The association between voluntary disclosure in audit committee reports and banks’ earnings management

Sahyoun, Najib; Magnan, Michel

doi:10.1108/maj-05-2019-2279

Cited by 28 publications

(50 citation statements)

References 58 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Our paper also complements qualitative studies, mainly based on interviews with AC participants in small number of companies, on the AC process showing that AC actions play a key role in configuring meanings of effectiveness (Gendron and Bédard, 2006;Turley and Zaman, 2007; d785a796-434c-4b72-a76f-4cd1adac9fd4 |Page 3 of 37 Beasley et al, 2009;Compernolle, 2018;Khemakhem and Fontaine, 2019). It also adds to the literature on AC disclosures (e.g., Guttierrez et al, 2018;Lennox et al, 2018 andCzerney et al, 2019;Sahyoun and Magnan, 2020) through a focus on the textual properties of AC reports, particularly the tone of AC disclosures, and examining the effects on financial reporting quality as proxied by earnings management.…”

Section: Introductionmentioning

confidence: 54%

“…They find that investors generally do not respond to explanatory language at the time of the audit report release. Sahyoun and Magnan (2020) analyse AC disclosures based on recommendations from multiple industry and governance organisations' reports and its association with banks' earnings management and find that the voluntary disclosures in AC reports are used as a tool for impression management.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…It also adds to the literature on AC disclosures (e.g. Guttierrez et al , 2018; Lennox et al , 2018; Czerney et al , 2019; Sahyoun and Magnan, 2020) through a focus on the textual properties of AC reports, particularly the tone of AC disclosures, and examining the effects on financial reporting quality as proxied by earnings management.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Audit committee disclosure tone and earnings management

Al‐Shaer

Zaman

2021

JAAR

View full text Add to dashboard Cite

PurposeThis paper examines the effect of audit committee (AC) reporting, measured by the tone of audit committee disclosures, in improving financial reporting quality as proxied by earnings management.Design/methodology/approachThe authors focus on the textual properties of AC reports, particularly the tone of AC disclosure, and their impact on financial reporting quality proxied using real and accruals-based earnings management. For additional analysis, the authors use a financial reporting index and matched sample. The analysis is based on a sample of UK FTSE 350 firms.FindingsThe analysis suggests that AC reports are not boilerplate but varied in language. The authors find AC reporting is negatively associated with both real and accruals-based earnings management. In our additional tests, the authors find a positive association between financial reporting quality index and reporting tone.Research limitations/implicationsOverall, this paper provides baseline evidence for future research and policy making and reveals that ACs reporting what they have done increases transparency and impacts on reporting quality.Practical implicationsOverall, this paper suggests that the tone of AC reports seems to convey information that affects the communication function of AC reporting and thereby helps to improve reporting quality.Originality/valueThough the importance of AC disclosures in improving reporting quality is well recognised in policy guidelines and governance recommendations, no study has employed computer-based textual analysis of AC reports and investigated the effect of AC disclosure tone and the role it can play in achieving higher reporting quality.

show abstract

Section: Introductionmentioning

confidence: 54%

Section: Hypothesis Developmentmentioning

confidence: 99%

See 1 more Smart Citation

Audit committee disclosure tone and earnings management

Al‐Shaer

Zaman

2021

JAAR

View full text Add to dashboard Cite

show abstract

“…However, this creates an agency issue. Alternatively, they may be willing to provide more voluntary disclosure (Sahyoun and Magnan, 2020) to make their annual reports more complex to read and hide their earnings management practices. Thus, the association between voluntary disclosure and the complexity of annual reports may be unclear is ex ante for firms engaging in earnings management practices.…”

Section: Voluntary Disclosure and Complexity Of Reportingmentioning

confidence: 99%

Voluntary disclosure and complexity of reporting in Egypt: the roles of profitability and earnings management

El-Din

El-Awam

Ibrahim

et al. 2021

JAAR

View full text Add to dashboard Cite

PurposeThe study explores the relationship between information overloading and the complexity of reporting. In particular, it investigates whether voluntary information in a firm annual report is associated with its readability. Likewise, it examines how a firm's profitability and earnings management practices impact the nexus of voluntary disclosure and readability.Design/methodology/approachIt uses the annual reports of the Egyptian nonfinancial firms listed in the EGX 100 index from 2010 to 2018. The readability of the annual report is measured automatically using the LIX index, and a predeveloped voluntary disclosure index is used to measure the level of voluntary disclosure in the annual reports.FindingsThe results reveal that the readability of annual reports is a negative function of voluntary disclosure, suggesting that Egyptian firms with more voluntary disclosure are likely to have more complex (i.e. less readable) annual reports. Likewise, less profitable firms and firms with earning management practices increase voluntary information in their annual reports, resulting in an adverse impact on their reporting readability.Research limitations/implicationsIt focuses only on the annual reports of Egyptian firms and considers a firm’s overall voluntary information rather than a particular area of voluntary disclosure. It introduces a code to measure the readability of Arabic-written texts, which can be applied to different areas of disclosure.Practical implicationsPolicymakers in Egypt are encouraged to develop enforceable regulations to control voluntary disclosure in annual reports. Egyptian investors should view the practice of higher voluntary disclosure skeptically as its aim may be to divert attention from a firm's poor performance and earnings management practice.Originality/valueThe study is the first evidence from Egypt on the effect of information overloading, proxied by voluntary disclosure, on the readability of reporting. Likewise, it contributes to methodological development in measuring the readability of Arabic-written annual reports.

show abstract

“…However, [ 56 ] found that banks with high earnings management practices will encourage audit committees to increase their voluntary disclosure. [ 57 ] revealed that higher earnings management practices of banks were caused by lower foreign ownership and higher ownership concentrations of these banks.…”

Section: Literature Reviewmentioning

confidence: 99%

Key determinants of deposits volume using CAMEL rating system: The case of Saudi banks

AL-Najjar

Assous

2021

PLoS ONE

View full text Add to dashboard Cite

CAMEL is considered one of the well-known banking rating systems used to build a proper bank ranking. In our paper, we investigate the CAMEL rating for Saudi banks, which is considered the second largest banking sector in GCC. The Saudi banking sector consists of 11 banks and is the leading sector in the Saudi stock index (TASI). In this research, we aim to determine the ranking of Saudi banks according to CAMEL composite and CAMEL overall ratings and explore the effects of these ratings on banks’ total deposits for the period from 2014 to 2018. The methodology involves four phases. In the first phase, we calculate the key financial ratios of CAMEL’s composites for each bank. In the second phase, we rank the banks from 1 to 11 to each one of CAMEL’s composites for each bank per year. In the third phase, we rank Saudi banks according to CAMEL composite and CAMEL overall. Finally, in the fourth phase, we run a regression model using CAMEL financial ratios rank as independent variable and banks’ total deposits as a dependent variable. Using the stepwise regression method, the results indicated that the best regression model has an adjusted R2 of 73.4% and a standard error of around 0.58. The results further indicated that capital measured by CAR, management as an efficiency ratio, earning with ROE proxy, and liquidity as loans to deposits have positive effects on banks’ total deposits. Meanwhile, earnings as net interest income to net revenue and liquidity calculated by CASA have a negative effect on banks’ total deposits. Finally, asset quality ratios and the rest of the ratios have no significant effect on banks’ total deposits.

show abstract

The association between voluntary disclosure in audit committee reports and banks’ earnings management

Cited by 28 publications

References 58 publications

Audit committee disclosure tone and earnings management

Audit committee disclosure tone and earnings management

Voluntary disclosure and complexity of reporting in Egypt: the roles of profitability and earnings management

Key determinants of deposits volume using CAMEL rating system: The case of Saudi banks

Contact Info

Product

Resources

About