The New EU Remuneration Policy as Good but Not Desired Corporate Governance Mechanism and the Role of CSR Disclosing

[EN] The recent global financial crisis (GFC) has put under scrutiny the sound remuneration policy and consequently the incentives design that influences risk-taking by managers in the banking industry to be a politically charged variable. In particular, this paper analyzes the new EU remuneration regulation of bank executive compensation and the role of corporate social responsibility (CSR) on this. Though all the EU efforts put into remuneration practices suggest commitment in aligning risk, performance, and compensation and aim at easing bank managers' risk appetite for variable payments, the new regulation might drive unintended consequences, creating adverse selection problems in EU banks and hidden compensation habits that lower transparency, thus threatening financial system's sustainability. Focusing on European Banking Authority (EBA) reports spanning from 2010 to 2017, the data reveals increasing values on the fixed component, less involvement in bank discipline by economic agents, and a potential for accounting-based incentives compensation that might reinforce attitudes towards building countercyclical buffers and smoothing earnings. As well, the new regulation might reduce the number of best-performing bank managers in the Eurozone, since "bad risks" are accepted to the detriment of "good risks," which might stimulate their migration. In contrast, CSR investment is supposed to offset such practices and incentives that harm EU financial stability. As a result, policymakers, banks, and regulators should promote the transparency of CSR disclosure.Porcuna-Enguix, L. (2021). The New EU Remuneration Policy as Good but Not Desired Corporate Governance Mechanism and the Role of CSR Disclosing. Sustainability. 13(10):1-35. https://doi.org/10.3390/su13105476S135131

La calidad de la información contable de las instituciones financiera europeas: la gestión del resultado

La presente tesis doctoral examina fundamentalmente tres objetivos generales: (i) indagar en los factores que influyen sobre la calidad de la información contable, en especial, el papel del supervisor prudencial sobre la práctica contable bancaria; (ii) analizar la relación del ciclo económico con la gestión del resultado bancario, en particular, el alisamiento del resultado; y (iii) comprobar la asociación entre la normativa contable de pérdidas crediticias y el comportamiento de concesión de crédito. Las motivaciones que nos llevaron a acometer la realización de este proyecto de investigación surgen, en primer lugar, como consecuencia de la importancia del sector financiero en la economía. Las entidades financieras poseen características especiales, y por ello son analizadas y reguladas también por las autoridades de supervisión prudenciales pertinentes. En segundo lugar, la importancia de la calidad de la información contable para la eficiencia de los mercados. En tercer lugar, el cambio normativo contable, en especial, la implementación del modelo de pérdidas incurridas de la Norma Internacional Contable 39 (NIC 39) en 2005 por el Reglamento 1606/2002/CE del Parlamento europeo y del Consejo. En cuarto lugar, la contabilidad de pérdidas crediticias debería ser considerada dentro del contexto general del ciclo económico y del comportamiento de la gestión con el ciclo. Por todo ello, la consecución de los objetivos generales planteados al inicio de la presente tesis doctoral se materializa en la realización de dos estudios empíricos. El primero examina el papel de los organismos prudenciales sobre el alisamiento del resultado de los bancos europeos cotizados tras la adopción de la NIC 39. En particular, analizamos la influencia de dos de los principales rasgos que caracterizan a los supervisores bancarios: (i) el poder de supervisión, y (ii) la independencia legal del supervisor, este último aspecto no analizado hasta la fecha sobre la gestión del resultado. El segundo, analiza el impacto de la reciente crisis financiera global sobre el comportamiento procíclico bancario. Para nuestros análisis utilizamos las cuentas anuales consolidadas de una muestra de bancos comerciales pertenecientes a 14 economías europeas. Los datos han sido recogidos a partir de la base de datos THOMSON ONE desde 2000 a 2013. En el caso del primer estudio, los resultados muestran la adopción de la NIC 39 efectivamente reduce el alisamiento del resultado a través de las pérdidas crediticias en los bancos europeos, aunque siguen alisando el resultado. Esta reducción es mitigada cuando el supervisor puede ejercer más presión (más poderoso), sin embargo, este efecto se ve mitigado por la independencia legal del supervisor respecto del gobierno y de la industria. Así pues, añadimos una variable adicional al debate sobre las características de la gobernanza del Mecanismo Único de Supervisión. Los resultados del segundo estudio muestran que el alisamiento del resultado depende de la intensidad de la crisis, es decir, los bancos alisan en mayor medida cuanto más agresiva es (crisis crediticia 2008-2009), y en cambio no lo hacen cuanto se torna moderada (crisis de la deuda soberana 2010-2013). Respecto a la relación de las pérdidas crediticias con la fluctuación del crédito, mientras el componente no discrecional de las pérdidas amplifica el ciclo del crédito, el discrecional expande el crédito, sin embargo, no encontramos evidencia durante la crisis financiera de que los directivos reconozcan pérdidas discrecional como herramienta anticíclica para conceder crédito. Como principales implicaciones, podemos decir que, en primer lugar, la contabilidad de pérdidas crediticias efectivamente no puede entenderse aisladamente del ciclo económico ni tampoco de la gestión del crédito. En segundo lugar, la gestión del resultado cambia a lo largo del tiempo al igual que la demanda de información se ajusta al nivel de incertidumbre. Y en tercer y último lugar, la visión prudencial sobre la contabilidad de pérdidas crediticias resulta inadecuada, pues los objetivos de los organismos prudenciales difieren de los emisores de normas contables. La tesis doctoral se ha estructurado como sigue. En la primera parte, compuesta por tres capítulos (Capítulo II, Capítulo III y Capítulo IV), representa el marco teórico sobre el cual se asienta este trabajo de investigación, donde se expone el marco regulatorio e institucional de las entidades de crédito, una revisión detallada de la literatura previa sobre la calidad de la información contable, en particular, la calidad del resultado, y más concretamente, el alisamiento del resultado mediante el uso de las pérdidas crediticias, y finalmente, la relación entre el sector bancario y el ciclo económico, donde se explicará de forma detallada la reciente crisis financiera. En la segunda parte, los Capítulos V y VI están dedicados a dos trabajos empíricos relacionados con los objetivos planteados. Por último, en el Capítulo VII presentamos las reflexiones finales de este trabajo de investigación y las potenciales vías futuras de investigación.This doctoral thesis examines three general goals: (i) to investigate those factors that have an impact on the quality of accounting information, particularly the role of prudential supervisors on banking accounting practice; (ii) to analyze the relationship between the business cycle and the earnings management of banks, especially, income smoothing practices; and (iii) to look into the association between loan loss accounting and credit supply behavior. The motivations that led us to undertake the development of this research project are the following ones. Firstly, the importance of the financial sector in the economy. Financial firms have special features, and because of that they are supervised and also regulated by the prudential supervisory authorities. Secondly, the importance of the quality of the accounting information for an efficient market. Thirdly, the accounting regulation change, in particular, the implementation of the incurred loss model according to the adoption of the International Accounting Standard 39 (IAS 39) in 2005, by the Regulation 1606/2002/EC of the European Parliament and the Council. Fourthly, loan loss accounting should be considered in the general context of business cycle and management's behavior through the cycle. In view of this motivations, the achievement of the general objectives which have been previously presented are materialized by two empirical studies. The first one examines the role of the prudential organisms on the income smoothing behavior of European listed banks after IAS 39 adoption. In particular, we are interested in two main features of banking supervisors: (i) supervisory power, and (ii) legal independence of the supervisor, the latter being not studied to date with respect to earnings management. The second work analyzes the effect of the most recent financial crisis on banks' procyclical behavior. To do so, we use the consolidated financial statements of a commercial banks sample from 14 European economies. Data has been collected from THOMSON ONE database spanning 2000 to 2013. In the case of the first study, the results show that effectively the implementation of the incurred loss model of the IAS 39 reduces income smoothing practices through using loan loss impairments. Despite this, European listed banks still smooth earnings in general. This reduction is lower where the supervisor may make more pressure (more powerful), however, this effect is mitigated by the legal independence of the supervisor, both from the government and the industry. In this sense, we add an additional variable to the actual debate about the characteristics of the governance of the Single Supervisory Mechanism. The results from the second study demonstrate that income smoothing practices depend on the intensity of the crisis, that is, banks smooth earnings in a greater extent when crisis turns into more aggressive (subprime crisis 2008-2009), but they do not when crisis become more moderate instead (sovereign debt crisis 2010-2013). With respect to the relationship between loan losses and credit fluctuation, whereas the non discretionary component of loan losses amplifies credit cycle, the discretionary component expand credit in general, however, in downturn we do not find evidence that banks' managers use the discretionary component of loan losses as a countercyclical tool to supply more credit. So that, the main implications of this study are: first, loan loss accounting may not be isolated from neither the business cycle nor credit management; second, earnings management change over time, as the demand of information adapts to the uncertainty level; and third, prudential perspective on loan loss accounting might be inappropriate, as the goals of the prudential authorities differ from those adopted by the accounting standard setters. The doctoral thesis is structured as follows. The first section, which consists of three chapters (Chapter II, Chapter III and Chapter IV), represents the theoretical framework which the research work is based on, where we develop the institutional and regulatory framework of financial firms, a detailed review of previous literature about the quality of the accounting information, in particular, earnings quality, and more precisely income smoothing practice through using loan loss impairments, and finally the relation between the banking sector and business cycle, in which a detailed explanation of the recent financial crisis will take place. In the second sections, Chapters V and VI include both empirical studies related to stated objectives. Lastly, Chapter VI presents final considerations that come from this research project and the potential future lines of research

Los Mapas contables de gestión de las empresas cotizadas chilenas : análisis cualitativo

El artículo analiza las clases de gestión realizadas por las empresas cotizadas chilenas localizadas en los espacios administrativos de Chile. La orientación del análisis realizado considera que el factor cultural de la región donde están localizadas las empresas chilenas condiciona la clase de gestión desarrollada por dichas empresas. El desarrollo de esta hipótesis se realiza aplicando la metodología contable de los gráficos radiales. Las tensiones existentes entre los periodos medios de maduración representados en un gráfico radial asumen la existencia de un factor cultural en las transacciones realizadas por las empresas en una región y supone que la toma de decisión en un área tiene efectos multidireccionales. De esta forma, las decisiones de economía general sobre un sector, así como el contraste de la actividad empresarial respecto a los valores medios de los indicadores del sector, son cuestionable

Use of Movies in an accounting class as a teaching technique to promote learning about financial reporting and ethical issues

[EN] This study presents an innovative experience using movies in an accounting class. The learning experience was found interesting and useful for the learning process in three groups in University XXX. The students voluntarily watched three movies and answered a test for each one, containing questions about the ethical and accounting concepts in the film, as well as their satisfaction with the methodology. Non-parametric tests have been computed to assess if those students that watch a movie obtain a higher exam mark as compared to those that do not follow the methodology, as well as for the other accounting and ethical questions. Our results show that there is a particular film that evidences a significant effect on the final exam mark for more questions than the other films. In general, the results are valuable as they show that students get engaged with this methodology and this can help students to improve their exam result.This work has been financed with a teaching innovation project of the University of Valencia, uv-sfpie_pid20-1349374.Merello, P.; Barberá, A.; Porcuna Enguix, L.; Porcuna, R.; Zorio, A. (2021). Use of Movies in an accounting class as a teaching technique to promote learning about financial reporting and ethical issues. En 7th International Conference on Higher Education Advances (HEAd'21). Editorial Universitat Politècnica de València. 421-428. https://doi.org/10.4995/HEAd21.2021.12888OCS42142

Movies, ethics and accounting: a teaching experience

This research presents an innovative learning experience undertaken in three groups of a financial accounting course at the University of Valencia (Spain). After watching three accounting-related movies, students answered a test based on each movie with questions about the ethical and accounting issues described in them and their satisfaction with the learning technique. Nonparametric tests and a multivariate analysis showed that the students who participated in this experience obtained a higher exam mark than those who did not. Our results evidence a significant effect on the final exam mark for more questions only in one of the movies. Our results are valuable because they show that students engage in this methodological approach, which can be helpful for them to improve their exam performance

Constructing the audit risk assessment by the audit team leader when planning: using fuzzy theory

The aim of this study is to construct the assessment of the expected audit risk by the audit team leader (ATL) during the planification phase of the audit. The ATL plays an important role within the audit, and even more so regarding small and medium-sized (SME) audit firms. The audit risk assessment is critical as relying more (less) on internal controls implemented by the client leads to performing less (more) substantive audit procedures. This is determined by the ATL based on their professional judgement and previous experience. The use of fuzzy theory has powerful potential into the audit arena, as the audit risk assessment (outcome) is critically related to the auditors’ judgement and perception. We argue that ATL characteristics are core conditions in determining the audit risk assessment when planning. Using hand-collected and private data from Spanish SME audit firms, we find that a comprehensive set of conditions must be given for perceived high audit risk. The results indicate that female and inexperienced ATLs planning the audit of indebted firms with high proportions of capital assets, less profitability, and with a larger board sizes, as they are expected to have bad internal control. The same conditions are met when expecting errors, as well as shorter audit tenures. Finally, conditions such as the ATL’s experience gains importance in expecting irregularities. This paper extends our understanding of the role of ATL characteristics on the audit risk assessment when planning and raising awareness on studying SME audit firm behavior

The Role of e-Tutor Competencies in Postgraduate e-Learning Courses: Spotlight on Emotion Management

[EN] The role of e-learning in the existing and challenging educational era is crucial. However, it is necessary to overcome some drawbacks such as feelings of isolation and a lack of emotional contact. In this sense, emotion management is a key driver of student satisfaction in e-learning, which is significantly related to students' motivation, learning, cognitive strategies, self-regulation, and personality antecedents in the classroom. This article examines an online postgraduate course in financial statements auditing, describing the resources used by the e-tutor to conduct affective tutorials, reduce students' feelings of isolation, increase student involvement, and achieve success in e-learning. The results of a survey administered to 125 students over the period 2015 to 2020 indicate that students who receive emotional support have higher levels of satisfaction with the course in terms of all satisfaction indicators. In addition, female e-learning students are more satisfied with intensive e-tutor monitoring overall but are less gratified by non-face-to-face e-tools. Our study responds to the calls in the 2021-2027 Digital Education Action Plan to improve and reset education and training for the digital ageBustos-Contell, E.; Porcuna-Enguix, L.; Serrano-Madrid, J.; Labatut-Serer, G. (2021). The Role of e-Tutor Competencies in Postgraduate e-Learning Courses: Spotlight on Emotion Management. Sustainability. 13(17):1-13. https://doi.org/10.3390/su13179716S113131

Constructing the Audit Risk Assessment by the Audit Team Leader When Planning: Using Fuzzy Theory

[EN] The aim of this study is to construct the assessment of the expected audit risk by the audit team leader (ATL) during the planification phase of the audit. The ATL plays an important role within the audit, and even more so regarding small and medium-sized (SME) audit firms. The audit risk assessment is critical as relying more (less) on internal controls implemented by the client leads to performing less (more) substantive audit procedures. This is determined by the ATL based on their professional judgement and previous experience. The use of fuzzy theory has powerful potential into the audit arena, as the audit risk assessment (outcome) is critically related to the auditors' judgement and perception. We argue that ATL characteristics are core conditions in determining the audit risk assessment when planning. Using hand-collected and private data from Spanish SME audit firms, we find that a comprehensive set of conditions must be given for perceived high audit risk. The results indicate that female and inexperienced ATLs planning the audit of indebted firms with high proportions of capital assets, less profitability, and with a larger board sizes, as they are expected to have bad internal control. The same conditions are met when expecting errors, as well as shorter audit tenures. Finally, conditions such as the ATL's experience gains importance in expecting irregularities. This paper extends our understanding of the role of ATL characteristics on the audit risk assessment when planning and raising awareness on studying SME audit firm behavior.Porcuna-Enguix, L.; Bustos-Contell, E.; Serrano-Madrid, J.; Labatut-Serer, G. (2021). Constructing the Audit Risk Assessment by the Audit Team Leader When Planning: Using Fuzzy Theory. Mathematics. 9(23):1-22. https://doi.org/10.3390/math923306512292

Accounting training professionalization: TIC, social networks and mentoring

[EN] This study is based on the latent need of implementing a high-performance teaching-learning system that promotes digital skills. For this reason, the present teaching innovation is developed in the first academic course of the Degree in Business Administration and Management, subject “Financial Accounting”. The sample consists of 412 undergraduates divided into 5-member groups. Teaching innovation is based on the implementation of an Accounting Information System in Excel (SICE) to develop students’ professional skills. Likewise, a mentoring program with Finance and Accounting students for peer learning, and Instagram as a communication tool by using learning pills, complements that. The results reveal a very significant and positive reception of the project by the students, both from SICE, the use of Instagram and the presence of mentors. Students have improved their technical and soft-skills, getting higher marks and seeing themselves more qualified in the accounting field.[ES] El presente estudio se fundamenta en la necesidad latente de implantar un sistema de enseñanza-aprendizaje de alto rendimiento que fomente las competencias digitales. Por ello, se desarrolla la presente innovación docente en la asignatura de Contabilidad Financiera de primer curso del Grado en ADE con una muestra de 412 estudiantes divididos en equipos de 5 miembros. La innovación docente se basa en la implementación de un Sistema de Información Contable en Excel (SICE) para desarrollar las competencias profesionales de los estudiantes. Asimismo, se complementa con un programa de mentoría con estudiantes de Finanzas y Contablidad para un aprendizaje entre iguales, y con el uso de Instagram como herramienta de comunicación de píldoras de aprendizaje. Los resultados revelan una acogida muy significativa y positiva del proyecto por parte de los alumnos, tanto del SICE, del uso de Instagram, como de la presencia de las mentoras participantes. En este sentido, los estudiantes han mejorado sus competencias técnicas y las soft-skills obteniendo mejores resultados y viéndose más capacitados en el ámbito de la contabilidad.Este trabajo ha sido desarrollado bajo el proyecto de innovación docente NOU_PID, UV-SFPIE_PID-2073598 de la Universitat de València.Porcuna-Enguix, R.; Merello, P.; Porcuna-Enguix, L.; Fullana, O.; Escrivà, M.; Alcaide, MÁ.; Ferrairó, E.... (2023). Profesionalización de la formación contable: las TIC, redes sociales y mentoría. Editorial Universitat Politècnica de València. 715-729. https://doi.org/10.4995/INRED2023.2023.1658571572

Prudential supervisors' independence and income smoothing in European banks

[EN] We investigate the role of prudential supervisors' independence in affecting income smoothing behavior in European banks. Powerful national supervisors are predicted to influence the accounting practices of their supervised entities, shaping the properties of the accounting numbers they prepare. In particular, we study whether greater independence of powerful supervisors from the government and from the industry is associated with lower income smoothing. We use the mandatory adoption of a single set of accounting standards in Europe as a shock to the influence of prudential supervisors over national banks' accounting practice. Our results confirm that political and industry independence of the supervisor are important determinants of income smoothing. This suggests that independence of prudential supervisors is a desirable governance characteristic, with positive impacts on financial transparency.This paper received financial support from the "Conselleria de Educacio, Cultura i Esport" from Generalitat Valenciana, under project VALi+d (Resolucion 26 de junio de 2014), CAM-Fondo Social Europeo (S2015/HUM-3417 INNCOMCON-CM), FEDER (UNC315-EE-3636), and the Spanish Ministry of Economy and Competitiveness (ECO2013-48328; ECO2013-48208-P; ECO2016-77579).García Osma, B.; Mora, A.; Porcuna-Enguix, L. (2019). Prudential supervisors' independence and income smoothing in European banks. Journal of Banking & Finance. 102:156-176. https://doi.org/10.1016/j.jbankfin.2019.03.001S15617610