scholarly journals Financial Reporting Changes and the Internal Information Environment: Evidence from SFAS 142

2017 ◽  
Author(s):  
Qiang Cheng ◽  
Young Jun Cho ◽  
Holly Yang
Keyword(s):  
Financial Reporting ◽  
Information Environment ◽  
Sfas 142 ◽  
Internal Information

Are earnings strings restrained after SOX?

2018 ◽  
Vol 17 (1) ◽  
pp. 18-40 ◽  
Author(s):  
Mark Kohlbeck ◽  
Jomo Sankara ◽  
Errol G. Stewart
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Firm Value ◽  
Information Environment ◽  
Content Type ◽  
External Monitoring ◽  
Auditor Tenure ◽  
Sarbanes Oxley ◽  
Reporting Environment ◽  
The Impact

Purpose This paper aims to examine whether external monitors (auditors and analysts) constrain earnings strings, an indicator of earnings management, and whether this monitoring is more effective after the implementation of the Sarbanes-Oxley Act of 2002 (SOX), given the emphasis of SOX on improving auditing, financial reporting and the information environment. Design/methodology/approach Agency theory establishes the premise between external monitoring and earnings strings. Auditor tenure and number of analysts following provide measures for external monitoring quality. Using prior research, empirical models explaining the presence of an earnings strings and earnings strings trend are developed to test the hypotheses. Findings Pre-SOX, extreme auditor tenure, indicating lower quality external monitoring, is associated with greater earnings strings trend, and analyst coverage is associated with increased likelihood of earnings strings and greater earnings strings trend consistent with analyst pressure on management. More effective auditor and analyst monitoring occurs post-SOX in terms of reduced likelihood of earnings strings and earnings strings trend. Originality/value The authors provide evidence on how elements of external monitoring are associated with increased earnings strings pre-SOX. Further, they contribute to the debate on the impact of SOX on external firm monitoring and the overall financial information environment. By focusing on earnings strings, the outcome of earnings management, the authors provide a unique understanding of external monitoring that also provides insight on the overvaluation of equity and ultimate destruction of firm value. The evidence demonstrates how regulation has contributed to an improved financial reporting environment and external monitoring.

Financial reporting quality and firms’ information environment: a case of Iranian firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yasser Rezaei Pitenoei ◽  
Mehdi Safari Gerayli ◽  
Ahmad Abdollahi
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Stock Exchange ◽  
Reporting Quality ◽  
Information Environment ◽  
Financial Reporting Quality ◽  
Multivariate Regression Model ◽  
Content Type ◽  
Composite Measures ◽  
The Relationship

Purpose The purpose of this study is to investigate the relationship between financial reporting quality and information environment (IE) in firms listed on the Tehran Stock Exchange (TSE). Design/methodology/approach In this study, composite measures were used as the proxy to measure financial reporting quality and IE. In this regard, a sample of 1,490 firm-year observations of the firms listed on the TSE during the years 2008 to 2017 and a multivariate regression model was used to examine the research hypothesis. Findings Findings indicate that financial reporting quality has a positive relationship with firms’ IE. This result is robust to the alternate measure of financial reporting quality and endogeneity problem. Originality/value The present study is the first study to develop a composite measure for the firms’ IE in the Iranian capital market. As a result, it not only expands the theoretical literature on the firms’ IE but also helps policymakers, regulators, investors and financial reporting users make informed decisions.

scholarly journals Internal Control Weaknesses and Acquisition Performance

2017 ◽  
Vol 93 (1) ◽  
pp. 235-258 ◽  
Author(s):  
Nancy L. Harp ◽  
Beau Grant Barnes
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Internal Control ◽  
Cost Benefit ◽  
Acquisition Performance ◽  
Sarbanes Oxley ◽  
Abnormal Stock Returns ◽  
Internal Information ◽  
Internal Control Weaknesses ◽  
Section 302

ABSTRACT This study examines internal control weaknesses (ICWs) reported under Sarbanes-Oxley (SOX) Section 302 in the context of mergers and acquisitions. We predict that problems in an acquirer's internal control environment have adverse operational implications for acquisition performance. We argue that acquirers with low-quality internal information needed to select profitable acquisitions will make poorer acquisition decisions. We also argue that ICWs impede effective monitoring and are likely to hinder integration tasks that are important to acquisition profitability. We find that ICWs disclosed prior to an acquisition announcement predict significantly lower post-acquisition operating performance and abnormal stock returns. Poorer post-acquisition performance is concentrated in ICWs that are expected to impede acquisition activities (i.e., forecasting/valuation, monitoring, and integration). Our findings contribute to the literature linking ineffective internal control over financial reporting to negative operational outcomes. We also contribute to the SOX cost-benefit debate by documenting a previously unidentified benefit of ICW disclosures.

scholarly journals Internal Information Environment and Labor Investment Efficiency

2020 ◽  
Vol 9 (4) ◽  
pp. 70
Author(s):  
Xin Luo ◽  
Fan Zhang
Keyword(s):  
Information Quality ◽  
Optimal Level ◽  
Information Environment ◽  
Accurate Information ◽  
Investment Efficiency ◽  
High Quality ◽  
Union Coverage ◽  
Internal Information

This study investigates the relation between internal information environment and labor investment efficiency. We argue that better internal information quality allows managers to obtain more timely and accurate information from subordinates and therefore make better decisions in labor investments. Our results suggest that the labor investments of firms with high quality internal information have less deviation from the optimal level. This association holds for both companies in industries with high and low union coverage.

scholarly journals Mandatory IFRS Adoption And Financial Analysts' Information Environment: Evidence From Korean Market

2016 ◽  
Vol 32 (5) ◽  
pp. 1387
Author(s):  
Saerona Kim ◽  
Noolee Kim ◽  
Kyoung-Min Kwon
Keyword(s):  
Financial Reporting ◽  
Financial Analysts ◽  
Forecast Accuracy ◽  
Information Environment ◽  
Analyst Coverage ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Information Sets ◽  
Mandatory Adoption ◽  
Korean Market

The paper examines the effects of the mandatory adoption of International Financial Reporting Standards (IFRS) on financial analysts’ information environment, specifically on analysts forecast accuracy in the Korean market. We find that financial analysts’ forecast accuracy improves after the mandatory IFRS adoption. We further investigate the source of observed accuracy enhancements and find that the improved forecast accuracy is attributable to the increased precision in analysts’ information sets for KOSPI firms and increased opportunity for earnings management for KOSDAQ firms. We also find that the analyst coverage in Korean market is reduced after mandatory IFRS adoption.

scholarly journals Audit Committee Characteristics and Quality of Financial Information: The Role of the Internal Information Environment and Political Connections

2021 ◽  
Vol 14 (6) ◽  
pp. 273
Author(s):  
Omid Mehri Namakavarani ◽  
Abbas Ali Daryaei ◽  
Davood Askarany ◽  
Saeed Askary
Keyword(s):  
Audit Committee ◽  
Information Quality ◽  
Stock Exchange ◽  
Entropy Method ◽  
Information Environment ◽  
Financial Information ◽  
Financial Knowledge ◽  
Political Connections ◽  
Internal Information

This study explores the relationship between audit committee characteristics and accounting information quality by justifying the role of the internal information environment and political connections under the theocracy state of Iran with syncretic politics. Using panel data of 558 firms from the Tehran Stock Exchange (TSE) for 2011–2016, we rank firms using Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and entropy method for determination of the weight of evaluating indicators. The firms are positioned into high- to low-level political connections, and two proxies for audit committee characteristics are used: independence of audit committee and financial knowledge. Furthermore, three proxies are used for an internal information environment: earning announcement speed, the accuracy of earning forecasting and lack of financial restatements. Our findings show that there is a significant and positive relationship between the audit committee and financial information quality characteristics in high-level political connections, as well as between financial knowledge and financial information quality. Furthermore, the findings of this study suggest that the application of political economy theories could be appropriate for more inquiry.

Internal Information Quality and Tax-Motivated Income Shifting

2017 ◽  
Vol 40 (2) ◽  
pp. 25-44 ◽  
Author(s):  
Sean T. McGuire ◽  
Scott G. Rane ◽  
Connie D. Weaver
Keyword(s):  
Information Quality ◽  
Tax Planning ◽  
Information Environment ◽  
Income Shifting ◽  
Firm Characteristics ◽  
Planning Strategy ◽  
Internal Information

ABSTRACT This study examines whether the quality of a firm's internal information environment influences its tax-motivated income shifting activities. Although income shifting is an important tax-planning strategy, evidence regarding its determinants is limited. We find that higher internal information quality (IIQ) is associated with greater tax-motivated income shifting, which suggests that higher IIQ enables managers to better identify and execute income shifting opportunities. We find that the influence of IIQ on tax-motivated income shifting varies with firm characteristics. Specifically, we find that higher IIQ is associated with tax-motivated income shifting for firms with greater uncertainty and greater coordination needs. Overall, these results suggest that the improved information obtained through higher-quality internal information environments allows managers to increase tax-motivated income shifting.

The Effect of CEO IT Expertise on the Information Environment: Evidence from Earnings Forecasts and Announcements

2017 ◽  
Vol 32 (2) ◽  
pp. 71-94 ◽  
Author(s):  
Jacob Z. Haislip ◽  
Vernon J. Richardson
Keyword(s):  
Information Technology ◽  
Earnings Forecasts ◽  
Information Environment ◽  
Data Availability ◽  
Enterprise System ◽  
High Quality ◽  
Internal Information

ABSTRACT Firms depend on information technology to provide high-quality internal information, but prior research suggests that IT is underutilized. Prior research suggests that when CEOs have experience with IT, then IT is more likely to be accepted throughout their firms. We take these arguments a step further by asserting that CEOs with IT expertise are more likely to encourage the utilization of IT throughout the firm, thus improving the information environment that is revealed through numerous outputs of the firm. We first investigate whether firms that employ CEOs with IT expertise make forecasts that are more accurate, even if they already use an enterprise system (Dorantes, Li, Peters, and Richardson 2013). Overall, we find that CEOs with IT expertise do make forecasts that are more accurate. We also find that firms with IT-expertise CEOs announce earnings on a timelier basis than firms with non-IT-expertise CEOs. Data Availability: The data used are publicly available from sources cited in the text.

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