Gaetano Matonti

Voluntary Adoption of Ifrs by Italian Private Firms: A Study Of The Determinants

Prior literature states that the voluntary adoption of IFRS by private firms is related to some firms’ contracting incentives (for example, the leverage or the firm’ size). In Italy, from the 2006 the private firms that meet the criteria of the Legislative Decree 38/2005 may prepare (voluntary choice) the separate financial statements according to the IFRS. In 2009 we find that some private firms have voluntarily adopted the IFRS. The aim of the paper is to analyze the determinants of voluntary adoption of IFRS by those firms in their separate financial statements. According to prior literature, we find those firms are more likely to adopt IFRS when the ownership is dispersed, there are foreign shareholders and firms are more leveraged. We also find that the likelihood of IFRS voluntary adoption by private subsidiaries firms increases when their parent company complies with IFRS.

Measuring the intellectual capital of Italian listed companies

Purpose The purpose of this paper is to investigate the relationship between intellectual capital (IC), measured in terms of the market to book (MTB) ratio, and potential key determinants of IC value such as intangible assets (IA) and a range of other factors. Design/methodology/approach The study is conducted for a sample of 140 Italian corporations over the period 2009-2013. Applying a holistic market-based approach, the relationship between IC value and selected determinants from the extant literature is tested. Five hypotheses are tested using a pooled OLS regression model, while controlling for time. ROE is employed as a useful firm profitability indicator from the perspective of an equity investor. Moreover, four robustness tests are undertaken. Findings The results show that IA, profitability, leverage, industry type, auditor type, and family ownership positively affect IC value, whereas SIZE and AGE negatively affect IC value. Moreover, the findings of the robustness tests suggest that all firms, and not just knowledge-intensive business service industry firms, manage knowledge. Research limitations/implications The validity of the findings is limited to the Italian context, as the study focuses on a sample of companies listed on the Milan Stock Exchange, all of which prepare their individual financial statements according to IFRS. Further limitations are related to the use of market value in the short term, as it is influenced by market volatility. The study may allow academic researchers to investigate the impact of other non-accounting sources of information on market value within a multidisciplinary perspective. Practical implications This paper also has implications for managers and practitioners. The findings suggest that managers should not take for granted that firm growth (an increase in SIZE) alone will lead to an increase in IC value, in the absence of a consistent IC-oriented investment strategy. Managers should also avoid smoothing their IC investment as the company grows, in order to maintain a stable MTB ratio. Further, standard setters should seek to explore better means of disclosing non-accounting information relating to IC value. Originality/value This paper contributes to the IC literature as it is the first study which applies the market capitalization approach to analyze IC value determinants in the Italian context, within the framework of IFRS. The findings reveal some interesting relationships between the MTB ratio and recognized intangible investments, which are found to be insignificant in previous studies, confirming that, through the holistic effect, the MTB ratio may be a good proxy for IC.

Auditor choice in Italian non-listed firms

Purpose - This paper aims to investigate auditor choice in those Italian non-listed firms adopting the “traditional” model of corporate governance. In Italy, non-listed firms can choose between two types of auditor: the Board of Statutory Auditors (BSA), that is the statutory auditors, or an “external” auditor. At the same time, a BSA conducts the administrative auditing for all companies with equity exceeding €120,000. Design/methodology/approach - The paper estimates a logistic regression model of firm auditor choice between an external auditor and the BSA, which incorporates variables proxying for both agency conflict and organizational complexity effects. Findings - The results show that of the potential agency factors, only board independence drives auditor choice, whereas organizational complexity and risk factors including firm size, investment in inventories, subsidiary status and complexity drive auditor choice. These results may be explained in the administrative audit role of the BSA, which monitors both day-by-day firm operations and the financial statements preparation “project”. Stakeholders as a result are reassured that, in general, their interests are protected. Finally, it was found that legal form and voluntary International Financial Reporting Standards compliance exert an impact on auditor choice. Originality/value - The paper provides support for an internal yet independent auditing body such as the Italian BSA as a wider model for corporate governance in European non-listed firms (OECD, 2004 and 2015). The BSA as an administrative and financial auditing body made up solely of independent highly qualified professionals can work within the firm on an operational basis, and in so doing can increase stakeholder protection.

Myth #7: The Myth of Measurement

The mantra that inspires healthcare systems is: “If you can’t measure it, you can’t manage it.” The measuring process is closely related to the epistemological ideal of modern science. This has been developed through a world simplification, which is considered useful to disclose principles that work under surrounding reality. The search for natural laws carries a distinctive component: phenomena are not accepted as they are, but they are instead transformed through abstraction and experimentation. What is considered as real is the result of abstraction and experimentation. This attitude, however, entails that some reality aspects are sacrificed in their variety and entirety. In economics, especially in the rational choice theory, the world, where we make decisions and judgments, is not real, but outward and accidental. In its stead, we find abstract constructions of expected utility maximization and pursuit of self-interest.