Determinants and Consequences of Key Performance Indicators (KPIs) Reporting by UK Non-financial Firms

The study examines the level of quantity and quality of Key Performance Indicators (KPIs) reporting for a sample of FTSE 350 UK listed companies over the period (2006-2010). Furthermore, it identifies the determinants of KPIs reporting and investigates its impact upon firm value. Based upon the guidance of the best practice recommended by the Accounting Standard Board (2006), the study develops a measure of disclosure quality by considering the main qualitative attributes of information which, arguably, makes KPIs information more useful to stakeholders. The distinction between disclosure quantity and quality in the study enables the researcher to get greater insights into the drivers and implications of KPIs reporting quantity and quality. The study finds a variation between UK firms in the number of KPIs disclosed with a notable low level of reporting quality, especially for non-financial KPIs. It also finds that corporate governance mechanisms play an important role in improving KPIs reporting. In particular, it shows that directors’ compensations affect the quantity and quality of KPIs disclosure. Furthermore, the study provides evidence that quantity and quality of KPIs disclosure are not derived by the same factors, and both have different impacts on firm value. Whereas, the study finds a negative association between the numbers of KPIs disclosed and firm value, a non-significant relationship is reported between KPIs reporting quality and firm valuation. Overall, this study provides evidence that disclosure quantity is not a good proxy for disclosure quality

Determinants of narrative risk disclosures in UK interim reports

Purpose– The purpose of this paper is to contribute to the existing disclosure literature by examining the determinants of narrative risk information in the interim reports for a sample of UK non-financial companies. Design/methodology/approach– This study uses the manual content analysis to measure the level of risk information in interim report narrative sections prepared by 72 UK companies. It also uses the ordinary least squares regression analysis to examine the impact of firm-specific characteristics and corporate governance mechanisms on narrative risk disclosures. Findings– The empirical analysis shows that large firms are more likely to disclose more risk information in the narrative sections of interim reports. In addition, the analysis shows that industry activity type is positively associated with levels of narrative risk disclosure in interim reports. Finally, the analysis shows statistically insignificant impact of other firm-specific characteristics (liquidity, gearing, profitability, and cross-listing) and corporate governance mechanisms on narrative risk disclosure. Practical implications– The study's findings have practical implications. It informs investors about the characteristics of UK companies that disclose risk information in their interim reports. For example, the findings show that narrative risk disclosures are affected by firm size and industry type rather than firms' risk levels (e.g. financing risk measured by the gearing ratio or liquidity risk measured by lower liquidity ratios). Practical implications for managers from these findings are that, in order to keep investors satisfied, companies with high levels of financing and liquidity risks should look at investors' demands for risk disclosure. This will help investors when making their investment decisions. Originality/value– The determinants of narrative risk disclosure in interim reports have not been explored so clearly in prior research and, therefore, this paper is the first of its kind to examine this research issue for a sample of UK companies

External audit quality and firms' credit score

Using a sample of UK firms, we investigate whether external audit quality has an informational role for firms credit score. In our general research setting, we could not find any evidence on the association between firms’ credit score and external audit quality. However, when firms are suspected to be engaged in managerial misstatements, firms’ credit score seems to be associated with external audit quality. In particular, suspected firms get high credit score when they are audited by one of industry-specialised auditors. In addition, credit rating agencies penalise suspect firms when they pay high audit and non-audit fees

Determinants of narrative risk disclosures in UK interim reports

Purpose – The purpose of this paper is to contribute to the existing disclosure literature by examining the determinants of narrative risk information in the interim reports for a sample of UK non‐financial companies. Design/methodology/approach – This study uses the manual content analysis to measure the level of risk information in interim report narrative sections prepared by 72 UK companies. It also uses the ordinary least squares regression analysis to examine the impact of firm‐specific characteristics and corporate governance mechanisms on narrative risk disclosures. Findings – The empirical analysis shows that large firms are more likely to disclose more risk information in the narrative sections of interim reports. In addition, the analysis shows that industry activity type is positively associated with levels of narrative risk disclosure in interim reports. Finally, the analysis shows statistically insignificant impact of other firm‐specific characteristics (liquidity, gearing, profitability, and cross‐listing) and corporate governance mechanisms on narrative risk disclosure. Practical implications – The study's findings have practical implications. It informs investors about the characteristics of UK companies that disclose risk information in their interim reports. For example, the findings show that narrative risk disclosures are affected by firm size and industry type rather than firms' risk levels (e.g. financing risk measured by the gearing ratio or liquidity risk measured by lower liquidity ratios). Practical implications for managers from these findings are that, in order to keep investors satisfied, companies with high levels of financing and liquidity risks should look at investors' demands for risk disclosure. This will help investors when making their investment decisions. Originality/value – The determinants of narrative risk disclosure in interim reports have not been explored so clearly in prior research and, therefore, this paper is the first of its kind to examine this research issue for a sample of UK companies

Attributes of female directors and accruals-based earnings management

Based on the notion that female directors are superior in monitoring and informed by a theoretical framework that draws insights from agency, resource dependence, and upper echelon theories, this study investigates the impact of female monitoring director's tenure and busyness on mitigating managerial opportunistic behavior, applying to a sample of US firms over the period from 1998 to 2014. In line with the theoretical foundation, results demonstrate that both long tenure and more directorships have a positive impact on female directors monitoring competency. This finding is auxiliary supported by the further analysis considering the impact of the Sarbanes-Oxley act on the association between monitoring female directors' attributes and earnings management practices. Accordingly, this study contributes to the literature on the influence of different attributes of female monitoring directors on their monitoring competency. This in turn provides an insight to decision makers that could help in recruitment of female directors that can better enhance monitoring effectiveness of corporate boards

Female directors and managerial opportunism: monitoring versus advisory female directors

Going beyond the mere participation of female directors within boardrooms, we investigate which of the two major boards of directors’ roles (advisory versus monitoring) is best played by female directors in order to make a difference to shareholders. More specifically, we investigate the impact that advisory and monitoring female directors have on managerial opportunism with a specific focus on earnings management. Using sample of US firms, we find evidence suggesting that female directors holding monitoring roles mitigate managerial opportunism, as measured by discretionary accruals. In contrast to the current argument that advisory directors in general are better able to sustain and improve earnings quality, we find no evidence that suggests that advisory female directors are significantly associated with lower managerial opportunism. Overall, the results remain robust after controlling for potential endogeneity problems, corporate governance, and external auditor quality