How Do Financial Constraints Relate to Financial Reporting Quality? Evidence from Seasoned Equity Offerings

Kurt, Ahmet C.

doi:10.2139/ssrn.2255832

Cited by 11 publications

(14 citation statements)

References 75 publications

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“…When we use the market-to-book ratio (e.g.,Gao and Sidhu, 2018;Kurt, 2018) instead of the bookto-market ratio, we obtain positive coefficients that are consistent with the results presented here.…”

supporting

confidence: 92%

Product Market Competition and Firms’ Disclosure of Cross‐segment Differences in Performance

Königsgruber¹,

Perotti²,

Oliver

et al. 2021

Abacus

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This study examines how product market competition affects firms' disclosures of their individual segment's performance. We explicitly account for different types of product market competition by distinguishing between competitors who are already active in a particular market and potential competitors who are considering entering the market. Arguably, firms that are subject to intensive existing competition have lower incentives to conceal information because they are less likely to exhibit abnormal profitability. By contrast, a high level of potential competition constitutes a threat to profitability and hence provides incentives to conceal segment performance. In line with these proprietary cost arguments, we find that potential competition is negatively associated with the disclosure of cross-segment differences in performance, whereas existing competition is positively associated with the disclosure of cross-segment differences in performance. Our results remain robust to a number of sensitivity tests.

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supporting

confidence: 92%

Product Market Competition and Firms’ Disclosure of Cross‐segment Differences in Performance

Königsgruber¹,

Perotti²,

Oliver

et al. 2021

Abacus

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“…From the traditional risk view of audit pricing, increased EPU may lead to higher audit fees. On the one hand, as economic policy uncertainty increases, firms may suffer from shrinkage of product market and become more financially constrained (Zhang et al., ), which leads to more misstatement in financial reports (Kurt, ), thereby exposing auditors to greater risk of material misstatement (inherent risk and control risk). Under this circumstance, auditors are more likely to fail in detecting material misstatements (i.e.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

International evidence on economic policy uncertainty and asymmetric adjustment of audit pricing: Big 4 versus non‐big 4 auditors

Zhang

Tong

et al. 2018

Business Fin & Account

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By investigating the association between economic policy uncertainty and audit fees using data from eight countries, this study examines whether and how Big 4 auditors reinforce their advantages over non-Big 4 auditors through audit pricing. We find that both Big 4 and non-Big 4 auditors reduce their audit fees when economic policy uncertainty increases. However, while non-Big 4 auditors adjust audit pricing asymmetrically as economic policy uncertainty changes, i.e., the magnitude of decline in audit fees when economic policy uncertainty increases exceeds the magnitude of rise when economic policy uncertainty decreases, Big 4 auditors regulate their audit pricing in a symmetric manner. Further analyses reveal that: (1) the asymmetric pricing of non-Big 4 auditors mainly exists in countries where Big 4 auditors have dominant market share, (2) Big 4 auditors provide higher-quality audits when economic policy uncertainty increases and (3) many firms in better financial condition turn to Big 4 auditors during uncertain years. Our findings suggest that the symmetric audit pricing helps Big 4 auditors maintain a favorable position in the audit market.

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“…Considering its importance, it is imperative to identify the factors that affect the level of FRQ. Consequently, prior research has identified several firm-specific factors that can influence the quality of financial reporting, including corporate governance mechanism (Bravo and Reguera-Alvarado, 2018;Kalyani et al, 2019), ethics and diversity management (Labelle et al, 2010), innovation (Lobo et al, 2018), Chief Executive Officer (CEO) attributes (Francis et al, 2008;Huang et al, 2012), managerial ability (García-Meca and García-Sánchez, 2018), financial constraints (Kurt, 2018), financial expertise of CEO (Matsunaga and Yeung, 2008), financial expertise of Chief Financial Officer (CFO) (Aier et al, 2005), management's personal ideology (Notbohm et al, 2019), CEO and CFO power (Jiang et al, 2010;Baker et al, 2019) and the characteristics of the top management team (TMT) (Zhang, 2019). Among these factors, there is increasing interest in the role played by the members of the TMT, specifically how their financial expertise can affect the level of the firm's FRQ (Aier et al, 2005;Matsunaga and Yeung, 2008).…”

Section: Introductionmentioning

confidence: 99%

Presence of professional accountant in the top management team and financial reporting quality

Rashid

2020

JAOC

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Purpose The purpose of this study is to examine the effect of the presence of professional accountants in the top management team (TMT) on financial reporting quality (FRQ) in public limited companies using the context of Bangladesh, which is an emerging economy. Design/methodology/approach This study adopts a modified version of Beest et al.’s (2009) FRQ index to measure the quality of information published in 351 annual reports of listed companies in Bangladesh. It also uses a qualitative characteristics approach to measure the quality of financial reporting, as defined by the International Financial Reporting Standards framework 2018, as opposed to an accrual or value relevance approach that solely depends on the information disclosed in the financial statements. Findings This study finds that the presence of professional accountants in the TMT is positively and significantly associated with FRQ. The findings also show that the sample companies disclosed better quality information in the enhancing qualitative characteristics category, as compared to the fundamental qualitative characteristics category. Originality/value This study uses the context of Bangladesh to explore a new type of relationship between the presence of professional accountants in the TMT and FRQ.

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How Do Financial Constraints Relate to Financial Reporting Quality? Evidence from Seasoned Equity Offerings

Cited by 11 publications

References 75 publications

Product Market Competition and Firms’ Disclosure of Cross‐segment Differences in Performance

Product Market Competition and Firms’ Disclosure of Cross‐segment Differences in Performance

International evidence on economic policy uncertainty and asymmetric adjustment of audit pricing: Big 4 versus non‐big 4 auditors

Presence of professional accountant in the top management team and financial reporting quality

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