1,079 research outputs found
The effect of time orientation in languages on the recognition of goodwill impairment losses
No full textSynopsis:
The research problem
In this study, we investigate the relationship between the future-time reference (FTR) in languages and goodwill impairment.
Motivation
Previous studies on goodwill have focused mainly on firms’ economic and reporting incentives in single country settings using economic theories. Therefore, there have been recent calls for more research on goodwill accounting across countries (d’Arcy and Tarca, 2018), and greater use of behavioural theories in goodwill accounting studies (Amel-Zadeh et al., 2021). In response, we apply the linguistic relativity hypothesis to a new and highly significant area of future-oriented behavior (impairment decision) to explain cross-country variations in goodwill impairment reporting.
The test hypotheses
We hypothesize: Firms in countries that use weak FTR languages have higher levels of (and greater quality) goodwill impairment than those in countries that use strong FTR languages.
Target population
We used a sample of 15,179 firm-year observations taken from firms reporting under IFRS across 21 countries for the fiscal years 2005 to 2018.
Adopted methodology
Tobit regressions, logit regressions, mixed-effects modelling, and propensity score matching analyses for robustness.
Analyses
We tested the relationship between FTR in languages and (a) goodwill impairment decision, (b) goodwill impairment amounts, and (c) abnormal goodwill impairments. We repeated our main analyses using several sub-samples, different measures of FTR, and alternative regression specifications.
Findings
In line with the linguistic relativity hypothesis, our findings indicate that managers who speak weak FTR languages are more willing to bear the costs of their impairment decisions in the present and are less motivated to shift current impairment into future accounting periods. In contrast, speakers of strong FTR languages tend to delay the recognition of current impairments to future periods to reduce their anxiety about the negative effects of current impairment decisions. Findings from further analysis indicate that firms in countries that use weak FTR languages report lower abnormal goodwill impairment, thereby bringing impairment levels closer to their normal optimal levels. Our inferences are robust to alternative samples, different measures of FTR, and alternative model specifications.
Keywords: Goodwill impairment; language; religiosity; culture
Informal institutions and managers' earnings management choices: evidence from IFRS-adopting countries
No full textIn this study, we investigate the role of informal institutions (religiosity and culture) in determining managers’ choices of earnings management methods (accruals vs. real activities), after controlling for formal institutions (investor protection, enforcement quality and equity market development). Using an ethical perspective, we find that managers tend to choose an earnings management strategy that meets the prevailing social (informal) norms of the environment where the firm is headquartered. Specifically, our analysis shows that firms domiciled in countries with strong religious adherence and high-power-distance cultures prefer to manage their earnings ‘upwards’ through real activities rather than accruals. Overall, our results suggest that informal institutions determine managers’ earnings management choices at least as strongly as formal institutions do. It would therefore be misleading to analyze managers’ choices in managing earnings solely from the formal rules perspective without considering the role of informal constraints or vice versa
Abnormal Inventory and Performance in Manufacturing Companies: Evidence from the Trade Credit Channel
No full textThis paper examines the value of abnormal inventory and the channels through which firms decrease abnormally high inventory or increase abnormally low inventory for a sample of 976 United Kingdom (UK) manufacturing firms over the period from 2006 to 2015. Using GMM regressions, the results show that (i) an optimal inventory policy exists; and (ii) firms that are able to converge at this optimal inventory level by either decreasing abnormally high inventory or increasing abnormally low inventory to improve operational and stock performance. Importantly, the results show that trade receivables and trade payables are the channels through which firms achieve efficient inventory management
Do trade credit and bank credit complement or substitute each other in public and private firms?
No full textIn this study, we analyse the complementary and substitution effect between trade credit (TC) and short-term bank credit (BC) for public and private firms in the UK. Using a sample of 254,352 firm-year observations over the period 2008–2021, we find TC and BC are substitutes for public firms that have easy access to cheap external finance. In contrast, TC and BC are complements for private firms that have limited access to alternative financing resources, such as financial markets. Importantly, our results show that public firms are faster in adjusting towards the optimum level of their TC and BC than private firms in an attempt to determine the appropriate mix between these two types of financing. Our study introduces new evidence on the efficient management of TC and BC for public and private firms
The distant music of a flute
No full textAamer Hussein has contributed to The Young Wife and Other Stories as a content introducer. Born in Karachi, Hussein moved to London in 1970. He reviews for The Independent and the TLS. He is the author of Turquoise, This Other Salt, and editor of Kahani: Short Stories by Pakistani Women. He has held visiting posts at the University of Southampton and the University of London, and is a Fellow of the Royal Society of Literature
Short-term credit policies and operating performance
No full textUsing a sample of United Kingdom (UK) non-financial firms from 2009 to 2021, this paper examines the operating performance effect of aggressive and moderate use of trade payables and bank credit. The results demonstrate a hierarchical effect of the use of short-term credit on firms operating performance. In particular, the results show that aggressive use of bank credit achieves higher operating performance, followed by moderate use of trade payables and bank credit and then aggressive use of trade payables. We further document that operating performance of firms dealing in differentiated products, lower firm size, firms with higher market power and financially stable firms’ increases with aggressive and moderate use of trade payables and bank credit. Overall, the results indicate that firm operating performance is an increasing function of bank credit use and demonstrate the importance of short-term credit policies on firms’ operating performance. The results are robust after using a novel approach in addressing the issue of endogeneity
The impact of international diversification on credit scores: Evidence from the UK
No full textDespite the great deal of previous research into international diversification, we know little about the impact of international diversification on firms’ credit scores. Drawing upon the resource-based view and transaction cost economics, we examine the relationship between international diversification and credit scores by using a large sample of 6,557 UK firms between 2016 and 2017. We find an inverted U-shaped relationship between international diversification and firms’ credit scores, indicating that the effect of international diversification on credit scores is initially positive but becomes negative with over-diversification. In addition, we find that R&D intensity positively moderates the relationship between international diversification and credit score, implying that the credit scores of highly diversified firms improve as they increase their investment in R&D. Further analysis suggests that a firm’s credit score becomes less dependent on international diversification for large firms, firms in concentrated industries, firms in the manufacturing sector, and firms distant from key metropolitan areas, such as London
The impact of industry competition on the value relevance of goodwill impairments across different information environments
No full textBuilding upon prior studies that explore the impact of competition on financial reporting quality, this paper investigates the influence of industry-level competition on the value relevance of goodwill impairments. Additionally, it examines whether this impact is more pronounced for firms operating in countries with rich information environments. We analyze 21,224 firm-year observations from companies in 21 countries that reported under International Financial Reporting Standards (IFRS). We find that companies facing higher product market competition tend to report impairment losses that are relevant to investors’ equity valuation decisions. This is consistent with the notion that companies in competitive industries are subject to greater scrutiny and have fewer incentives to manipulate their impairment reporting. We also find that the impact of industry competition on the value relevance of goodwill impairments is more pronounced in the rich information environments of market-based economies than bank-oriented economies. These findings underscore the impact of competition and its interplay with the information environment on the market perception of accounting information that is subject to managerial discretion
Trends. The Latest Victory of Saddam Hussein
No full textThe author discusses the advantages that were obtained by Saddam Hussein in negotiations with United Nations (UN) Secretary General Kofi Annan
Milosevic and Hussein on Trial
No full textIn this article in the Symposium on Milosevic & Hussein on Trial, the author discusses the difficulties of trying Saddam in the International Court of Justice (ICJ) at the Hague to argue that previous cases of genocide have resulted in the political strategy of exile or extermination. Four points that limit the possibilities for an ICJ trial are discussed, & the probable unjustness of the Iraqi Special Tribunal (IST) is related to the treatment of historical cases of Napoleon & Milosevic, & genocide criminals in the Rwanda & Nuremberg criminal trials. The author argues that the current position on genocide according to the General Framework Agreement for Peace in Bosnia & Herzegovina (GFA) & the Dayton Accords, leaves the Milosevic & Hussein cases extremely unclear, & advocates handing Saddam over to the Iraqi police, & finds advantages in the probable chance that Milosevic may die before his trial ends. J. Harwel
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