International Journal of Managerial and Financial Accounting (7 papers in press)
IFRS and IPO Underpricing: Evidence from Italy
by AGLIATA FRANCESCO, MAGLIO ROBERTO, PETRAGLIA MARIA ROSARIA
Abstract: This study examines the impact of the IFRS adoption on IPO underpricing; the latter is, as known, the positive spread between the first day of trading closing price and the offer price of a newly issued share. The underpricing phenomenon is usually associated with the information asymmetry among the actors involved in the process of listing. Some scholars suppose that IPO firms usage of the IFRS, rather than the domestic GAAP, affects IPO underpricing through two mechanisms: (1) the quality, and (2) the comparability of the financial reports. Our study is the first research that studies the impact of the IAS/IFRS on the IPOs underpricing in the Italian stock market. We find that the IFRS adoption is not associated with a decrease in IPO underpricing and that the trend of the financial market is the only factor associated with this phenomenon. Referring to the Italian stock market, our results suggest that the IFRS adoption does not reduce information asymmetries among investors, probably due to the lax of enforcement which seems to characterize the Italian environment.
Keywords: IPO; International Financial Resporting Standards; Underpricing; Performance; Financial market;.
Does corporate retrenchment gain value? A Study from Malaysia.
by L.I.K. JING UNG, Rayenda Brahmana, Chin Hong Puah
Abstract: This paper explores the rarely investigated strategy, namely, defensive strategy. It investigates the performance of defensive strategy by gauging further the ownership structure and identity. It follows prior research in the value of diversification such Lins and Servaes (2002), Fauver et al (2004), or Lee et al (2012), but with different strategy perspective which is the retrenchment strategy. This research aims to investigate the relationship between firm value and retrenchment strategy for a sample of 596 listed firms in Malaysia over 2008-2013. From the results, we document a positive association between the excess value of retrenchment cost. We also examine a special moderator variable for ownership expropriation that captures the ownership structure. Our findings show that there is a negatively significant relationship between ownership structures and excess value, where foreign and government underperformed in imposing retrenchment strategy. However, our research further indicates that ownership concentration does not play a significant role on the association between excess value and retrenchment cost. The implication of this research lies in two main points. Firstly, it adds to the body of knowledge by showing the effectiveness of retrenchment strategy in value creation, and the role of corporate governance in that relationship. Secondly, it provides valuable insight to regulators and policymakers by demonstrating that retrenchment strategy might have a beneficial to create value. In summary, this research implies that retrenchment strategy might bring value to certain types of firms and certain levels of ownership.
Keywords: Retrenchment; Excess Value; Ownership Expropriation; Corporate Strategy.
Do Book to market and size explain stock returns of banks? An empirical investigation from MENA economies
by Monia BEN LTAIFA
Abstract: The aim of this study is to examine empirically the determinants of stock returns of banks in the MENA countries. Methodologically, we use the capital asset pricing model (CAPM) and the three-factor model of Fama and French (1993) for a sample of 30 banks during the period from March 31, 2004 to March 18, 2014. From the empirical findings, we can show that the firms with big size and with high book to market (BH) produce higher average stock returns than big firms during all periods of study (before the crisis, during the financial crisis of 2007 and after the financial crisis). In addition, we find that the size, the book to market and the market risk premium have very strong importance to explain the volatility of the expected returns. The results show, also, that the market risk (Mkt) has a positive impact on market profitability of banks except for the SM and BH portfolios in the case of the CAPM and Fama and French models. The risk associated with the size (SMB) has a positive impact on small banks and a negative impact on banks with big sizes. Finally, the risk related to the market value (HML) has a positive impact on small and large banks.
Keywords: Conventional banks; CAPM; Fama and French (1993); stock returns.
Auditor-Client Negotiations: Applying the Dual Concerns Model in an Emerging Economy
by Emad Awadallah
Abstract: Professional auditors and their clients often encounter situations in which they disagree on the treatment of certain accounting transactions. However, because each conflict often involves unique circumstances, the resolution may also be influenced by several factors that affect the relative negotiating power of the two parties involved. Based on a sample of 152 professional auditors in Qatar, this paper conducted an experimental study to address the chosen negotiation strategy the auditor adopts in audit disputes with client management. Based on the Dual Concerns Model, the negotiation strategies examined are; (1) competing; (2) accommodating; (3) collaborating; (4) compromising; and (5) avoiding. The results showed that there is no single, rigid approach of dealing with audit conflicts. Nonetheless, from the results, it may be implied that they will use some strategies more readily than others, and therefore tend to rely upon those strategies more heavily.
Keywords: Audit disputes; auditor-client interactions; negotiations strategies; dual concerns model; NAS; audit tenure; audit firm size; corporate governance; experimental study; Qatar.
The Impact of Social Responsibility Disclosure on the Liquidity of the Jordanian Industrial Corporations
by Alaa Abu Mallouh, Asem Tahtamouni
Abstract: This paper aims to identify the impact of the disclosure of corporate social responsibility on liquidity of the Jordanian industrial Corporations. This will be done by investigating the impact of the disclosure of corporate social responsibility activities on liquidity during the period (2013-2015). The paper developed an index of corporate social responsibility disclosure and examined the annual financial reports of some selected companies listed in Amman Stock Exchange. In order to evaluate the impact of the disclosure of corporate social responsibility activities on liquidity in Jordanian Corporations during the period (2013 2015), a multiple linear regression analysis was conducted to identify the relationship between the studys variables. The paper found that the level of disclosure of corporate social responsibility items among the sampled companies is below than the required level. It was concluded that there isnt any statistically significant impact for disclosing any of the corporate social responsibility activities on liquidity represented in the current and quick ratios. Moreover, there isnt any relationship between the disclosure of corporate social responsibility and liquidity in the sampled companies.
Keywords: Corporate Social Responsibility; Disclosure; Liquidity; Jordanian Industrial Corporations; Amman Stock Exchange.
Do customer profitability analyses pay? A survey of large Norwegian companies
by Øyvind Helgesen, Helge Mykkeltveit Sandanger, Joakim Sandbekk
Abstract: The purpose of this paper is to study the relationships between the extents of use of customer profitability analyses (CPA) and business performance. In addition to CPA as an overall construct, five methods are included: (1) CPA of individual customers, (2) customer segments, (3) assessments of customer lifetime value, (4) valuations of customers, and (5) customers as investments. A total of 437 large Norwegian companies were invited to answer a questionnaire, of which 171 participated giving a response rate of 39%. CPA (overall construct) is positively linked to business performance. CPA of individual customers is the only method that significantly drives business performance. Thus, conducting detailed customer profitability analyses to establish reliable customer profitability accounts appears to be worth the effort. The respondents perceive the three forward-looking methods, i.e. (3), (4) and (5) as variations of one approach. Analogous studies are highly recommended. Cost estimation methods could also be addressed.
Keywords: business performance; CAP; CPA; customer account profitability (CAP); customers as investments; customer profitability accounting (CPA); customer profitability analyses (CPA); customer segments; lifetime value; Norway; valuation of customers.
Special Issue on: Advances in Managerial and Financial Accounting, Theory and Practice Managing the Intangible and Disclosing the Business Performance in Emerging and Traditional Markets
Determinants of mandatory goodwill disclosure: The case of impairment testing in Germany
by Laurent Lazar, Patrick Velte
Abstract: Goodwill accounting standards, according to International Financial Reporting Standard 3 (IFRS 3) and International Accounting Standard 36 (IAS 36), oblige firms to describe the circumstances that form the basis of the annual impairment testing. We observe that managers interpretation or application of the IFRS is associated with the information content disclosed in financial statements. The use of boilerplate instead of firm-specific information decreases the information quality. This study investigates the disclosure quality of goodwill impairment testing under the IFRS of German listed companies between 2010 and 2015. Our results provide evidence that firm performance and goodwill impairment losses are positively linked to the quality of goodwill impairment disclosure. Furthermore, the results show that the magnitude of reported goodwill is negatively associated with the disclosure quality. Our findings are robust to additional tests and make several contributions to further research, regulation, and practice.
Keywords: impairment only approach; IAS36; disclosure quality; goodwill.