Earnings management and issue characteristics: an empirical analysis of IPOs in India

PurposeThis study aims to examine earnings management around initial public offerings (IPOs) in India. It also explores the influence of issue characteristics on earnings management around the IPOs.Design/methodology/approachA sample of 511 IPOs that came during April 2003-March 2019 is studied for calculating earnings management for pre-issue, issue and post-issue years. Using Cross-Sectional Modified Jones Model, the paper presents earnings management on the basis of three proxies i.e. discretionary accruals, discretionary current accruals and discretionary long-term accruals. The influence of issue characteristics on earnings management practised around the IPOs is also observed through correlation and multiple regression analysis.FindingsThe paper finds that earnings management is abnormally high during the issue year compared with pre-issue and post-issue years. It also unveils that profitability, premium, age, and size of the issuer significantly determine the level of pre-issue and issue year earnings management practised by Indian IPO issuers.Research limitations/implicationsThe findings are useful to stakeholders (potential investors, analysts and regulators) to observe, assess and understand the quality of financial numbers that are based on fallacious disclosure of accounting figures. It provides insight into the possibilities of managed earnings around the issue that could influence investors' decision-making. Further, the study reflects the efficacy of Indian regulatory norms for IPOs.Originality/valueTo the authors' knowledge, it is the only Indian study that had used an extensive data set of about two decades to calculate earnings management during pre-issue, issue and post-issue years. The uniqueness of the study further lies in three proxies of earnings management representing short-term and long-term accruals. Moreover, it is the first study to observe the influence of IPO issue characteristics on earnings management.

The Moderating Effects of Corporate Social Responsibility on Corporate Financial Performance: Evidence from OECD Countries

This study aims to investigate the nature and intensity of the changes in corporate financial performance due to the corporate social responsibility (CSR) disclosures as a result of certain relationships between corporate governance and company performance in the non-financial sector. This study selected 625 non-financial companies across six organizations for economic cooperations (OECD) countries' stock markets for the period of 10 years (2012–2021). For this qualitative study, corporate governance, financial performance, and corporate social responsibility score data were collected from the DataStream, a reliable database for examining the research on OECD countries' listed companies. For the data analysis we applied various statistical tools such as regression analysis and moderation analysis. The findings of the study show that all attributes of the corporate governance mechanism, except for audit board attendance, have significant positive impacts on financial performance indicators for all the selected OECD economies except the country France. France's code of corporate governance has a significant negative impact on return on asset (ROA) and return on equity (ROE) due to differences in cultural and operational norms of the country. The audit board attendance has no significant impact on ROA. Moreover, all the attributes except board size (BSIZ) have significant positive impacts on the earnings per share (EPS) in Spain, The United Kingdom (UK) and Belgium. The values obtained from the moderation effect show that Corporate social responsibility is the key factor in motivating corporate governance practices which eventually improves corporate financial performance. However, this study advocated the implications, Investors and stakeholders should consider both corporate governance and CSR disclosures when making investment decisions. Companies that prioritize both governance and CSR tend to have better financial performance and are more likely to mitigate risks. Moreover, the policy makers can improve the code of corporate governance in order to attain sustainable development in the stock market.

Aggregate health shock and retirement decision

The retirement of old workers increased during the COVID-19 pandemic, and health concerns are considered to be a critical factor. To understand the effect of pure health concerns during the pandemic, we analyze the impact of the aggregate health shock on retirement decisions using a life cycle model. The aggregate health shock changes the economy from the normal state to the pandemic state, where the probability of adverse idiosyncratic health shock increases, especially if agents are working. Simulation results suggest that the shock accelerates the retirement of agents aged over 60. The increase in retirement is significant even though the shock is expected to be temporary. Also, the effect hinges on the assumption that working poses a greater risk of receiving a negative health shock than retiring. Even accounting for the large income and wealth changes that US households experienced in 2020, a counterfactual experiment suggests that the aggregate health shock plays a prominent role in increasing retirement.

Labour market dualization and social policy in pandemic times: an in-depth analysis of private consumption services in Europe

PurposeThis article contributes to the debate on how social policies and labour market regulation have been used to limit the socio-economic consequences of the pandemic by focusing on one specific economic segment of European labour markets: private consumption services, such as trade, tourism, catering and other support services.Design/methodology/approachThe analysis combines mixed methods and a variety of sources. First, we built a set of indicators from the EU-LFS microdata for 2019 and the 2018 Eurostat "Structure of earnings survey” and performed a cluster analysis (k-means) on the dimensions and indicators considered. Second, we elaborated EU-LFS data covering 2019 and 2020 (by quarter) and OECD 2020 data, and finally we traced Covid-related policy reforms for the period March 2020–December 2021 and analysed documents and information collected in different policy repositories.FindingsThe paper shows the relevance and characteristics of private consumption services in different countries, demonstrating that so-called labour market "outsiders” are highly represented in this sector and illustrates the policies adopted to respond to the pandemic in different European countries. The paper asks whether this emergency has been a window of opportunity to redefine regulation in this sector, making it more inclusive. It demonstrates, however, that the common approach in Europe has been dominated by temporary, short-term and one-off measures, which do not represent major changes to the social security schemes that were in place before the pandemic.Originality/valueThis article builds on the literature on labour market dualization, but approaches the concept from a different perspective – one not centred on the nature of employment relations (stable/unstable) but on economic sectors/branches. This article does not, therefore, discuss in general terms what happened to labour market outsiders during the pandemic, but rather focus attention on a specific group of workers who are highly exposed to risks stemming from dualization: those employed in the private consumption services. The economic sector perspective is an integrative way of framing dualization which is still under-researched.

The Relationship Between Financial Indicators and Financial Intermediaries' Stock Price Volatility Listed on the BM&FBOVESPA Index in the Crisis Period of 2008 and 2020 (Covid-19): GCG

The study goal was to verify the relationship among financial indicators and intermediaries' volatility stock price listed on the BM&FBovespa Index in the crisis period from 2008 and 2020 (COVID-19). The methods used for analysis were Spearman's correlation, multiple linear regression, and Test T. The analyzed period refers to the year 2008, the second semester of 2019 and the first semester of 2020, which include the periods before and during the crises of 2008 and 2020. The results found show that only the indicator of the assets total turnover rate has a significant relationship with the stock price volatility.Alternate :O estudo tem como objetivo verificar a relação entre os indicadores com a volatilidade das ações das intermediadoras financeiras listadas no Índice BM&FBovespa no período das crises de 2008 e 2020 (COVID-19). Os métodos utilizados para análise foram de correlação de Spearman, regressão linear múltipla e Teste T. O período analisado refere-se ao ano de 2008, segundo semestre de 2019 e primeiro semestre de 2020, onde englobam os períodos pré e durante as crises de 2008 e 2020. Os resultados encontrados apontam que apenas o indicador taxa total de rotatividade dos ativos possui relação significativa com a volatilidade do preço das ações.Alternate :El estudio tiene como objetivo verificar la relación entre los indicadores y la volatilidad de las acciones de los intermediarios financieros listados en el Índice BM&FBovespa en el período de las crisis de 2008 y 2020 (COVID-19). Los métodos utilizados para el análisis fueron la correlación de Spearman, la regresión lineal múltiple y la prueba T. El período analizado se refiere al año 2008, la segunda mitad de 2019 y la primera mitad de 2020, que incluyen los períodos antes y durante las crisis de 2008 y 2020. Los resultados encontrados indican que solo el indicador de tasa de rotación de activos totales tiene una relación significativa con la volatilidad del precio de las acciones.

The importance of entrepreneurial leadership in fostering bank performance

PurposeThis study investigates how entrepreneurial leadership fosters market orientation, bank innovativeness and bank performance;it also investigates how market orientation contributes to brand orientation, bank innovativeness and bank performance.Design/methodology/approachIn total, 1500 questionnaires were distributed to 100 bank branches in Indonesia (500 to managers and 1000 to employees);300 responses (20% response rate) were used for further statistical analysis.FindingsThe results confirmed the existence of relationships among entrepreneurial leadership, market orientation, bank innovativeness, brand orientation and bank performance. The role of entrepreneurial leadership in fostering market orientation, bank innovativeness, brand orientation and bank performance demonstrates that leaders can motivate employees to complete their tasks.Practical implicationsThe findings suggest that entrepreneurial leadership, new ideas and innovative products and services can foster bank performance.Originality/valueThe emerging banking industry in Indonesia has witnessed changing market conditions. Banks will benefit from being more market-driven and diverse in their customer relationships to generate value.

COVID-19 and earnings management: a comparison between Chinese family and non-family enterprises

PurposeThe main objective of this study is to examine the impact of the COVID-19 pandemic on earnings management practices in China using a sample of family and non-family enterprises. More specifically, this study aims to examine whether the COVID-19 pandemic causes variation in Chinese listed family and non-family enterprises' operations, as reflected in the level of real earnings management (REM).Design/methodology/approachThis study uses three standardised REM indicators, namely, the abnormal level of cash flows from operations, the abnormal level of production costs and the abnormal level of discretionary expenses. Ordinary least squares (OLS) regressions are applied to compare the earnings management of Chinese family and non-family enterprises during the pre-pandemic period (2017–2019) and the pandemic period (2020).Findings The authors find that Chinese listed non-family enterprises tend to participate in more REM activities than family enterprises before the COVID-19 outbreak. However, the opposite is true during the pandemic. The authors also find that COVID-19 has increased the involvement of family and non-family enterprises in REM activities.Originality/valueThe results of previous studies based on REM using Chinese listed firms may not be applicable under the new social background of COVID-19. As the period after the COVID-19 outbreak is relatively recent, Chinese researchers have yet to study it comprehensively. The present study is amongst the first empirical attempts investigating the effect of a pandemic financial reporting by investigating whether and how the burst of the COVID-19 crisis affected financial reporting through the earnings management practices of listed Chinese family and non-family enterprises. Such information is crucial because it can provide analysis for all stakeholders to make better decisions.

The impact of earnings volatility, environmental uncertainty and COVID-19 pandemic on accounting comparability in an emerging economy

Purpose: The present study investigated the impact of earnings volatility and environmental uncertainty on accounting comparability in an emerging economy and the moderating role of COVID-19 pandemic for the companies listed on Tehran Stock Exchange (TSE). Design/methodology/approach: The data about 181 companies during 2014–2021 were examined. In this study, accounting comparability was predicted for the firms' accounting systems and the coefficient estimates were calculated. The present study used the coefficient of variation of sales to capture sales volatility as the primary environmental uncertainty measure. Findings: The results showed that both the earnings volatility and environmental uncertainty have a significant negative effect on accounting comparability, and that COVID-19 significantly increases the negative impact of earnings volatility and environmental uncertainty on accounting comparability. The hypothesis testing based on robust, GLS, GMM, GLM, OLS regressions and t+1 test confirmed these results. Originality/value: The present study aimed to develop knowledge-providing benefits for companies about the accounting comparability and managing more efficient decisions. The present findings help investors to understand and evaluate the performance of firms more accurately especially in earnings volatility and environmental uncertainty conditions and in the wake of a pandemic crisis such as COVID-19. © 2023, Emerald Publishing Limited.

Earnings Management amid the COVID-19 Financial Crisis: The Experience of Poland

This study examines the consequences of the COVID-19 turbulence on the infor-mativeness of financial reporting. Using data from non-financial public compa-nies in Poland, our evidence documents the evolution of accrual and real earn-ings management during the pandemic period. We estimate earnings quality with cross-sectional models, observing abnormal accruals, abnormal cash flow from operations, abnormal discretionary expenditures and abnormal production costs. We contribute to the debate on earnings management during financial crises. Specifically, discretionary accruals declined significantly during the crisis. This suggests companies were less eager to inflate earnings via accruals. Polish firms also seemed to be more inclined to adopt the 'big bath' strategy to inflate future income. Additionally, the research provides support for predictions that real earn-ings management gained importance during the turbulence when the total effect of boosting income through real transactions was significant. It suggests that dur -ing the COVID-19 crisis companies based their strategies more on the probability of being detected, rather than on the cost of such activities. The study adds to the debate on the qualitative characteristics of earnings as key accounting informa-tion and its importance in corporate finance, issues that cannot be overestimated from the perspective of company stakeholders.

The effects of CPC 47 on earnings management in companies listed in B3

Purpose: The objective of this study is to analyze the effects of adopting CPC 47 on the level of the earnings management of companies listed in the Brazilian capital market. Methodology: The sample used in this study is composed of 207companies listed in B3 in the observation period 2012-2021 totaling 2070 observations. The approach is quantitative, using multiple linear regression with balanced panel data. Dechow, Hutton, Kim and Sloan (2012) and Kothari, Leone and Wasley (2005) models were used to improve the discretionary accruals and an earnings management model with control and interest variables. Results: The results did not confirm the hypothesis that the adoption of CPC 47 affected the level of results management in the analyzed period but showed that indebtedness and operating cash flow explain discretionary accruals, regardless of the adoption of the pattern of revenue recognition. This evidence about earnings management increased with the adoption of CPC 47 was contrary to Baldissera, Gomes, Zanchet and Fiirst (2018), however, according to the findings of Grecco (2013), Jewel and Nakao (2014) and Braga (2020) in relation to the effects of accounting standards. The results indicate that companies with higher operating cash flow can generate accounting information with better quality regardless of the effects of the adoption of CPC 47. The period of the coronavirus pandemic did not significantly affect earnings management levels. Contributions of the Study: As a contribution, the study expands the theoretical knowledge about the effects of CPC 47 on earnings management. Additionally, in a practical way, it collaborates with regulatory organs, auditors, executives, stakeholders and the financial market in general.

The COVID-19 pandemic: How important is face-to-face interaction for information dissemination?

Does face-to-face interaction still facilitate information transfer despite proliferating communication technologies? We use the COVID-19 collapse in such interactions to examine their influence on information flow in the stock market around earnings announcements. Using daily, county-level abnormal mobility of U.S. residents to proxy for face-to-face interaction, we find that firms located in counties with lower abnormal mobility experience a weaker immediate price reaction to earnings announcements and a larger post-announcement drift. Our findings suggest that lower face-to-face interactions dampen price discovery in financial markets, and that investor attention is a potential mechanism of this effect.

Do Investors Overreact to COVID-19 Outbreak? An Experimental Study Using Sequential Disclosures

This paper aims to investigate market participants' reactions to sequential information, presenting firm-specific news and market-wide information. Experimental study takes place in the COVID-19 pandemic era, as market-wide information representation. We also provide firm-specific information in the form of company fundamental information. The results show that participants, as representatives of retail investors, do not overreact to COVID-19. The recency effect dominates their decision-making. Neither firm-specific information nor market-wide information can eliminate the recency effect in decision making. Investors still provide valuations based on the latest information they receive. Another interesting finding in this study is that positive framing of information cannot mitigate the effects of bad news contained therein. Our findings contribute to the study of behavioral finance and corporate disclosure strategies. From the market participants' point of view, our results describe that investors' decisions are often not based on the information content but the latest information they received. From the company perspective, this research also contributes to the corporate disclosure strategy valued by investors based on how they disclose information to the public.

Green bond market boom: did environmental, social and governance criteria play a role in reducing health-related uncertainty?

Recent years have been characterized by considerable growth of the green bond market in Europe, particularly in the domain of social bond issuance. Considering the recent pandemic, it is also a stylized fact that this growth is positively correlated with the concept of health-related uncertainty, as the green bond market aims to acquire financing in order to allow the development of projects that comply with the so-called environmental (E), social (S) and governance (G) criteria. This study then applies a dynamic spatial econometric analysis and several robustness checks to assess the extent to which each E, S and G criterion contributes to the societal dynamics of health-related uncertainty. The analysis takes advantage of available data on the number of confirmed cases of COVID-19 to measure health-related uncertainty at the municipal level, so that a higher (lower) number of confirmed cases constitutes a proxy for a greater (smaller) degree of uncertainty, respectively. To reinforce the need to evaluate impacts in a context characterized by health-related uncertainty, the time span covers the first wave of COVID-19, which is the period when uncertainty reached its highest peak. Additionally, the geographical scope is mainland Portugal since this country has become a breeding ground for startups and new ideas, being currently one of the world leaders in hosting businesses that reached Unicorn status. The main result of this research is that only the social dimension has a significant, positive and permanent impact on health-related uncertainty. Therefore, this study empirically confirms that the European green bond market has been and can be further leveraged by the need to finance projects with a social scope.

Do dividend announcements override the pandemic impacts? Evidence from the BSE 500 constituent firms

With a sample of 332 dividend announcements from January 2019 to December 2020, using the event study methodology with the market model, we provide evidence that the dividend announcements failed to influence the stock prices under the pandemic stress. Although the pre-pandemic period announcements significantly impacted the stock returns, the pandemic period dividend announcements failed to generate significant abnormal returns even for an increase in dividend over the previous year. The pre-pandemic period results are consistent with previous literature with significant returns for constant, increase, and decrease in dividends. During the pre-pandemic period, we also find the possibility of information leakage in the Indian stock market as the pre-announcement period is marked with positive significant abnormal returns while the post-announcement period seems to be profit booking. The industry-wise analysis reveals the presence of positive returns in the Information Technology, Media and Telecommunication sector. However, the rest of the results are in line with the previous analysis. The findings suggest that before making such announcements, the companies should wait for the market to recover;else, the positively impacting dividend announcement will fail to influence the stock prices when the market is already under pandemic stress. We conduct the first-ever study to examine the impacts of dividend announcements during a pandemic stress period with also comparing the impacts during the pre-pandemic period. (c) 2021 The Authors. Published by Elsevier B.V. on behalf of College of Management, National Cheng Kung University.

Investigating the link between board independence and dividend distributions in South Africa

Purpose: As shareholder-elected monitors, independent non-executive directors (INEDs) should ensure that managers do not retain earnings to promote their own interests. The relationship between board independence and dividend distributions was hence investigated for selected companies listed on the Johannesburg Stock Exchange (JSE). The country offers a well-developed corporate governance framework to listed companies. Design/methodology/approach: Data on the considered companies' dividend payout ratios (DPRs), board independence and six control variables were obtained from Bloomberg for the period 2007-2021. The significance of the observed trends in these variables was considered by conducting analysis of variance (ANOVA) and Fisher's least significant difference (LSD) tests. The hypothesised relationship was assessed using a mixed-model regression. Findings/results: The results are in line with prior research showing that dividends are often omitted or reduced during and after crisis periods, that is, the global financial crisis (2008/2009) and the coronavirus disease 2019 (COVID-19) pandemic (2020/2021). A negative but statistically insignificant relationship was reported between DPR and board independence. Practical implications: Although board independence was not significantly related to dividend distributions for the sampled companies, INEDs still perform an important monitoring role. Shareholders are thus encouraged to play a more active role in the election of these directors. Originality/value: This study extends and refines previous research in South Africa and reveals new insights regarding board independence and dividend distributions during three King regimes and distribution-related regulatory changes. Copyright: © 2023. The Authors. Licensee: AOSIS. This work is licensed under the Creative Commons Attribution License.

The Case for A Global Excess Profits Tax: A Response to Dr. Tarcísio Diniz Magalhães & Professor Allison Christians

In striving to slow the spread of the COVID-19 pandemic, governments across the globe acted quickly to implement various "stay-at- home" orders and bans on all "non-essential activities." While these actions were likely effective in slowing the spread of the virus, the economic impacts were felt almost immediately. The US deficit rose to $3.1 trillion following massive spending to aid individuals and small businesses. Internationally, governments have been increasing their debt loads to combat both the health and financial impacts of the pandemic. Indeed, by the end of 2020, the international debt load increased to a record-breaking $281 trillion. Almost as quickly, various proposals have been offered regarding how to mitigate this pandemic-fueled deficit. One solution offered is the return of a historical tax scheme-an excess profits tax. Excess profits taxes have historically been applied both domestically and internationally during times of war. Although there are variations in how an excess profits tax is calculated, traditionally, an excess profits tax is applied to those companies who earn returns in excess of a set "normal" rate of return.

Patterns of Earnings and Employment by Worker Sex, Race, and Ethnicity Using State Administrative Data: Results from a Sample of Workers Connected to Public Assistance Programs

During the strong economic conditions that predated the COVID-19 pandemic, many US workers, especially females and individuals of color, suffered from economic vulnerability. Despite growing research attention, we lack an understanding of how the prevalence and patterns of earnings and job instability vary with worker characteristics, particularly at the intersections between sex and race/ethnicity. This study uses longitudinal administrative data from a large, diverse state from 2015 through 2018 to document changes in earnings and jobs. We then examine variation in the size, frequency, and direction of these changes by worker sex and race/ethnicity among a subsample of workers who are connected to the public welfare system. Results indicate that, as expected, workers who are connected to the public welfare system experienced higher levels of economic vulnerability, but with substantial racial/ethnic and sex differences. As a consequence, a large number of workers—disproportionately those of color—were experiencing high levels of economic instability during a period of strong economic growth. Our findings have implications for policy and practice strategies.

Displaced workers and the pandemic recession

Workers displaced during the pandemic recession experienced better earnings and employment outcomes than workers displaced during previous recessions. A sharp recovery in aggregate labor market conditions after the pandemic recession accounts for these better outcomes. The industry and occupation composition of displaced workers, the prevalence of recalls, and increased take-up of unemployment insurance benefits are unlikely explanations. © 2023 Elsevier B.V.

COVID-19 outbreak and earnings management practice: case of Tunisia

Purpose: This article attempts to investigate the impact of COVID-19 outbreak on the earnings management (EM) for listed Tunisian companies. Design/methodology/approach: The study focuses on both accrual-based and real EM (REM) practices. With panel data, the authors employ the multiple regression approach and the generalized least squares (GLS) estimate method. The sample is made up of 41 listed companies observed from the first half of 2016 to the second half of 2020. Findings: This study finds that, during the pandemic period, Tunisian firms use decreasing income discretionary accruals. Also, with regard to REM, the COVID-19 variable displays a negative response coefficient but of lesser magnitude. Research limitations/implications: This study's findings can help Tunisian authorities, listed companies and market investors to better understand EM practices during a negative shock and to better understand the various internal and external factors influencing the quality of financial reporting. These findings may contribute, also, significant EM implications for scholars interested in other emerging markets. As limitations, the authors point out mainly to the small sample size used in this study and that the authors used a single model, namely the modified Jones model (1995), to measure the accounting EM. Also, the authors used a binary variable as a proxy for the COVID- 19 pandemic. Originality/value: To the best of authors' knowledge, it is the first in Tunisia, if not in Africa, to examine the impact of the COVID-19 pandemic on EM practices. Second, this study builds on previous work by examining both the accrual-based EM and the REM. © 2023, Riadh Garfatta, Mouna Hamza and Imen Zorgati.

Post Covid-19 Pandemic And The Rise Of eSports In Malaysia

This conceptual paper explored the COVID-19 pandemic began in early 2020 and rapidly spread to nations due to its strong transmissibility. The Covid-19 pandemic brought about the demise of several businesses, including the sports industry. Thus, the eSports industry has become a feasible alternative and requirement for sporting competitions. This study aims to analyse existing research on the history and growth of eSports in Malaysia to give better insights into its sustainable development, even post-pandemic. This study also covers a detailed assessment of gamers, marketers, and earnings. The study used a literature review strategy and conducted a thorough electronic search for relevant literature using Google Scholar, indexed databases and newspapers. Malaysian governments develop eSports training centres, fund allocations and academies to nurture the athletes and the eSports industry. Many gamers and audiences adapt to the new normal and technologies, particularly during the movement control order. Many Malaysians shift their behaviour and rely on the internet for home entertainment and activities. Covid-19 has enhanced eSports consumption, and the viewership will grow post-pandemic. Game developers invest more money to develop the eSports sector with innovative marketing strategies. This paper focuses on the rise of eSports and the chances for marketers to connect with customers. Many people believe eSports will continue growing, even post-pandemic, as many people have already adapted to it, and cutting-edge technologies also propel many people to accept this unique field.