Agency costs of free cash flow and conditional conservatism

Ha, Joo Hyung

doi:10.1016/j.adiac.2019.04.002

Cited by 5 publications

(15 citation statements)

References 100 publications

(157 reference statements)

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“…Consistent with previous studies (i.e. LaFond and Roychowdhury, 2008;Khan and Watts, 2009;Chen et al, 2017;Ahmed and Duellman, 2013;Ha, 2019) we control for a set of factors considered to have an impact on accounting conservatism. The set of controls includes SIZE, LEV, MTB, CFOA, ROA, SG, SDROA and SDSALES.…”

Section: Econometric Model and Control Variablesmentioning

confidence: 85%

“…The coefficient on leverage (LEV) is positive for conditional conservatism measures indicating that highly leveraged firms are more asymmetrically timely in recognizing bad 3) which indicates that firms generating large cash flows from operations on average report less conservative financial reports. The coefficient on SDSALES is consistently positive and statistically significant, meaning that firms that have high sales volatility are likely to report more conservatively, probably to reduce information asymmetry resulting from operational uncertainty (Ha, 2019).…”

Section: Descriptive Statistics and Correlationmentioning

confidence: 94%

“…To test the effect of climate risk on accounting conservatism and consistent with previous studies (Khan and Watts, 2009;Ahmed and Duellman, 2013;Ha, 2019) we use the firm-specific measures of both conditional and unconditional conservatism estimating the following model:…”

Section: Econometric Model and Control Variablesmentioning

confidence: 99%

“…We also include operating uncertainty (SDSALES) which is measured by the standard deviation of sales. Ha (2019) suggests that operating uncertainty can affect information asymmetry between managers and shareholders as well as debtholders. All the variables used in the regression model are winsorized at 5 and 95% levels.…”

Section: Econometric Model and Control Variablesmentioning

confidence: 99%

“…Based on the same approach by Khan and Watts (2009), Ha (2019) and Ha and Feng (2018), we construct a firm-specific measure of conditional conservatism by estimating the following annual cross-sectional regression model…”

Section: Climate Risk and Accounting Conservatismmentioning

confidence: 99%

See 4 more Smart Citations

The impact of climate risk on accounting conservatism: evidence from developing countries

Khalifa,

Zouaoui,

Ben Othman

et al. 2023

JAAR

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PurposeThe authors examine the effect of climate risk on accounting conservatism for a sample of listed companies operating in 26 developing countries.Design/methodology/approachThe authors employ the Climate Risk Index (CRI) developed by Germanwatch to capture the severity of losses due to extreme weather events at the country level. The authors use different approaches to measure firm-level accounting conservatism.FindingsThe authors find that greater climate risk leads to a lower level of accounting conservatism. The results hold even after using different estimation methods.Research limitations/implicationsAlthough the authors' analysis is limited to the period 2007–2016, it could be helpful for standard setters such as International Accounting Standards Board (IASB) and International Sustainable Standards Board (ISSB) as they may consider the potential effect of climate risk in their international standards.Practical implicationsThe negative impacts of climate risk on the quality of financial reporting as proxied by accounting conservatism could trigger regulators and standard setters to require disclosure of information relating to climate risks and to incorporate climate-related risks in their risk management systems. In addition, for policymakers, incorporating accounting conservatism as a financial quality reporting standard could help promote greater transparency, accuracy and reliability in financial reporting in the context of climate risk.Originality/valueThe authors add to the literature on international differences in accounting conservatism by showing that climate risk significantly affects unconditional and conditional conservatism. The authors' results provide fresh evidence of the dark side of climate change. That is, climate risk is shown to decrease financial reporting quality.

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Section: Econometric Model and Control Variablesmentioning

confidence: 85%

Section: Descriptive Statistics and Correlationmentioning

confidence: 94%

Section: Econometric Model and Control Variablesmentioning

confidence: 99%

Section: Econometric Model and Control Variablesmentioning

confidence: 99%

Section: Climate Risk and Accounting Conservatismmentioning

confidence: 99%

See 3 more Smart Citations

The impact of climate risk on accounting conservatism: evidence from developing countries

Khalifa,

Zouaoui,

Ben Othman

et al. 2023

JAAR

View full text Add to dashboard Cite

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The landscape of accounting-related research in Indonesia: mapping distinctive settings and future research agenda

Kristanto,

Cao

2024

JAL

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PurposeThis systematic literature review presents the evolution of accounting-related research in the Indonesian context. We examine 55 academic articles from the initial 296 records of accounting and finance research in the Q1 Scopus-indexed journals from 1995 to 2022. This study sheds light on Indonesia’s main research streams, unique settings and urgent future research agenda.Design/methodology/approachThis study adopts a systematic approach for a comprehensive literature review. We select articles according to a series of criteria and compile the metadata for the bibliographic mapping.FindingsOur bibliometric analysis suggests five main research streams, namely (1) political connection, (2) capital market, (3) audit and accountability, (4) firm policy and (5) banking. We identify the following distinctive country settings, which are well discussed in extant literature: political connection, two-tier board system, weak accounting profession, information opacity and cultural impact on accounting. We outline prospective agendas to examine the institutional mechanisms’ role in addressing major environmental challenges through accountability.Originality/valueThis study offers unique contributions to the literature by comprehensively reviewing accounting-related research in Indonesia. Despite Indonesia’s economic and environmental importance, it has received limited attention from scholars. Using dynamic topic analysis, we highlight the need to examine the role of informal institutions, such as political connections and culture and formal institutional mechanisms, such as corporate governance and environmental disclosure.

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Agency costs and auditor choice: moderating role of board’s expertise and internal control

Behbahaninia

2022

JFRA

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Purpose This study aims to examine the effects of agency cost on auditor choice. This paper also deals with the moderating role of the board’s financial expertise (Bfe) and the status of the internal control (Intecon) system on the relationship between agency cost and auditor selection. Design/methodology/approach This study’s sample consists of 1,040 firm-year observations of Iranian nonfinancial companies listed on the Tehran Stock Exchange from 2012 to 2019. The information required for this research is mainly extracted from Comprehensive Database of All Listed Companies (in Iran Stock Exchange). Data from 130 companies were obtained during the research period. This study used logistic regression to test the hypotheses. Findings The findings indicate that companies with higher agency costs choose the auditor from lower classes. As the proportion of financial expert members on the board increases, the intensity of this relationship will be reduced. Companies with higher agency costs choose the auditor from the lower classes, but the higher the ratio of financial expert board members, the more these companies will choose high-quality auditors. However, findings showed that the status of the Intecon system has no moderating effect on the relationship between agency costs and auditor selection. Originality/value The results of this study can expand the existing literature on the relationship between auditor selection and agency costs and the factors affecting this relationship, especially the Bfe and Intecon. This research has significant suggestions for regulators, stakeholders, shareholders and analysts in emerging economies that may encounter similar contextual implications.

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Agency costs of free cash flow and conditional conservatism

Abstract: 3.2. The effect of debt issuance on conservatism among J-type firms (H2) ..........18 3.3. The effect of payouts policies on conservatism among J-type firms (H3) .....19 3.4. The effect of the cash retention policy on conservatism among J-type firms (H4) .

Cited by 5 publications

References 100 publications

The impact of climate risk on accounting conservatism: evidence from developing countries

The impact of climate risk on accounting conservatism: evidence from developing countries

The landscape of accounting-related research in Indonesia: mapping distinctive settings and future research agenda

Agency costs and auditor choice: moderating role of board’s expertise and internal control

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