Search Results (17)

Purpose: This study aims to provide a comprehensive and objective view to investigate whether the motives of strong financial managers to adopt an accounting conservatism strategy have significant effects on improving financial growth opportunities in the context of banks listed on the Saudi Stock Exchange, while knowing how this relationship is affected by litigation risks. Design/Methodology/Approach: Using data from Saudi financial databases, this study examines how litigation risk moderates the relationship between accounting conservatism and financial growth in Saudi listed banks. Basu’s (1997) model and accrual-based metrics measure conservatism, whereas assets, liabilities, and business age are used to measure financial growth. Litigation risk factors included previous lawsuits. Validity was ensured using fixed-effects regression and robustness tests. Findings: The study found that accounting conservatism has a mixed impact on financial growth, litigation risk moderates the relationship between conservatism and financial growth, and litigation risk has a positive impact on accounting conservatism. Practical Implications: Use a balanced strategy to maintain accounting conservatism, lower litigation risk while maintaining the accuracy of financial statements, take legal risk into account when evaluating the quality of financial reporting, increase transparency without impeding growth, create guidelines tailored to a particular bank, and fortify governance to reduce lawsuits while permitting long-term financial growth. Originality/Value: In order to bridge the gap between conservatism strategies and long-term financial stability in emerging economies, this study examines how managerial decisions in accounting conservatism affect the financial growth of Saudi banks, incorporating litigation risk as a moderating factor. It also contributes to financial policies, risk management, and regulations. Full article

As healthcare systems face mounting pressure to modernise payment infrastructure, fintech innovations have emerged as potential tools to improve affordability and efficiency. However, the adoption of these technologies in clinical settings remains limited. This study investigated the perceptions and resistance patterns of healthcare professionals toward Buy-Now-Pay-Later technology and blockchain in healthcare finance, using Innovation Resistance Theory as the guiding framework. Survey data collected from medical practitioners (N = 366) were analysed to identify knowledge gaps, perceived risks, and tradition-related barriers that influence adoption intent. The findings reveal that while interest in financial innovation exists, resistance is driven by institutional conservatism, regulatory uncertainty, and limited familiarity with decentralised finance systems. This research contributes to the literature by offering a theory-based explanation for why even high-potential financial tools face behavioural and structural resistance in healthcare environments. Full article

This paper examines the relationship between the voluntary disclosure of intangible assets and financing constraints using a sample of 2850 listed companies from 2017 to 2021. Additionally, we examine the moderating effects of prudence in accounting and the attention given to the disclosures by analysts from both an internal and an external perspective. The results show that voluntarily disclosing intangible assets helps to alleviate a firm’s financing constraints, with more significant effects observed in state-owned enterprises and companies listed on the Growth Enterprise Market index than for private enterprises and those listed on the main board of the Chinese capital market. Further, conservatism in accounting and attention given by financial analysts both positively moderate this relationship. The theoretical and empirical insights provided by this study should help listed companies in China to enhance the quality of their voluntary intangible asset disclosures, while also helping to mitigate financing constraints. Full article

Financial flexibility occurs when companies borrow less than expected and is widely practiced. A commonly used model to establish the presence of financial flexibility is based on the determinants of the leverage model, which was developed some time ago and is composed of various factors that determine a company’s leverage use. Governmental borrowing and financial sector development in the meantime were shown to be key drivers of corporate borrowing. We add these two factors to the original model to establish how the prevalence of financial flexibility is affected by these inclusions into the model. South Africa is used as a locality for the study because of its relatively recent financial sector development and increased governmental borrowing. The results of the study show that financial flexibility is more prevalent when these factors are considered in a South African context. Previous studies have paradoxically shown a lower financial flexibility prevalence in South Africa when compared to a developed market such as the UK, which is contradictory to developing market debt conservatism. In this study, we show that when accounting for financial sector development and governmental borrowing, financial flexibility is widely prevalent in a South African context, at similar levels to that of a developed economy. The primary implication of the study’s findings is that financial flexibility may have been underreported in developed markets in prior studies. Full article

This study seeks to measure the microeconomic consequences of the adoption of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards on the conservatism, financial performance (FP), and earnings management (EM) of Islamic banks (IBs). The study draws on data from 122 IBs across 22 countries over a period of eight years (2014–2021), using the generalised method of moments (GMM). The results indicate a positive impact of AAOIFI adoption on financial performance and conservatism compared to non-adopters. Our results further show that IBs that adopt AAOIFI are less involved in EM. After applying robustness checks (corporate governance, inflation, and mandatory adoption of AAOIFI in some countries), our results remain the same. The implications of the study are potentially valuable for those setting accounting standards (such as AAOIFI and International Accounting Standards Board (IASB)), central banks, financial market regulators, investors, governments, and any adopting or non-adopting Islamic financial institutions (IFIs) through identification of the effects of AAOIFI adoption. Full article

This paper investigates the relationship between accounting comparability, executive compensation, conditional and unconditional conservatism, and accounting information quality. The findings suggest that conditional conservatism and accounting comparability have a positive and significant impact on executive compensation. Moreover, accrual earnings management can strengthen the relationship between accounting comparability and executive compensation, whereas this is not the case with actual earnings management. Unconditional conservatism, however, does not significantly influence executive compensation. In the end, determining the correlation between earnings management and conservatism reveals that executives use conditional conservatism to perform opportunistic behaviours and gain more compensation. In light of the current results, it is expected that the assimilation of standardisation processes and their use in conjunction with existing features will enhance information quality, greater reliability of financial reports, and protect public interests. Full article

Accounting conservatism could affect the quantitative information on a financial statement. In this paper, the author focuses on qualitative information on financial statements. The author investigates the association between financial report readability and accounting conservatism and uses the FOG index to measure financial report readability. By using management discussion and analysis (MD&A) from 1996 to 2019, the author finds that financial report readability is positively associated with accounting conservatism. Additionally, the author separates the samples into high-compensation incentive and low-compensation incentive subsamples. The results show that the above association is stronger in the high-compensation incentive samples than in the low-compensation incentive samples. This result implies that accounting conservatism could mitigate managerial opportunism in the qualitative disclosure setting. Full article

The prevalence of zero-leverage firms is a puzzle in corporate finance. We analyze the acquisition behavior of zero-leverage firms and offer a new venue to the studies on zero-leverage puzzle and the interdependence of capital structures and investment decisions. The prior literature suggests three explanations regarding the zero-leverage puzzle: limited access to the debt market, managerial preference, and financial flexibility. While non-persistent zero-leverage firms show similar behavior as moderately leveraged firms, persistent zero-leverage firms are conservative in their acquisition behaviors. These firms are less likely to make acquisitions, acquire smaller targets, and are more likely to acquire zero-leverage targets than are moderately leveraged firms. Meanwhile, both persistent and non-persistent zero-leverage firms are not financially constrained, since they are likely to use cash in their offers, and they increase leverage post-acquisition. Overall, our evidence on persistent zero-leverage firms supports the managerial preference hypothesis, while the evidence on non-persistent zero-leverage firms is consistent with the financial flexibility hypothesis. Therefore, studies on corporate investment strategy should be aware of persistent firms’ unique behavior of debt and investment conservatism that differentiates these firms from other under-leveraged firms and non-persistent zero-leverage firms. Full article

Research and development (R&D) is the main driver for the sustainable development of corporate innovation. Given the prevalence of information asymmetry in R&D, executives opportunistically manipulate R&D investment. While accounting conservatism as a corporate governance mechanism can effectively reduce information asymmetry, few studies have focused on the relationship between the two. Based on Chinese listed companies in 2008–2019, this paper investigates the impact of accounting conservatism on R&D manipulation, as well as the moderating effect of internal control quality and tax enforcement efforts on this relationship. The results indicate that not only are the results more significantly negative in subgroups of low-level internal control and tax collection, but the coefficients of their cross-sectional variables are also positive. Therefore, accounting conservatism can effectively deter R&D manipulation, and this effect is weakened by internal control and tax enforcement. Additionally, the impact of accounting conservatism on manipulation differs in direction and lifecycle. The negative conservatism–manipulation relationship is more significant for upward manipulation and growing enterprises. Further research also suggests that conservatism’s inhibitory effect on R&D manipulation is mediated by financial constraints, which enhances corporate innovation efficiency. The conclusions not only provide empirical evidence for the corporation to improve R&D efficiency but also provide the basis for the authorities to promote innovation supervision. Full article

Given that the current economic hardship created by COVID-19 is still in progress, it is important to understand firms’ strategic responses to prior external shocks (e.g., the financial crisis in 2007 and 2008) and the relationship between their courses of action and post-shock firm performance. This study examines (1) whether firms’ practices in financial reporting are associated with the financial crisis and (2) whether firms with conservative financial reporting during the crisis exhibit better performance in post-crisis periods. Using the ordinary least squares (OLS) models and conservatism proxy, we find that firms are more conservative in financial reporting during the financial crisis. We also find that firms with a higher degree of accounting conservatism in the financial crisis outperform in the post-crisis periods. These findings have implications for practice by providing guidance on accounting conservatism for firms who want to develop resilience from financial setbacks due to economic shocks. Full article

Approximately 40% of Tennesseans are vaccinated fully, due mainly to higher vaccination levels within urban counties. Significantly lower rates are observed in rural counties. Surveys suggest COVID-19 vaccine hesitancy is entrenched mostly among individuals identifying as white, rural, Republican, and evangelical Christian. Rural counties represent 70 of the total 95 counties in Tennessee, and vaccine hesitancy signifies an immediate public health crisis likely to extend the COVID-19 pandemic. Tennessee is a microcosm of the pandemic’s condition in the Southern U.S. Unvaccinated communities are the greatest contributors of new COVID-19 infections, hospitalizations, and deaths. Rural Tennesseans have a long history of cultural conservatism, poor health literacy, and distrust of government and medical establishments and are more susceptible to misinformation and conspiracy theories. Development of novel strategies to increase vaccine acceptance is essential. Here, I examine the basis of COVID-19 following SARS-CoV-2 infection and summarize the pandemic’s extent in the South, current vaccination rates and efforts across Tennessee, and underlying factors contributing to vaccine hesitancy. Finally, I discuss specific strategies to combat COVID-19 vaccine hesitancy. We must develop novel strategies that go beyond financial incentives, proven ineffective toward vaccinations. Successful strategies for vaccine acceptance of rural Tennesseans could increase acceptance among unvaccinated rural U.S. populations. Full article

Economic fallouts from COVID-19 have been unprecedented across all industries, with a handful of exceptions. The present study attempts to capture the impact of dividend distribution tax elimination, introduced through the Indian Finance Act 2020, on corporate dividend behavior in India. It explores the determinants of dividend payouts, changing payout decisions, dividend behavior of regular payers, and the prevalence of factors associated with changing payouts. Out of the top 1000 firms, based on their market capitalization at the Bombay Stock Exchange, 509 non-financial firms pursuing consistent dividend payments from 2015 to 2019 are analyzed. The study also examines the dividend behavior of regular payers exhibiting a stable or step-up payout from 2015 to 2019. COVID’s impact on the firm’s financial performance and sentiments seems to dominate, suppressing investors’ expectations of enhanced payouts associated with dividend distribution tax advantages, with considerable reductions in payouts and omissions shown by regular and irregular payers in 2020 and 2021 vis-à-vis the preceding years. The findings signify that the dividend payouts of sample firms are positively associated with the firms’ size, MBV ratio, and past dividends, and negatively allied with free cash flows and the EBITDA margin. Regular payers are observed to be more sensitive to past dividends. The study lends credence to the conservatism and prevalence of signaling and catering theories in the dividend behavior of Indian corporate firms. Full article

Accounting conservatism (AC) is one of the components of financial reporting, and has been widely studied by academicians to identify its impact on information quality. Scholars in accounting have started to explore how AC is related to different fundamental functional areas of organizations. The interest of the scholars has resulted in an increasing number of publications in this field. In this study, we examined 408 indexed publications related to AC. This work’s objectives include analyzing the regional distribution, size, and evolution of this knowledge base by identifying key authors, documents, and journals while exploring current literature, scholarly structure, and highlighting contemporary trends. The findings of the study concluded that most of the studies are conducted in developed nations contexts. However, there are still areas that need further exploration to obtain more profound insights on the subject. This bibliometric review inspires a new generation of researchers on the topic by giving them an overview of the past studies related to AC. Full article

This paper aims to examine the relationship between managerial ethics level and financial reporting quality mainly focusing on accounting conservatism. Recently, there has been evidence to support the argument that managerial ethics level can affect reporting quality in the business world. Hence, this paper seeks to compare both fraud and non-fraud firms in terms of their ethical practice in the business. Furthermore, this study provides a more realistic perspective by making a comparison with previous studies. To test the hypotheses, we chose 243 fraud firms and compared them with the same number of non-fraud firms listed in the KOSPI and KOSDAQ from 2005 to 2012. The analysis using two groups across the time horizon reveals that the measured values of accounting conservatism do not show any meaningful difference between fraud and non-fraud firms. Additionally, fraud firms have greater absolute discretionary accruals than their counterparts. This result suggests that fraud firms are more likely to manipulate their earnings than the non-fraud firms. Also, accruals quality of fraud firms is lower than that of non-fraud firms. The significance of the paper lies in the fact that we used different criteria to judge a company’s comparative ethics level. Full article

This paper finds evidence that delisting firms make reported earnings more conservative to avoid litigation risk. Conservatism has been used as one of suitable reporting quality measurements that is separate from discretionary accruals, in that investors can monitor the firm’s contract efficiency or litigation risk by demanding conservatism. We collect a sample that is composed of 6348 listed non-financial companies for the period 2009–2016. Our results are as follows. First, we find that companies ahead of delisting are more conservative than other companies in Korean Securities Dealers Automated Quotations (KOSDAQ). Second, companies that are ahead of delisting whose auditor is non-big4 are significantly more conservative. Our results imply that companies that are in the process of delisting are seeking to increase their sustainability and to improve earnings quality, such as conservatism, and that small auditors are more conservative in order to mitigate the higher risk of litigation in comparison with big4 auditors. This study has a role to complement prior studies regarding delisting, and provides that the delisting institutions in KOSDAQ market can improve the efficiency and the reliability of the capital market. Full article