Anti-corruption disclosure quality and earnings management in the United Kingdom: the role of audit quality

Purpose Building upon institutional pressures on firms to deal with corruption, this study aims to investigate the association between a firm's engagement with anti-corruption disclosure quality (ACD_Q) and earnings management (EM). Also, this study examines the moderating role of audit quality in the association between ACD_Q and EM. Design/methodology/approach The authors constructed an ACD_Q index based on the 2010 UK Bribery Act and taking into account a wide range of rules on corruption and bribery, including those of the OECD, World Bank, UNCTAD, UNGC, UNCAC and GRI. Generalized method of moments and panel regression were used to examine the association between ACD_Q and EM. Findings Using a sample of 2,695 firm‐year observations of the UK’s FTSE-350 from 2008 to 2018, this study finds ACD_Q is negatively associated with EM. In addition, this negative relationship is contingent on audit committee independence and audit committee expertise. This finding is supported by additional robustness and sensitivity analysis. Practical implications The empirical evidence reiterates the crucial need for more concerted efforts to ensure corporate engagement in anti-corruption practices with a view to reducing earnings manipulations. Originality/value This study contributes to the limited evidence that investigates how ACD Q influences EM in the UK after the introduction of the UK Bribery Act in 2010. Furthermore, by considering the period from 2008 to 2019, this study investigates the potential moderating role of UK corporate governance reforms in EM reduction. In particular, to the best of the authors’ knowledge, this study assesses for the first time the moderating effect of audit committee mechanisms on the ACD Q and EM nexus

Does the quality of voluntary disclosure constrain earnings management in emerging economies? Evidence from Middle Eastern and North African banks

Purpose This study aims to examine the influence of the quality of voluntary disclosure (QVD) on earnings management (EM) amongst a sample of commercial banks in the Middle East and North Africa (MENA) region. Design/methodology/approach Using a sample of 1,060 bank-year observations for the period 2006–2015, this paper developed a three-dimensional framework to measure the QVD, which considers the quantity, spread and usefulness of the information. Furthermore, this study examines the QVD-EM nexus using an ordinary least squares regression model. This technique is supplemented with conducting an instrumental variable regression model and a two-stage least squares model to overcome the potential occurrence of endogeneity problems. Findings The findings suggest that QVD is negatively attributed to EM in the context of MENA banks. The findings also confirm that the quality of financial reporting is enhanced by QVD dimensions that were considered in the framework, leading banks to less engagement in EM practices. In contrast, the influence of the quantity dimension (level) of the disclosed information has an insignificant impact on EM, while the spread and usefulness dimensions of VD are negatively and significantly associated with EM in the region. Research limitations/implications Although the results are robust to various measurements and to the possible occurrence of endogeneity problems, there are a few limitations should be acknowledged, which provides opportunities for future research. For example, the sample size is relatively small due to data accessibility issues. Likewise, the findings of the research might not be appropriate for non-financial sectors. These limitations provide a good opportunity for future studies to expand on the research by covering other developing economies and, thereby, enriching the understanding offered by this study. Practical implications This study offers several implications for bank managers, academics and policymakers. Firstly, it may help managers to appreciate the function and the importance of QVD in mitigating EM. Secondly, for academics, the study provides suggestive evidence on the impact of QVD on EM; however, future research may need to consider the role of morality and ethical behaviour across different environments in reducing excessive risk-taking and constraining earnings manipulation. Finally, it provides insights for policymakers and regulators to develop a framework or guidance that can help banks in providing high-QVD in the context of developing economies. Originality/value The study distinctively develops an innovative measurement for QVD using a new multi-dimensional model. This paper also bring new evidence on QVD complexity and its impact on EM practice from an under-researched developing context, namely, the MENA region