Emerald | Asian Review of Accounting

The impact of independent directors and independent audit committees on earnings quality reported by Indonesian firms

Ferdinand T. Siagian, Elok Tresnaningsih — 2011-09-20 00:00:00.0

Abstract

Purpose – The purpose of this paper is to investigate whether independent directors and audit committees that are chaired by an independent director as required by the Jakarta Stock Exchange (JSX) affect the quality of reported earnings. Design/methodology/approach – The paper uses both total discretionary accruals (DA) and earnings response coefficient (ERC) as the proxies for earnings quality. It runs multivariate regressions to examine the improvements in earnings quality after the firms meet the JSX requirements. Findings – It is found that both DA and ERC improve significantly after firms acquire independent directors and independent audit committees. Lower DA occurs in the first and second years after the firms meet the JSX requirements. There is an improvement in ERC in the first years after firms meeting the requirements. Research limitations/implications – The results suggest that independent directors and audit committees do improve earnings quality. Originality/value – This is the first paper that compares the quality of earnings before and after firms acquire independent directors and independent audit committees. This methodology allows us to examine the impact of meeting JSX independence requirements on earnings quality. The findings contribute to the literature by showing the importance of having independent directors and an independent audit committee in order to improve earnings quality. These findings are specifically important for the capital market regulatory bodies, the shareholders, and the boards of directors, and for other users of financial reports in general.

The effects of changes in competition, technology and strategy on organizational performance in small and medium manufacturing companies

Tuan Zainun Tuanmat, Malcolm Smith — 2011-09-20 00:00:00.0

Abstract

Purpose – This study aims to examine how the relationship among competitive environment, manufacturing technology and organisational strategy affect organisational performance. Design/methodology/approach – Using a contingency approach, this study investigates the changes in competitive environment, manufacturing technology and organisational strategy in small and medium Malaysian manufacturing companies. The data is collected using a mailed questionnaire survey of manufacturing companies in the Klang Valley. Findings – Results of the study show that the majority of responding companies have recognised changes in their competitive business environment and advanced manufacturing technology, which have impacted on organisational strategic behaviour. Structural equation modelling shows positive relationships among competitive environment, manufacturing technology and organisational strategy, with a positive impact on performance. Research limitations/implications – These outcomes provide useful insights into our knowledge of how organisational change has taken place in small and medium companies. Practical implications – The study provides useful guidelines to small and medium sized companies facing changes to their business environment. Originality/value – The study makes an incremental contribution to the existing organisational change literature for SMEs in developing countries.

Changes in management accounting practices in Malaysia

Tuan Zainun Tuanmat, Malcolm Smith — 2011-09-20 00:00:00.0

Abstract

Purpose – Malaysia has moved towards global competitiveness. As an important contributor to the Malaysian economy, this change makes manufacturing companies in Malaysia need to ensure that their business operation and management cope with the current changes. To do this they need to reconsider their existing management accounting practices more than ever. Therefore, this study is carried out to determine how changes in management accounting practices in Malaysian manufacturing companies took place in response to a changing business environment and the effect of changes on performance. Design/methodology/approach – A structured questionnaire survey is used to collect the data from various manufacturing companies in Malaysia. The Federation of Malaysian Manufacturer Directory is used as a sampling frame. Findings – The results show that the level of changes in management accounting practices increased over the five year period from 2003 to 2007. The changes mostly occurred through the introduction of new practices, replacement of existing practices and modification of the way existing practices were used. Findings in this study also reveal that there are no significant differences in management accounting practices among local and foreign companies, or between small and medium, and large companies. This study also support previous research in terms of the positive relationship between changes in management accounting practices and performance. Originality/value – Taken together this research outcome has contributed to the existing management accounting change literature especially in a developing economy setting.

The impact of cultural factors on students’ learning style preferences: A global comparison between Japan, Australia and Belgium

Gregory Boland, Satoshi Sugahara, Evelien Opdecam, Patricia Everaert — 2011-09-20 00:00:00.0

Abstract

Purpose – The purpose of this study is to examine empirically the relationship between cultural factors and students’ learning style preferences in the context of the current global convergence in accounting education. Design/methodology/approach – Kolb's Learning Style Inventory and Hofstede's Value Survey Model for Young People were administered to 244 undergraduate students studying accounting in Japanese, Australian and Belgian universities. Findings – The outcome of this research revealed that the student groups from Australia and Belgium tended to be more individualistic in their learning and were more willing to learn by doing, while Japanese students do not prefer to learn by doing, but prefer learning by watching. Originality/value – The results might be of interest to accounting educators to assist them with the smooth introduction of the International Education Standards (IES) by the International Federation of Accountants (IFAC) and the International Accounting Education Standard Board (IAESB).

Overseas listing and accounting conservatism: evidence from Chinese H-share companies

Fan-Hua Kung, Kieran James, Chia-Ling Cheng — 2011-09-20 00:00:00.0

Abstract

Purpose – The objective of this paper is to examine the incremental effects of overseas listing on earnings conservatism. In particular, it investigates whether mainland Chinese companies listed “overseas” in Hong Kong exhibit a higher degree of earnings conservatism than companies without overseas-listing. Design/methodology/approach – The paper employs the concept of “conditional conservatism” and adopts Basu’s (1997) conservatism model, examining data for Chinese companies overseas listed on the Stock Exchange of Hong Kong as H-shares, to test hypothesis concerned with the difference in the speed with which economic gains and losses are captured in accounting earnings. Findings – The empirical findings indicate that both overseas-listed and China-only-listed Chinese companies demonstrate a minimal degree of earnings conservatism in the earlier sample sub-period. However, companies listed overseas provide a higher degree of earnings conservatism overall. Furthermore, this conservatism becomes statistically significant in the 2006 to 2008 sub-period. Originality/value – The evidence in this study shows that differences in earnings conservatism arise from differential information demands and differential regulations. Hence the findings have direct policy implications for the regulatory agencies in China and Vietnam and in the ex-communist countries further afield such as Russia, the former Soviet Union, and Eastern Europe.