Asian Review of Accounting

Zhao, Gang; Yu, Xin; Ni, Kailun

2023 Asian Review of Accounting

doi: 10.1108/ara-03-2022-0055

The findings suggest that reducing information processing costs as a result of better transportation is an important ingredient in promoting the pricing of firm-specific information. This study aims to discuss the aforementioned issue.Design/methodology/approachThe authors adopt a difference-in-difference (DID) research design to examine the impact of information processing costs on stock price synchronicity with a sample of firms listed in the Chinese A-share market during 2007 and 2017.FindingsThis paper shows that the launch of the high-speed railway (hereafter HSR) in China is associated with lower stock price synchronicity, consistent with the theory that the HSR reduces investors’ information processing costs (cost of monitoring, acquiring and analyzing firm disclosures). This effect is more pronounced for companies located in remote areas than for those located in large cities. Further tests show that the negative association between the launch of HSR and stock price synchronicity is stronger for companies with higher information asymmetries, proxied by higher equity concentration, higher complexity and lower internal control quality.Originality/valueThis study contributes to the literature in the following three ways. First, prior literature relates the effects of geographic distance to information transmission and information asymmetry between insiders and outside investors (e.g. Coval and Moskowitz, 2001; Kang and Kim, 2008; Malloy, 2005). The authors supplement the literature by providing new empirical evidence from an exogenous shock (natural experiment), that is, the launch of HSR, that facilitates transportation and reduces information transmission costs. Second, prior studies have shown that new airline routes that facilitate transportation improve investment and productivity (e.g. Bernstein et al., 2016; Giroud, 2013). The authors extend this stream of studies by showing that the development of HSR networks reduces information processing costs, and promotes the incorporation of firm-specific information in the asset pricing. More importantly, in this study, the authors explicitly incorporate disclosure processing costs theory into our framework thus enhancing our understanding of how and why improvements in transport relate to better market outcomes.

Engelmann, Bernd; Lam Nguyen, Thi Thanh

2023 Asian Review of Accounting

doi: 10.1108/ara-04-2022-0105

This article aims to analyze the impact of COVID-19 measures by governments and central banks on International Financial Reporting Standards (IFRS) 9 loan loss provisions (LLPs). Changes in the total amount of LLPs, distribution of outstanding loan balance among IFRS 9 stages and credit risk parameters used for calculation are investigated for each world region where banks report under IFRS.Design/methodology/approachData for a global selection of 105 banks reporting under IFRS were collected from 2019 to 2020 annual reports, financial statements, and Pillar III reports. These data provide the basis to empirically analyze the impact of COVID-19 on LLPs.FindingsIn most world regions Stage 2 balances increase while Stage 3 balances remain comparatively stable. The credit risk parameters used for computing LLPs remained stable in 2020. However, in China, the impact of COVID-19 on banks was not detected. Mean Stage 1 balances for Chinese banks increased slightly during the pandemic. Aside from the COVID-19 impact, we find that LLPs, credit risk parameters, and loss absorption capacities are significantly lower for banks in Canada, Oceania and Western Europe compared to those in the rest of the world.Originality/valueThere exists previous research examining the COVID-19 impact on financial stability, implementation of emergency rules and country-wide analyses to anticipate default rates depending on recovery scenarios. However, this is the first global study on the immediate impact of COVID-19 on LLPs. It reveals the significant differences between world regions and provides implications about their resilience against future credit shocks.

Rainsbury, Elizabeth; Bandara, Saman; Perera, Ahesha

2023 Asian Review of Accounting

doi: 10.1108/ara-04-2022-0106

New Zealand regulatory bodies guided preparers and auditors of financial statements to deal with potential COVID-19 impacts on the financial statements and audit procedures. This study provides evidence of auditors' response to the impact of COVID-19 on the reporting of key audit matters (KAMs) in audit reports of listed companies in New Zealand. The purpose of this paper is to address this issue.Design/methodology/approachA sample of 50 New Zealand listed companies was selected to compare the KAMs in 2019 (pre-COVID-19) and 2020 (during COVID-19). The study uses content analysis to evaluate the KAMs’ disclosures and descriptive analysis to examine the differences between 2019 and 2020 in terms of the auditor type, industry sector and accounting standards.FindingsAuditors responded positively to the request from regulators to communicate the impacts of COVID-19. The findings show an increase in the amount and length of KAMs in 2020 compared to 2019, with 82% of companies and 61% of KAMs reporting the impact of COVID-19. The real estate and information technology sectors disclosed more on the impact than other sectors. In analysing the KAMs, accounting standards for inventories, property plant and equipment, impairment of assets, investment property, revenue from contracts with customers and leases were highly affected by COVID-19.Practical implicationsThe findings support regulators to evaluate how well auditors communicated matters relating to COVID-19 in the audit report. Also, the findings will help standard setters to identify key accounting standards affected by COVID-19 of KAMs and provide insights to users on how the KAM reporting enhances communicative value during the pandemic.Originality/valueThe current study captures the impact of COVID-19 on the reporting of KAMs by comparing changes before and during the pandemic.

Lu, Jing; Khan, Shahid

2023 Asian Review of Accounting

doi: 10.1108/ara-04-2022-0102

This paper investigates whether sustainability performance (SP) protects financial performance (FP) for firms in both developed and emerging economies during the COVID-19-induced economic downturn.Design/methodology/approachUsing a recent sample of firms in 34 countries between 2003 and 2021, the authors employ ordinary least squares regressions, moderations and the Heckman two-step method to test the hypotheses.FindingsFirms with strong SP have higher FP in developed and emerging economies in the upcoming year. During the COVID-19 crisis in 2020–2021, the impact of sustainability on FP is pronounced in developed but not in emerging economies. Furthermore, cross-listings expose firms in emerging economies to high-standard institutional mechanisms in developed economies. Thus, sustainable firms in emerging economies cross-listed on European stock exchanges are more profitable.Practical implicationsFor regulators and standard setters, the global-level comparative analysis helps them find solutions that may assist firms in improving SP globally (e.g. mandatory reporting) and enduring crises resiliently. For institutional investors, the study reveals the relatively different impact of sustainability risk for firms in developed and emerging economies. For practitioners and private sector firms, this study contributes to the dialogue on what makes firms more resilient in COVID-19. Although COVID-19 might be temporary, the lessons learned could protect firms from future crises.Originality/valueThe authors contribute to the contingency perspective between sustainability and financial performance by providing recent empirical evidence in a global setting during the COVID-19 pandemic. The authors demonstrate how different external institutional mechanisms (rule-based governance and relation-based governance) and cross-listing affect the SP-FP relationship during a crisis. The authors extend the knowledge in crisis management literature with a comparative study and fill the research gap on how SP affects FP for firms in emerging economies compared to developed economies.

Fan, Shaojun; Chen, Juan; Han, Hong

2023 Asian Review of Accounting

doi: 10.1108/ara-01-2022-0012

The authors expand the connotation of the research on the accounting information quality characteristics, provide empirical evidence for the factors of consistency and also help to deepen further their understanding of the economic consequences of ownership concentration and other ownership structures.Design/methodology/approachUsing financial data of Chinese listed companies as samples, coupled with a method to calculate the consistency of the sample enterprises on the corporate level in the 2007–2019 period, the authors studied its impact of ownership concentration on consistency.FindingsThe study finds that after controlling other factors, ownership concentration could significantly reduce accounting information consistency. Further research finds that when the executives' shareholding is higher, the reduction effect of ownership concentration on consistency is weaker. After the robustness test, the conclusion remains basically unchanged.Research limitations/implicationsFirst, maybe there is a limitation of De Franco et al. (2011) method the authors use in China. As some scholars pointed out, the systematic component of returns variation is large in emerging markets (Morck et al., 2000), so it is hard to determine to what extent market stock returns will capture the net effect of earnings. As is mentioned above, there are multiple methods for measuring comparability and consistency, but it is not easy to judge which way is the best. Maybe the authors will have a perfect process in the future. Second, in addition to the factors mentioned in this study's hypotheses, there should be other factors (these include internal factors and external factors) that play moderating role in the impact of ownership concentration on accounting information consistency. The authors have not thoroughly studied the effect of those factors. These limitations all need to be further explored in the future.Originality/valueThe study finds that after controlling other factors, ownership concentration could significantly reduce accounting information consistency, but the reduction will be affected by some other factors related to corporate governance. The new insights from these advances are that the conclusions provide a technical path for management of companies to improve corporate governance efficiency and the quality of accounting information, and also provide more reference and empirical evidence for information users to identify the company's accounting information quality, which contributes to creating a prerequisite for the usefulness of accounting information.

Nguyen, Tra My; Phan, Duc; Maheshwari, Greeni

2023 Asian Review of Accounting

doi: 10.1108/ara-04-2022-0108

The authors explore the state of internationalization of accounting education as perceived by accounting academics, accounting employers, and accounting students in Vietnam. Based on data collected, authors draw recommendations to better facilitate internationalization of accounting education in Vietnam.Design/methodology/approachWith a qualitative approach, the authors use content analysis (materials from 27 universities) and semi-structured interviews (28 participants) to explore the state of internationalization of accounting education as perceived by academics, employers, and students in Vietnam.FindingsThe authors identify the extent of and challenges in internationalization of accounting education in Vietnam, including language barrier, teaching approach, and budgetary constraints. Practical recommendations are drawn to help overcome challenges and facilitate progress.Originality/valueThe study integrates two fields of research: accounting and education, particularly through addressing in-depth perspectives of a broad range of stakeholders in addition to a detailed examination of archival contents. Practical recommendations are proposed for short term, medium term, and long term.

Liang, Shangkun; Xin, Fu; Yu, Junli; Zhao, Gang

2023 Asian Review of Accounting

doi: 10.1108/ara-04-2022-0087

The political influence on the determinants of capital structure has been under-researched for a long time. Taking the turnover of secretary of municipal committee as a political factor in China, this paper studies the effect of local government officials' turnover on firm's capital structure.Design/methodology/approachStarting with all A-shares listed firms in the Shanghai and Shenzhen Stock Exchanges from 2001 to 2018, this paper implements the OLS estimation, staggered difference-in-difference approach to investigate the effects of political turnover on the choice of capital structure.FindingsThe results show that, driven by government officials' turnover, firms will significantly reduce their leverage. When comparing between formal finance (bank loans) and informal finance (payables), the reduction of capital structure is mainly driven by banks, not by suppliers. Furthermore, two possible channels have been investigated. First, the reduction effects are mainly driven by the SOEs when classifying the types of corporate ownership into SOEs and non-SOEs. Second, the reduction effects exist in areas with the more intense government intervention when considering the heterogeneity of the development of institutional environment in provinces.Originality/valueThis paper first contributes to the literature on the determinants of corporate choice on capital structure. Second, this paper enriches the studies on the economic consequences of local government officials' turnover.

Kalia, Deepali; Basu, Debarati; Kundu, Sayantan

2023 Asian Review of Accounting

doi: 10.1108/ara-05-2022-0121

The study explores extant knowledge on the nature of the relationship between internal and external corporate governance mechanisms, particularly board characteristics and audit quality, respectively, while also investigating how the relationship varies across geographies.Design/methodology/approachThe extant knowledge is synthesized using a meta-analysis, which is conducted using a sample of 56 empirical studies from publications of varying grades. The studies span over 25 years (1996–2021) and cover 147 empirical samples (343,787 firm-year observations) across more than 20 countries. The dependent variable is audit fees, and the independent variable captures 12 different measures of board characteristics.FindingsOverall, the results reveal a positive association between board characteristics and audit fees, indicating complementarity between governance mechanisms. Effect size analysis shows board characteristics, like size and independence, are positively associated with audit fees. However, heterogeneity is noted for some characteristics, and further analysis by geography (developed vs emerging countries) explains the heterogeneity.Practical implicationsThis study helps multiple stakeholders like firms, shareholders, boards, regulators and policymakers in designing and strengthening governance frameworks.Social implicationsBoth governance and auditing literature benefit from identifying specific board characteristics that drive audit quality consistently across different institutional settings and samples. Heterogeneity analysis helps improve the understanding of contradictions documented in prior literature.Originality/valueThis meta-analysis is the first to explore the interplay between internal and external corporate governance mechanisms, with a focus on board characteristics and audit quality. The study provides valuable insights on how different governance mechanisms influence each other while highlighting, for the first time, how the interaction between governance mechanisms varies by a country's level of development.

Yang, Zhifeng

2023 Asian Review of Accounting

doi: 10.1108/ara-09-2022-0218

The purpose of this study is to discuss Kalia, Basu and Kundu's (KBK’s) paper's motivation, findings and contributions and suggest further development.Design/methodology/approachThis paper is to discuss the meta-analysis of board characteristics and demand for audit Quqality by KBK.FindingsKBK paper is well motivated and makes new contributions to the literature. Future research can expand the sample and examine the moderating effects of institutional factors such as ownership structure, regulatory reforms and country-level investor protection and legal enforcement.Originality/valueBased on the review of KBK’ spaper, this study suggests that future research should expand the sample and examine the moderating effects of institutional factors such as ownership structure, regulatory reforms and country-level investor protection and legal enforcement.