http://hdl.handle.net/10993/63 Search this channel search https://orbilu.uni.lu/simple-search http://hdl.handle.net/10993/54588 Title: Three Essays in Narrative Risk Disclosure Tone, Meta-analysis and Cost Asymmetry <br/> <br/>Author, co-author: Hajikhanov, Nijat <br/> <br/>Abstract: The thesis is divided in the following three chapters: Chapter 1 analyzes firms’ tone in risk disclosure using a sample of listed firms in the European Economic Area from 2002 to 2016. Firstly, findings show that firms, on average, use more negative than positive words in risk disclosure. This linguistic negativity bias has increased over time, suggesting that efforts to discourage companies’ propensity for overly positive risk disclosure had been potentially effective. Secondly, this negativity bias in tone increases more when receiving bad news than it decreases when receiving good news. Chapter refers to this phenomenon as ‘conditional risk disclosure tone conservatism’. Thirdly, we show that risk tone conservatism and stock price crash risk are negatively associated within a certain range of accounting conservatism. Chapter 2 aims to advance the understanding of the generic firm characteristics and to provide a meta-analysis of the relationship between generic firm characteristics and stock price crash risk. It analyzes the existing findings of the relationship between firm size, investor heterogeneity, growth, leverage, financial performance, volatility, earnings management and crash risk across 99 prior empirical studies. In addition, it investigates the potential covariates that moderate the variation in the results. Meta-analysis is used to investigate and aggregate the association between generic firm characteristics and stock price crash risk. Meta-regression analyses are conducted to examine whether potential moderators affect this association. Findings indicate that firm size, investor heterogeneity, and growth opportunities have a significant positive association with crash risk. However, leverage has a negative significant relationship with crash risk. Meta-regression results show that the variation in the firm characteristics and crash risk relationship is moderated by the measurement of generic determinants, publication status, citations, journal ranking, countries, financial sector and crisis period inclusion in the sample of studies, author’s country, position, and gender. Chapter 3 shows that Communist Party Committee (CPC) involvement in corporate governance is a determinant of the asymmetric behavior of selling, general, and administrative (SG&A) costs in Chinese state-owned enterprises (SOEs). SOEs having CPC direct control show a higher level of asymmetric cost behavior. In addition, the moderating effect of regional institutional quality on the relationship between CPC involvement and cost asymmetry is examined. Results indicate that firms located in regions with strong market-based institutions exhibit a stronger association between CPC direct control and cost asymmetry, thus the CPC counteracts pressure from markets to cut costs. This chapter contributes to the cost asymmetry literature by introducing a new political determinant that is specific to the growing Chinese market, CPC direct control. http://hdl.handle.net/10993/53371 Title: Do financial performance indicators predict 10-K text sentiments? An application of artificial intelligence <br/> <br/>Author, co-author: Derouiche, Imen; Mushtaq, Rizwan; GULL, Ammar Ali; Shahab, Yasir <br/> <br/>Abstract: n this study, we employ Natural Language Processing (NLP), a subdomain of artificial intelligence (AI), to predict the sentiments while analyzing 3729 annual 10-k financial reports of S&P 500 companies over the 2002–2019 time period. Our findings suggest that the firm’s financial performance indicators help reduce negativity in the textual part of 10-ks. In contrast, we do not observe any significant association between the firm’s financial performance indicators and 10-ks positivity. Our findings are robust to alternative econometric specifications and alternative measures of key variables. Our results contribute to the accounting and financial disclosure literature by indicating that corporate financial performance indicators can predict the tone of 10-k filings. http://hdl.handle.net/10993/52927 Title: Title: Board members in squeeze-out transactions: an event study analysis <br/> <br/>Author, co-author: Lopatta, Kerstin; Kaspereit, Thomas; Trenkle, Johann <br/> <br/>Abstract: In this study, we investigate the role of board members in German squeeze-out transactions by applying the event study methodology. We find that a dismissal of a management board member is associated with lower cumulative abnormal returns in the period of three months preceding the squeeze-out announcement. This indicates that minority shareholders receive a lower compensation if management board members are dismissed prior to the squeeze-out announcement. Though we are cautious to draw inferences from this finding, we follow other scholars (e.g., Daske et al., 2010) and suggest that majority shareholders exploit their superior status and use its power opportunistically. We furthermore explore the effects of directors' dealings in a squeeze-out transaction. We find that if stock purchases take place in a period of one year preceding the announcement, abnormal returns tend to be lower in the run-up period and higher on the announcement date. http://hdl.handle.net/10993/52926 Title: The moderating role of CEO sustainability reporting style in the relationship between sustainability performance, sustainability reporting, and cost of equity <br/> <br/>Author, co-author: Lopatta, Kerstin; Kaspereit, Thomas; Tideman, Sebastian; Rudolf, Anna R. <br/> <br/>Abstract: This paper explores the role of individual managers in the relationship between sustainability performance, sustainability reporting, and cost of equity. Based on prior research showing that both sustainability performance and reporting reduce the risk premium, this paper contributes to the literature by acknowledging that the true motives behind a manager’s corporate sustainability engagement are not apparent to investors. Thus, investors need to rely on further information to assess the relationship between sustainability performance and risk. We argue that CEOs’ values and preferences drive their decisions regarding sustainability activities. Thus, their fixed effect on sustainability reporting conveys a signal to investors about the motives behind corporate sustainability engagement and the extent of reporting. In the first step of our empirical analysis, we document that a CEO’s specific reporting style indeed has significant statistical power in explaining a company’s level of sustainability reporting. In the second step, we find that improved sustainability performance is associated with increased cost of equity when the CEO exerts a strong personal influence on sustainability reporting. However, cost of equity declines if the CEO’s influence on the reporting of improved sustainability performance is low. Our results are consistent with the argument that investors interpret CEO’s fixed-effect on sustainability reporting as a signal. That is, for a high CEO fixed-effect, increases in sustainability engagement are conflated with the CEO's self-interested values. In further tests, we show that the signal seems to be particularly important for normative sustainability activities (vs. legal sustainability activities). http://hdl.handle.net/10993/52870 Title: Does waste management affect firm performance? International evidence <br/> <br/>Author, co-author: Derouiche, Imen; Gull, Ammar Ali; Atif, Muhammad; Tanveer, Ahsan <br/> <br/>Abstract: This study examines an important yet underexplored aspect of firms’ sustainability practices, i.e., waste management, in order to analyze its impact on financial performance. Although the extant literature has focused on various aspects of sustainability, the impact of waste management, which has disastrous consequences for the climate and firm performance, remains largely unexplored. Thus, using the 2002–2019 data of listed firms from 41 countries, we found a significantly negative (positive) relationship between waste generation (recycling) and financial performance. Our findings are robust to alternative variables, sub-sample analysis, and identification strategies. Moreover, a channel analysis showed that this relationship is influenced by operating costs, ESG performance-based compensation, industry nature, the Paris agreement on climate change, and the global financial crisis. Overall, the findings suggest that environmental initiatives are beneficial for firms and present important policy implications for regulators and firms. http://hdl.handle.net/10993/49767 Title: Voluntary disclosure, tax avoidance and family firms <br/> <br/>Author, co-author: Derouiche, Imen; Boubaker, sabri; Nguyen, Hung <br/> <br/>Abstract: This study examines the effect of voluntary disclosure in annual reports on tax avoidance activities. The agency theory of tax avoidance suggests that tax sheltering is associated with important agency costs, underlining the importance of corporate governance mechanisms such as voluntary disclosure in shaping tax planning. Using a sample of 3448 firm-year observations of French listed firms over 2007–2013, the results show that voluntary disclosure is associated with lower tax avoidance activities, providing evidence that this disclosure can be seen as an effective monitoring tool that reduces the insiders’ likelihood to engage in rent extraction through tax avoidance activities. The results also indicate that the negative effect of voluntary disclosure on tax avoidance is significant only when family control is below 40%, suggesting that the disciplinary role of voluntary disclosure is limited to firms with relatively low family control levels. Overall, our findings are consistent with the agency theory of tax avoidance and highlight the important role of corporate disclosure in improving corporate governance. http://hdl.handle.net/10993/47680 Title: What Do We Know About Audit Oversight <br/> <br/>Author, co-author: Muessig, Anke http://hdl.handle.net/10993/44820 Title: Determinants and usefulness of risk disclosure in Europe: Evidence from annual reports of listed companies <br/> <br/>Author, co-author: Weber, Véronique http://hdl.handle.net/10993/44331 Title: Managerial style in cost asymmetry and shareholder value <br/> <br/>Author, co-author: Lopatta, Kerstin; Kaspereit, Thomas; Gastone, Laura http://hdl.handle.net/10993/43482 Title: At the boundaries of institutional theorizing: Individual entrepreneurship in episodes of regulatory change <br/> <br/>Author, co-author: Löhlein, Lukas; Muessig, Anke <br/> <br/>Abstract: We analyse the institutional dynamics surrounding the establishment of independent audit oversight in Germany from 1997 to 2016. Complementing prior works, which have focused on countries where the global demand for independent regulation coincides with the domestic erosion of public trust in professional self-regulation, we investigate regulatory change in a context featuring strong trust in the accounting profession. To analyse the accounting establishment’s response to expanding global standards of accounting regulation and the escalating resistance of small accounting firms, as orchestrated by one individual, we mobilize a Bourdieusian field perspective and the literature on institutional entrepreneurship. By demonstrating how intra-professional conflict has increasingly eroded the establishment’s capital to reproduce its hegemonic field position and keep the regulator at distance, our case provides a counterpoint to prior research, which suggests that oversight is mainly the product of negotiations between a unified profession and the regulatory authority. Examining a rare instance of individual entrepreneurship also enables us to engage in a theory-testing process on the explanatory power of institutional ambiguitiesdthe subjectively perceived ruptures and contradictions within established social arrangementsdfor agency. Our findings suggest that ongoing encounters with institutional ambiguities result in varying disposition to activism. In this way, while acknowledging agency as a cause of field reproduction and change, our analysis shifts attention towards the relational, temporal, and transformational institutional dynamics that constitute distinct modes of agency. By identifying empirical residuals that seem to escape theorization, we also reveal the limits of institutional theorizing. http://hdl.handle.net/10993/43462 Title: The relevance of risk disclosure and the role of readability and comparability <br/> <br/>Author, co-author: Weber, Véronique; Muessig, Anke http://hdl.handle.net/10993/42367 Title: Risk disclosure and analyst following:A study of French listed firms <br/> <br/>Author, co-author: Derouiche, Imen; Muessig, Anke; Weber, Véronique <br/> <br/>Abstract: In this study, we examine the effect of risk disclosure on the number of analysts following a firm using a sample of non financial and non utilities listed companies belonging to the 120 SBF index over the period 2007−2015. We also investigate the role that information asymmetry plays in this relationship. Our results show a positive and significant association between risk disclosure and analyst following, suggesting that firms providing higher risk disclosure attract more analysts, probably because of the low cost of gathering information on more transparent firms. However, a high degree of information asymmetry mitigates this positive effect, indicating that risk disclosure may not be a sufficient incentive for analyst following. Thus, although the analyst works as an information intermediary, the high information asymmetry seems to act as a burden making the cost of following those high risk disclosure firms outweighing the benefits associated with it. http://hdl.handle.net/10993/42355 Title: The effect of risk disclosure on analyst following <br/> <br/>Author, co-author: Derouiche, Imen; Muessig, Anke; Weber, Véronique <br/> <br/>Abstract: Prior research shows that financial analysts play an important information intermediary role in France. This study extends earlier research to examine the effect of risk disclosure on the number of analysts following listed firms. Using a unique dataset of French firms on the 120 SBF index over 2007−2015, the results show a positive and significant relation between risk disclosure and analyst following, suggesting that firms having greater risk disclosure attract more financial analysts. These findings provide empirical support to the argument that analysts incur lower costs of information gathering in firms with greater risk disclosure. The demand for analyst services is also more valuable in these firms, given their potentially high exposure to risks, implying greater analyst following. Overall, our results are in line with prior literature highlighting that analysts’ activities complement annual report disclosures and, generally, corporate disclosures. http://hdl.handle.net/10993/41655 Title: Risk disclosure and firm operational efficiency <br/> <br/>Author, co-author: Derouiche, Imen; Manita, riadh; Muessig, Anke <br/> <br/>Abstract: This paper examines the effect of risk disclosure on firm operational efficiency using a unique database of nonfinancial, and non-utility French firms belonging to the SBF 120 index over the period 2007–2015. In a first step, we use a data envelopment analysis output-oriented variable returns to scale model to determine firm operational efficiency scores based on one output (i.e., sales revenue) and three inputs (i.e., net property, plant, and equipment; cost of goods sold; and selling, general, and administrative costs). These scores are used in a second step to estimate the effect of risk disclosure on operational efficiency after controlling for a set of other factors. The empirical results show a statistically significant positive relation between risk disclosure and operational efficiency, suggesting that firms tend to be relatively more efficient when they disclose more about their risk exposure. Overall, we provide evidence that firms with greater risk disclosure are seen by stakeholders as more credible and trustworthy, leading them to conduct better transactions and, consequently, to improve their operational efficiency. This result is consistent with the notion that stakeholders perceive transparent firms positively, particularly those revealing bad news. http://hdl.handle.net/10993/40770 Title: Information Content of Systematic and Idiosyncratic Risk Disclosure <br/> <br/>Author, co-author: Weber, Véronique; Muessig, Anke http://hdl.handle.net/10993/40230 Title: Effect of firm regulatory focus on risk disclosure: Evidence from UK strategic reports <br/> <br/>Author, co-author: Weber, Véronique http://hdl.handle.net/10993/40229 Title: Information Content of Systematic and Idiosyncratic Risk Disclosure <br/> <br/>Author, co-author: Weber, Véronique; Muessig, Anke http://hdl.handle.net/10993/40014 Title: Accruals Quality, Financial Constraints And Corporate Cash Holdings <br/> <br/>Author, co-author: Mansali, Hatem; Derouiche, Imen; Jemai, Karima <br/> <br/>Abstract: This paper examines the impact of accruals quality on the corporate cash holdings of a large sample of 6,501 observations of French firms listed in Euronext Paris over the period 2000 – 2015. The results show that cash holdings decrease with accruals quality, suggesting that firms tend to increase their cash reserves in the presence of information asymmetry driven, in particular, by low accounting quality. The results also show that this negative effect is more pronounced in financially constrained firms than in financially unconstrained ones. This indicates that low reporting quality drives higher cash holdings when firms are, in addition, financially constrained, which emphasizes the importance of information asymmetry for corporate cash holdings. Overall, the conclusion is consistent with the precautionary motive for cash holdings. Support is also found for the notion that corporate transparency is a key factor in explaining a firm’s cash management policy and, in general, corporate policies. http://hdl.handle.net/10993/39152 Title: Improving predictions of upward cost adjustment and cost asymmetry at the firm-year level <br/> <br/>Author, co-author: Kaspereit, Thomas; Lopatta, Kerstin <br/> <br/>Abstract: This study introduces a new method for predicting cost elasticity with respect to changes in sales that incorporates cost asymmetry at the firm-year level. The new method is based on widely available factors that, according to the “economic theory of sticky costs” (Banker et al., 2013) and the “integrated theory of cost behavior” (Banker and Byzalov, 2014), are expected to influence cost behavior. The new method is subject to fewer data restrictions than the method proposed by Weiss (2010). By extending the cost variability and cost stickiness (CVCS) model of Banker and Chen (2006), we find that incorporating firm-year specific proxy measures for upward cost adjustment and cost asymmetry significantly enhances earnings forecasts. However, this improvement in forecast accuracy is not reflected in contemporaneous stock returns, pointing towards a partial understanding of cost behavior by capital markets. We further find that predicted cost stickiness is associated with lower analysts’ forecast accuracy and a weaker effect of earnings surprises on market reactions, confirming the results reported in Weiss(2010) for his measure of cost asymmetry. http://hdl.handle.net/10993/38155 Title: Risk disclosure and firm operational efficiency <br/> <br/>Author, co-author: Derouiche, Imen; Muessig, Anke; Manita, Riadh <br/> <br/>Abstract: This paper examines the effect of risk disclosure on firm operational efficiency using a unique database of non-financial, and non-utility French firms belonging to the SBF 120 index over the period 2007–2015. In a first step, we use a Data Envelopment Analysis (DEA) output-oriented Variable Returns to Scale model to determine firm operational efficiency scores based on one output (i.e., sales revenue) and three inputs (i.e., net property, plant, and equipment, cost of goods sold, and selling, general, and administrative costs). These scores are used in a second step to estimate the effect of risk disclosure on operational efficiency after controlling for a set of other factors. The empirical results show a statistically significant positive relationship between risk disclosure and operational efficiency, suggesting that firms tend to be relatively more efficient when they disclose more about the risks they are exposed to. Overall, we provide evidence that firms having higher risk disclosure are seen by stakeholders to be more credible and trustworthy, leading them to conduct better transactions and, consequently, to improve their operational efficiency. This is consistent with the notion that stackholders positively perceive transparent firms, in particular those revealing bad news.