Bikki Jaggi

Association between independent non- executive directors, family control and financial disclosures in Hong Kong

Abstract Our study examines whether comprehensive financial disclosures, used as a proxy for corporate board’s responsiveness, are positively associated with the proportion of independent non-executive directors (INDs) on corporate boards, and whether family control of the firm has an impact on this association. The findings suggest that the ratio of INDs to the total number of directors on corporate boards is positively associated with the comprehensiveness of financial disclosures, and this association appears to be weaker for family controlled firms compared to non-family controlled firms.

Impact of Culture, Market Forces, and Legal System on Financial Disclosures

Abstract This study examines the impact of legal systems (LSs) on financial disclosures by firms from different countries. The results indicate that firms from common law countries are associated with higher financial disclosures compared to firms from code law countries. The findings also reveal that cultural values have an insignificant impact on financial disclosures by firms from common law countries, and the results on firms from code law countries provide mixed signals. The results for multinationals are similar to the results for the total sample. The cultural values have no impact on financial disclosures of multinationals from common law countries, and there are mixed signals for multinationals from code law countries.

An Analysis of the Association between Pollution Disclosure and Economic Performance

The association between the extent of pollution disclosures and economic performance of firms belonging to four highly polluting industries — chemicals, steel, oil and paper and pulp is examined. The economic performance is determined by calculating ratios on return of assets, return on equity and operating performance. For measurement of the extensiveness of pollution disclosures, a disclosure index has been developed. The results do not indicate a significant association between the economic performance and pollution disclosures for the total sample. However, when the sample is segmented by industry group, a significant positive correlation is detected for the oil industry, indicating an association between economic performance and pollution disclosures. Furthermore, when the sample is divided on the basis of the firm size, the results show that the sub‐group of large firms with poor economic performance provides detailed pollution information. For smaller firms, no association between the two variables is observed.

Determinants of audit report lag: further evidence from Hong Kong

Abstract This study examines whether the audit report lag (ARL) of Hong Kong companies is associated with auditor business risk and audit firm technology. The study is based on a sample of 393 Hong Kong companies for the 1991–1993 period. Financial condition and family ownership/control of a company are used as proxies for auditor business risk, and the structured/unstructured audit approach is used as a proxy for audit firm technology. Other variables, such as the number of subsidiaries, nature of clients business, company size, unexpected positive earnings news and nature of audit opinion, are included as control variables. Regression results show that there is a positive association between the audit report lag and the financial risk index for Hong Kong companies, suggesting that companies with a weak financial condition are associated with longer audit delays. The results also show that companies audited by audit firms using the structured audit approach have longer audit delays. The findings on the ...

Accuracy of forecast information disclosed in the IPO prospectuses of Hong Kong companies

Abstract Hong Kong and international investors are interested in the accuracy of forecasts disclosed in the Initial Public Offering (IPO) prospectuses issued by Hong Kong companies. This study examined bias as well as accuracy of IPO forecasts disclosed from 1990 to 1994. The results of this study show that unlike IPO forecasts disclosed in most other countries, IPO forecasts disclosed by Hong Kong companies do not overestimate their earnings and/or dividends. Instead, the bias seems to be toward underestimation. The level of forecast accuracy is also quite high and compares favorably with that of most other countries. The results show that the level of accuracy is to some extent influenced by the number of years the company has been in business. No other company-specific variable seems to have any influence on the accuracy level. On an overall basis, the findings of this study can be interpreted to mean that IPO forecasts disclosed by Hong Kong companies provide reliable information.

Insider Trading, Earnings Management and Corporate Governance: Empirical Evidence Based on Hong Kong Firms

We document positive association between earnings management and insider selling after the fiscal year-end for Hong Kong firms. This positive association is especially evident before the 1997 Asian Financial Crisis. Our findings suggest that Hong Kong executives manage reported earnings to maximize their private benefits from insider selling. Additionally, we find that a higher proportion of independent directors (INED) on corporate boards moderate the positive association between insider selling and earnings management. Stricter monitoring of earnings management by INED is especially evident when no member of the family with majority ownership is present on corporate boards as a director. This suggests that the presence of family members with majority ownership on corporate boards significantly reduces INEDs monitoring effectiveness. Our findings suggest that strict regulations are needed to control insider trading, and independence of corporate boards is important for monitoring of earnings management associated with insider trading. Furthermore, appointment of family members with majority shareholdings should be avoided to enhance independence and to monitor effectiveness of corporate boards.

An Analysis of Joint Effects of Investment Opportunity Set, Free Cash Flows and Size on Corporate Debt Policy

This study, based on a sample of 1869 observations from 1989 to 1993 for non-regulated U.S. firms, examines the association between investment opportunity set (IOS), free cash flows (FCF) and debt, and also tests whether firm size acts as a moderating variable on this association. The results show that there is a significantly positive association between FCF and debt for low IOS firms, which provide support to Jensens (1986) “control hypothesis”. The results also show that the positive association between debt and high FCF for low IOS firms is more pronounced for large firms, suggesting that the firm size serves as a moderating variable on the association.

An investigation of the long-run relationship between pollution performance and economic performance: The case of pulp and paper firms

Abstract Studies in environmental economics have tended to examine the impact of pollution performance on economic performance from a macro perspective. Management and accounting studies have focused on the short run. No real consensus has emerged from these studies taken as a whole as to the relationship between pollution performance and economic performance. In this study the economic impact of pollution performance is examined from a micro long-run perspective. Pollution is measured at the plant level and economic performance is measured both using the company as a whole and using just the segment specifically affected by pollution abatement. The analysis is done for both a 6-year and a 9-year time horizon. The association between three measures of pollution performance and five measures of economic performance for the company as a whole is tested using the Spearman rank correlation coefficients. To test the association between the pulp and paper segment and the three measures of pollution, two measures of economic performance were correlated with the pollution measures. The results indicate that the firms were not negatively impacted economically by abating water pollution in their pulp and paper mills. These results do not support the expectation that there would be a negative impact on the economic performance from pollution abatement activities of the firms. These findings are consistent with the finding of earlier studies. Furthermore, it may have policy implications when the US considers future environmental legislation.

Global warming and corporate disclosures: A comparative analysis of companies from the European Union, Japan and Canada

This chapter evaluates whether disclosures on global warming by companies from the European Union are more extensive than disclosures by Japanese and Canadian firms. The study is based on disclosures made on websites, annual reports, social, environmental and sustainability reports and on a questionnaire developed by the Carbon Disclosure Project by 282 of the largest firms from these countries. Content analysis is utilized to asses their disclosures. The results indicate that the EU firms make significantly less global warming disclosures than firms from Japan or Canada. We also find no relation between the changes in carbon emissions and global warming disclosures indicating that these disclosures do not truly reflect emission performance. These findings suggest that the EU requirements of reducing GHG pollution have not improved GHG disclosures. Regulatory disclosure requirements may be the answer to improve disclosures.

The SEC's Pollution Disclosure Requirements: Are They Meaningful?

Firms materially affected by pollution abatement costs are required to disclose pollution information in their annual filings with the Securities and Exchange Commission. Is pollution information disclosed by management useful? Do investors perceive the usefulness of pollution disclosures and react to them? The authors present recommendations for improving the SEC9s current pollution disclosure requirements.