Stock Exchange-listed Companies Research Articles

Toward an alternative measure of board diversity: an exploratory study on board polarization in German stock exchange-listed companies

PurposeThe effects of board composition on performance have long been discussed in management research using fractionalization measures. In this study, we propose an alternative measurement approach based on board polarization.Design/methodology/approachUsing an exploratory analysis and applying the polarization measure to German Deutscher Aktienindex (DAX)-, Midcap-DAX (MDAX)- and Small Cap-Index (SDAX)-listed companies, this paper applies the polarization index to examine the relationship between board diversity and performance.FindingsThe results show that the polarization concept is well suited to measure principal-agent problems between the members of the management and supervisory boards. We reveal that board polarization is negatively associated with firm performance, as measured by return on investment (ROI).Originality/valueThis exploratory study shows that the measurement of board polarization can be linked to performance differences between companies, which offers promising starting points for further research.

Supply Chain Leadership in a Developing Economy for Sustainable Innovation and Competitiveness: The Case of Johannesburg Stock Exchange-Listed Companies

The supply chain leadership (SCL) concept has gradually gained traction among various stakeholders such as legislators and specialists because of its dependable practices for companies in sustainable innovation and competitiveness across developing economies. The effective implementation of SCL strategic actions in a company can initiate sustainable innovation and competitiveness at each level of the company. Statistical data collection was performed for 46 of the top 100 Johannesburg Stock Exchange (JSE)-listed companies through an online Survey Monkey questionnaire. The primary purpose of this study was to identify the SCL strategic actions that are undertaken by companies in a developing economy regarding sustainable innovation and competitiveness. The findings significantly reveal empirical insights for companies to include and leverage in SCL strategic actions that influence sustainable innovation and competitiveness in an emerging economy. The findings show that firms operating within developing economies must adopt, and recognize the importance of, sustainable innovation and competitiveness in their practices for the betterment of the goods and services provided to the market. A major contribution is offered to the literature for the assistance and planning of sustainable innovation and competitive practice in developing economies in a global environment. This study further offers a robust recognition of, and information about, the characteristics and strategies that commonly lead to SCL being prioritised by the top 100 JSE-listed companies.

Market responses to appointment of women and men as directors: A study of top 40 Johannesburg Stock Exchange-listed companies

Market responses to appointment of women and men as directors: A study of top 40 Johannesburg Stock Exchange-listed companies

Assessing Circular Economy Readiness Factors: Empirical Insights from a Developing Nation

The Circular Economy concept has gained popularity among both researchers and practitioners. However, a comprehensive methodology for assessing a company's Circular Economy Readiness is lacking. Current assessment procedures often lack clarity in terms of metric and indicator selection. To bridge this gap, this paper introduces a novel model that integrates Circular Economy Readiness factors. To address Circular Economy Readiness in developing nations, this study amalgamates national, organizational, and individual readiness factors into a unified model, drawing from recent literature. Readiness for change models and frameworks from selected publications are synthesized to establish a comprehensive conceptual model for Circular Economy Readiness. Five Individual Readiness factors, twelve Organizational Readiness factors, and one factor under National Readiness are identified. These factors analyze CER readiness levels. The model is tested on Colombo Stock Exchange-listed companies, yielding practical insights for policymakers and practitioners to design and implement effective circular economy strategies. The study's findings can be transformed into metrics to gauge CER in developing countries and perhaps in other nations. By comprehensively investigating factors influencing CER across levels and sectors, this research empowers policymakers and practitioners to devise strategies that facilitate the transition to a circular economy.

Factors Affecting The Integrity Of Property And Real Estate Company Financial Statement

Companies have a responsibility to uphold integrity when disclosing financial reports. This research examines Indonesian Stock Exchange-listed companies in the property and real estate subsector from 2017 to 2021, specifically focusing on the ownership structure of financial, leverage, and intellectual assets and their impact on the integrity of financial statements. Quantitative methods, including panel data regression and descriptive statistics, are used to test hypotheses. A purposive sampling technique was utilised, resulting in a sample of 16 companies and 70 observation data points. The results indicate that ownership by institutions, managers, financial leverage, and intellectual assets collectively impact the honesty of financial statements. According to the findings, leverage affects the integrity of financial accounts somewhat positively, whereas managerial ownership exerts an adverse impact. However, no significant influence was found between institutional ownership and intellectual capital in relation to financial statement integrity.

Navigating digital transformation in accounting system: Challenges and opportunities

The primary objective of this study was to assess the challenges associated with the digital transformation process in the accounting systems of companies listed on the Khartoum Stock Exchange, focusing on the perspectives of senior management, financial management, and technology management. These departments were considered integral due to their profound understanding of digital transformation processes, requirements, and existing as well as anticipated challenges. Employing a descriptive-analytical approach, the study utilized a questionnaire to gather data from 315 individuals within the study population. The results revealed a favorable inclination among Khartoum Stock Exchange-listed companies towards digital transformation, manifested through a notable automation of accounting procedures, the cultivation of a digital culture, and the adoption of strategic approaches for digital transformation. However, the study identified several challenges, including insufficient technological infrastructure at the national level, the absence of a clear national strategic plan for digital transformation, and limited financial resources allocated to digital transformation in accounting systems. The study also proposed a set of solutions to address these challenges, categorized into national and corporate levels.

Do credit market incentives drive classification shifting in emerging markets?

PurposeTo report inflated operating performance indicators, such as operating revenue and operating profit, managers vertically reposition revenue and expense items inside the income statement. This study aims to investigate the relationship between credit market incentives and these practices.Design/methodology/approachThis study examined a sample of 1,592 Bombay Stock Exchange-listed companies from 2009 to 2021 and tested them using panel data regression models. The propensity score matching method and different measurements of classification shifting practices are used to validate the results.FindingsThe conclusions drawn from the empirical data show that firms prefer revenue shifting over expense shifting to prevent debt covenant violations. It shows that the firm’s classification-shifting practices are driven by credit market incentives. This finding is consistent with the notion of positive accounting theory that firms engage in classification shifting (earnings management) to avoid violation of debt covenants. Further, the firm’s preference for revenue shifting is in line with the ease-need-advantage-based shifting framework where firms choose the shifting tool based on costs and constraints associated with each tool.Practical implicationsThe finding suggests that if managers heavily rely on revenue shifting to avoid debt covenant violations, the firm may end up breaking these covenants based on its actual operating performance. Managers may use aggressive accounting techniques to prevent covenant violations, which can be a warning indicator of financial difficulties or operational problems. It highlights the necessity for creditors and investors to carefully evaluate a company’s financial stability outside of the financial statements that are publicly disclosed. Authorities should create separate forensic accounting standards for auditors to check revenue items and stop the corporate misfeasance of revenue shifting.Originality/valueThe study is among the earlier attempts to provide empirical evidence on credit market incentives behind classification shifting practices. It is the first study that documents the substitution relationship between classification shifting forms for avoiding violation of debt covenants.

An analysis of the level of collaboration between social and environmental stakeholders and Johannesburg Stock Exchange-listed companies in creation of shared value

Purpose: Over the years, social and environmental reporting has been marred with theories and approaches that lack guidance on how companies can simultaneously uplift lives of social and environmental stakeholders (SEs) while creating measurable economic value. Shared value creation is a new model that promotes simultaneous creation of economic, social and environmental value, in collaboration with social and environmental stakeholders (SEs). This study analyses the level at which Johannesburg Stock Exchange-listed companies (JSE) are collaborating with social and environmental stakeholders in the process of simultaneously creating economic social and environmental value. Methodology: A qualitative interpretive research methodology was used in this study. Random sampling was used for twenty-one interviews from civil society organisations that had participated in protests during the period understudy. Two hundred seventy-eight integrated reports were collected over a period of five years from top 100 JSE-listed companies as soon as they became available. Media reports sample was not predetermined but accumulated as events related to the study occurred. The study adopted grounded theory design for analysing perceptions, experiences of participants and narratives in order to socially construct reality using those interpretations. ATLAS ti software and excel was used to analyse the data. Findings: From the analysis, the study identified weaknesses in collaboration processes. From the interpretations, it emerged that JSE-listed companies intensely involve SE stakeholders in the collection of material concerns but inadequately collaborate with SE stakeholders during implementation process. Originality/Value: The study recommends an improvement in relational collaboration for empowerment of SEs.

Environment, Social, Governance, and Performance in Far East Asia for the Period of 2018-2021

This study investigates how banking performance in the Far East Asia region is impacted by environmental sustainability through sustainability reporting using ESG Index as a proxy. For the 2018–2021 period, 89 Far East Asia stock exchange-listed companies that routinely provide ESG scores are the sample for this study. The environment sustainability dimension in this study uses the ESG index as a proxy. The research analysis starts with descriptive statistical analysis to summarize the sample data. Then regression was performed using the Fixed Effect Model method for all research models to test the variables simultaneously. This study discovered a detrimental effect of ESG as a proxy of environmental sustainability on banking performance. However, they also discovered a beneficial relationship between one ESG dimension—corporate governance—on banking performance.

Determinants of going-concern audit opinions: evidence from Vietnam stock exchange-listed companies

Determinants of going-concern audit opinions: evidence from Vietnam stock exchange-listed companies

Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

PurposeThis study aims to examine the relationship between auditor industry specialization (IS) and audit fees.Design/methodology/approachThe authors utilize 2,100 firm-year data of Jordanian companies from 2005 to 2018. Two conflicting theoretical approaches of IS were employed: the product differentiation approach, as assessed by market share (MS); and the shared efficiency approach, as evaluated by portfolio share (PS).FindingsResults of the ordinary least squares (OLS) regression support product differentiation (shared efficiency) and show that employing experts' auditors exerts a very substantial and favorable direct impact on audit fees (negative).Originality/valueThis research contributes new empirical data to the auditing literature by examining if IS does influence Jordanian businesses' audit fees. The findings offer useful data for Jordanian officials to examine the auditing industry's difficulties while refining regulations and revising auditor pricing. Additionally, the results offer advice to Jordan's regulatory bodies who oversee the auditing industry. Arguably, results from Jordan may be extrapolated to other Middle Eastern nations.

A Comparative Study of the Fama-French Three Factor and the Carhart Four Factor Models: Empirical Evidence from Morocco

This paper investigates the validity of the Fama-French Three Factor (FF3F) and the Carhart Four Factor (C4F) models in Morocco. Monthly returns of Casablanca Stock Exchange-listed companies are extracted from Reuters DATASTREAM over a 5 years’ period (2013-2017). Market, size, value and momentum effect-mimicking exogenous variables are formed and regressed against the returns of size and value-sorted portfolios over a total of 8 multivariate linear regressions. While the size and value effects were found to partially hold, the momentum effect was found to be insignificant. Additionally, the C4F Model did not exhibit a better explanatory power compared to the FF3F Model. It appears that both models cannot be fully relied on in order to predict cross-sections of return in the Casablanca Stock Exchange (CSE), as they both only partially hold in the latter. Ultimately, this study brings value to the existing literature by testing two widely explored asset pricing models in an emerging market where equity research-oriented inquiries are relatively scarce or basic. Even if the models do not fully hold in the Moroccan context, this study posits whether the individual anomalistic factors hold in the CSE, which might be useful for future asset pricing models augmenting endeavors.

Shareholder Voting and COVID-19: The China Experience

Using state-of-the-art data-mining techniques, this research constructs a unique dataset comprising the votes cast by Chinese shareholders on 15,553 resolutions laid before 2,888 general meetings of Shanghai Stock Exchange-listed companies in the six-year period between 2015 and 2020. This research empirically depicts, for the first time, the manner in which minority shareholders exercise their rights to vote in China, presenting a counter-thesis to the conventional wisdom of shareholder passivity. In particular, this research offers a unique perspective on how the COVID-19 pandemic has influenced Chinese shareholders’ voting behaviour by focusing its empirical investigation on the 76-day time window from 23 January to 7 April 2020, during which period Wuhan, the epicentre of the COVID-19 outbreak in China, came under a mandatory lockdown order. Our findings offer strong empirical evidence that Chinese shareholders cast their votes in a characteristically more informed manner in the 2020 sample period than they did during the sample periods in the previous five years. The research highlights the potential of shareholder activism in economies where share ownership is concentrated. It also has implications for the ongoing discourse on virtual shareholder meetings and the shareholder franchise.

Impact of Audit Quality on Earnings Management: An Empirical Analysis in the Indian Context

Anchoring upon the agency theory of corporate governance, auditing function as a monitoring mechanism is supposed to alleviate information asymmetry between the managers and the shareholders of a company by controlling distortion of reported earnings by the former. The aim of this study is to determine the effect of audit quality on earnings management and substitutability of earnings management strategies using a sample of all Bombay Stock Exchange-listed companies for 10 financial years, that is, from 31 March 2010 to 31 March 2019. The previous studies addressing the issue have mostly captured companies in the developed countries or have dealt with only one strategy at a time. This study adds to the literature by undertaking a comprehensive approach to the analysis by studying both accrual earnings management as well as real earnings management in the Indian context, which are estimated through various models. The findings suggest significance of Big 4 auditors in constraining all forms of earnings management. For firms within the sample that have the incentives to distort earnings, long auditor tenure is found to be aiding earnings management through accruals, thus impairing audit quality.

Integrating ESG factors in investment decisions by mutual fund managers: a case of selected Johannesburg Stock Exchange-listed companies

This paper examines whether mutual fund managers incorporate environmental, social, and governance (ESG) factors when deciding which sector to invest on behalf of their trustees. In doing this, the top 20 South African mutual fund companies (asset managers) listed on the Johannesburg Stock Exchange (JSE) were selected. The paper identified the top 30 JSE listed companies (in the large industrial, equipment, and machinery sectors, excluding unlisted and service-oriented companies) where trustees’ funds were invested (with a total of 28 companies between 2007 and 2017) from the mutual fund companies’ Equity Fund Fact Sheets 2017 (representing recent investment focus). ESG data were collected from the integrated and sustainability reports at the sampled companies’ websites, and financial data were sourced from the IRESS database. This study adopted the panel data analysis. The results show an insignificant negative relationship between the ESG proxies (water usage, employee health and safety cost [number of work-related fatalities], percentage of women on corporate board) and return on equity (ROE). This means that the sampled companies disregard the United Nations Principle of Responsible Investment (UN PRI) guideline, suggesting that asset managers focus on increasing returns on shareholders’ investment without considering ESG issues. The paper concludes that the disregard for responsible investment guidelines does not encourage companies to improve their unsustainable business practices.

The role of debt financing in the relationship between capital structure, firm’s value, and macroeconomic factors: To throw caution to the wind

The role of debt in capital structure and firms' performance has a great novelty in reducing market imperfections that improve firms' value. This study integrated the qualitative and quantitative aspects of capital structure and firms' performance in 56 stock exchange-listed companies of Jordan by using the time series data from 2012 to 2016. The results confirmed the "stewardship theory," "pecking order theory," and "concentrated ownership theory," while contractionary monetary instruments diffuse the recessionary phase in a country. The results confirmed a U-shaped relationship between debt and Tobin's Q in mediation with the country's per capita income. In contrast, an inverted U-shaped relationship found between market capitalization and a firm's performance in intervention with domestic credit provided by the financial sector (DCPFS). These results are essential in the light of CG theories to stabilize the firm's internal and external issues, which are further optimized by government financial agencies to energize macroeconomic policies for sustained growth.

Credibility assessment of financial stock tweets

Social media plays an important role in facilitating conversations and news dissemination. Specifically, Twitter has recently seen use by investors to facilitate discussions surrounding stock exchange-listed companies. Investors depend on timely, credible information being made available in order to make well-informed investment decisions, with credibility being defined as the believability of information. Much work has been done on assessing credibility on Twitter in domains such as politics and natural disaster events, but the work on assessing the credibility of financial statements is scant within the literature. Investments made on apocryphal information could hamper efforts of social media’s aim of providing a transparent arena for sharing news and encouraging discussion of stock market events. This paper presents a novel methodology to assess the credibility of financial stock market tweets, which is evaluated by conducting an experiment using tweets pertaining to companies listed on the London Stock Exchange. Three sets of traditional machine learning classifiers (using three different feature sets) are trained using an annotated dataset. We highlight the importance of considering features specific to the domain in which credibility needs to be assessed for – in the case of this paper, financial features. In total, after discarding non-informative features, 34 general features are combined with over 15 novel financial features for training classifiers. Results show that classifiers trained on both general and financial features can yield improved performance than classifiers trained on general features alone, with Random Forest being the top performer, although the Random Forest model requires more features (37) than that of other classifiers (such as K-Nearest Neighbours − 9) to achieve such performance.

The many faces of earnings before interest, tax, depreciation and amortisation (EBITDA): Assessing the decision usefulness of EBITDA disclosure by Johannesburg Stock Exchange-listed companies

Orientation: The voluntary disclosure of non-Generally Accepted Accounting Principles (non-GAAP) earnings may lack decision-usefulness if not faithfully represented or comparable. Commonly accepted as being well defined, earnings before interest, tax, depreciation and amortisation (EBITDA) may be misleading if labelled, defined and calculated inconsistently. Research purpose: To assess the decision-usefulness of EBITDA disclosure by Johannesburg Stock Exchange (JSE)-listed companies. Motivation for the study: Prior research on voluntary disclosure largely excluded EBITDA from its focus, accepting it as standardised. Research approach/design and method: A quantitative content analysis was used to analyse the EBITDA disclosure in 220 Stock Exchange News Service (SENS) reports in which JSE-listed companies reported their annual results for the period 2014–2016. Main findings: Companies inconsistently labelled, defined and calculated EBITDA. Twenty-four per cent of the SENS reports labelled and defined EBITDA as earnings before interest, tax, depreciation and amortisation, but calculated it by adjusting for other items as well. Companies’ definitions of EBITDA also differed widely, with 27 different definitions identified in 52 SENS reports that disclosed an unmodified EBITDA label. Practical/managerial implications: Existing JSE reporting requirements appear lacking in ensuring that companies disclose EBITDA that is faithfully represented and comparable. The identified diversity of definitions has implications where EBITDA is used for valuation and contracting purposes. Contribution/value-add: The study contributes to the voluntary disclosure literature by focussing on a non-GAAP earnings measure that has largely been ignored by prior research, namely EBITDA. Empirical evidence is presented on the diversity that exists in EBITDA disclosure by JSE-listed companies.

An analysis of the possible impact of mandatory audit firm rotation on the transformation and market concentration of the South African audit industry

Orientation: Consistent with global concerns regarding the quality of audits and regulatory changes in Europe, South African audit regulations will require audit firms to rotate clients periodically, in an attempt to safeguard auditor independence and audit quality. In 2017 the South African audit regulator issued a ruling requiring mandatory audit firm rotation (MAFR) every 10 years, effective April 2023, primarily intended to improve audit quality. In addition to audit quality improvement, the regulator also believes that MAFR will stimulate transformation in the audit profession by building capacity of black-owned audit firms and allowing opportunities for small- and medium-tier audit firms to compete for the audits of listed companies. Research purpose: This study explores the perceptions of auditors and audit committee chairs of Johannesburg Stock Exchange-listed companies with regard to the direct and indirect financial effects of the implementation of MAFR in South Africa with respect to black economic empowerment and market concentration. Motivation for the study: No studies have explored this controversial additional objective of MAFR in South Africa. Research approach, design and method: An exploratory mixed-methods design is employed, using questionnaires derived from a review of the academic research and professional debate concerning MAFR. Main findings: Contrary to the intentions of the regulator, MAFR may not result in improved transformation of the audit profession and could in fact reduce the capacity of audit firms to pursue transformation initiatives. In addition, MAFR may not decrease the current degree of audit domination of the Big 4 firms of the JSE, possibly even further concentrating the industry, as audit committees and shareholders may be reluctant to appoint mid-tier firms as auditors of the large listed companies. Practical/managerial implications: Industry stakeholders and the regulator should consider targeted interventions to mitigate the potential for impaired transformation and further concentration of the industry which may result from implementation of MAFR in 2023. Contribution/value-add: The findings and conclusions will contribute to addressing concerns regarding the rate of black participation in the industry, as well as mitigating the potential unintended consequences of MAFR.

Tax governance compliance: An exploratory study of the 50 largest Johannesburg Stock Exchange-listed companies

In line with current international sentiment which promotes greater transparency, the King Committee on Corporate Governance in South Africa updated its corporate governance framework through the issue of the King IV Report on Corporate Governance for South Africa, which replaced the King III Report on Corporate Governance for South Africa with effect 1 April 2017. The King IV Report on Corporate Governance for South Africa now specifically includes the formulation of a tax policy and strategy within the ambit of responsibilities of the board of directors and states that the organisation’s tax policy must be ‘transparent’ and ‘responsible’. The objective of the study was threefold: Firstly, to develop a tax reporting framework that incorporates the principles of good tax governance to ensure transparent and responsible tax policies and practices in South Africa. Secondly, to use the developed tax reporting framework to measure the tax reporting performance of the 50 largest Johannesburg Stock Exchange (JSE)-listed organisations in South Africa. Thirdly, to produce a holistic and strategic methodology for South African organisations to employ as a standard and pragmatic approach that incorporates the responsible and transparent tax policy requirements of the King IV Report on Corporate Governance. The study commences with a literature review of established international trends on good tax governance, continues by aligning these international trends with principles from the King IV Report on Corporate Governance for the South African context and concludes with descriptive statistics to measure the performance of South African JSE-listed organisations against these trends. It was found that less than half of the 50 largest JSE-listed organisations comply with more than 50 per cent of the disclosure criteria as recommended by international practice on good tax governance. Only 25 per cent of organisations complied with 65 per cent or more of the disclosure criteria. Of such organisations, 75 per cent are primarily listed on a stock exchange other than the JSE with a secondary listing on the JSE. It is evident that most primarily listed JSE-listed organisations do not meet international criteria of good tax governance. It is therefore submitted that the presented methodology may contribute to South African governance literature.