Accounting - Research Publications
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ItemNo Preview AvailableProfessional financial statement users' perceived value of carbon accounting disclosures and decision context(EMERALD GROUP PUBLISHING LTD, 2023-07-10)Purpose This study aims to investigate how professional financial statement users use carbon accounting information in their decisions and whether this use is sensitive to changing the decision context from an investment to a donation. Design/methodology/approach Using a sample of 173 US professional financial statement users, the authors conduct an experiment that manipulates an investment or donation choice to evaluate how differing levels of carbon sequestration affect decision-making across contexts. Findings Carbon sequestration information affects users’ donation decisions but does not affect investment decisions. Variation in the reliability of the information and whether the information is linked to strategy do not affect users’ decision-making. Research limitations/implications This study is performed by an experiment and informs our understanding of the relevance to users of carbon sequestration disclosure. Results indicate that carbon sequestration disclosure has value for donation but not investment decisions. The authors interpret this as evidence of some value of this type of disclosure in professional financial statement users’ decision-making but not for a financially focused evaluation. Originality/value This paper provides unique insights into the effect of reporting carbon sequestration on decision-making. There has been significant research on the broader topic of corporate sustainability, and capital markets research indicates that the market values increased sustainability disclosure. This study extends the research by examining a specific component of carbon disclosure that is not currently widely reported and by the use of information for different types of evaluations. The results find evidence that the value of this type of carbon disclosure does not stem from a purely financial perspective but instead, from other nonpecuniary factors.
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ItemAsbestos Contamination: Governance and Financial Reporting Issues in the Public, Private and Not-for-profit Sectors(WILEY, 2021-12)Abstract We explore implications of asbestos for the measurement and reporting of liabilities, assets and expenses by diverse entities. We argue that entities in both public and private sectors are failing to recognise or appropriately measure liabilities related to asbestos and that the implications of asbestos for assets and expenses in financial statements are rarely reported. While we focus on recognition and measurement implications for Australian entities, we also examine relevant requirements in other jurisdictions and for sustainability reporting.
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ItemRestatement of CSR Reports: Frequency, Magnitude, and Determinants*(WILEY, 2021-09)ABSTRACT We provide the first direct analysis of the magnitude of unreliable quantitative information disclosed in corporate social responsibility (CSR) reports. CSR report reliability is of particular interest to fund managers for investment decisions as well as to policymakers for regulating and monitoring purposes. However, surprisingly little is known about CSR reporting reliability despite concerns raised in the prior literature. We examine how often CSR reports for the Global Fortune 250 (G250) are restated, the magnitude of restatements, and factors associated with restatements during the period 2006 to 2013. During this sample period, the occurrence of restatements increased monotonically, with 39% of G250 CSR reports including one or more line‐item restatements. The magnitude of the line‐item restatements is quite high, with a median restatement of about 10%. We also find evidence of bias in the revised items toward overstatement. We find that restatements occur more frequently in firms that have reported a high level of social performance and that have environmental targets. The occurrence of restatement is also positively associated with firms residing in strong law countries and having their CSR reports audited. Our analysis of reporting bias indicates a negative association between use of Global Reporting Initiative (GRI) reporting guidelines and the likelihood of an overstatement. We also find a positive association between having the CSR report audited and the likelihood of revisions associated with overstatements. Together, our exploratory results indicate that CSR information may be unreliable and firms that face pressure to perform well have more restatements. However, our evidence is consistent with the restatements resulting from improvements in information systems over time rather than intentional bias. Our findings will help investors and fund managers better judge the reliability of CSR disclosures, and inform regulators and standard setters on ways to enhance the reliability of CSR reporting. Finally, we contribute to the audit literature examining sustainability assurance.
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ItemAir pollution and analyst information production(Elsevier, 2020-02-01)Recent studies investigate the impact of air pollution on labor productivity. We extend this literature by showing that air pollution negatively affects equity analyst information production. Analysts exposed to air pollution are less likely to issue timely forecasts or improve their forecast accuracy. Investigating the underlying mechanism, we find that analysts exposed to air pollution are less likely to provide bold (especially, negatively bold) forecasts. We also find evidence that market pricing is less sensitive to forecast revisions issued by analysts exposed to air pollution. Our results are robust to controlling for firm/analyst and time fixed effects, as well as additional specifications employing difference-in-differences designs and placebo tests.
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ItemHeaping of Executive Compensation(American Accounting Association, 2020-04-21)We investigate whether compensation grants are subject to "heaping", the tendency of less informed individuals to provide round values when reporting estimates of discrete data. We document that an unexpectedly large number of CEOs receive round compensation (i.e., evenly divisible by 100,000 and/or 10,000). We investigate whether consistent with heaping, frequency of round compensation varies with proxies for boards of directors' effort in setting compensation. We find that round compensation is more common when boards have characteristics suggesting they provide weak oversight of compensation and thus face more uncertainty in estimating compensation. We also find less frequent round compensation when boards face stronger pressure from external stakeholders, encouraging boards to expend additional cognitive effort in setting compensation. Further, consistent with weak oversight of compensation, round compensation tends to be higher than non-round compensation. However, we do not find a consistent association between this higher, round compensation and future firm performance.
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ItemReporting Bias and Monitoring in Clean Development Mechanism Projects(Wiley, 2021)The Clean Development Mechanism (CDM) is a flexible carbon market mechanism managed by the United Nations. The program grants tradable carbon emissions credits (Certified Emission Reductions) for carbon‐reducing projects in developing countries. A project can only be admitted to program if it is not financially profitable, and thus would not take place, without the emission credits granted through the CDM. In this paper, we examine how monitoring reduces incentives of companies to bias the reported expected financial viability of potential CDM projects to gain admission to the program. We find that reported rates of return, which are a key factor for admission to the program, tend to be downwardly biased and are negatively associated with the expected benefits stemming from forecasted greenhouse gas reductions. However, monitoring from various sources mitigates some of the distorted incentives and related reporting bias. Furthermore, the monitoring effect becomes much stronger after 2008, when the CDM Executive Board implemented a series of measures to strengthen the additionality testing which provides guidance for program applications.
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ItemExploring the Challenges of Broadening Accounting Reports(Oxford University Press, 2014-10-02)