Journal of Accounting in Emerging Economies

Efferin, Sujoko; Frisko, Dianne; Hartanto, Meliana

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-10-2013-0052

PurposeThe purpose of this paper is to reveal the relations between management control system (MCS), leadership style and gender ideology. It investigates how a female leader’s gendered personal values are formed, translated, produced, and reproduced in her leadership style, the subsequent MCS and organisational life.Design/methodology/approachThis is an interpretive case study that uses the anthropological lens of emic and etic views. The emic view is derived from the interpretation of the company’s subjects. The etic view refers to the interpretation of outsiders (the researchers and previous literatures). The combination of these two views enables an in-depth understanding of the case. Interviews, observation and documentary analysis were used to collect the data.FindingsIn a gendered society, a female leader will gain full respect if she demonstrates leadership behaviours that fit her subordinates’ gendered expectations. The leader’s and followers’ common gendered cultural background will result in leadership and followership that support each other. Gendered leadership produces gendered MCS. Gendered MCS is based on gendered cultural values that direct the behaviour of organisational members to focus on certain competencies based on a single gender perspective. In turn, the gendered MCS sustains and reinforces the gendered leadership.Research limitations/implicationsThe study does not focus on the potential value of including feminine measures in MCS. In the future, MCS literatures need to explore the strategic advantages of introducing measures into the system in order to develop feminine competencies in organisation. Furthermore, the processes by which MCS reinforces gendered practices in a society are not explored in the study. Therefore, another important next step is to examine the patterns of the reinforcement processes and their magnitude in strengthening the biases beyond organisational boundaries (e.g. in professional and industrial practices).Practical implicationsThis study encourages leaders to consider the use of masculine and feminine characters in MCS to increase organisational effectiveness, build a more humane organisational atmosphere, establish organisational cohesion and harmonise different personal aspirations.Originality/valueMCS literatures tend to hide gender bias in the system. This study offers insight on how MCS translates, produces and reproduces societal gendered practices in organisational life.

Goddard, Andrew; Mkasiwa, Tausi Ally

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-03-2014-0018

PurposeThe purpose of this paper is to investigate the budgeting practices in the Tanzanian Central Government. New budgeting reforms were introduced following exhortations from the bodies such as the UN, the World Bank and the IMF and reflect the new public management (NPM).Design/methodology/approachA grounded theory methodology was used. This methodology is inductive, allowing phenomena to emerge from the participants rather than from prior theory. This ensures both relevance and depth of understanding.FindingsThe principal research findings from the data concern the central phenomenon of “struggling for conformance”. Tanzanian Central Government adopted innovations in order to ensure donor funding by demonstrating its ability to implement imposed budgetary changes. Organizational actors were committed to these reforms through necessity and struggled to implement them, rather than more overtly resisting them.Research limitations/implicationsThe research is subject to the usual limitations of case study, inductive research.Practical implicationsThis research has several implications for policy-makers of NPM and budgetary reforms. These include the recognition that the establishment of the rules and regulations alone is not adequate for the successful implementation of budgetary and NPM reforms and should involve a comprehensive view of the nature of the internal and external environment.Originality/valueThere are few empirical papers of NPM accounting practices being implemented in the public sector of developing countries and none at all based in Tanzania. The paper identifies the existence of struggling to conform to reforms rather than resistance identified in prior research.

Safdar, Raheel; Yan, Chen

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-07-2014-0038

PurposeThe purpose of this paper is to investigate whether income smoothing helps to reduce volatility in reported earnings and which firms are more inclined to be engaged in income smoothing.Design/methodology/approachThe authors used negative correlation between pre-managed earnings of a firm and its discretionary accruals (DAs) as proxy for income smoothing and the firms having more negative correlation coefficient are expected to have lower volatility in their reported earnings. The authors used Kothari et al.’s (2005) version of modified-Jones model to estimate DAs and used least squares estimations to investigate the research questions using six-year (2007-2012) sample of non-financial firms listed over Karachi Stock Exchange, Pakistan.FindingsThe authors found that firms experiencing more volatility in economic activities and smaller firms are more aggressively involved in income smoothing. Moreover, a predominant majority (72.2 per cent) of firms in the sample are involved in income smoothing through accruals manipulation. Also, the authors found that firms which are more aggressively involved in income smoothing have lesser volatility in reported earnings. Lastly, the level of DAs per se does not have any impact on income smoothing.Research limitations/implicationsThe proxy used for income smoothing, though the authors consider it to be better, is not the only one used in literature and the sample is limited to Pakistan.Originality/valueThis study adds to earnings management literature by providing evidence on extensive accrual manipulation for income smoothing in Pakistan.

Ben Rejeb Attia, Mouna; Lassoued, Naima; Attia, Anis

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-05-2013-0022

PurposeThe purpose of this paper is to test the political costs hypothesis in emerging economies characterized by interventionist governments and weak protection of property rights. The paper uses executives’ political connection and state control to measure firms’ political costs.Design/methodology/approachBased on a sample of Tunisian firms, univariate and multivariate analyses are used to test whether firms’ political costs have any impact on earnings management.FindingsThe empirical analysis indicates that the executives’ political connection is not directly related to earnings management. However, the interaction between executives’ political connection and the state control affects the firm’s sensitivity to political pressure and its earnings management practices. More specifically, this study provides evidence that non-connected firms and state-controlled firms attempt to use accounting policies to decrease their earnings especially during periods of the former government when they had to face high political costs. This finding is robust to comparing means of political cost indicators between different groups. Indeed, private firms with political connection enjoy a significantly lower insurance right, tax and donations and grants compared to other firms.Research limitations/implicationsThis study provides empirical evidence for the specific application of accounting theory in emerging economies.Practical implicationsPolitical influence may be an important criterion that will be used by auditors and investors to appreciate and detect specific manipulations of accounting earnings. Similarly, regulators should be aware of the political factors effect on discretionary behavior of managers to provide appropriate rules and standards.Originality/valueThe study is a pioneer in proving that a firm’s size is not always a suitable measure of its political cost. It extends the accounting literature on the role of political economy in the application of the political costs hypothesis. This hypothesis is confirmed in emerging economies by providing new and significantly measure of firms’ political costs

Jaffar, Romlah; Abdul-Shukor, Zaleha

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-05-2014-0021

PurposePast studies show that companies’ connection with the government (or politically connected companies (PCCs)) contributed negatively to their financial performance. The grabbing hand theory suggests that political connection demand companies to serve political and social obligation that exhaust companies’ financial resources. The purpose of this paper is to extend the previous studies by examining the role of monitoring mechanisms, specifically corporate governance mechanism and institutional ownership (IO), whether they weaken or strengthen the financial performance of PCCs in Malaysia.Design/methodology/approachThe sample consists of all companies listed on the Main Board of Bursa Malaysia (previously known as Kuala Lumpur Stock Exchange) for the year of 2004-2007. The time periods were chosen because there were no significant economic and political events that could possibly distorted the financial and non-financial data.FindingsThe findings show that companies’ political connection (the presence of political figure or government representative as members of board of director) has consistently showing negative relationship with performance. The result is consistent with the grabbing hand theory that argues that companies’ connection with government would actually destroy companies’ value. The monitoring role of corporate governance as measured by the percentage of independent board members does not have any significant effect on firm’s performance. The monitoring role of corporate governance as measured by the composition of independent board members have shown a positive significant effect on the company’s performance. However the second monitoring mechanism, the percentage of institutional investors, have a tendency to weaken the company’s performance.Originality/valueThe findings of this study provide an additional understanding of the consequence of government intervention on companies’ performance. This study also highlights the role of monitoring mechanism (independence board members and IO) in strengthening or weakening the performance. The findings suggest that the proper appointment criteria for board members should be seriously considered to ensure better corporate governance structure. Therefore, the formation of the nomination committee as suggested by the current Malaysian Code of Corporate Governance play an important contribution to ensure candidates nominated as board members have proper credentials and qualifications to carry out responsibilities as board members.

Bin-Ghanem, Hasan; Ariff, Akmalia M.

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-07-2014-0037

PurposeThe purpose of this paper is to examine the effect of board of directors and audit committee effectiveness on the level of internet financial reporting (IFR) disclosure practices.Design/methodology/approachThe sample consists of 152 listed financial companies in Gulf Cooperation Council (GCC) countries. Based on agency theory, the authors posit that board of directors and audit committee effectiveness influence corporate IFR disclosure practice. Content analysis approach, based on an un-weighted index of 35 IFR items is used to measure the level of IFR disclosure. Thus, multiple regression analysis is utilized to analyse the results of this paper.FindingsThe results show that board of directors and audit committee effectiveness has significant influence on the level of IFR disclosure.Research limitations/implicationsOne potential limitation of this paper is that the sample is drawn only from the GCC listed financial companies. Therefore, the findings cannot be generalized to other than the financial institutions.Practical implicationsThe finding(s) highlights the importance of board of directors and audit committee characteristics in corporate governance and in the development of financial markets that foster IFR disclosure.Originality/valueThis paper extends previous IFR disclosure studies by considering both the role of board of directors and audit committee effectiveness score in examining IFR disclosure.

Saliya, Candauda Arachchige; Jayasinghe, Kelum

2016 Journal of Accounting in Emerging Economies

doi: 10.1108/JAEE-10-2011-0040

PurposeThe purpose of this paper is to focus on the enterprise lending and control process in closely held banks, with special reference to Sri Lanka. It explores how those processes are being influenced by the distinctive cultural and political processes at organizational and societal levels.Design/methodology/approachThe study relies on three cases built upon the life experiences of several employees in a closely held bank, articulating multiple sources of evidence: interviews, observations, documents, archival records, open-ended questionnaires, internet conversations and exchange of e-mails. The data analysis adopts cultural political economy theory.FindingsThe study’s findings reveal how cultural and political factors, such as egoistic motives and politics, gifts/rewards and a manipulative culture, along with exploitative and discriminatory politics at organizational and societal levels, articulate into the enterprise lending and control process (“five Cs”) in closely held banks. “Rational” enterprise lending and control processes in this context merely become a “ceremonial” practice, serving the petty interest of powerful capitalist business owners. Whereas previous studies emphasize that the criteria (five Cs) discriminate against ordinary people, as distinct from the élite, the findings of this study implicate that over and above that the criteria are set aside when it suits in order to favor or accommodate the élite.Originality/valueThe paper provides a “qualitative inquiry” on how cultural politics at organizational and societal-level effect on enterprise lending and control process within closely held banks in less developed countries (LDCs). The previous studies on bank lending and control used either large-scale surveys or alternatively devoted their interest toward the role and impact of accounting in World Bank and IMF-led lending schemes and policies, particularly in LDCs.