The Role of Political Connections in the Relationship Between Managerial Ability and Fraudulent Financial Statements

Ahmad, Yahya Yeshua; Subroto, Bambang; Atmini, Sari

doi:10.18196/jai.v23i3.14493

Cited by 5 publications

(9 citation statements)

References 39 publications

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“…Despite the general agreement of the positive aforementioned effect, Garg et al (2022) indicate the dark side of upper level managers, who may involve in opportunistic behavior. Therefore, Ahmad et al (2022) found that increase managerial ability resulted in higher fraudulent financial statements. Some studies justify the claim that political connections have a negative impact on the positive influence of managerial ability on fraudulent statement fraud.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Some studies justify the claim that political connections have a negative impact on the positive influence of managerial ability on fraudulent statement fraud. Additionally, there is a negative correlation between pay inequality in top management teams and readability, at least in part because it generates feelings of unfairness and worsens the information environment, which manifests in longer or less readable financial reports (Ahmad et al, 2022;Park, 2023).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

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الدور المُعدل للمنافسة فى سوق المنتج على العلاقة بين القدرة الإدارية وقابلية التقارير المالية للقراءة(باللغة الانجليزية)

عمارة

2024

مجلة الاسکندرية للبحوث المحاسبية

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This paper explores how managerial ability affects financial reporting readability and examines the moderated role of product market competition in the relationship between managerial ability and financial reporting readability. Using a sample of 48 non-financial Egyptian companies listed on the EGX100 with 432 observations through the period 2013-2021 and depending on Ordinary Least Squares (OLS) and the Generalized Method of Moments (GMM) regression models, Results exhibit that there is a negative impact of managerial ability on financial reporting readability. Moreover, product market competition has a negative effect on financial reporting readability. Nevertheless, the results show that product market competition moderates the negative effect of managerial ability on financial reporting readability in both OLS and GMM models. A robustness check confirms the positive impact of product market competition on the association between managerial ability and financial reporting readability.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

الدور المُعدل للمنافسة فى سوق المنتج على العلاقة بين القدرة الإدارية وقابلية التقارير المالية للقراءة(باللغة الانجليزية)

عمارة

2024

مجلة الاسکندرية للبحوث المحاسبية

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“…On the contrary, some studies have found that high-ability managers might take advantage of their competence, which can harm many parties. For example, they can engage in financial statement fraud, such as earnings manipulations (Ahmad et al, 2022;Herawaty & Solihah, 2019). For this reason, this study focuses on the effect of managerial ability on segment disclosure since segment information is essential in firms' performance analysis.…”

Section: Atika Utami and Simamoramentioning

confidence: 99%

“…Since segment information is essential, high-ability managers may comprehensively disclose their operating segment information to signal their firm's performance to stakeholders. Nevertheless, some studies uncovered that higher-ability managers are associated with higher levels of financial statement fraud, including earnings manipulations (Ahmad et al, 2022;Herawaty & Solihah, 2019). Therefore, it is crucial to examine the effect of managerial ability on disclosure, especially segment disclosure, which has never been studied before.…”

Section: Introductionmentioning

confidence: 99%

Does Managerial Ability Affect Segment Disclosure? Evidence From Indonesia

Atika¹,

Utami²,

Simamora³

2022

JAI

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Research aims: While prior study around segment disclosure has mainly focused on firm characteristics, there is little study on whether managerial characteristics are associated with segment disclosure. This study, therefore, aims to examine the effect of managerial ability on the level of segment disclosure.Design/Methodology/Approach: This study used panel data regression with 556 firm-year observations of Indonesian manufacturing firms during 2017-2020. This study employed the checklist based on PSAK 5 (2015 edition) and adopted a content analysis approach. To measure managerial ability, this study utilized the managerial ability score developed by Demerjian, Lev, McVay (2012) for Indonesian firms. Research findings: The results of this study revealed that managerial ability significantly and positively affected the level of segment disclosure. Higher-ability managers also tended to disclose their segment information more extensively.Theoretical contribution/Originality: This study contributes to the managerial ability literature and the disclosure literature (specifically for segment disclosure). This study is also the first to provide empirical evidence about the effect of managerial ability on the level of segment disclosure.Practitioner/Policy implication: This study results can be used by the Financial Accounting Standards Board of the Institute of Indonesia Chartered Accountants regarding the effectiveness of management approach implementation in Indonesia. Furthermore, the result of this study suggests that managers need to improve their capabilities to accommodate a dynamic business environment.Research limitation/Implication: This study used content analysis to measure segment disclosure, including subjectivity. Nevertheless, this study only investigated manufacturing firms. Further research may expand the industry sample to get a better understanding.

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“…Recent research has emphasized the growing importance of connections between businesses and governmental entities, as highlighted in the studies conducted by Nguyen and Wong (2021), Nguyen et al (2020), and Ahmad et al (2022). Debates surrounding the state's involvement in corporations have consistently revolved around the themes of efficiency and opportunities for investment, aiming to enhance competitiveness and refine business strategies (Nguyen et al 2020;Ben Rejeb Attia et al 2018) and its agency problems (Huang et al 2017;Khatib et al 2022).…”

Section: Introductionmentioning

confidence: 99%

The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences

Nguyen,

Darsono,

Phan

et al. 2023

JRFM

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The level of state ownership in corporations is still a controversial topic because of its duality: on the one hand, it brings resource advantages, and on the other hand, it causes agency problems. Thus, our study aims to investigate the relationship between state ownership and corporate performance within the Vietnamese context, unraveling the impacts of state ownership’s non-linear and provincial business environment. Analyzing financial data spanning over a decade from 359 listed corporations on the Vietnamese stock markets (2010–2021), our empirical findings derived through the General Method of Moments (GMM) reveal that state ownership emerges as a potent “strategic asset” with a positive influence on corporate performance. However, a critical point is identified when state ownership surpasses the threshold of 32 percent and a decline in corporate performance ensues—a confirmation of an inverted U-shaped impact. These results substantiate the necessity of the equitization process and underscore the imperative of judiciously managing state ownership in Vietnam. Notably, our study unveils a more critical dimension: the enhanced provincial business environment bolsters corporate performance and amplifies the positive impact of state ownership. Thus, a strategic dual approach is suggested to improve corporate performance: improving the business environment and recalibrating the percentage of state shareholders. Our study serves as empirical evidence, referencing Vietnam and other transitional economies, toward mannerly policy decision-making related to state ownership and the business environment to boost corporate performance.

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The Role of Political Connections in the Relationship Between Managerial Ability and Fraudulent Financial Statements

Cited by 5 publications

References 39 publications

الدور المُعدل للمنافسة فى سوق المنتج على العلاقة بين القدرة الإدارية وقابلية التقارير المالية للقراءة(باللغة الانجليزية)

الدور المُعدل للمنافسة فى سوق المنتج على العلاقة بين القدرة الإدارية وقابلية التقارير المالية للقراءة(باللغة الانجليزية)

Does Managerial Ability Affect Segment Disclosure? Evidence From Indonesia

The Nexus between Corporate Performance and State Ownership in Vietnam: Evidence of State Ownership’s Inverted U-Shape and Provincial Business Environment Influences

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