Voluntary Policy Research Articles

Voluntary disclosure and earnings management: evidence from the Brazilian capital market

ABSTRACT This study examines the association between the voluntary disclosure of economic and financial information and earnings management. The outlined arguments on the subject are based on the assumption that consistent voluntary disclosure policies may reduce earnings management. The analysis is conducted on a random sample of 66 non-financial Brazilian listed companies in the 2005-2012 period. To measure voluntary disclosure, the index proposed by Consoni and Colauto (2016) is used. As a proxy for earnings management, discretionary accruals (DA) are estimated based on the model by Dechow, Sloan, and Sweeney (1995). The relationship between these measurements is analyzed using a model of simultaneous equations and by the random effects regression method with panel data. A significant negative relationship was expected a priori; however, the main result of the study indicates that voluntary disclosure and earnings management are not simultaneously determined or associated. Although the results obtained contradict certain theoretical assumptions, there are alternative explanations for this finding. The empirical set of evidence in this research, in addition to those in previous studies, should be interpreted with caution because there is no consensus on the measures for voluntary disclosure and earnings management. Second, several companies in Brazil may not be interested in providing high-quality voluntary disclosure because most of their shareholders enjoy private benefits of control. This issue reduces the importance of the potential market demand for information, stratifies information asymmetry, and does not prevent earnings management.

Shareholder Wealth Effects of Women on Boards Promoting Policies: Evidence from Germany

This study discusses differences in the effectiveness of voluntary and mandatory policies promoting women on boards and their potential effects on stock price returns. Furthermore, it classifies the announcements of the policy proposals discussed in Germany and analyzes their impact using event study methodology. The event date identification follows a two-step procedure employing search engine query data from GoogleTrends and traditional search methods using Lexis-Nexis and newspapers. One key event produces negative significant cumulative abnormal stock returns (CAR) of approximately 1.3 percentage points. Further regression analysis of the CAR reveals that the share of women on the supervisory board of firms which were not planned to be subject to the mandatory board gender quota exhibits significant negative CAR around the event days. On the contrary, the effect of the share of women on the supervisory board is positively associated with the CAR for firms planned to be subject to the mandatory board gender quota. Thus, the implementation of a mandated quota was costly especially for shareholders of companies not affected by the mandatory quota.

Mecanismos de gobierno corporativo y capital intelectual

Purpose – The purpose of this paper is to identify the corporate governance characteristics of Spanish companies included in the Ibex35 stock price index that influence the voluntary information disclosure policy regarding their Intellectual Capital. Design/methodology/approach – The methodology used was content analysis of 115 annual reports from 23 Ibex35 companies over five years; this allowed for the development of an index to quantify Intellectual Capital information. Findings – Based on Agency-Stakeholders Theory postulates, the main results reveal that companies that disclose most information about their Intellectual Capital are those in which managers have greater managerial ownership, fewer independent directors, separation of functions between the chairman and the chief executive, and larger Boards of Directors. Originality/value – With this study, we contribute to agency-stakeholder theory by analyzing a non-Anglo-Saxon market (characterized by strong executive power and low protection of minority shareholders and other stakeholders), stating that certain characteristics of Corporate Governance condition the disclosure of Intellectual Capital.

Embracing Maternity Protection into Workplace: The Effects of Progressive Bundling and its Use

This study explores the “maternity protection policy” in the workplace, and its effects on the organizational outcome: voluntary turnover and productivity. We investigate 7,147 firm-level samples from 2005 to 2011, using the Korea Workplace Panel Survey data. A factor analysis of 14 maternity protection items shows three classifications: (1) leave policies, (2) health protection at work, and (3) voluntary policies beyond legal requirements. Each classification is regarded as a bundle. Our finding suggests that: (1) firms with a wider range of policy bundles, especially ones extending beyond legal requirements, have a lower voluntary turnover rate and higher productivity; (2) HR practices consistent with the firms’ business strategy strengthen the positive relationship between maternity protection and productivity; (3) firms with a wider range of policy bundles also have a higher use ratio of available policies; and (4) actually using the available maternity protection policies is significantly related to the voluntary turnover rate and productivity. A multi-theoretical approach is used to explain our findings. This study indicates that maternity protection in the workplace not only corresponds to social norms but also function as a competitive advantage for firms.

Can Transparency Foster More Understanding and Compliant Citizens?

AbstractVoluntary policy compliance is an important yet rarely studied topic in public administration. To address the paucity of research, this article proposes and empirically tests a conceptual framework that ties policy transparency and policy understanding to voluntary policy compliance intentions. The reasoning is that the extent to which citizens understand a policy contributes to their intentions to comply with that policy. Further, the authors argue that policy transparency indirectly influences voluntary policy compliance intentions through a positive effect on citizens’ levels of policy understanding. To enhance the validity of the findings, the authors assess these relationships across two policy domains. The findings reflect an indirect positive effect of transparency on voluntary compliance occurring through policy understanding. However, this emerged only for one policy domain. These results suggest that the effects of policy transparency on policy understanding and voluntary policy compliance intentions may depend on the policy domain.

Voluntary vaccination: the pandemic effect.

Justification of a voluntary vaccination policy in England and Wales rests on tenuous foundations. Two arguments against voluntary vaccination are gaining ground. The first is that globalisation necessitates preparedness strategies for pandemics. Assuming sufficient supply, compulsory vaccination of adults and children constitutes a potential policy option in the context of a severe, vaccine‐preventable pandemic outbreak. The second argument is that children have a right to preventive medicine and thus to vaccination. The influence of the UN Convention on the Rights of the Child and its emphasis on parents as the trustees of their children's best interests, and the increasingly global nature of our collective and individual responsibilities with respect to the transmission of vaccine‐preventable disease present challenges to the right to refuse vaccination on our own behalf and on behalf of our children. Exploring methods of compulsion and persuasion utilised across Europe, the USA and Australia, this paper argues that necessity and proportionality must be reassessed, and national public health law and policy setting out a graduated and proportionate approach to compulsory vaccination developed as a matter of priority.

Presidential Prescriptions for State Policy: Obama's Race to the Top Initiative

With increasing frequency, U.S. presidents have orchestrated relations between federal and state governments. A defining feature of this “executive federalism” is a pragmatic willingness to both borrow from and reconstitute very different types of past federalisms. A case in point is President Barack Obama's Race to the Top (RttT) initiative, which sought to stimulate the adoption of specific education reforms in state governments around the country through a series of highly prescriptive but entirely voluntary policy competitions. This paper evaluates the results of such efforts. To do so, it draws on four original data sets: a nationally representative survey of state legislators, an analysis of State of the State speeches, another of state applications to the competitions themselves, and finally, an inventory of state policymaking trends in a range of education policies that were awarded under the competition. This paper then relies upon a variety of identification strategies to gauge the influence of RttT on the nation's education policy landscape. Taken as a whole the evidence suggests that RttT, through both direct and indirect means, augmented the production of state policies that were central components of the president's education agenda.

The determinants of corporate voluntary disclosure policy

PurposeThe purpose of this paper is to identify the factors affecting firm voluntary disclosure policy adopted by a sample of 25 UAE companies listed on the Abu Dhabi Securities Exchange (ADX) for the period 2010-2014.Design/methodology/approachThe author computes a weighted disclosure index (Botosan, 1997) for three-factor voluntary disclosure items and uses a multivariate regression analysis between disclosure index and a set of explanatory variables identified by previous research. The author also controls for endogeneity problem and uses panel data estimation.FindingsIt has been found that listing history, governmental sector, firm profitability and foreign listing positively affect the level of voluntary disclosure adopted by ADX listed companies. By contrast, the percentage of shares owned by block holders and industrial sector negatively affect the level of voluntary disclosure by ADX listed companies. Finally, the board and firm size, managers’ stock options and the leverage ratio do not have any impact on the level of voluntary disclosure adopted by ADX firms. The results remain unchanged to additional sensitivity checks.Research limitations/implicationsThe research presents some limitations: first, the author does not take into account all voluntary disclosure items such as human resources and environmental data disclosed by ADX listed firms. Second, other voluntary disclosure determinants remain unexplored for UAE firms such as culture and tax incentives in the light of the new tax rules including corporate tax and value-added tax.Practical implicationsThe study has many implications: first, it can help investors in their decision making and lead to fair allocation of resources. Second, it gives helpful directives to UAE accounting authorities to enhance the quality of financial reporting in the light of the New Commercial Company Law 2015 for mandatory adoption of IFRS by all listed companies. The paper also presents helpful directives for tax authorities planning for both company and value-added taxes. It also sheds light on factors driving corporate social responsibility disclosures as a crucial component of voluntary disclosure policyOriginality/valueThe paper explores the new determinants of voluntary disclosure such as foreign listing, governmental status and block holding for an emerging relatively unexplored stock market: ADX.

The Richest Wins Them All: Triggering the Benevolent Provision of Public Goods by Federal Transfers

Voluntary participation can improve multilateral environmental governance. We develop a theory of voluntary participation in federal environmental policy by states of differing wealth. Using a general equilibrium model, we formalize voluntary participation by a Pareto-improving federal emission price that coexists with state-level emission pricing. Federal revenues are distributed equally per capita (egalitarian), in proportion to states' historical emission levels (sovereignty), or states' actual payments (juste retour). We find that the existence of Pareto-improving uniform federal prices depends on the transfer rules, and on whether or not states anticipate them. Sovereignty transfers work in all cases. The effectiveness of egalitarian transfers is hampered by too large differences in wealth between states. Juste retour transfers render federal policy ineffective if states anticipate them. The lowest optimal federal price maximizes the utility of the richest state and represents the voluntarily-feasible federal minimum price. In that sense, rich states brake or make possible voluntary federal policy.

Exploring Citizen Support for Different Types of Climate Policy

Citizen support for climate policies is considered an important criterion in climate policy-making. While there is a growing body of literature exploring factors of citizen support, most studies tend to use climate policy support as an aggregate variable, overlooking differences in support for different climate policy types. This study examines citizen support for several market-based, regulatory, and voluntary climate policies using survey data collected from a representative sample of Canadian citizens (n=1306). Specifically, the research objectives are to (1) assess citizen support for different types of climate policies, (2) identify the key factors associated with citizen support for different policy types, and (3) explore heterogeneity across respondents based on policy support patterns. Results indicate that most regulatory and voluntary policies receive high levels of support (83–90% of respondents), while a carbon tax receives the highest levels of opposition (47%). Regression analysis identifies several factors associated with citizen support, including values, trust, and household features. However, only a few factors are consistently associated with support across policy types, including being concerned about climate change, having trust in scientists, and being female. Other significant factors are unique to different policy types. Cluster analysis identifies four distinct respondent clusters based on policy support.

Optimal Versus Sustainable Degrowth Policies

This paper introduces a natural resource and pollution in a Ramsey growth model which relies on the postulates of ecological economics. It studies the impact of voluntary degrowth policies on production and welfare. The instrument of these policies is a tax on the natural resource. These public policies are implemented after the downturn of the households' welfare following from the increased pollution.Two kinds of policies are considered and rely either on an optimality criterion or on an intergenerational equity criterion. With respect to the laissez-faire case, they decrease both production and pollution but increase welfare. Classes of sustainable degrowth paths characterized by time-constant or time-increasing tax rates are determined.

Integrating Social and Ecological Knowledge for Targeting Voluntary Biodiversity Conservation

AbstractImproving the effectiveness of voluntary biodiversity policies requires developing trans‐disciplinary conservation plans that consider social constraints to achieving ecological objectives. We integrated data on landowners’ willingness to participate in voluntary conservation efforts with ecological data on conservation values in a spatial prioritization, and found that doing so considerably reduced the loss in conservation value caused by landowners’ reluctance to participate. We learned that conducting prioritization with stakeholder input gained through dialogue during field visits could be beneficial for increasing the legitimacy of conservation plans with stakeholders. Thus, in addition to developing a methodology for using data on stakeholder perceptions of conservation in spatial prioritization, our study suggests that engaging landowners and other stakeholders in the conservation prioritization process will improve the success of conservation plans.

An evaluation of a public-private partnership to reduce artificial trans fatty acids in England, 2011-16.

The Public Health Responsibility Deal (RD) is a public-private partnership in England involving voluntary pledges between government, and business and other public organizations to improve public health. One such voluntary pledge refers to the reduction of trans fatty acids (TFAs) in the food supply in England by either pledging not to use artificial TFAs or pledging artificial TFA removal. This paper evaluates the RD's effectiveness at encouraging signatory organizations to remove artificially produced TFAs from their products. We analysed publically available data submitted by RD signatory organizations. We analysed their plans and progress towards achieving the TFAs pledge, comparing 2015 progress reports against their delivery plans. We also assessed the extent to which TFAs reductions beyond pre-2011 levels could be attributed to the RD. Voluntary reformulation via the RD has had limited added value, because the first part of the trans fat pledge simply requires organizations to confirm that they do not use TFAs and the second part, that has the potential to reduce use, has failed to attract the participation of food producers, particularly those producing fast foods and takeaways, where most remaining use of artificial TFAs is located. The contribution of the RD TFAs pledges in reducing artificial TFAs from England's food supply beyond pre-2011 levels appears to be negligible. This research has wider implications for the growing international evidence base voluntary food policy, and offers insights for other countries currently undertaking work to remove TFAs from their food supply.

Business Strategy Under Institutional Constraints: Evidence From China's Energy Efficiency Regulations

This paper links theoretical perspectives from energy efficiency economics with those observed from corporate environmental strategy to develop a framework for explaining energy efficiency strategies by firms in response to national policies and local regulations in China. The framework is refined through analytic generalization of 20 cases from four industries and four cities in Jiangsu Province, and reveals two strategies: 1) firms with moderate institutional pressure seek incremental competitiveness by adopting energy-saving technologies, which is reinforced by their informational, organizational, and financing capabilities, and facilitated by voluntary policies and industrial competition; 2) firms with survival risk or development constraints under regulation seek a position favored by local governments by replacing old plant and equipment with larger, more efficient ones and contributing to the local community. The Chinese case studies reveal a strong institutional impact on firms' choice of business strategies and particularly the positioning strategy. The identified business strategies shed additional light on the effectiveness and implications of different policy instruments for energy efficiency.

An examination of a voluntary policy model to effect behavioral change and influence interactions and decision making in the freight sector

Freight transportation is essential to maintaining commerce and economies in the United States and globally. However, freight transportation is known to have significant environmental and public health impacts. Harmful emissions of carbon dioxide, methane, hydrofluorocarbons, and black carbon increase the risk of global climate change. Emissions of nitrogen oxides and particulate matter contribute to serious public health risks including increased incidences of premature death, and increased severity of respiratory and cardiovascular illness. As trade is increasingly globalized and economies expand, harmful air emissions from goods movement are projected to increase at faster rates than all other sources of transport-related emissions. While mandatory rules such as advanced vehicle emission and fuel quality standards reduce emissions from new vehicles, the vast legacy fleet of heavy duty diesel vehicles present a challenge for policy makers around the world. This paper examines how a voluntary policy model, the U.S. Environmental Protection Agency’s SmartWay Transport Partnership, fosters behavior change, facilitates strategic interactions and enables more informed decision-making in the freight sector to improve performance and reduce emissions. The effectiveness of this innovative model has generated international interest and led to program replication in other countries.

Analysing energy intensity trends and decoupling of growth from energy use in Indian manufacturing industries during 1973–1974 to 2011–2012

This paper has two research objectives: first, it derives and analyses energy intensity trends for seven energy intensive manufacturing industries and the aggregate manufacturing sector in India for the period 1973–1974 to 2011–2012 and compares the same with best practice benchmarks. Second, based on Index Decomposition Analysis, it studies the extent to which the energy efficiency has contributed in the decoupling of industrial activity growth from growth in energy use. The study finds faster decline in energy intensity in all the seven industries during the recent years (1998–1999 to 2011–2012). Aluminium, cement and fertilizer industries are found to operate close to the global best-practice energy intensities with transformational changes in process technology. Iron and steel and pulp and paper are found to be lagging behind with only incremental transformation in technology in place. The decomposition results show that activity growth is the major driver of growth in energy demand with marginal impact coming from structural change. However, declining energy intensity has been able to neutralize a major portion of the growing energy demand resulting in decoupling trends, especially in recent years, with more energy efficiency-related voluntary and mandatory policies in place).

Information Disclosure in Dynamic Lemon Market

This paper studies the incentive of a long run seller to disclose past offers when trading with a sequence of short-run buyers. Compared with the models of mandatory disclosure or mandatory non-disclosure, there is a new set of equilibria generated by allowing flexibility in the disclosure option. In this new class of equilibria, the seller adopts a threshold rule in disclosure and only discloses rejected price offer above the threshold to the future buyers. In a two-period case I show that the welfare-maximizing equilibrium in the optional disclosure model could generate a strictly higher social surplus than any equilibria in models with mandatory restrictions on the disclosure policy. Mandatory disclosure or concealment of past offers may not be necessary for market information structure. Moreover, a policy maker can adopt non-disclosure policy for lower prices and voluntary (or mandatory) disclosure policy for higher prices to enhance trading efficiency.

Effect of Trade Liberalization on Low-Carbon Energy Technology Dissemination in Asia

The production and use of low-carbon energy technology and services, such as renewable energy, are imperative for Asia's emerging economies (which are heavily dependent on imported energy and resources) to tackle global environmental issues like climate change. Acknowledging this fact, recently, governments in the Asian region individually have been taking effective actions in the form of voluntary targets and policy commitments to improve the production and use of low-carbon technology, such as solar, wind, geo-thermal, and so forth. Nevertheless, the diffusion of these technologies has been through liberalized trade, which has been low compared with trade and investment in other energy intensive sectors. Though effective tariffs are low, non-tariff barriers or behind-the-border constraints are very high. In this exploratory study, the potential for increased exports in low-carbon technology and services under a grand regional coalition, partial regional coalition, and stand alone scenarios is studied. We find that production, trade, and investment in renewable energy technologies are very low regionally. There is a large gap between the demand for and the supply of low-carbon energy technology and associated pollution abatement services. Behind-the-border constraints that exist within the exporting country, such as poor infrastructure and inefficient institutions, create this gap between actually realized and potentially possible exports. This supply gap provides an opportunity for those emerging Asian economies, which have the potential to contribute to the manufacturing of such technologies individually and collectively pooling their physical and human capital.

Firm geographic location and voluntary disclosure

This study aims to shed light on the effect of a firm’s geographic location on its voluntary disclosure policy. It hypothesizes that a firm’s geographic distance from metropolitan areas increases the cost of oversight of managerial actions, which creates incentives for remotely located firms to make more voluntary disclosures in their annual reports that improve information available to investors and hence mitigate agency conflicts. Based on a sample of 260 French listed firms spanning the period 2007–2010, we find support for our hypothesis that as a firm’s distance from the Paris region increases, its level of voluntary disclosure in annual reports increases as well. This is consistent with the notion that remote firms are likely to pre-commit to higher voluntary disclosure so as to reduce oversight costs arising from geographic remoteness and mitigate agency conflicts. Our results are robust to alternative measures of voluntary disclosure, to several geographic location proxies, and to alternative estimation techniques. Collectively, they confirm the positive effect of distance on the extent of voluntary disclosure.

Corporate governance and the profitability of insider trading

This paper examines the influence of corporate governance systems on insiders' ability to profit from their information advantage and the ways through which corporate governance systems influence such ability. We find that corporate governance significantly reduces the profitability of insider sales but not that of insider purchases. Given that sales involve greater legal risk than purchases, the results suggest that well-governed firms restrict informed insider trading mainly to reduce legal risk. We also find that better-governed firms reduce the profitability of insider sales by increasing the likelihood of adopting ex-ante preventive measures (e.g., voluntary insider trading restriction policies), implementing such measures more effectively, and taking ex-post disciplinary actions more actively. These results highlight how better-governed firms are able to restrict insiders from exploiting private information.