Antonio Parbonetti

Exploring the Effects of Corporate Governance on Intellectual Capital Disclosure: An Analysis of European Biotechnology Companies

Abstract This paper examines the relationship between governance variables and voluntary intellectual capital disclosure in a sample of European biotechnology firms. We extend previous research by simultaneously considering governance mechanisms such as the proportion of independent directors, board dimension, CEO duality and board structure in relationship to voluntary disclosure on intellectual capital. We understand voluntary disclosure as a multidimensional and complex concept and, hence, use the semantic properties of the information disclosed, and on the content of information, as proxies for the quality of disclosure. Our results suggest that governance-related variables strongly influence the quantity of information disclosed, thus confirming our hypotheses. In regard to the quality of disclosure, our results show that (1) the proportion of independent directors is positively related to the disclosure of internal structure, (2) CEO duality is negatively linked to the disclosure of forward-looking information, and (3) board structure helps to improve the annual reports overall readability. We contribute to agency theory by indicating that corporate governance mechanisms and voluntary disclosure can be used strategically to reduce agency conflicts. The results of this study might be of interest to regulators, investment analysts and market participants.

Firm Complexity and Board of Director Composition

This paper examines the relationship between firm complexity and board of director composition. Utilising the board typology of Baysinger and Zardkoohi (1986 ), we classify board members either as insiders, business experts, support specialists, or community influentials, and examine board composition in relation to firm internal and external complexity. Internal complexity refers to the sophistication of internal work processes (proxied by firm RD Coles et al., 2005 ; Gillan et al., 2003 ; Linck et al., 2005 ), by providing a unique lens in examining board characteristics that goes beyond the traditional insider/independent classification. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

The Convergence of Disclosure and Governance Practices in the World’s Largest Firms*

Many studies discuss convergence of cross-border governance and governance-related disclosure practices, but provide little empirical evidence to support their arguments and analysis. Our study examines the governance and disclosure practices of the worlds largest transnational firms. Using a unique dataset of 75 large firms in two time periods, 1995 and 2002, we examine both the governance practices, and disclosures regarding those governance practices, across Anglo-Saxon and non-Anglo-Saxon firms. Results indicate that non-Anglo-Saxon firms have developed their governance practices towards promoting an independent mechanism of control, namely a mechanism that is more similar to an Anglo-Saxon governance regime. In regard to governance-related disclosure practices, results indicate that for both Anglo-Saxon and non-Anglo-Saxon groups, disclosure practices have been evolving and converging towards more disclosures regarding governance matters. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

The rise of cost accounting: evidence from Italy

Accounting historians link the origins of cost accounting to the rise of manufacturing firms and, in a more detailed way, to efficiency control, pricing and decision-making problems faced in those organizations. To date, the international debate has mainly focused on practices in the USA, Great Britain and France, with little evidence available of developments in other countries, such as Italy. In this paper, the authors analyse the development of cost accounting in an Italian firm, La Magona dItalia. This iron, steel and tinplate firm, situated in Piombino, is observed over the period 1865-1940, i.e. during the central phase of the industrial revolution in Italy. We find that several factors influenced the implementation of a cost accounting system at Magona, including efficiency control, strategic decision making, and stock valuation. We also find a strong British influence on Magonas strategy, organization and information system, particularly in respect of finance, managers, technology and accounting practices. There is little evidence that Italian accounting traditions and practice played much of a role.

Mandatory IFRS adoption: the trade-off between accrual-based and real earnings management

This paper examines whether firms substituted real earnings management for accrual-based earnings management after the International Financial Reporting Standards (IFRS) became mandatory. Using a sample of 101,331 firm-year observations from 33 countries between 2000 and 2010, we show that IFRS adoption came with the unintended consequence of certain firms substituting real earnings management for accrual-based earnings management, especially among firms in countries with strict enforcement regimes. Furthermore, we document that the trade-off is confined to EU countries in which strong firm-level characteristics (i.e. the firm-level mechanism of control, the market’s level of scrutiny, and firm-specific incentives to provide transparency) are coupled with strong enforcement. We also show that IFRS had an effect in countries outside the EU, albeit at a different time. Overall, the results suggest that accounting regulators’ efforts to increase earnings quality might have had the unintended consequence of increasing real earnings management activities.

The Influence of Country- and Firm-level Governance on Financial Reporting Quality: Revisiting the Evidence: THE INFLUENCE OF COUNTRY- AND FIRM-LEVEL GOVERNANCE

This paper examines how firm‐level governance and country‐level governance interplay in shaping financial reporting quality. Using IFRS adoption as a source of variation in firms’ reporting discretion, and a large sample of European firms that mandatorily switch to the new set of standards, we find that in countries with low enforcement and weak oversight over financial reporting, only firms with strong board‐level corporate governance mechanisms experience an increase in financial reporting quality, consistent with firm‐ and country‐level governance mechanisms being substitutes. However, in countries with high enforcement and strict oversight over financial reporting, firms with either strong or weak board‐level governance mechanisms experience an increase in financial reporting quality, even if the increase is larger for the former group. Overall, our findings indicate that in the debate about the effects of governance on the quality of financial reporting, it is important to consider both country‐ and firm‐level corporate governance mechanisms.

CEO Risk Incentives and the Riskiness of Securitization Transactions in the Financial Industry

The paper investigates the role of CEO risk incentives in increasing the riskiness of securitization transactions in the financial industry. Using a sample of US financial institutions, and a system model to account for the endogeneity problem between risk incentives and securitization, we document that: i) financial institutions whose CEOs had high risk incentives engaged in securitization transactions to a larger extent than did financial institutions guided by CEOs with low risk incentives, and ii) CEOs with high risk-related incentives securitized riskier loans than did CEOs with low incentives. Thus, our results suggest that CEO risk incentives induced banks to focus on securitizations and increased the riskiness of such transactions.

Securitizations and the financial crisis: Is accounting the missing link?

Abstract In this paper we focus on the interplay between securitization accounting and regulatory capital rules to discuss how the misalignment between these two sets of regulations offered banks the opportunity to engage in opportunistic behaviors and incented them to take on too much risk.

It is not a flat world after all: Tax repatriation costs and cash value

US corporations have accumulated record‐high amounts of cash, and most of it is trapped in foreign accounts. This study tests the hypothesis that the marginal value of cash decreases in the presence of tax repatriation costs, as these costs are a strong indication that part of the cash is trapped abroad. Cash abroad is not readily available to the company because it is subject to an additional layer of tax before it can be used or distributed. Moreover, uncertainty surrounds the potential use of foreign cash, and research documents that firms holding high amounts of cash abroad are likely to invest in negative net present value activities. Finally, possible changes in tax regulation are an additional source of uncertainty. Consequently, foreign cash should be worth less than domestic cash. Using a large sample of US firms drawn from COMPUSTAT during the 1991–2012 period, the analysis suggests that shareholders value an extra dollar of cash at

When LIBOR becomes LIEBOR: Reputational Penalties and Bank Contagion

1.086. However, this result changes dramatically when the change in cash is interacted with the tax cost of repatriating the earnings. That is, the marginal value of cash decreases significantly in the presence of tax repatriation costs, and shareholders discount cash when it is likely to be held abroad. This study contributes to the literature on cash holding by investigating whether tax repatriation costs affect the value of corporate cash. Moreover, the findings show that there are important economic consequences linked to the phenomenon of cash accumulation in foreign countries and therefore provide regulators with a sound foundation on which to take additional actions to require more disclosure of and transparency in the actual location of firms’ cash holdings.