors influencing business success and long-term viability in the Egyptian context.

The Relationship Between Corporate Governance Mechanisms and Financing Decision: Evidence from Listed Egyptian Firms

The Relationship Between Corporate Governance Mechanisms and Financing Decision: Evidence from Listed Egyptian Firms

Does climate risk disclosure shape conservatism? The role of earnings quality in the Egyptian context

The objectives of this study are to (i) examine the relationship between accounting conservatism and climate-related risk disclosure (CRRD) in the context of Egypt, and (ii) look into the moderating role of earnings quality (EQ) in such a relationship. To operationalize CRRD reported by Egyptian firms listed in the SP/EGX ESG index across the years from 2018 to 2022, the study uses a manual content analysis as a base for analysis and employs two (OLS) regression models to test the study’ hypotheses. EQ is measured using the cross-sectional modified Jones model, while accounting conservatism is gauged using the C-Score. Additionally, endogeneity checks in robustness tests are performed using system GMM. The findings show no impact of CRRD on the conservative accounting practices of Egyptian firms. However, there is a sizable adverse effect when EQ is used to moderate this association. This finding is consistent with the notion that firms report high levels of climate impacts and have fewer information asymmetry issues. This paper extends disclosure indexes by highlighting the frequent keywords of CRRD used in the annual narrative reports of Egyptian firms. Hence, this study is among the first to explore the moderation impact of EQ on the relationship between CRRD and accounting conservatism in the Egyptian setting.

Financial distress and stock price crash risk in Egyptian firms

Economic policy uncertainty intensified as a result of the global financial crisis. To overcome these obstacles, firms handle issues with financial distress and crash risk more proactively. This paper offers new insights into the relationship between financial distress and crash risk on the Egyptian stock market during the period of 2014–2021 and presents how managers strengthen the bad news hoarding mechanism to their advantage. Data were collected via financial statements and reports obtained from the Thomson Reuters database using 824 annual observations of 103 Egyptian firms via the generalized method of moments and ordinary least squares. Results show a strong positive impact of financial distress on crash risk using OLS and GMM. Results support the role of managerial opportunism to cover up bad news that undermines a firm’s economic fundamentals. The findings support an agency theory of how financial distress affects crash risk. The findings support conducting robust tests for alternative financial distress and crash risk measures.

Board gender diversity and earnings management: what difference does gender quota legislation make in emerging market?

Purpose This paper aims to examine the impact of board gender diversity (BOGD) following the adoption of gender quota legislation on earnings management (EM) in an emerging market, Egypt, whose cultural and economic conditions and institutional context are unlike most previously studied countries’ context. Design/methodology/approach The authors use ordinary least squares (OLS) regression to estimate the impact of gender quota legislation on EM using data from listed companies in Egypt from 2015 to 2022. Difference-in-difference (DID) approach estimation was used to validate the robustness of the main results. Findings This paper documents that gender diversity on boards has a significantly negative impact on EM. In addition, this paper provides robust evidence using the DID approach to show that BOGD is significantly negatively linked with EM for the period following gender quota legislation. Furthermore, the results support the critical mass and agency theories. Practical implications The findings of this study have important implications for Egyptian companies, regulatory bodies and investors in emerging markets. Specifically, these results suggest that when choosing board members, enterprises should pay particular attention to BOGD, and female involvement in all listed firms should be monitored by regulators. Social implications This paper provides evidence supporting the positive contribution of women in society by enhancing the economic performance of Egyptian firms and promoting the country’s sustainable development strategy in light of Egypt vision 2030. Originality/value As per the authors' knowledge, this empirical study is unique in investigating the impact of BOGD quota regulation on EM in Egypt. This paper contributes to BOGD as a major factor in improving financial reporting quality in Egyptian companies.

Contextual Factors as Determinants of Management Accounting Practices Adoption and its Impact on the Performance of Egyptian Firms

Contextual Factors as Determinants of Management Accounting Practices Adoption and its Impact on the Performance of Egyptian Firms

Demand Volatility and Firm Export Margins: Evidence from Egypt

The study explains the export behavior of Egyptian firms under demand volatility in destination countries using detailed customs data and high-dimensional fixed effects. It finds that demand volatility negatively affects both the intensive and extensive export margins. The effects are particularly evident for large firms which reduce their export sales — especially over time — to more volatile destinations/products, are more likely to exit from exporting more volatile products and are less (more) likely to enter (exit) more volatile destinations. These findings confirm recent literature that emphasizes the greater elasticity of large firms to foreign demand shocks. They are also in line with risk aversion models in which the average risk premium increases with firm size. Given the disproportionate adverse impacts on large exporters, we find that higher demand volatility leads to lower aggregate exports, especially to geographically close and low trade costs countries. Accordingly, uncertainty in demand lessens the positive effect of lower trade barriers on exports.

Earnings management, institutional ownership and investment efficiency: evidence from a developing country

Purpose This study investigates the effect of earnings management (EM) and institutional ownership (IO) on investment efficiency (IE). It also investigates the effect of IO, as a governance mechanism, on the relation between EM and IE. Design/methodology/approach This study examines a sample of Egyptian firms listed on EGX100 during the period 2014–2019. The data are collected manually from firms’ annual reports and governance reports obtained from Egypt for Information Dissemination Company. We depend on the t-test, Pearson correlation, and OLS regression to test our hypotheses. Findings The results revealed a negative relationship between EM and IE. In contrast, IO has a significant and positive effect on IE. The results also show that IO mitigates the negative implications of EM for IE. Additionally, we find robust evidence for the governance role of pressure-insensitive IO, as it has a positive effect on IE and on mitigating the negative effects of EM on IE. Originality/value To our knowledge, this is the first study to examine the effect of IO as a governance mechanism on the relationship between EM and IE. The results of this study can be of interest to investors, regulators, and policy-makers due to highlighting the potential implications of EM and IO for firms’ investment decisions in Egypt–one of the important emerging markets in the Middle East and Africa.

Determining audit fees: evidence from the Egyptian stock market

PurposeThis paper aims to empirically examine the determinants affecting audit fees in the Egyptian context concerning different organizational forms and governance mechanisms.Design/methodology/approachThis study adopts financial and non-financial data from 62 Egyptian firms listed on the Egyptian Stock Exchange from 2015 to 2020. The proposed audit fees model is developed by adopting panel data analysis to examine the effect of auditee, auditor and engagement attributes on audit fees. The validity of the proposed equation for determining audit fees on an annual basis was established by applying the fixed effect model results for the year 2020.FindingsThe results revealed that the most significant determinants that affect audit fees are liquidity, audit committee independence, audit report lag and the status of the audit firm. Audit fees of 95.7% are determined by these factors. The validation test proved that the proposed model was more accurate and closer to the estimated data at nearly 90.2%.Practical implicationsThe results of this paper would send early signals to audit firms, stakeholders and regulators regarding the determinants of audit fees, and provide an objective standard for fee-setting to be used by stock market regulators and professional bodies, in determining a minimum amount of audit fees that ensure a reasonable level of audit quality.Originality/valueTo the best of the authors’ knowledge, for the first time, this paper empirically examines the determinants of audit fees in an emerging market like Egypt and presents evidence for a period of six years.