Includes bibliographical references.

Do co-opted boards increase insider profitability? -- Corruption exposure, political disconnection, and their impact on Chinese family firms -- Determinants of the duration of the voluntary administration process: An unconditional quantile regression analysis -- Multiple directorships and the extent of loan loss provisions: Evidence from banks in South Asia -- Are gender diverse boards more cautious? The impact of board gender diversity on sentiment in earnings press releases -- The value relevance of corporate voluntary carbon disclosure: Evidence from the United States and BRIC countries -- Macroeconomic uncertainty and management forecast accuracy -- Did mandatory CSR compliance impact accounting Conservatism? Evidence from the Indian Companies Act 2013.

[Article Title: Do co-opted boards increase insider profitability? / Dewan Rahman and three others ]

Abstract: Using a sample of U.S. firms over the period 1996–2014, this paper examines whether insider trading profitability increases with high board co-option. Indeed, we find that firms with a higher level of co-opted directors exhibit higher insider trading profitability, largely due to a lower level of managerial ability and analyst coverage. Co-opted boards are also unlikely to implement self-imposed insider trading restrictions, exacerbating this relationship. This positive association is mitigated by a higher level of external monitoring by institutional investors and if the CEO receives more performance-based incentives. Overall, co-opted directors demonstrate aligned interests with CEOs and corporate insiders rather than performing their role as monitors. As a result, a more co-opted board is positively associated with exploitative behaviour of insiders.

Link: https://doi.org/10.1016/j.jcae.2021.100265

[Article Title: Corruption exposure, political disconnection, and their impact on Chinese family firms / Siwen Song Aelee Jun and, Shiguang Ma ]

Abstract: This study adopts a quasi-natural experimental approach to examine the responses of Chinese family firms to political disconnection following exposure to corruption scandals. Our results are consistent with the view that family firms build political connections to achieve better performance, for access to external financing, and to secure more investment opportunities. We also find that the impact of political disconnection is more profound for firms located in provinces with a low level of marketisation, located in the same provinces as their related corrupt officials, and belonging to industries with high levels of corruption. Our results are robust after ruling out the impact of corruption cases per se as well as to alternative measurements of key variables and sample selection methods.

Link: https://doi.org/10.1016/j.jcae.2021.100266

[Article Title: Determinants of the duration of the voluntary administration process: An unconditional quantile regression analysis / John Goodwin and, James Routledge]

Abstract: This study explores determinants of voluntary administration (VA) and deed of company arrangement (DOCA) durations using unconditional quantile regression (UQR). Determinants’ effects are heterogeneous across the VA and DOCA distributions. Determinants related to complexity and negotiation, including size and debt restructuring existence, are positively and negatively related respectively to VA duration, and are stronger at longer durations. Insolvency firm expertise is negatively related to VA duration at shorter durations. Determinants related to scale and procedure, including size and accounting problems, are positively related to DOCA duration, and are stronger at longer durations. No determinants explain short DOCA durations. The UQR results uncovered other new empirical regularities.

Link: https://doi.org/10.1016/j.jcae.2021.100276

[Article Title: Multiple directorships and the extent of loan loss provisions: Evidence from banks in South Asia / Shawgat S. Kutubi and three others]

Abstract: This paper examines whether directors with multiple directorships affect extent of banks' loan loss provisions in South Asia. Our results indicate that directors with multiple directorships tend to delay the recognition of loan loss provisions. Specifically, we find the existence of a U-shaped relationship between directors with multiple directorships and loan loss provisions, indicating that the delay is more pronounced in the case of moderately busy directors than in that of directors with fewer directorships and time-poor over-boarded directors. This helps directors achieve profitability targets while maintaining their reputations and indicates their optimism about the loans’ future. Our results are robust in terms of accounting for endogeneity concerns, which are addressed using a two-stage least squares regression and entropy-balancing methodology as well as some alternative definitions of ‘multiple directorships’ used in the literature.

Link: https://doi.org/10.1016/j.jcae.2021.100277

[Article Title: Are gender diverse boards more cautious? The impact of board gender diversity on sentiment in earnings press releases / Paul Mather, Dinithi Ranasinghe and, Luisa A. Unda ]

Abstract: We examine the impact of board gender diversity on the sentiment in earnings press releases. Managers may use press releases to manage readers’ perceptions of corporate performance and we posit that gender diverse boards actively monitor managerial disclosures and tend to favour more cautious language in the press releases. Using a sample from ASX top 200 company voluntary disclosures and natural language text extraction processes, we find that board gender diversity is associated with the use of more cautious sentiments and less positive sentiments in earnings press releases. Further robustness tests validate our findings. We provide insights to practitioners and regulators by contributing to an ongoing regulatory debate on board gender diversity.

Link: https://doi.org/10.1016/j.jcae.2021.100278

[Article Title: The value relevance of corporate voluntary carbon disclosure: Evidence from the United States and BRIC countries / Yan Jiang and three others]

Abstract: Our study focuses on the value relevance of corporate voluntary carbon disclosure. Our sample includes firms from the United States (listed in the S&P 500) and firms from Brazil, Russia, India, and China that are targeted by the CDP. We examine whether the capital market rewards firms’ voluntary carbon disclosure. Voluntary carbon disclosure is measured as firms’ propensity to voluntarily disclose carbon information and the comprehensiveness and quality of their disclosure. We find that firms with greater carbon disclosure have higher firm value. Furthermore, the positive association between firm value and voluntary carbon disclosure is stronger in developing countries. We also find that large emitters with sufficient carbon disclosure experience a less negative valuation than firms with inadequate carbon disclosure. Furthermore, a subcomponent analysis suggests that the disclosure of specific types of climate risk and opportunity is rewarded by investors and can mitigate the valuation penalty of carbon emissions. These results have important implications for companies, investors, and regulators. Our analyses enhance understanding of the consequences of voluntary carbon reporting, which enriches the reporting of current financial information.

Link: https://doi.org/10.1016/j.jcae.2021.100279

[Article Title: Macroeconomic uncertainty and management forecast accuracy / Norio Kitagawa]

Abstract: This study examines the effect of macroeconomic uncertainty on the accuracy of management earnings forecasts. Focusing on Japanese management earnings forecasts, which are effectively mandated, I find that during periods of high macroeconomic uncertainty, firms tend to report accurate earnings forecasts. I also find that macroeconomic uncertainty lessens optimistic but not pessimistic errors. These findings are consistent with the scenario that managers try to avoid missing their forecasts or revising their forecasts downward because investors place greater weight on bad news when macroeconomic uncertainty is high. Consistent with this scenario, additional analyses reveal that firms experience a larger decrease in stock prices when they miss their forecasts or revise their forecasts downward under high macroeconomic uncertainty. Moreover, these findings are robust after controlling for the effect of earnings management. These results suggest that the usefulness of management forecasts does not decrease even when macroeconomic uncertainty is high.

Link: https://doi.org/10.1016/j.jcae.2021.100281

[Article Title: Did mandatory CSR compliance impact accounting Conservatism? Evidence from the Indian Companies Act 2013 / Tara Shankar Shaw and three others]

Abstract: In 2013, India became the first country in the world to require firms to spend two percent of their average profit on corporate social responsibility (CSR) activities. Taking advantage of this unique event, we examine how the mandatory CSR compliance impacts conditional accounting conservatism of Indian firms. We find a positive relation between CSR compliance and conditional accounting conservatism and this relation is stronger for firms that have stronger governance and weaker for family firms. Further, we find that current period accounting conservatism is negatively related to next period CSR spending.

Link: https://doi.org/10.1016/j.jcae.2021.100280