Volume 9, 2020
TABLE OF CONTENTS
Impact of Accountant Resource on Quality of Accounting Information System: Evidence from Vietnamese Small and Medium Enterprises
Vu Thi Thanh Binh, Nhat-Minh Tran, Do Minh Thanh, Nguyen Thi Hong Nga
Hanoi University of Industry
National Economics University
Improving the quality of accounting information systems through accountant resources is beneficial to the performance and sustainable development of SMEs. This study investigated the impact of accountant resources on the quality of accounting information systems in Vietnamese SMEs. Accounting information system quality was measured by a multidimensional scale including system quality, information quality, and usefulness. The study tested hypotheses using Path analysis of Structural Equation Model based on 434 respondents. The findings indicated a strong interaction between the components of the accounting information system quality under the effect of accountant resources. The results showed a positive direct effect of accountant resources on system quality and the path analysis results also revealed an influence of accountant resources on information quality and usefulness via mediating variables. The results highlighted the importance of accountant resources for the quality of accounting information systems. This study contributed theoretically to the non-financial indicator for measuring accounting information system quality.
Keywords: Accountant Resource, Performance measurement, Quality of accounting information system, SMEs
Corporate Social Responsibility and Executive Compensation: The Negative Externality Perspective
Ahmed Marhfor, Kais Bouslah, M’Zali Bouchra
Université du Québec en Abitibi-Témiscamingue
University of St. Andrews
Université du Québec à Montréal
This research develops a new argument that departs from traditional theories that explain the potential impact of Corporate Social Responsibility (CSR) on Chiefs Executive Officers (CEOs) compensation. More specifically, we argue that if CSR investments provide value for firm’s shareholders and stakeholders, they can also decrease firm’s competitors’ value (negative externality hypothesis). As a result, inefficient CEO compensation may arise even if CSR choice allows managers to act in the best interest of firm’s shareholders and non-investing stakeholders. In sum, our new perspective indicates that excessive levels of CEO compensation are more than a principal-agent-stakeholder problem. In addition, our new theoretical argument suggests that voluntarily CSR should not be a relevant factor for achieving efficient levels of CEO compensation.
Keywords: Corporate social responsibility, CEO compensation, Negative externality, Market failure, Stakeholder`s management, Public interest theory
The Effect of Access to Debt on Lebanese Small and Medium Enterprises Performance
Zainab Abdulawood Jadoua, Nihal Farid Mostapha
Beirut Arab University
Since thirties access to debt has been considered as one of the main challenges facing the growth of Small and medium-sized enterprises (SMEs). Therefore, empirical studies focused on how facilitating access to debt affects SMEs financial performance in developed countries. However, this is not the case in the developing economies countries such as Lebanon due to the lack of financial transparency and poor financial reporting. In addition, very few studies discussed the theoretical pillar behind SMEs financial behavior on how access to debt affects firm performance in developed and developing countries. Therefore, this study attempts to investigate the effect of access to debt on Lebanese SMEs financial performance in terms of profitability and tangibility. In addition, the study explores the theoretical explanation of how Lebanese SMEs access to debt affects profitability (PR) and tangibility (ST) using trade-off theory (TOT) and pecking order theory (POT). Data of 102 SMEs for the period 2014 till 2017 from 12 official audit firms located in Beirut-Lebanon. Additionally, generalized least squares (GLS) method was used to conduct regression analysis. The analysis reveals the positive effect of Lebanese SMEs access to debt on SMEs profitability and tangibility confirming the adoption of trade-off theory as an approach by Lebanese SMEs and lenders. It is concluded that facilitating Lebanese SMEs access to debt to reach proper debt level improves SMEs performance which in return affects positively the lenders and economy as whole.
Keywords: SMEs performance, Access to debt, Trade off theory, Pecking order theory, Assets structure, Tangibility, Profitability
Risk Determinant of Musharakah Financing: A Study in Indonesia
Rosmini Ramli, Erie Febrian, Dian Masyita, Mokhamad Anwar
Universitas Padjadjaran – Bandung, Universitas Indonesia Timur
Universitas Padjadjaran – Bandung
The purpose of this paper is to find out the influence of internal and external factors on the risk of musharaka financing of Islamic Commercial Banks in Indonesia. Financing risks in previous Islamic banking studies focus more on overall financing risks involving internal and external aspects, both separately and jointly. There have been no studies that examine the internal and external aspects of sharia commercial banks on financing risks, especially in the musharakah contract. This study will complement the literature on the aforementioned issue. This study uses a quantitative method with panel data regression analysis. The data used is quarter financial ratio data from all Sharia Commercial Banks in Indonesia for the period 2012-2017. The results of the study show that bank internal factors predominantly influence the risk of musharakah financing. Whereas on external factors, only GDP growth has a significant effect.
Keywords: Financing risk, Musharakah contract, Risky sector, Internal and external factors
Cox Proportional Hazards Regression Analysis to assess Default Risk of German-listed Companies with Industry Grouping
Andreas V. Ledwon, Clemens C. Jäger
FOM University of Applied Sciences for Economics and Management, Germany & UCAM – Catholic, University of Murcia, Spain
FOM University of Applied Sciences for Economics and Management, Germany
This study evaluates three corporate failure prediction models using latest available data on corporate insolvencies for non-financial constitutes represented in CDAX. We estimate semiparametric Cox proportional hazards models considering Andersen-Gill counting process (AG-CP) to explore the importance of accounting and financial ratios as well as industry effects that are useful in detecting potential insolvencies. The contribution of this paper is twofold. First, the literature on corporate default prediction is manifold and predominantly focused on U.S. data. Thus, academic contribution based on German-listed companies is limited. To our best knowledge, we are the first to conduct thorough comparative out-of-sample Cox regression models considering AG-CP based on a unique dataset for non-financial constitutes subject to the German insolvency statute (“InsO”). Relying on a parsimonious accounting-based approach inspired by Altman (1968) and Ohlson (1980) is merely adequate. Shumway (2001) and Campbell et al. (2008) variable selection delivers the best discriminatory power and calibration results. In particular, a combination of pure accounting ratios augmented with market-driven information in Model (2) indicates superior accuracy rates in top deciles. However, in-sample empirical results underpin the importance towards market-based indicators, as all accounting ratios enter statistically insignificant. Secondly, we test to what extend industry variables improve discriminatory power and forecasting accuracy of fitted models. Contrary to the findings of Chava & Jarrow (2004), our research implies that industry grouping adds marginal predictive power and no overall improvement in accuracy rates when market variables are already included in the probability of default (PD) model.
Keywords: Insolvency, Default prediction, Cox proportional hazards regression, AG-CP, Recursive AUC, Walk-forward analysis, Industry grouping
Digital Accounting and the Human Factor: Theory and Practice
Shawnie Kruskopf, Charlotta Lobbas, Hanna Meinander, Kira Söderling, Minna Martikainen, Othmar Lehner
Hanken School of Economics, Helsinki
This paper gives an overview of the current and future technologies impacting accounting and auditing fields. The aim is to present the technological disruptions shaping these fields and also look at how they might influence future jobs and required skills. Starting with a historical background check on how Industry 4.0 emerged, we survey four main areas of the topic: 1) current developments supported with real-life cases, 2) a literature review of on-going research, 3) possible future job descriptions, and 4) required skills and how to acquire them.
Keywords: Digitalisation, Accounting, Auditing, Industry 4.0, Skills
Current State and Challenges in the Implementation of Smart Robotic Process Automation in Accounting and Auditing
Max Gotthardt, Dan Koivulaakso, Okyanus Paksoy, Cornelius Saramo, Minna Martikainen, Othmar Lehner
Hanken School of Economics, Helsinki
Technology development has grown rapidly in the last decades and gained importance for accounting and auditing through its identified potentials. Particularly the automation of judgment systems and systems that require human intervention, are deemed to be more relevant to confront a transformation through Robotic Process Automation (RPA). During the continuous development, the augmentation of such systems through Artificial Intelligence (AI) presents a greenfield project with high expectations. However theoretical frameworks have not yet been elaborative and sufficient to capture how such deployments can be conducted. Addressing this research gap, this study presents a summarized overview of the transforming RPA ecosystem and indicates what challenges are critical to being confronted for a successful implementation of such systems in accounting and auditing.
Keywords: Robotic Process Automation, Artificial Intelligence, Financial technologies, Accounting, Auditing, Technology implementation, Black Box Solutions
SOX Section 404 Twenty Years After: Reviewing Costs and Benefits
Bianca Fischer 1, Bernadette Gral 1, Othmar Lehner 2
1 University of Applied Sciences Upper Austria
2 Said Business School, University of Oxford, and Hanken School of Economics, Helsinki
Some issues of the Sarbanes Oxley Act of 2002 are still discussed controversially in literature. Thereof, Section 404 concerning internal control over financial reporting is one of the most criticized parts. This article focuses on costs and benefits of the section and impacts on earnings management. Most authors agree that compliance costs of Section 404 far outweigh its benefits. However, long-term benefits are expected. Regarding earnings management, studies show that the section has positive effects such as increased earnings quality and improved internal control systems. Although the section is heavily debated in literature, there is consensus that SOX Section 404 greatly contributed to the improvement of quality of financial reporting and of corporate governance as a whole.
Keywords: Sarbanes Oxley, Section 404, Internal control, Costs of SOX, Benefits of SOX, Earnings management, Earnings quality
A Factor Analysis of Corporate Financial Performance: Prospect for New Dimension
Ronny Kountur, Lady Aprilia
PPM School of Management
Executive Development Program of PPM Manajemen
This study aims to find the dimensions of financial indicators where both ratio and non-ratio indicators are accommodated. It is expected that the new dimensions of financial indicators be found. Both Exploratory and Confirmatory Factor Analysis is used in analyzing the data. Data are taken from 120 companies listed in Indonesian Stock Exchange (IDX). Twenty financial indicators from the financial reports of each company are identified. While it has been a common practice to use ratio in indicating financial performance, it is not common to use an individual value from financial statements as financial indicators. This study shows that financial indicators can be grouped into four dimensions; they are Operational Performance, Asset-Income Performance, Owner Returns Performance and Leverage Performance. All of the non-ratio indicators that are expressed in the amount are grouped in the Asset-Income Performance dimension. New dimensions of financial performance indicators that do not commonly exist in this study, they are Asset-Income, and Leverage Performance. With the new dimension, non-financial performances such as customer satisfaction, corporate social responsibility, reputation, nepotism, and professionalism may be detected.
Keywords: Financial performance, Corporate finance, Factor analysis
Social Finance and Sustainable Development Goals: A Literature Synthesis, Current Approaches and Research Agenda
Alessandro Rizzello, Abdellah Kabli
Department of Law, Economics and Sociology, University “Magna Graecia” of Catanzaro, Catanzaro, Italy
The debate, especially in policy circles, around the emergence of Social and Sustainable Finance (SSF), depict as ‘paradoxical’ the contrast between SSF as a relatively under-developed field of knowledge and thought, and yet as an area of practice with ‘vast potential’ that is experiencing an ‘explosion’ in practitioner numbers. Such potential, in term of economic and social value that SSF can deliver, is reflected in the increasing of interest within the public policy-making arena in the achievement of Sustainable Development Goals (SDGs). More in detail, it is also underlined by the raising of public and private investment into promoting and supporting them. Within such evolving arena, the exact scale and scope of SSF’s contribution to the improvement of SDGs worldwide is difficult to delineate and measure accurately, but there seems to be universal agreement that SDGs represent an ideal and widespread area where SSF can register a significant growth. However, limited research addressed the marriage of these two fields. The purpose of this research are: i) to shed light on existing academic literature embracing both Social and Sustainable Finance and SDGs issues, ii) explore emerging trends deriving from international policy-making actors, market builders, managers, senior academics and, iii) to identify the main areas for further research focusing on SSF and SDGs. In order to derive a research agenda about such emerging research topic, the study adapts a triangulated approach based on qualitative mixed methods. With such objectives in mind, the study provides an extensive literature review in order to depict a comprehensive overview of existing knowledge considering both SSF and SDGs topics. The analysis is therefore enhanced by the trends identified from literature deriving from public policy-making actors and market-builders as well as from invited commentaries on SSF from senior scholars and managers. Thus, a holistic perspective on SSF experience, useful to identify the main areas for further research on SSF in the sustainability industry, was derived. The study, therefore, aims to provide, through a triangulated analysis of the concepts, frameworks and trends, a detailed understanding of the mechanisms for managing the interplay between SSF and SDGs, by highlight future avenues of research in this field.
Keywords: Social finance, Sustainable finance, SDGs, Research agenda
Transition Finance and Markets
UTS Business School, University of Technology Sydney
The increased focus and agreement on the requirement for the planet to be more sustainable has led to an array of new research and financial products. The new buzz phrase is transition financing which is being seen as the path to achieving a sustainable world. The Development Assistance Committee (DAC) in the Organisation for Economic Co-operation and Development (OECD, 2019) has the main objective of transition finance is to optimise access to finance for sustainable development to avoid financing gaps or socio-economic setbacks. This chapter examines some of the products and markets in current use by financial institutions and investors. It describes their use and recent research in this area as well as some gaps in this research.
Keywords: SDGs, transition finance, sustainable development, impact investing
On Relation between No-Arbitrage Pricing Principle and Modigliani-Miller Propositions
Valery V. Shemetov
An extension of Merton’s (1974) model (EMM) taking account of the firm’s payments and generating a new statistical distribution for the firm value is suggested. In an open log-value space, this distribution evolves from the initially normal to negatively skewed one. When payments are zero or proportional to the firm value, EMM turns into the Geometric Brownian model (GBM). We show that Modigliani-Miller Propositions (MMPs) and the no-arbitraging principle (NAP) result from the use of GBM with no payments. For a firm with payments, MMPs hold for short times and are false for time intervals exceeding a year. In contradiction with MMPs, the asset structure affects the firm value at the perfect market, and at the market with taxes, debt decreases the firm value even when there are no bankruptcy costs. NAP always holds for the entire market for short time deals. For long-term investments, the firm’s mean year returns decline in time intervals whose length depends on the firm’s initial conditions and its business environment. In these conditions, NAP does not hold for the whole market, but it temporarily holds for individual stocks as far as the mean year returns of the firms issuing them remain constant and fails when the mean year returns begin to decline.
Keywords: Credit risk, Structural models, No-arbitrage pricing principle, Modigliani-Miller proposition
Fixing the Fix for Silver and Gold
Susan J. Crain, Seth A. Hoelscher, Jeffrey S. Jones
Missouri State University
Accusations of price manipulation in the silver and gold markets have emerged in recent years. In an effort to increase transparency, the London spot price “fixing” mechanism was recently changed from an opaque negotiation process among a small number of dealer banks to a more observable auction platform system with more participants and public reporting. This change in the price fixing process raises questions about whether manipulation was occurring prior to the fix change and whether any perceived manipulation has since been reduced. Our results suggest that the changes to the price fixing process have impacted volatilities and prices within the silver and gold markets which could be an indicator of manipulation prior to the change.
Keywords: Futures markets, Gold, Price Fixing, Spot markets, Silver
Financial Factors Affecting Earnings Management and Earnings Quality: New Evidence from an Emerging Market
Isam Saleh, Malik Abu Afifa, Fadi Haniah
Al Zaytoonah University of Jordan
The World Islamic Sciences and Education University, Jordan
The purpose of this study is to examine the effect of financial factors on earnings management and earnings quality. Moreover, the study examines the role of earnings management as a mediator in the effect of the financial factors on earnings quality. It provides some empirical evidences from an emerging market, especially from the Jordanian market. The study uses a panel data analysis method over a ten-year period (2009-2018). The study population includes all Jordanian insurance companies listed in Jordanian market at the end of the year 2019, and the study sample consists of 20 Jordanian insurance companies (a complete population), giving a total of 200 observations for each variable. The results indicate that all financial factors in the model combined affect the earnings management and earnings quality. In addition, earnings management negatively affects earnings quality, and earnings management fully mediates the effect of financial factors on earnings quality. The study advises that policy makers ought to follow good legislation to curb the company's earnings management activities. Hence, the policy makers need to apply regulations which enrich the company’s effectiveness and efficiency whilst protecting the investors and other interested parties from risk.
Keywords: Financial factors, Earnings manipulation, Reporting quality, Financial information quality, Jordanian market
Alternative Asset: Evidence from Moroccan Insurance and Pension Funds
Omar Chiboub, Samira Benjelloun
Mohammed 5 University of Rabat, Laboratory of Economic analysis and Modelling (LEAM), fsjes Souissi
The goal of this paper is to provide a critical overview of Moroccan insurance/pension fund investments in alternative assets through data analysis techniques. The results show that the risk of reserve depletion and the investment restrictions imposed by the regulator are not the real reasons why insurance companies / pension funds in our database reduce their investments in the alternative asset market. The results also show that the barriers that deter Moroccan insurance/pension funds from alternative assets are of two kinds: the first are of a general nature and concern the whole world (not just Morocco), the second type of barriers are specific to the Moroccan context.
Keywords: Alternative assets, Asset allocation, Insurance companies, Pension funds
JEL Classification: G10, G11, G22