Purpose This paper aims to investigate the determinants and consequences of using disclaimer language in the banks’ audit committee (AC) reports. This study aims to analyze the factors tempting AC members of banks to disclose disclaimer language in the AC reports and the effect of such language on the cost of equity. Design/methodology/approach The data cover the period from 2006 to 2015 and considers the top US bank holding companies. Voluntary disclosure in the AC report is manually coded by using a scoring grid. Multivariate regression analysis is mainly used in the study. Findings The findings suggest that the ACs are using the disclaimer language to protect themselves when disclosing a high level of voluntary information that describes their oversight activities or to reduce their liability exposure due to lower financial reporting quality. The findings also reveal that investors are requiring a higher return on their investments whenever ACs use disclaimer language in their reports. Originality/value The AC report provides useful information to shareholders who evaluate the AC’s performance and accordingly vote for or against AC members on annual basis. The paper sheds lights on the motives and consequences of disclaimer language in the ACs report. Thus, the study benefits shareholders by providing empirical evidence in regard to the usage of disclaimer language. Also, the findings benefit industry, corporate governance organizations, standard setters and regulators that analyze AC disclosures and issue recommendations or new standards for improving those disclosures.
Context The Environment, Social, and Governance [ESGÓ]-platform offered by BloombergÔ Professional Services [https://www.bloomberg.com/professional/] is a leading source of relevant, reliable, and timely information on the context within which market trading firms operate. The ESG-platform of the Bloomberg Terminals [BBT] includes more than 2,000 data fields that provide intel to aid in better understanding the “Stakeholder-impact” of the firm’s activities. One of the sub-platforms therein is the Institutional Shareholder Services [ISS] which offers Governance QualityScores: (GQSÔ). The BBT[ISS[GQS]]-platform is a data-driven approach to scoring & screening designed to help investors monitor a company’s control of governance risk. Previous studies have provided vetting information of the BBT[ISS[GQS]]-platform. As an enhancement to these vetting-studies, we offer the following. Study Design In the ESG-Platform, there are Disclosure Scores for: The General [ESG], Environment, Social & Governance categories. The vetting question of interest is: Does the ISS score those firms that provide more Disclosure information as ISS[1] and those firms that provide less as ISS[10]? If so, this would cast doubt on the relevance and reliability of the ISS-assignment taxonomy. Results We discuss the critical role of vetting. Then, the Dul: Necessity & Sufficiency Screen is offered as the organizing logic of the Inferential vetting platform. Finally, using the Gold Standard test: Linear Discriminant Analysis for the vetting inference, it is clear that the ISS-assignment is not aligned with the degree of provision of disclosure information for any of the four ESG-Disclosure Score variables. Thus, these vetting results are not inconsistent with a functioning taxonomic-allocation platform.
Purpose This study aims to examine whether a company’s corporate social responsibility (CSR) transparency (reflected in two separate dimensions of social transparency and environmental transparency) affects a company’s dependence on expensive trade credit (TC) financing. Design/methodology/approach The authors use a panel of S&P 500 index companies between 2012 and 2019 and ordinary least squares estimators. Transparency ratings represented by Bloomberg scores capture both the quantity and quality of verified CSR practice information. Findings CSR transparency (CSRT) is negatively associated with a firm’s dependence on expensive TC financing. This study’s results continue to hold after a battery of robustness tests like substitute proxies for TC, use of two-stage least squares regression, industry-adjusted dependent variable, generalized linear model and bootstrapping approach. This association is stronger among companies with higher information asymmetry (IASY) and lower quality regarding governance and financial reporting. Further investigation indicates that potential channels through which CSRT mitigates a company’s reliance on TC financing are the cost of debt (CoD) and stock liquidity. This study’s findings suggest that transparent companies have a lower CoD and higher stock liquidity. This helps these companies to be more financially flexible and eventually less dependent on expensive TC financing. Originality/value By combining two separate research lines of TC and CSR, this study adds to both works of literature as it is the first (to the best of the authors’ knowledge) to present evidence of the effect of CSRT proxied by Bloomberg scores on a company’s reliance on TC (a real economic decision and financial policy). Additionally, this study documents the moderating effects of financial reporting quality, IASY and corporate governance on the relationship between CSRT and TC financing. In conclusion, this study provides empirical evidence regarding the potential mechanisms of CoD and stock liquidity, through which CSRT influences a company’s reliance on TC financing.
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