Disclosure Quality Research Articles

The Big 4 audit dilemma: Board characteristics, audit quality, and sustainability disclosure in Malaysian companies

Our study investigates the relationship between firm profitability, board characteristics, and the quality of sustainability disclosures, while examining the moderating effects of financial leverage and external audit assurance. A key focus is the distinction between Big 4 and non-Big 4 audit firms. Using data from Malaysia’s top 100 publicly listed organizations from 2018 to 2020, we analyze sustainability reports based on the Global Reporting Initiative (GRI) standards. Unexpectedly, our results indicate a negative association between firm profitability and board characteristics, challenging traditional assumptions. We find that non-Big 4 audit firms significantly enhance sustainability disclosure quality, contradicting the widely held belief in the superiority of Big 4 firms. Our finding introduces the “Big 4 dilemma” in the Malaysian context and calls for a reassessment of audit firm selection practices. Our study offers new perspectives on the strategic role of board composition and audit firm selection in advancing sustainability disclosures, urging Malaysian organizations to evaluate audit firms on criteria beyond the global prestige of Big 4 firms to improve sustainability reporting.

Integrated Reporting, ESG Disclosure, Forecast Accuracy, and Firm Value: Profitability as Moderating Variable

Objective: This study investigate how the quality of IR and ESG disclosures can affect the level of information asymmetry and enhance legitimacy and signal about firm value. Theoretical Framework: IR will increase the company's transparency to stakeholders so that reduces the problem of information asymmetry and long-term business value creation. SDGs encourages organizations to pursue credentials by implementing ESG to increase corporate credibility. High profitability can provide positive signals that encourage managers to implement IR and submit ESG reports, thereby reducing information asymmetry and increasing firm value. Method: Based on data from the IDX database, this study analyses companies that are members of the LQ45 group. We have collected annual reports and sustainability reports for the period between 2013 and 2022. Results and Discussion: IR quality has a negative influence on FA and firm value, while ESG disclosure has a positive influence on FA and firm value. Profitability variable is able to strengthen the effect of IR quality and ESG disclosure on FA. Therefore, IR quality and ESG disclosures have a strong influence on FA. Research Implications: Theoretically, this study’s result strengthen the study of legitimacy and institutional theories in explaining the relationship between IR quality and sustainability disclosures on information asymmetry and firm value in the long run. Practically, it highlights the importance for managers to enhance IR and ESG disclosures, thereby promoting corporate transparency and accountability. Originality/Value: This considers profitability variables to understand the motives and drivers of managers to implement integrated reporting formats and deliver sustainability reporting.

Capital market liberalization and corporate environmental performance: Evidence from the Shanghai-Hong Kong Stock Connect.

The implementation of Shanghai-Hong Kong Stock Connect marks the maturity of China's capital market, and the effect of the implementation has been the focus of academic attention. Based on this quasi-natural experiment, We select 3248 samples of heavily polluting enterprises listed in China in 2010-2020 to examine the impact of capital market liberalization and on corporate environmental performance.The results show that capital market liberalization significantly improves the environmental performance of heavy polluting enterprises. The results of the heterogeneity analysis indicate that the positive effect varies across firms with different ownership and internal controls. Finally, mechanism analysis results find that capital market liberalization promotes the environmental performance of heavily polluting firms by increasing environmental assets,reducing stock price volatility,and improving the quality of information disclosure.

Evaluating Board Characteristics’ Influence on the Readability of Annual Reports: Insights from the Egyptian Banking Sector

This study aims to examine the impact of board characteristics (BCs) on banks’ annual reports readability (BARR). Further, it examines whether bank size (BS) moderates the association between BC and BARR. The study employs a sample of 208 bank-year observations from both listed and non-listed banks in the Egyptian stock exchange (EGX), utilizing data spanning from 2016 to 2023. The study employs a random-effect regression model to test the hypotheses and discuss the results. The results suggest that BARR has a significant association with board meetings, gender and cultural diversity. Furthermore, BS played a moderating role in determining the association between BCs and BARR, supporting the second hypothesis. The findings show that the BCs and disclosure quality differ for banks of varying sizes. The findings have practical implications for the Egyptian banking sector, highlighting that board structure is critical to transparency and maintaining public trust. Additionally, the results focus policymakers’ attention on standardizing the contents and structure of banks’ annual reports, with the aim of reducing managers’ manipulation of disclosures and reducing the level of information asymmetry between stockholders, as suggested by the agency theory.

The value-relevance of gains on bargain purchase: do actions speak louder than words?

PurposeThis paper investigates whether disclosure quality and a history of overpaying for acquisitions are associated with differences in the value-relevance of gains on bargain purchase with high disclosure prominence.Design/methodology/approachFindings are from multivariate regression results, using a sample of firms listed in South Africa from 2010 to 2019, where a mandatory earnings reconciliation provides high disclosure prominence for gains on bargain purchase.FindingsGiven high disclosure prominence, disclosure quality is not associated with differences in the pricing of gains on bargain purchase. Instead, most gains on bargain purchase are priced as future losses (unrecognised liabilities). However, when a firm has a history of overpaying for acquisitions, gains on bargain purchase are priced as transitory economic gains.Research limitations/implicationsFurther research is required to determine if overpaying for acquisitions similarly communicates the credibility of gains on bargain purchase when disclosure prominence is low.Practical implicationsDisclosure prominence can reduce disclosure processing costs and increase the value-relevance of complex acquisition accounting. High disclosure quality cannot compensate for a weak acquisition track record.Originality/valueFindings deepen our understanding of the pricing of gains on bargain purchase. This paper presents empirical results that reconcile previously conflicting theoretical views of gains on bargain purchase (as unrecognised assets or as unrecognised liabilities), by shedding light on the role that a record of overpaying for acquisitions plays in the value-relevance of gains on bargain purchase.

Confucian Culture, Climate Risk, and Corporate Environmental Information Disclosure Quality: Evidence from China

Confucian Culture, Climate Risk, and Corporate Environmental Information Disclosure Quality: Evidence from China

Does Flood Risk Affect the Implied Cost of Equity Capital?

Utilizing monthly city level precipitation data across China from 2006 to 2019, this paper constructs an objective flood risk index and investigates the impact of flood risk on the implied cost of equity capital for A-share listed companies. First, our study finds a positive correlation between the flood risk and the implied cost of equity capital and this result holds when we use instrumental variables for flood risk. Second, empirical results reveal that flood risk influences the implied cost of equity capital through two channels: physical risk premium and investor sentiment. Third, we discover that companies with higher ESG (Environmental, Social, and Governance) ratings, higher information disclosure quality and better city infrastructure, are capable of mitigating the adverse impact of flood risk on their implied cost of equity capital. These findings have important implications for investors, policymakers, and corporate stakeholders in understanding and mitigating the financial risks associated with climate change in a rapidly developing economy.

The Impact of Institutional Commitments on Corporate Risk-taking: Evidence from the United Nations Principles for Responsible Investment

Taking the institutions that signed the United Nations (UN) Principles of Responsible Investment (PRI) from 2012 to 2021 as a sample, we study whether the risk-taking of investment targets will be affected when the institutions sign the PRI. The findings demonstrate that when an institution subscribes to the PRI, it significantly decreases its investment target’s degree of risk-taking. After a series of stability tests, such as surrogate variables and propensity score matching method, the main regression results in this paper remain consistent. It has been suggested through mechanism analysis that signing the PRI increases both investment efficiency and information disclosure quality thereby minimizing enterprise risk-taking behavior. Further research shows that the state-owned nature of institutions and higher media attention can reduce the risk-taking of enterprises. This paper provides a new explanatory dimension through which enterprises can reduce their level of risk-taking and offers a theoretical foundation for further expanding the impact of the PRI.

ESG disclosure quality and cost of debt

ESG disclosure quality and cost of debt

Product upgrade and advanced quality disclosure in a supply chain

Retailers frequently preannounce the quality of upcoming products, highlighting the importance of information disclosure in supply chains. This study examines the interaction between advanced quality disclosure and product upgrades within a supply chain, where a supplier can release either upgraded products exclusively or alongside regular products in a subsequent period. Using a game-theoretical model, we investigate how the supplier’s upgrade decisions and the retailer’s disclosure strategy affect consumer behaviour, particularly strategic waiting and product cannibalisation. Our results show that when only upgraded products are offered, the retailer discloses quality in advance if the innovation level is high. When both regular and upgraded products are available, the retailer chooses advanced disclosure when the innovation level is either high or low. Even when the product improvement is minimal, advanced disclosure reduces cannibalisation and attracts more consumers to the upgraded products, thereby boosting the retailer’s profits. Additionally, the supplier may choose not to upgrade products when the innovation cost is moderate. These insights suggest that advanced disclosure can mitigate both cannibalisation and consumer waiting, particularly in high-tech industries or incremental innovation scenarios, such as electronics and smart home sectors, where the preannouncement of product information is crucial.

Research on Quality Evaluation of Climate Information Disclosure in Cement Industry

This paper discusses the current situation and framework of climate information disclosure through the review of domestic and foreign literature. Based on relevant international guidelines and Chinese policies and regulations, the evaluation system is constructed from four dimensions of governance, strategy, risk management, index and target report by using analytic hierarchy process (AHP) and content analysis method. Taking the content of climate-related information disclosure of Tianshan Stock in 2023 as an example, this paper studies the gap between domestic cement enterprises in their climate information disclosure and the global benchmark, and puts forward relevant countermeasures and suggestions to promote the improvement of the quality of climate information disclosure of listed companies in the cement industry.

The impact of supply chain finance on financial constraints of small and medium-sized enterprises and the moderating factors

ABSTRACT Supply chain finance (SCF) has gained significant popularity and has been extensively implemented in practical applications to facilitate cash flow by involving financial institutions. However, there are very few empirical studies on SCF. This study examines whether and how much SCF can alleviate financial constraints of small and medium-sized enterprises (SMEs). Furthermore, we examine the impact of information asymmetry, financial development depth, and economic policy uncertainty on the effectiveness of SCF. These three moderating factors correspond to the influence of firms, local financial development, and national government on SCF effectiveness, respectively. The empirical analysis shows that SCF can alleviate SMEs’ financial constraints significantly, and this effect is more pronounced for firms with higher information disclosure quality and located in financially developed areas. Our findings have important implications for firms and authorities, such as understanding the dynamics of SCF and developing appropriate measures and frameworks to promote the broad adoption and effective utilization of SCF.

Characterization of NFDQ1 in Cryptosporidium parvum

BackgroundCryptosporidium spp. are important zoonotic parasites that can cause moderate to severe diarrhea in humans and animals. Among the three Cryptosporidium species infecting the intestines of calves, Cryptosporidium parvum has a broad host range and causes severe diarrhea in calves, while Cryptosporidium bovis and Cryptosporidium ryanae mainly infect calves without obvious clinical symptoms. Comparative genomic analysis revealed differences in the copy number of genes encoding the nonfinancial disclosure quality (NFDQ) secretory protein family among the three species, suggesting that this protein family may be associated with the host range or pathogenicity of Cryptosporidium spp. To understand the function of cgd8_10 encoded NFDQ1, tagged and knockout strains were constructed and characterized in this study.MethodsTo determine the localization of NFDQ1, we used clustered regularly interspaced short palindromic repeats (CRISPR)/CRISPR-associated protein 9 (Cas9) technology to tag the C-terminus of NFDQ1 with three hemagglutinin epitopes (3 × HA). The tagged strain was constructed, and the genomic insertion was confirmed by polymerase chain reaction (PCR). Immunofluorescence assays were performed to observe the localization of NFDQ1 both in extracellular sporozoites and at various intracellular developmental stages. Immunoelectron microscopy was used to study the ultrastructural localization of NFDQ1. Then, the ΔNFDQ1 strain was generated by CRISPR/Cas9 and the in vitro growth assay on HCT-8 cells was used to analyze of phenotypic changes after knockout NFDQ1 in parasites.ResultsThe NFDQ1 tagging and knockout stains were successfully constructed by CRISPR/Cas9 technology and the insertions of transgenic strains were validated by PCR. The expression of NFDQ1 was validated in parasite by western blot. Immunofluorescence and immune-electron microscopy assay showed that NFDQ1 expressed in both asexual and sexual stages of C. parvum, where it was localized to the cytoplasm of the parasite. Upon ablation of NFDQ1, the ΔNFDQ1 strain showed an apparent growth retardation during sexual replication in vitro.ConclusionsNFDQ1 is a cytoplasmic protein without specific localization to secretory organelles, and it may participate in C. parvum growth during sexual reproduction. Future study should determine the role of NFDQ1 following C. parvum infection in vivo.Graphical

Factors affecting the quality of accounting disclosures provided in the annual reports for Jordanian firms

AbstractThis study aims to cover the factors that affect Jordanian companies’ annual reports’ accounting disclosures within the country's regulatory framework. This study analyses the qualitative content of accounting disclosures in Jordanian service and manufacturing companies to ascertain whether Jordanian law affects the company's capacity to provide adequate disclosures to stakeholders and whether industry type affects disclosure quality. The content analysis results indicated that Jordanian firms are aware of the laws and regulations governing the preparation of annual reports. Still, corporate governance rules are insufficient. Furthermore, the results revealed that annual report preparers are committed to mandatory and voluntary but provide inadequate CSR disclosures. The findings showed that service firms outperform manufacturing companies in terms of paying attention to narrating events and taking action to reduce their impact. Multiple factors influence the quality of accounting disclosures in Jordan. As for a limitation, content analysis inherently involves some level of subjectivity in interpreting and coding data, which could introduce bias into the analysis. Nevertheless, conducting targeted studies on particular sectors within Jordan could yield valuable information regarding industry‐specific disclosure procedures and obstacles, which could be a future study.

Boosting Islamic Bank Profitability: Governance, Disclosure, And Stakeholder Satisfaction

This study investigates how financial disclosure (SBFd), governance implementation (GGIsb), and social responsibility disclosure (SBSRd) affect profitability (SBP) and stakeholder satisfaction (SS), which are also mediating factors. This study uses a quantitative approach with secondary data in financial reports. The sample study involved 65 data of financial statements and reports annually collected during 2019-2022 from 13 Islamic Banks in Indonesia. The results show that SBFd and GGIsb positively impact SS and SBP. In contrast, SBSRd does not affect SBP and SS. Meanwhile, SS positively impacts SBP and has a good mediator effect on all correlations. This study confirms the stakeholder theory of the importance of transparency and good governance in improving the performance of finance and the mediating role of stakeholder satisfaction. Practical implications include recommendations to raise financial disclosure quality and strengthen governance mechanisms initiatives more effectively. The findings provide new insights for academics and practitioners in understanding the dynamics between operational factors and financially optimized banking sharia in the Indonesian context.

The effect of board of directors attributes, environmental committee and institutional ownership on carbon disclosure quality

AbstractThis study assesses the effect of the board of directors' attributes, environmental committee (EC), and institutional ownership (IO) on carbon disclosure quality (CDQ) from the perspectives of legitimacy and agency theories in Malaysia. This study collects and analyzes data based on 1000 observations of firms from carbon‐intensive industries from 2015 to 2019. The effect of the board of directors' attributes, EC, and IO on the CDQ was observed using a panel data regression model. The study revealed a significant positive relationship between board independence, board size, female representation, EC, IO, and CDQ. These findings suggest that carbon disclosure awareness is rising in Malaysia as firms have gradually integrated corporate governance (CG) best practices into their business strategies. To the best of our knowledge, this is the first study to examine the factors that influence CDQ in Malaysian businesses. This study identified firms with a higher CDQ using a new global reporting initiative‐based carbon reporting index. This expands the literature on carbon disclosures. This study focuses on carbon‐intensive industries, which might not reflect Malaysia's current CDQ situation. Thus, future research should focus on other sectors to fully grasp the current state of the CDQ in Malaysia and offer new perspectives on emerging markets. The findings may benefit a vast group of regulatory bodies in assessing Malaysian firms' responses to local and international carbon guidelines.

The impact of economic policy uncertainty on corporate environmental information disclosure: the moderating role of media attention and financing constraints

Economic policy uncertainty (EPU) is a major source of risk that could affect corporate environmental behaviors. We investigated the impact of EPU on environmental information disclosure by using 15,308 firm-year observations from 2,316 Chinese manufacturing firms between 2010 and 2020. Our study shows that EPU can be an incentive for firms to disclose environmental information. This finding supports the voluntary disclosure theory that firms are prone to disclose more environmental efforts in times of high EPU. Furthermore, the results show that the positive relationship between EPU and corporate environmental information disclosure can be positively moderated by media attention and financing constraints. Firms in competitive industries and heavily polluting industries provided better environmental information disclosure when facing uncertainty. Our results provide implications that managers should emphasize the quality of disclosure and use environmental information disclosure as a key strategy to deal with EPU.

Effects of Audit Quality in the Relationship between Audit Committee Effectiveness and Board Characteristics on Voluntary Disclosure Quality In (Mena) Countries

Effects of Audit Quality in the Relationship between Audit Committee Effectiveness and Board Characteristics on Voluntary Disclosure Quality In (Mena) Countries

Assessing the Impact of Environmental Accounting Message Disclosure Quality on Financing Costs in High-Pollution Industries

This article explores the relationship between environmental accounting message disclosure quality and financing costs in environmentally impactful industries. Utilizing a mixed-methods approach, it combines quantitative analysis of financial indicators with qualitative insights from industry experts. The findings indicate a significant correlation between high-quality environmental message disclosure and lower equity financing costs, suggesting that investors prioritize sustainability in their decisions. Companies that demonstrate greater environmental accountability enjoy improved access to capital. The article concludes that integrating robust environmental accounting practices and effective message disclosure is essential for fostering sustainable business practices, enhancing long-term financial viability, and promoting a culture of sustainability and resilience in the face of environmental challenges

Executive green cognition and corporate ESG performance

This paper examines how executive green cognition influences corporate ESG performance using data from Chinese listed companies. The results indicate that higher level of executive green cognition substantially enhance ESG performance. Specially, this paper finds that this positive impact is achieved through advancements in green innovation and improvements in the quality of environmental information disclosure. Additionally, heterogeneity analysis reveals that the benefits of executive green cognition on ESG performance are more significant in industries with lower competition and among non-state-owned enterprises. This paper introduces a novel perspective on enhancing ESG performance, offering valuable insights for promoting sustainable development within enterprises.