Karol Marek Klimczak

Information technology investment announcements and market value in transition economies: Evidence from Warsaw Stock Exchange

This study examines stock market reactions to announcements of information technology investments in Poland, an emerging market and transition economy. Based on 66 announcements by companies traded at the Warsaw Stock Exchange in the period 2002-2009, our study confirms some previously published results from studies conducted primarily in highly developed markets, but also shows that specific characteristics of announcements play a more important role than has been commonly assumed. Our results indicate that investors in Poland react more positively if systems are acquired from global rather than local vendors. Announcements about completed projects are more positively received than announcements about planned or in-progress projects. Furthermore, announcements in Polish, targeted at existing shareholders, are more likely to be received positively than similar announcements released in English, targeting global investors.

Corporate Hedging and Risk Management Theory: Evidence from Polish Listed Companies

Purpose - This paper aims to provide a comprehensive empirical assessment of major contemporary corporate hedging theories, i.e. financial theory, agency theory, stakeholder theory and new institutional economics. Design/methodology/approach - Hypotheses regarding the determinants of hedging are tested on a sample of 150 companies listed on the Warsaw Stock Exchange. The panel covers a period of five years (2001-2005). Unlike in previous research the tests are organised around theories rather than individual hypotheses. In addition to classic tests, CART analysis is used to verify hypotheses. Findings - The results show low empirical verification of all theories considered. However, the results support some single hypotheses. Tests identified currency exposure, market-to-book value, IT and service sectors and size as being determinants of hedging. Research limitations/implications - The results provide evidence for the low usefulness of contemporary theories. New models are needed to explain hedging behaviour more accurately. Practical implications - The results identify characteristics shared by firms that use hedging. Companies considering implementing hedging can check whether they share these characteristics. Originality/value - This paper adds to risk management research by providing strong empirical evidence of theory verification status. It can serve as a base for future conceptual research.

Risk Management Theory: A comprehensive empirical assessment

The aim of this paper is to develop a methodology for thorough empirical testing of major contemporary corporate risk management theories: financial theory, agency theory, stakeholder theory and new institutional economics. Unlike in previous research, the tests are organised around theories, rather than individual hypotheses. I used a number of tests for robustness and subjected hypotheses to repeated testing, cross-verifying results. Evidence of tests conducted on a sample of 150 companies listed at the Warsaw Stock Exchange in Poland, covering years from 2001 to 2005, clearly point to low empirical verification of all theories considered. However, I find evidence for some theoretical determinants: currency exposure, market-to-book value, IT and service sectors and size. In conclusion I suggest implications for future empirical and conceptual research.

Impression Management in Letters to Shareholders: Evidence from Poland

Abstract We study impression management in an emerging market setting with high ownership concentration. Using content analysis, we identify impression management techniques in a sample of letters to shareholders written in the Polish language by the 60 largest companies listed at the Warsaw Stock Exchange in 2008 and 2013. We find patterns in the occurrence of these techniques with the use of k-means clustering: the largest cluster includes letters that praise the management, while the rest include defensive arguments, discussions of negative outcomes and short, formal letters. The more concentrated ownership is, the shorter the letters are, which indicates that management invest less effort in communicating with investors. This is particularly visible in companies held by insiders, which tend to produce short, formal letters, devoid of impression management. In contrast, companies controlled by foreign shareholders prepare letters that are longer and which are more likely to present defensive arguments, while institutional non-controlling shareholders favour extensive disclosure. The results shed light upon communication practices in Central and Eastern Europe, and offer implications for regulators and managers that may help strengthen the information environment in regional stock markets.

Evaluation Markers and Mitigators in Analyst Reports in Light of Market Response to Stock Recommendations

Professionals and individuals who invest in equity markets rely on financial analysts’ recommendations and reports to decide on what to invest in and when to trade. This study examines the role of two groups of communication strategies, evaluation markers and mitigators, in establishing analysts’ credibility. The sample consists of 80 reports written in Polish for companies listed on the Warsaw Stock Exchange in Poland. In this emerging market setting, where credibility is challenged by uncertainty, analysts deploy various strategies depending on the recommendation they make: “buy,” “hold,” or “sell” shares. The findings point toward a specific group of mitigators, namely subjectivization, as a means of communicating expert opinion. Regression results reveal that investors’ reaction to the publication of a recommendation to “hold” or “sell” shares, measured based on the changes in share prices, is stronger when subjectivization is used in a report. The findings carry implications for research into analyst behavior and for the development of professional writing skills.

The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Poland

ABSTRACT We outline the process of implementation of the accounting Directive 2013/34/EU by the Republic of Poland in the context of references to IFRS. The purpose of the article is to determine to what extent IFRS are used by actors taking part in the legislative and enforcement processes. The accounting regulation in Poland comprises an act of Parliament and the regulations of the Ministry of Finance. As a result the regulation is relatively succinct and many elements present in IFRS are not covered, while the issues of record-keeping and verification of accounting documentation receive more attention. A review of the responses to a call for opinions reveals that IFRS are rarely mentioned.

Goodwill Disclosures under High Uncertainty: Poland

Abstract The goal of this paper is to determine how uncertainty can be communicated in the notes to financial statements. We focus on narrative disclosures in a setting of high uncertainty: disclosures concerning the results of goodwill impairment tests. The data come from Polish companies characterised by high uncertainty relative to the main markets of the European Union or the USA. We use qualitative methods, interviews and content analysis, and we draw on the genre theory to understand how the narratives are formed and why. We find that uncertainty is not communicated directly, because it would be against the rules of the genre. In cases where significant doubts concerning the reliability of goodwill valuation exist, preparers place clues that professional readers can notice and follow to determine the level of uncertainty. Preparers may only be encouraged to provide this information directly by introducing specific disclosure requirements.Key words: financial reporting, accountingAcknowledgements: This paper was prepared as part of a research project funded by the National Science Center under grant number DEC-2011/03/D/HS4/03392Please send your comments to: Karol M. Klimczak Last modified 3 September 2015.

Risk-based management control in the public sector in Poland

This paper presents the New Public Management reforms in Poland, where a small group of enthusiasts at the Ministry of Finance is attempting to enforce dramatic changes in control systems across the public sector. The changes are both technical and cultural. The new system is called “management control” as opposed to “internal financial control”. The development of controls rests on risk assessment, a model adopted from the British HM Treasury Orange Book. The main sponsors of the new systems are internal auditors, a new professional group that is developing since 2001, originally in opposition to traditional control structures. The actor-network theory literature in management control systems suggests that the adoption of this innovation is contingent upon the sponsors ability to stimulate the translation process and to recruit allies who would support it. We document the developments of the reform to date and contribute two empirical studies: a survey of first reactions to the new system and a risk perception study. Both studies show that neither problematisation nor interessment can be taken for granted. However, the new system has been embedded in national public finance law, which means that at least formally, it will persist. We discuss the potential for future research in the context presented.