Does ownership type affect environmental disclosure?

PurposeIn recent years, firms tend to direct their attention in communicating their environmental actions with their stakeholders. However, the level of environmental disclosers varies significantly among firms. This paper aims to explain the variation in environmental disclosure of firms based on their ownership type, namely – state ownership and institutional ownership. The study further aims to understand whether and how the relationship between ownership structure and environmental disclosure changes regarding countries’ development levels.Design/methodology/approachThis paper uses a sample of 27,847 firm-year observations from 72 countries/economic districts between the years 2002 and 2017 and regression analysis to test how the relationship between different ownership structures and environmental disclosure and whether this relation is conditional on countries’ development levels.FindingsThis study finds that firms with higher state ownership have higher environmental disclosures and higher institutional ownership has a negative effect on environmental disclosures. Furthermore, this paper also documents that firms with higher state ownership and operating in developed countries have incrementally higher environmental disclosure, relative to firms operating in developing countries.Research limitations/implicationsThe study has limitations that would provide possible starting points for further research. The first limitation is related to the environmental disclosure measure, which reflects the level of environmental disclosure of firms based on their disclosure information given in the Thomson Reuters, Asset4 database. A more refined measure can be constructed using hand-collected data based on linguistic analysis, which may reflect not only the level of the disclosure but also the quality of the environmental disclosure. The second limitation is the limited focus of the study toward state and institutional shareholding. Therefore, future research may consider examining the different types of ownership such as family ownership.Practical implicationsThe findings of the study may help policymakers and regulators to consider the potential impact of various ownership types on environmental disclosures. Also, given the impact of countries’ development levels, regulators should consider that a one-size-fits-all is not applicable in environmental disclosures. Therefore, each country should consider the institutional dynamics of their operating environment to set appropriate regulations to enhance environmental disclosures.Social implicationsFrom a social perspective, the findings indicate that firms’ stakeholder engagement via environmental disclosures depends on the type of the controlling shareholders.Originality/valueThis study contributes to the literature by developing a new construct for environmental disclosure based on Biodiversity, Climate Change, Environmental Investments and Spill Impact Reduction performance measures. Further, grounding on legitimacy and stakeholder theories, this study shows the influence of ownership type on environmental disclosures and how this effect changes in accordance with the countries’ development

Audit committee strength and auditors' risk assessments:The moderating role of CEO narcissism

This paper examines the impact of two elements of the client's control environment on auditor's assessment of the risk of material misstatement: audit committee strength and CEO narcissism, the latter of which is a component of management philosophy, operating style, and tone at the top. We predict and find that auditors' risk assessments are adequately responsive to both elements; however, importantly, a strong audit committee decreases perceived risk assessments only when the client has a CEO with less narcissistic characteristics. In other words, our findings suggest that the presence of narcissistic CEOs' attitudes weakens the perceived audit committee effectiveness, leading auditors to rely less on a strong audit committee. Our findings contribute to the auditing literature by exploring auditors' responses to the complex dynamics between management boards and those charged with governance. From a practical perspective, our results suggest that auditing standards and practice guidance should consider making such complexities and the role of management attitudes and styles even more explicit

From Conventional Methods to Contemporary Neural Network Approaches:Financial Fraud Detection

This chapter provides insights on the underlying reasons to replace the conventional methods with contemporary approaches—the neural network-based machine learning methods—in financial fraud detection. To do this, we perform a systematic literature review on the evolution of financial fraud detection literature over the years from traditional techniques toward more advanced approaches such as modern machine learning methods like artificial neural networks. Additionally, this chapter provides concise chronological progress of the fraud literature and country-specific fraud-related regulations to draw a better framework and give the idea behind the corpus. Using the metadata in the existing literature, we show both benefits and costs of using machine learning-based methods in financial fraud detection. An accurate prediction using contemporary approaches is essential to minimize the potential costs of fraudulent financial activities for stakeholders, reduce the adverse effects of fraudsters’ and companies’ fraudulent activities, and increase trust in capital markets via continuous fraud risk assessment of companies

Save money to lose money? Implications of opting out of a voluntary audit review for a firm’s cost of debt

An audit review (AR) is a mechanism used by boards to assess the quality of interim financial reports on a timely basis. In Canada, the AR is voluntary, with listed firms mandated to disclose when they choose to not purchase additional audit verification. Given the relatively low cost of an AR, opting out of it can be regarded as a negative signal, especially in the context of lenders' sensitivity to downside risk. Using a sample of 7,585 firm-year observations from 1,616 public firms in Canada over the period 2004-2015, we document that firms without a voluntary AR have a higher cost of debt than firms with an AR. Furthermore, after firms opt out of the AR, the increase in the cost of debt is accompanied by a rise in discretionary abnormal accruals and managers' stock-based compensation. Moreover, no-AR firms are more likely to reduce post-switch private borrowing and have lower equity analyst following. Our study is the first to document that although listed borrowers that opt out of an AR have a higher cost of debt financing, they are concurrently able to engage in more earnings management and grant their managers higher stock-based compensation because of lower external monitoring

Insights into current accounting research in The Netherlands:Report on the 4th Dutch Accounting Research Conference

After successful editions in Maastricht, Rotterdam, and Tilburg, the Department of Accounting of the University of Groningen has hosted the 4th Dutch Accounting Research Conference (DARC) on Friday, June 15, 2018. DARC is a one-day conference that brings together accounting researchers from the Netherlands to discuss a broad range of current issues in accounting research. During the conference, five papers have been presented in a seminar format

Ownership and Corporate Social Responsibility:"The power of the female touch"

Using a sample of 26,029 firm-year observations over the period 2002–2017 from 4,479 firms and 44 countries, we examine the relationship between ownership concentration and corporate social responsibility by focusing on the mediating role of board gender diversity and the moderating role of family shareholding. We find that ownership concentration negatively affects corporate social responsibility, and the board gender diversity partially mediates this negative effect. Our results indicate that the mediating effect of board gender diversity leads to a 10.65 percent decrease in the impact of ownership concentration on corporate social responsibility. Furthermore, moderated path analysis indicates that family shareholding weakens the direct effect of ownership concentration on board gender diversity and its indirect effect on corporate social responsibility. In post hoc analysis, we also document that the effect of gender diversity on the board is more prevalent in high gender-egalitarian societies where women are more involved in decision-making. Our study addresses the strategic role of female board members in increasing firms' respect for corporate social responsibility, especially in family-controlled firms. Thus, our results may provide insights to regulators and policymakers to enhance firms’ corporate social practices by encouraging women’s participation on corporate boards

CSR decoupling within business groups and the risk of perceived greenwashing

Research Summary: Given the growing legitimacy of corporate social responsibility (CSR), many firms engage in symbolic communication to showcase CSR without undertaking commensurate substantive actions. This “CSR decoupling” can create a risk of perceived greenwashing, which, in turn, may negatively affect a firm's performance. In this study, we explore an unexamined antecedent of decoupling: interfirm affiliation. Specifically, we use the structure of Business Groups (BGs) to investigate CSR decoupling across rather than within firms. We find that apex firms within a group are more likely to engage in CSR decoupling compared with non‐apex firms and, importantly, are partially shielded from greenwashing perceptions by the market. Our research contributes to the literatures on decoupling, perceived greenwashing, and the role of BGs and their CSR practices. Managerial Summary: Companies that engage in symbolic communication about corporate social responsibility (CSR) without substantive actions risk being perceived as “greenwashers,” a perception that harms firm performance. Our study demonstrates how, in certain contexts where firms are affiliated with others, this may not occur. For instance, apex firms within Business Groups (BGs)—where firms are interconnected through equity and social relationships—can report on the CSR actions of non‐apex affiliates without providing commensurate substantive actions of their own. Importantly, the control and coordination abilities of these apex firms protect them from greenwashing perceptions. This study, therefore, demonstrates the role of BGs in shaping CSR practices and provides insights for managers to understand the potential risks and benefits of affiliations within BGs

Do Auditing and Reporting Standards Affect Firms’ Ethical Behaviours? The Moderating Role of National Culture

This paper aims to examine the impact of national cultural values on the relation between auditing and reporting standards and ethical behaviours of firms. Based on a regression analysis using data regarding 54 countries between the years 2007 and 2012, we found that the impact of the perceived strength of auditing and reporting standards on the perceived ethical behaviours of firms is accentuated when a society is characterized by low power distance and ingroup collectivism, and high institutional collectivism, future orientation and uncertainty avoidance. Empirically, the study addresses a gap in the literature by highlighting the influence of national culture on the effectiveness of legal settings and regulations on ethical behaviours