Non-financial Companies Research Articles

Big 4 auditors, client informational problems, and bank loan contracting: evidence from Saudi Arabia

Purpose This study has three objectives: (i) to examine whether using a Big 4 auditor reduces loan interest rates; (ii) to analyze how loan interest rates differ between smaller firms, which face more acute asymmetric information problems, and larger firms; and (iii) to investigate whether the negative relationship between Big 4 auditors and loan interest rates is a function of client size. Design/methodology/approach The sample comprises all publicly traded nonfinancial companies listed on the Saudi Stock Exchange from 2007 to 2020. Pooled ordinary least squares (OLS) regression tests the hypothesized relationship between the dependent and independent variables. Findings The study offers three notable findings. First, borrowers audited by Big 4 auditors receive significantly lower interest rates than those audited by non-Big 4 auditors. Second, banks offer lower interest rates to larger firms (i.e. firms with fewer informational problems) than to smaller ones. Third, no conclusive evidence exists that the beneficial effects of Big 4 auditors (in terms of reduced interest rates) differ significantly between larger and smaller firms. This finding is attributable to the idea that Big 4 auditors do not report more favorably for larger clients or more conservatively for smaller clients. The results remain robust, even after addressing the endogeneity arising from auditor self-selection bias, which is validated by the results of two econometric tests: Heckman’s two-stage procedure and propensity score matching. Originality/value To the best of the author’s knowledge, this study is the first to examine the relationship between auditor size and bank loan contracting in Saudi Arabia.

How sustainability committees moderate the link between ESG performance and environmental innovation in European firms?

PurposeThis paper investigates the moderating role of sustainability committees in the relationship between environmental, social and governance (ESG) performance and environmental innovation within European nonfinancial firms.Design/methodology/approachThe study analyzes data from 691 nonfinancial sector firms operating within EU states from 2013 to 2022. It employs regression analysis to examine the correlation between ESG performance and environmental innovation, considering the moderating effect of sustainability committees.FindingsThe research reveals a significant and positive correlation between ESG performance and environmental innovation. Moreover, it demonstrates that sustainability committees play a positive moderating role in this relationship, indicating their importance in fostering environmental innovation within organizations.Research limitations/implicationsThe study is limited to European nonfinancial companies, potentially limiting the generalizability of findings. Additionally, the research focuses on the moderating role of sustainability committees, leaving room for further exploration of other governance mechanisms.Practical implicationsThe findings suggest that implementing an ESG performance framework and establishing dedicated sustainability oversight mechanisms, such as sustainability committees, can enhance environmental innovation within organizations. This insight is valuable for strategic decision-making aimed at advancing both sustainability and innovation agendas.Originality/valueThis study addresses a gap in the literature by exploring the moderating effect of sustainability committees on the link between ESG performance and environmental innovation from various theoretical viewpoints. It contributes to the understanding of mechanisms that enhance environmental innovation within companies and provides practical implications for corporate reporting accuracy and sustainability initiatives.

Sustainability management control system and sustainability performances in Indonesia

This study aims to determine the effect of the Sustainability Management Control System (SMCS) on improving Sustainable Performance (SP) or corporate sustainability performance. The study utilizes the data from 412 non-financial companies listed on the Indonesia Stock Exchange, covering the period from 2017-2021. Hypothesis testing was carried out with a least squares regression model strengthened by robustness tests. To support the results, a number of other studies were carried out, including panel data, sensitivity testing, and the coarsened exact matching approach. The results showed a positive correlation between SMCS and improving sustainability performance. This means that the better the implementation of SMCS in a company, the more its sustainability performance will improve. This indicates the important role of SMCS in supporting the improvement of corporate sustainability performance. The practical implication of this research is to provide insight for executives, policymakers, and stakeholders to encourage the implementation of SMCS to achieve the success of sustainable development. In terms of theoretical contribution, this research elucidates the relationship between SMCS and sustainability performance, highlighting that SMCS is a development of the Management Control Systems (MCS) concept, incorporating new metrics. Overall, this research is useful for understanding the effectiveness of SMCS in improving corporate sustainability performance.

The Effect of Risk Management and Leverage Towards Corporate Sustainability with Corporate Governance Mechanisms as a Moderation Variable

This research analyzes whether Corporate Governance mechanisms can moderate the relationship between Risk Management and Leverage on Corporate Sustainability. This research is explanatory research that will test the causality relationship between variables using a Stakeholder theory approach. The population and sample for this research are non-financial companies listed on the Indonesia Stock Exchange for the period 2020 - 2022. The purposive sampling method was used for the sample selection in this research. The data analysis technique in this research uses moderated regression analysis and statistical test tools in the form of a normality test, classical assumption test, coefficient of determination test, F test, and t-test. The results of this research show that Risk Management and Leverage both have a negative and significant effect on Corporate Sustainability. Corporate Governance can moderate the relationship between Risk Management and Corporate Sustainability. Corporate Governance can also moderate the relationship between Leverage and Corporate Sustainability.

Too good or not by hiring insider CEO: an analysis preference of investment efficiency from Indonesia

Purpose The term “Insider CEO” refers to actor in the top management at corporate level who has the advantage of having better information regarding a company’s resources to make investment decisions. This study aims to examine the relationship between insider chief executive officers (CEOs) and investment efficiency in emerging economies. Design/methodology/approach The authors comprises sample of nonfinancial companies listed on the Indonesia Stock Exchange during the period of 2011–2021, using an archival approach through regression analysis. Findings This study demonstrates a significant negative relationship between insider CEOs and investment efficiency. In addition, audit quality as the firm audited by BIG4 accounting firm changes the direction of previously negative findings, turning them into significant positive relationships, and audit quality acts as a moderating factor on the insider CEOs and investment efficiency nexus. Furthermore, the authors conducted a series of endogeneity and robustness tests to strengthen the results of this study. Research limitations/implications This study offers new ideas in the investment literature and its practice in companies, where it highlights the role of the existence of an insider CEO in practice on investment efficiency. The authors provide recommendations to companies, potential investors and policymakers regarding the potential for insider CEOs to influence investment returns that tend to be less efficient. Therefore, this study proves that the presence of an insider CEO has a higher risk-taking preference, which has the potential to influence less efficient investment practices. Originality/value Several previous studies have focused more on the role of CEOs who come from outside the company and their impact on investment practices. However, it is not clear whether insider CEOs will influence the company’s investment efficiency practices driven by the perspective of “risk preferences and investment returns”. To the best of the authors’ knowledge, this is the first study to substantiate the role of CEOs based on their origin and their impact on less efficient investment practices.

Market share and firm performance: Moderated and mediating effects of firm size and corporate governance

Firm performance is of global interest for sustainable growth and is a function of multiple factors. Market share is often considered the source of competitive position and ability to generate financial performance. By understanding these dynamics, organizations can develop tailored strategies incorporating corporate governance to enhance competitiveness for improved performance outcomes. This study examines the impact of market share on firm performance, considering the moderated effect of firm size and mediating effects of corporate governance with capital structure, growth, and innovation as control variables. This study relies on seven-year firm-level data, utilizing an uneven sample of 40 non-financial companies listed on the Nepal Stock Exchange (NSE) and encompassing 280 observations. A causal-comparative research design was used with Process Macro tools in a moderated mediating model to examine the hypotheses. The results revealed a significant impact of market share on firm performance, i.e., ROA (β = 0.195, p < 0.01) and Tobin’s Q (β = 0.232, p < 0.01). Additionally, firm size moderated negatively (β = –0.82, p < 0.01), while corporate governance positively mediated the relationship (β = 0.184, p < 0.01; Tobin’s Q: β = 0.188, p < 0.05). Control variables had no significant impact on corporate governance. The study highlights the implication of balance of market share, corporate governance, and innovation with firm size for the firm’s performance. By utilizing these insights, firms can create strategic initiatives to boost competitiveness, improve resource allocation, and reinforce governance practices. Acknowledgment We acknowledge all the individuals who supported this research process directly and indirectly. We also thank the anonymous reviewers for their valuable comments on improving the quality of the paper.

The role of audit committee characteristics in improving the risk disclosure of companies examining the moderating role of audit quality

This paper examines the association between audit committee characteristics (ACC) and risk disclosure (RD) of firms, focusing on the moderating effect of audit quality (AQ). The importance of RD to investors and stakeholders is that such a practice offers a better evaluation of the overall risk profile of companies. Based on agency theory complemented by the resource dependence theory, this paper therefore suggests that effective audit committees have an effect of reducing information asymmetry while increasing audit quality monitoring capacities and consequently enhance risk disclosure practices. In this respect, the literature sources were reviewed, and a hypothetical framework was developed to test the hypotheses. The sample selection comprises 54 companies with non-financial companies listed in the Egyptian Exchange Market, EGX100, for the period 2018 to 2021, which amounts to 216 observations. According to the results, ACC, such as size and financial expertise, are significant for RD, while ACC relating to meetings and independence are less important for RD. The study further established that AQ moderates the relationship between ACC and RD, implying that the significant influence of ACC is stronger when AQ is high. These inferences are of essence to policy makers and companies in understanding the implication of ACC on RD and the relation to high-quality audits in improving the effectiveness of audit committees. It underlines the importance of audit committees in giving assurance about transparency and accountability in financial reporting.

The Impact of Financial Asset Allocation on Firms’ Total Factor Productivity: Evidence from China’s Non-Financial Companies

As a core business strategy, sustainability has become increasingly important in today’s rapidly evolving world. The improvement of a firm’s total factor productivity (TFP) is necessary for the realization of sustainable development. The wide variation in the types and sizes of China’s firms can reflect the differences in financial capital allocation among firms. In addition, as the second largest economy in the world, China has a large number of firm data to be examined. Based on this, this paper selects China’s A-share non-financial listed companies from 2010 to 2023 as research samples to empirically test the impact of financial asset allocation on the TFP of firms. It is found that excessive financialization negatively affects both TFP and innovation, but that innovation can increase TFP, thus weakening the negative impact of financialization on TFP. Therefore, to enhance the productivity of firms and reach the sustainability of development, firms should invest more in innovation and reduce the level of financialization. By emphasizing innovation, firms can promote the application of green technologies and the production of green products, and achieve win–win economic and social benefits while protecting the environment, and sustainability can be realized.

The Effect of Retention Rate, Debt to Equity Ratio, and Current Ratio on Company Sustainable Growth Rate

This study examines the impact of financial metrics on sustainable growth, defined as the maximum rate at which a company can grow without changing its financial leverage, a concept supported in recent studies on corporate growth strategies. The analysis focuses on the retention ratio, debt-to-equity ratio, and current ratio. Data is sourced from non-financial companies listed on the Kompas 100 Index on the Indonesia Stock Exchange, selected based on consistent financial reporting and comprehensive data availability during this period. Utilizing a panel data regression model with Stata 17 software, the findings reveal that the retention ratio positively affects sustainable growth, supporting the idea that reinvesting profits promotes long-term company growth. Conversely, DER has a negative impact, indicating that higher leverage increases financial risk. The current ratio does not significantly affect sustainable growth within this model. These results emphasize the importance of strategic financial management, particularly in optimizing retention and leverage, to foster sustainable growth. The study offers stakeholders and legislators practical advice on how to encourage financial practices that foster long-term organizational growth.

Direct and indirect effects of unconditional conservatism on investment efficiency

PurposeThis study aims to investigate the effects of unconditional conservatism on investment efficiency, focusing on both its direct and indirect effects.Design/methodology/approachWe conduct multiple regression analyses on a sample of nonfinancial companies listed on the New York Stock Exchange from 2010 to 2018.FindingsWe provide evidence that conditional conservatism plays a central role in mediating the indirect effects of unconditional conservatism on investment efficiency. This is because a decrease in conditional conservatism, following an increase in unconditional conservatism, leads to reduced investment efficiency.Research limitations/implicationsThis study offers valuable insights for the growing body of literature on the relationship between accounting conservatism and investment efficiency while emphasizing the critical role of conditional conservatism in mediating the relationship between unconditional conservatism and investment efficiency.Practical implicationsThis study has several implications. Practitioners can make informed decisions regarding accounting policies, predict the potential effects of these choices and mitigate the negative impact of unconditional conservatism on investment efficiency. Investors can make more informed decisions by understanding how unconditional and conditional conservatism affect investment efficiency. Standard setters can guide user behavior toward more efficient investment decisions.Originality/valueConsidering the lack of comprehensive understanding in prior literature regarding the underlying mechanisms through which unconditional conservatism influences investment efficiency, this study investigates the direct and indirect effects characterizing this relationship. We provide evidence supporting a new explanation for the relationship between unconditional conservatism and investment efficiency.

Improving Capital Structure through Firm Size and Sales Growth: The mediating role of Managerial Ownership

Conflict between ownership and management constitutes a significant concern within organizational dynamics. Nevertheless, the alignment of the interests between owners and management can be advanced by promoting managerial ownership. Prior research delving into the role of managerial ownership as an intermediary variable linking firm size and sales growth, with capital structure remains rather limited, particularly in the context of non-financial companies listed on the IDX. This study investigates the correlations between firm size and sales growth with capital structure, mediated by managerial ownership. This investigation focuses on non-financial entities that are not state-owned enterprises and are listed on the IDX. Hypothesis testing in this study was conducted using path analysis. Path analysis is calculated by decomposing the causal influence model between direct and indirect variables. The findings of this study add to a more profound understanding on how firm size, when mediated by managerial ownership, impacts the capital structure, as indicated by the LTDR proxy. This underscores that managerial ownership, as a means of mitigating agency conflicts, can exert an influence on management's decision-making concerning the proportion of long-term debt within the capital structure. It is worth noting that Managerial ownership does not serve as a substantial mediator in the influence of sales growth on the capital structure.

The Moderating Effect of Accounting Expertise on the Relationship Between Board Characteristics and Earnings Management "Evidence from Iraq"

The current study aims to examine how board characteristics impact earnings management in non-financial companies. Its primary objective is to ascertain whether accounting expertise modifies the association between board characteristics and earnings management. The data utilised in this study came from 598 firm-year observations from 46 non-financial sector businesses registered on the Iraqi Stock Exchange between 2010 and 2022. To take care of potential endogeneity and reverse causality, the study employed the system generalised method of moments (SGMM) estimate model. The findings revealed a positive and significant relationship between gender diversity, busyness, board independence, and earnings management. Conversely, the results show that the relationship between board independence, busyness, gender diversity, and earnings management is significantly and negatively moderated by accounting expertise. Thus, by investigating the subject experimentally in Iraq, this study adds to the body of existing literature. Additionally, by investigating whether accounting expertise moderates the association between board features and EM, the study fills the gap in the literature.

Financial Distress and Earnings Management An Empirical Study of Non-Financial Firms Listed on the Indonesia Stock Exchange

This study examines the relationship between financial distress and earnings management among non-financial companies listed on the Indonesia Stock Exchange during the period 2018–2022. This study uses a quantitative approach using the modified Jones model to measure discretionary accruals, with leverage, firm size, and profitability included as control variables. Data from 342 companies are analyzed to determine whether companies facing financial distress are more likely to engage in earnings management as a strategy to improve their financial performance. The findings reveal that profitability has the strongest positive effect on earnings management, indicating that firms with higher profitability are more likely to manipulate earnings to improve financial results and meet market expectations. In contrast, leverage shows a significant negative effect, indicating that firms with higher debt levels are less likely to engage in earnings manipulation due to increased creditor monitoring and financial discipline. Meanwhile, financial distress and firm size have minimal impacts, with their coefficients showing no significant effect on discretionary accruals. These results highlight the importance of profitability and leverage as key drivers of earnings management while suggesting that financial distress and firm size play a smaller role in this context. This study acknowledges limitations, including its focus on non-financial firms in Indonesia, the five-year observation period, and the exclusion of additional factors such as governance and macroeconomic conditions. Future research could address these limitations by expanding the data set, incorporating more variables, and exploring other emerging markets.

Female leadership and environmental, social and governance performance. Empirical evidence from France

Purpose This paper aims to examine the extent to which the presence of women in governance and top management positions is likely to affect corporate environmental, social and governance (ESG) performance. This study also examines the interaction effect between female leadership and cultural leadership in the boardroom. Design/methodology/approach The empirical quantitative paper covers a sample of French-listed non-financial companies from 2018 to 2022 (925 firm-year observations). France is the European Union pioneer of non-financial reporting and gender equality policies. A fixed-effect panel regression analysis was estimated to unveil the links between the presence of women in governance and top management positions and ESG performance. Findings Results show that appointing more women on the board of directors and executive team is conducive to higher ESG performance. Nevertheless, the interaction effect between female and cultural leadership does not impact ESG performance. Originality/value This study contributes to the accounting and corporate governance literature on gender diversity and ESG performance by investigating female leadership in both directorship and top executive roles.

The Determinants of Firm Value: A Panel Data Approach on the S&P 500 Companies

Over the last two decades, the US companies have faced a series of challenges caused by the two of the most significant events, namely the global financial crisis and the Covid-19 pandemic crisis. To analyze the influence of these crises along with other factors on the firm value represented by Tobin’s Q, there were estimated unbalanced panel data multiple regression models, with cross-section fixed effects, with cross-section and period fixed effects, with cross-section random effects, and with cross-section random effects with period fixed effects, using a sample of 442 non-financial companies included in the Standard & Poor’s 500 index, over a period of 20 years, from 2004 to 2023. The independent variables are divided into three categories, namely financial indicators, corporate governance variables, and dummy variables that indicate the crisis periods. The results showed that the financial leverage, asset tangibility, liquidity, firm size, the number of meetings attended by the board members annually, the proportion of the independent members on the board and the Covid-19 pandemic crisis had a positive effect on the company value, while the firm age, CEO duality, the number of the members on the board, the proportion of the females on the board and the global financial crisis exerted a negative impact on the firm value. To better differentiate the determinants of the firm value in the context of the two major events that occurred during the analyzed period, there were estimated other empirical models using interaction variables between each dummy variable showing the crisis and the other factorial variables.

Impact of liquidity on capital structure and financial performance of non-financial-listed companies in the vietnam stock market

The primary objective of this study is to conduct a comprehensive analysis of the relationships between liquidity (LIQ), capital structure (LEV), and financial performance (FIP). Additionally, we seek to investigate the indirect effect of liquidity (LIQ) on financial performance (FIP) by examining the intermediary role of the capital structure (LEV) of non-financial-listed companies in the Vietnamese stock market. This study utilizes PLS-SEM with a robust sample of 644 non-financial-listed companies in the Vietnamese stock market. The findings suggest that liquidity positively influences financial performance but negatively impacts capital structure. Conversely, capital structure negatively affects financial performance. Thus, liquidity indirectly enhances financial performance through capital structure mediation. This research result can provide suggestions for non-financial enterprises in making financial decisions to increase financial efficiency by increasing the holdings of highly liquid assets to prevent risks and take advantage of new investment opportunities in the future. In addition, increasing the holding of highly liquid assets also reduces debt pressure and reduces interest costs, thereby increasing financial efficiency. Our research shows that the relationship between economic factors is extremely complex; specifically, our research shows the true nature of the positive impact of liquidity on financial performance, including direct positive effects and indirect positive effects through capital structure. In addition, our research results also show that non-financial enterprises that want to increase financial efficiency need to pay attention to revenue growth, and non-financial companies with larger total assets (size) will have more advantages in increasing financial performance.

BANKS AND SOCIETY: WHO SERVES WHOM?

This paper adds a new dimension to the financialization research. The research question is how the contribution of banks to national economic performance compares with the share of national wealth appropriated by banks. In order to quantify it, I put forward a novel set of metrics. It embraces aspects such as: banks’ propensity to lend to non-financial enterprises, bank lending contribution to investment in fixed assets by non-financial companies, a cross-sector comparison of profitability and average wages, the share of banks in total taxes paid by corporations nationwide, etc. Each metric is composed by one or more indicators derived from publicly accessible statistical sources, thus ensuring transparency and replicability. I apply the metrics to Russian banking industry in the period of 1991–2020, and arrive at a number of counter-intuitive findings, such as banks flourishing and displaying record profitability while the rest of the economy melts down in the 1990s, or the trend reversing along with a creeping nationalization of the banks after 1998. Overall, one might argue that it is the economy (and society) at large that serves the banking industry, rather than the other way around, as it should be.

The Impact of Internationalization on the Success of Western European Multinational Companies

The paper deals with the results of the study aimed at assessing the influence internationalization has on the performance of leading European transnational corporations (TNCs) approximated by their company value. The authors test a hypothesis that high level of international operations results in extra competitiveness of the TNCs under review both domestically and in foreign markets. Data on about five dozen largest European non-financial companies from UNCTAD World Investment Reports for 2018‒2022 are in the focus of regression modeling analysis. The findings show no significant relationship between transnationality index changes and value of the companies under review. The authors provide some possible reasons associated with the regional peculiarities of European firms to explain the obtained results.

Pengaruh Company Growth, Komite Audit, Komisaris Independen, Cash Flow, dan Dividend Payout Ratio Terhadap Konservatisme Akuntansi

Conservatism is the principle of prudence in financial reporting where companies do not immediately recognize and measure asets and profits but immediately recognize losses and debts that may occur. This study aims to analyze the effect of company growth, audit committee, independen commissioners, cash flow, dividend payout ratio on accounting conservatism in non-financial companies listed on the Indonesian stock exchange for the period 2020-2022. The sampling technique used in this study was purposive sampling. A total of 273 companies that have met the criteria as observation units. The analysis method used is multiple linear regression analysis. The results of the study provide empirical evidence that the audit committee, independen commissioners, and dividend payout ratio affect accounting conservatism. While company growth and cash flow have no effect on accounting conservatism.

Exploring fundamental anomalies: Evidence from the Moroccan stock market

Fundamental anomalies are explored, for the first time, in the Moroccan stock market. The sample includes non-financial companies from July 2001 to June 2020. We carry out, initially, sorts of returns on anomaly indicators, then, we follow through a regression analysis using a fixed-effect model and the system generalized method of moments methodology. The findings emphasize a significantly positive relationship between returns and the book-to-market ratio and a significantly negative relationship between returns and each of the price-to-earnings and the price-to-cash flow ratios. Regarding the size and the leverage effects, the findings highlight their absence. Finally, we cannot ascertain the existence of a positive or negative price-to-sales effect considering the contradictory results of the tests.