Window Dressing Research Articles

Nexus of Accounting Profession and Corporate Governance in Nigeria

This study attempts to investigate management bottlenecks in compliance , implementations of accounting principles, regulations and evaluation of accounting activities .The study adopted descriptive research and methodology to inquire on the state of corporate governance and accounting profession in Nigeria. The study reveals that despite the gorgeous principles of corporate governance and accounting professional gatekeepers and, others, corporate governance tends to be stifled. The study used secondary data such a journals and articles to examine the likely causes or drawbacks in achieving good and sustaining corporate governance in Nigeria which include: Management overriding in form of creative accounting , window dressing, nepotism, conflict of interest between the agent and the principal etc. The study highlighted on the core principles of corporate governance such as: Fairness, accountability, transparency, responsibility honesty etc. It also accentuates challenges of corporate governance in Nigeria, and the way-forward based on the investigation on the above subject, the study discovered that: Corporate governance is achievable only on commitments of entity’s directors, professional gate keepers, there association between practice of good governance professional skepticisms, ethic, code of conducts and conformability. Commitments of corporate governance directors and other professional gatekeepers impact greatly on corporate governance, there is often conflicts of interest between the equity owners, executive and management of corporate entities there by denying the equity owners’ right and equitable treatments. The study recommends that: Stock exchange operators should restructure new scheme of assessment of quoted or prospecting entities, adopting suitable policies and maintain strict and prompt compliance on the subject. Accounting bodies should unit and have one voice regarding professional transformation as it applies to ethics, code of conducts, creative accounting, and window -dressing accounting. Entities should base human resources employment on skills, performances and experiences, rather than only on certificates or degrees. Stock exchange operators and professional accountants and other gatekeepers of corporate firms should collaborate to ensure that paper and physical assets and liabilities of quoted and prospecting entities are verified and certified prior their endorsements. Also make provisions for entity’s executive and management to be co-owners to equity owners. Then corporate entities should adopt responsibility reports and reward systems in corporate affairs by reason of functions, performances and activities.

JANUARY EFFECT ON THE INDONESIAN STOCK MARKET

This study examines the January Effect, by not only comparing returns per year with returns in January, but also comparing returns per year with returns in other months. Thus, this study can determine whether there is a significant difference in January (January effect) on LQ45 company shares, or there is no significant difference in January, but there is a significant difference in other months. In order for this research to be ceteris paribus (isolating the effects of other factors beyond what was studied), this research will eliminate events that occur in companies that affect stock returns. When there is an event that affects return, the 1 week period is omitted. This study aims to test whether there is a January effect in Indonesia, by comparing the daily average return each month with the daily average return a year, using the Mann Whitney U Test analysis method, which is a non-parametric test where the dependent variable data scale is the interval / ratio or ordinal that is not normally distributed. This test can determine the median of 2 independent groups. By testing the average return per month, this study can prove whether there is a significant difference in January, or whether there is a significant difference in other months. The results of data processing in this study stated that there were 4 months where the results were significant, namely January, September, November, and December. Of these four months with significant results, January and December had significantly higher yields. Meanwhile, September and November had significantly lower results. From these results, it can be concluded that a significantly higher result in January indicates that there is a January Effect in Indonesia. In December, the yield was significantly higher due to Window dressing.

Is window dressing by banks systemically important?

We study banks' year-end window dressing in the European Union to assess how it affects the identification of global systemically important banks (G-SIBs) and the associated capital surcharges. We find that G-SIBs compress their balance sheet at year-end to an extent that they can reduce their surcharges or avoid G-SIB designation altogether. G-SIBs use several levers to adjust their balance sheets. Most notably, they compress intra-financial system assets and liabilities as well as their derivative books at year-end. Moreover, G-SIBs that are more tightly constrained by capital requirements window dress more than their peers. Our findings underscore the importance of supervisory judgement in the assessment of G-SIBs and call for greater use of average as opposed to point-in-time data to measure banks' systemic importance.

Can Executives Predict How Firm News Affects Stock Price?

More than 650 U.S. public company executives predict the stock price response to their quarterly financial reports and share their prediction after under a nondisclosure agreement. Despite having full knowledge of the reports before their release, executives’ estimates differ from realized returns by roughly 100% of the average absolute one-day response (i.e., 600 to 700 basis points) and are directionally wrong in one-third of cases. We do not find evidence that executives learn from the unexpected price movements; rather, executives profitably trade against the market the greater the prediction error. Greater error also reduces window dressing of financial information.

“It's all window dressing:” Canadian police officers' perceptions of mental health stigma in their workplace

PurposeThis study will provide a preliminary, general overview of Canadian police officers' perception of stigma toward mental illness in their workplace culture and its impacts.Design/methodology/approachThis study uses a mixed methods approach with two nationwide datasets: a self-report survey (N = 727) and 116 semi-structured interviews with police officers from 31 police services. Results are grounded in theories of stigma, masculinities and organizational culture.FindingsResults indicate that most officers believe stigma toward mental illness in their workplace remains, despite senior management messaging and program implementation. Reporting mental illness was often seen as high risk, both personally and professionally. Policewomen, constables and those on leave reported statistically significant higher levels of perceived stigma and risk. Features of traditional masculinity were commonly reported, influencing the way individuals viewed themselves (self-stigma) and organizational response (structural stigma). Those with lived experience reported the highest levels of self and structural stigmatization, which often negatively impacted their recovery.Originality/valueThis study strengthens our understanding of how organizational culture and structure combine to contribute to the persistent presence of stigma in some Canadian police services (with implications for male-dominated occupations generally). Gender, rank, years of service and lived experience are additional areas of limited scholarship addressed by this study. The findings have important implications for effective program and policy evaluation and development.

Creative Accounting: A Threat to Corporate Survival of Firms in Nigeria

This study examined creative accounting as it affects survival of corporate firms in Nigeria. To effectively carry out this study income smoothing, window dressing and choice of accounting policies were used as proxies of creative accounting (independence variable) and corporate survival as dependent variable. The researcher was motivated to study this title due to incessant stagnation, liquidation and collapse of public business organizations in Nigeria suspected to be caused by poor management of resources. The study adopted a descriptive survey and data were gathered primarily using a well-structured questionnaire. Data analysis was done using arithmetic mean while hypothesis were tested using chi-square(x2) analytical tool. It was discovered that income smoothing, window dressing as well as changes in accounting policy. Significantly and negatively affected corporate survival of business firms in Nigeria. This implies that instead of perpetual existence or survival of such companies, they dwindle, stagnate, liquidate and finally collapse. It therefore recommends that accounting and government regulatory bodies should step up proper monitoring tools to effectively monitor the activities of the preparers of financial accounts and management to rise to the expectations of investors and other user of accounting report.

Studying the specifics of manipulation of financial statements in organizations of the construction sector

Subject. We identify the signs of manipulating the financial statements in the construction sector organizations. Objectives. We focus on developing the analytical procedures to detect the signs of financial statements manipulation, namely, the so-called window dressing. Methods. The methodological basis rests on general scientific principles and methods of research, like abstraction, generalization of approaches of domestic and foreign authors to the detection of manipulation of reporting, and statistical methods of information processing. Results. We developed a classification of methods for manipulation of unsound improvement of financial statements, assessed the likelihood of misstatement of financial statements, identified the elements of poor quality items, proposed a method to detect the manipulation of reporting, based on the comparison of substandard financial statement items with reliable items and/or non-financial indicators. We tested the methodology on the data of enterprises, operating in the construction sector. Conclusions. The study found that a likely manipulator is, usually, a micro-enterprise or a small company that does not have a credit limit, has significant relative performance of assets and liabilities of low quality, while showing high productivity and high return on assets at the average level of capital/labor ratio, and characterized by low investment and financial activity.

Corporate governance reform and overstatement of compliance: Illustrations from an emerging economy

AbstractThis paper examines the effect of corporate governance (CG) reform on the window dressing of compliance in the context of an emerging economy, Bangladesh. In particular, this study investigates the true level of compliance concerning the three internal governance mechanisms, such as board independence, CEO duality and formation of audit committee before and after the reform enacts. By using content analysis of 194 non‐financial listed companies between 2007 and 2017, this study observes the extent of overstatements in compliance statements along with the nature of firms that are involved in it. After the regulatory shift in 2012, requiring more independent directors into the board and external certification of compliance statements, it was found that the extent of window dressing in compliance statements declined considerably over time. Moreover, government firms are found to make more proportionate overstatements compared to family and others (non‐family and foreign companies). counterparts. The fall in window dressing indicates that the companies' fabricating efforts in CG compliance are challenged by the regulatory change in a formal legal environment.

Family Governance and CSR Decoupling

The rise of corporate social responsibility (CSR) accompanies the growing skepticism about firms’ avowed adoptions of CSR policies, which can be coupled or decoupled from their actual implementations. Although firms often put CSR policies in place as window dressing, published studies about CSR decoupling are scarce, leaving the causes and conditions that shape CSR decoupling poorly understood. Drawing on the socioemotional wealth perspective, we theorize that controlling families are concerned with both economic wealth and socioemotional wealth and how they prioritize these dual concerns plays a key role in deciding over CSR decoupling. Specifically, we examine when family ownership is positively or negatively related to CSR decoupling by focusing on the conditions that make family owners concerned more about their socioemotional wealth. We hypothesize that returns and risks of CSR decoupling vary across firms according to the priority the family place on financial or nonfinancial gains. We argue that family ownership is positively related to CSR decoupling since family principals are more concerned with economic wealth as their ownership increases. However, this relationship shifts from positive to negative when the family CEO is at the helm of the firm because a family CEO increases family visibility and the family’s socioemotional concern. We also find that firm visibility attenuates the positive effect of family ownership on CSR decoupling. Our study uncovers the ambivalence of family control and reconciles previous inconsistencies in the literature on family business and CSR. In this way, we make a larger theoretical contribution to institutional theory and a wide array of decoupling studies.

Growing Needs of Forensic Audit in Corporate and Banking Frauds in India

With the gradual rise in money laundering and wilful default cases, RBI has made forensic audit mandatory for large advances and restructuring of accounts. In the present administrative system post Modi regime, no domain is spared from immoral misconduct, fraudulence and injustice. According to a joint study conducted by ASSOCHAM and Grant Thornton, corruption, money laundering, tax evasion, window dressing, financial reporting fraud and bribery are the most common corporate frauds occurring in India Inc. The study revealed that nearly half of corporate frauds have taken place in real estate and infrastructure in the last two years followed by financial services sectors recording 34% frauds. Scandals in accounting have grown in the last two decades and have put a question mark in corporate governance, role of company secretaries and auditors. The scandals occurred in this 21st century are also putting question on monitoring role of regulators also in some cases. Restoring stake holders’ confidence back in the financial reporting process and corporate governance is also a challenge in view of these developments. Further, the lengthy legal processes also help the criminal companies and borrowers to play with public money as long as they like. Consortium loan process should not be so conducive to give rise to get huge money without security and an easy game to play with public money. Forensic accounting helps the government, regulators and all stakeholders of the companies to have a confidence in dealing with such corporate.

Reserve balances, the federal funds market and arbitrage in the new regulatory framework

We study demand for reserves and trading dynamics in the federal funds market in the context of two banking regulatory changes: the widening of the FDIC assessment base and the introduction of the Basel III regulatory ratios. Using a novel panel of FDIC fee rates, we show that the widening of the assessment base changed the relative funding costs and incentives for banks to hold reserves. We document that foreign banks, not subject to the FDIC fee, experienced positive conditions for arbitraging between borrowing funds in the federal funds market and holding those funds in their reserves accounts to earn interest on excess reserves. As a result, foreign banks increased their reserve holdings and federal funds borrowing relative to domestic banks, contributing to a change in the distribution of reserves in the banking system and in the composition of banks’ balance sheets. Furthermore, we find that since the implementation of the Basel III leverage ratio, foreign banks have engaged in window dressing, with reserves and federal funds borrowing temporarily declining on reporting days. We introduce a model that incorporates the new regulatory framework and derive testable hypotheses to support our findings. Results suggest that: 1) following the implementation of the FDIC rule, the share of reserves over assets held by domestic banks was 4.5 percentage points lower than the share held by foreign banks. 2) after the public disclosure of the Basel III leverage ratio, foreign banks’ reserves on reporting dates relative to the period average dropped by 18.3 percentage points compared to domestic banks.

Creative Accounting – Definition, Types, Purposes and Impact on United Nations’ Sustainable Development Goals

This article aims to define what is the essence of the so called "creative accounting", its purposes, types of creative accounting techniques and methods and how it relates to and impacts the United Nations’ sustainable development goals (SDGs). Various definitions and characteristics are given to this phenomenon – different authors use variety of terms such as earnings management, income smoothing, creative accounting practices, aggressive accounting, cook the books, accounts manipulation, or window dressing. Irrespectively how it is called, it relates to one and the same thing – presentation of companies’ financial position, cash accounts, equity and earnings in a way that pursues specific personal objective. In most cases, this deliberate presentation is not fraudulent and does not violates the law or the relevant accounting standards, but breaks down the confidence in accounting profession and contradicts to the ethical principles of professional accountants. Specific attention is given to the relationship between accounting and sustainability and particularly, how creative accounting practices impact the achievement of United Nations’ sustainable development goals. Literature analysis and deliberations are presented on how creative accounting prevents the fair allocation of resources in economy and the damage it causes to society. This study does not pretend to explore in detail either the creative accounting, or the SDGs, but its essential objective is to create a basic overview on both phenomena and find intersection points between them. A lot of studies explore the relationship between accounting as a general term and UN’ Sustainable Development Goals, but very few are focused specifically on the link between creative accounting and it’s influence on the achievement of those goals.

Reasons and ways to manipulate financial statements

Subject. The article considers the reasons and tools for manipulation of financial statements and ways to identify it. Objectives. The purpose of the study is to reveal preconditions and the main instruments of misstatements of financial reporting. Methods. The study employs empirical and logical constructions, analysis and synthesis, generalization, systems approach, methods of comparative analysis. Results. I show the main ways of misstatements of financial reporting and formulate mechanisms to detect them. The findings can be useful for enhancing the financial accounting standards, as well as for all interested stakeholders of enterprises that use financial statements. Conclusions. The absence of adequate responsibility of auditors and appraisers involved in the preparation and confirmation of reporting contributes to the practice of misrepresentation of financial statements. On the one hand, a company hires appraisers or auditors and pays for their services, and the latter have no motivation to engage in any confrontation with the company that manipulates its financial statements. On the other hand, companies, pursuing various goals (meeting the KPIs by managers or in the run-up to the M&A transaction), apply window dressing and manipulate their financial statements, using a wide range of tools, like revenues reposting, provisions for impairment, reclassification of costs from the operating cost to capital cost category, etc.

Window dressing in equity mutual funds

This study examines the relationships among window dressing (WD), portfolio concentration, fund flows, and fund performance in Taiwan’s equity fund industry. Our empirical analysis documents that the WD phenomenon exists in equity mutual funds with poorly performing fund managers who are more likely to conduct WD activities. Funds with concentrated investment in their top 10 shareholdings are more likely to do this, and there is also a stronger year-end WD effect, showing that fund managers are more prone to improve the appearance of their portfolios at that time versus at other quarter-ends. Funds with higher WD activities tend to have poor performance during the quarter, but have a larger (smaller) proportion of winner (loser) stocks at the end of the quarter. In addition, fund managers typically buy winners at higher prices and sell losers at lower prices near quarter-ends. The highest WD quintile funds encounter lower long-term fund flows, and funds with higher WD activities experience poorer long-term performance. Finally, fund managers’ portfolio rebalancing more closely correlates to the agency problem than to momentum trading or tax-loss selling.

Seasonal liquidity effects and their determinants on the covered bond market

This paper finds that window dressing, bypass opportunities, market sentiment and index adjustments drive seasonal bond market liquidity effects. It uses a unique data set that combines a number of recurring event types. After controlling for other seasonal factors, liquidity is lower prior to quarter ends, which is attributed to market makers’ window dressing. Seasonal liquidity effects are smaller in case investors can bypass secondary market venues, and market sentiment influences both the direction and the size of most seasonal effects. Additions to an index spur the liquidity of the bond included, and index adjustments are also important for the liquidity of other bonds, that have been issued by the same institution. These results give important advice for the trading of market participants, they explain why the primary market is essential for secondary venues and why too much regulation can be detrimental to market capacity.

Window dressing in Brazilian investment funds

ABSTRACT This paper investigates the presence of window dressing in the Brazilian investment fund market, focusing on equity funds. Window dressing is a practice that presents a particular portfolio composition to the market, which is different from that held by the fund in the reporting period. Just before the end of the period, fund managers change their positions with the aim of presenting safer, more profitable securities portfolios. We believe that there is a lack of empirical evidence on this topic in Brazil. Previous research focuses on diversification, style analysis, fund portfolio turnover, manager profile, and performance. Therefore, we believe that our paper is pioneering in presenting results on window dressing in Brazil. With the presence of window dressing, the market may signal distorted results to investors and guide their allocations towards funds in which they would not invest in the absence of such practices. Moreover, the adoption of window dressing may increase transaction costs and thus destroy value. Our results present a connection with previous studies by Bremer and Kato (1996), O’Neal (2001), Ng and Wang (2004), Ortiz, Sarto, and Vicente (2012), and Agarwal, Gay, and Ling (2014). This paper provides evidence of window dressing in Brazilian equity funds and proposes an empirical study to verify the presence of the practice between 2010 and 2016, using market model residuals, rank gap, and backward holding return gap analysis techniques. In short, our results are consistent with window dressing practices in funds managed by small companies that were losers against the Bovespa Index and presented a high tracking error in the period.

To Define Window Dressing in the State Owned Enterprises and Private Companies (Case Study in Indonesia Stock Exchange LQ45)

Window dressing in capital market can be defined as the activities of company to increase the stock price. This study was conducted to observe all the activities of window dressing in some companies listed in stock market. The detection of window dressing in this study was focused based on the samples from state owned companies (Telekomunikasi Indonesia Tbk, and Adhi Karya Tbk) and private sector from Astra Agro Lestari (Agriculture Industry). GARCH model was used while window dressing was analyzed by using the method given by Owens and Wu (2011). Results indicate that the best model to explain the behavior of volatility is AR(1)-GARCH(1,1). However, window dressing for three companies mentioned was occurred in 2014-2016; 2014 and 2016, respectively. In additional to that the t-test, was found to be significant for the three companies while the short-term average was above than the long-term average of the year.

Mediating Impact of Financial Statements Window Dressings in Public Listed Companies Based on Corporate Governance Mechanism and Firm Financial Performance

This research examined the effects of corporate governance variables (foreign ownership, managerial ownership) on earnings multiples (FFP), and also the ability to earn management to mediate the relationship between corporate governance variables and earnings multiples. In this study, foreign ownership and managerial ownership are independent variables, earnings multiples (developed through PCA method from ROA, ROE and share price) is dependent variable and earnings management is mediating variable. All the relationship between dependent, independent and mediating variables are postulate on renowned agency theory. We estimate the dependent variable, i.e. earnings multiples (developed through PCA method from ROA, ROE and share price) while earning management is measured through modified Jones model, while rest of the data for CG variables are collected from the annual reports of the companies included in the sample. While financial data of earnings multiples and earning, management extracted from DataStream for the corresponding periods.

APA’s Psychiatric Services Has Filled Critical Niche for Seven Decades

APA’s <i>Psychiatric Services</i> Has Filled Critical Niche for Seven Decades

Window Dressing in the Public Sector: A Case Study of China's Compulsory Education Promotion Program

Window Dressing in the Public Sector: A Case Study of China's Compulsory Education Promotion Program