Abstract The purpose of this paper is to empirically analyse the developmental stages of non-financial reporting in corporations, by interpreting the views of interviewees from major ethical corporations on the six major dimensions of non-financial reporting (identified in the literature) within each stage of the five-stage model of non-financial reporting (developed in this paper). This study is part of a series of papers on Triple Bottom Line reporting (TBL), and its relevance to corporate (...) reporting practices. The TBL is perhaps the pioneer for getting corporations thinking about non-financial reporting. While literature has been done extensively on the TBL framework, empirical data linking TBL and how it has helped, or even hindered corporations progressing through different stages in their non-financial reporting processes is missing. In order to facilitate this analysis, 40 interviews were conducted over 1 year, with 40 corporations selected from various sustainability indexes, focusing on corporations that adopt best practices in this area, and also have a TBL approach to non-financial reporting. The results of the analysis show that TBL certainly got corporations started in the journey of non-financial reporting but has not pushed them far enough to develop a more integrated approach to reporting nor clearly aligning their non-financial reporting performance with their financial performance and business strategy. Content Type Journal Article Category Original Paper Pages 1-33 DOI 10.1007/s13520-011-0010-4 Authors Kaushik Sridhar, Macquarie Graduate School of Management, Macquarie University, Sydney, Australia Journal Asian Journal of Business Ethics Online ISSN 2210-6731 Print ISSN 2210-6723. (shrink)

Motivated by the disproportionately high incidence of fraudulent financial reporting in the IT sector where technological capability is a major source of competitive advantage, this study investigates the possible relationship between technological capability and fraud probability in the IT sector. Technological capability is measured by a firm’s technical efficiency relative to peers in transforming cumulative R&D resources into innovative output, which is a source of competitive advantage, according to the resource-based view of the firm. Technical efficiency is estimated (...) via data envelopment analysis. A sample of fraud firms taken from Accounting and Auditing Enforcement Releases is matched with control samples of non-fraud firms. Consistent with the RBV, technological capability is found to have a negative and economically significant effect on fraud probability. Moreover, fraud probability is insignificantly associated with the scale efficiency of innovative activities, as investment in R&D resources per se is not a source of sustainable competitive advantage. (shrink)

We report the results of a study that examines the association between gender and individuals’ intentions to report fraudulent financial reporting using non-anonymous and anonymous reporting channels. In our experimental study, we examine whether reporting intentions in response to discovering a fraudulent financial reporting act are associated with the participants’ gender, the perpetrator’s gender, and/or the interaction between the participants’ and perpetrator’s gender. We find that female participants’ reporting intentions for an anonymous channel (...) are higher than for male participants; the fraud perpetrator’s gender and the interaction with participants’ gender were not significantly associated with anonymous channel reporting intentions. Neither of the two factors nor the interaction between the two factors was associated with reporting intentions to a non- anonymous reporting channel. Results from an additional analysis indicate that male and female participants differ in the extent to which they judge the reduction in personal costs of an anonymous reporting channel compared to a non-anonymous reporting channel and that the reduction in personal costs mediates the relationship between participant gender and anonymous reporting intentions. (shrink)

The growing reliance on non-governmental independent regulators in many social and economic domains, including corporate financial reporting, has brought to the fore concerns over their regulatory accountability. This study looks at one aspect of the regulatory due process-regulatory impact assessment (IA). Drawing on the analytical framework developed by Bovens (Public accountability: a framework for the analysis and assessment of accountability arrangements in the public domain. CONNEX papers, Research Group 2, Democracy and Accountability in the EU, 2006, Eur Law (...) J 13(4): 447–468, 2007), we evaluate the contribution of IA as an instrument for enhancing regulatory accountability in the context of the Financial Reporting Council, an independent regulator for the accountancy profession in the UK. The study’s findings suggest that, despite an increasing level of sophistication in the manner in which IA is used within FRC, the contribution of IA to regulatory accountability remains limited. Specifically, there are concerns as to whether IA is used to achieve a transparent and fair regulatory process or simply to maintain an image of good governance and justify policy decisions that would have been made even in the absence of IA. (shrink)

Conflicts of interest have been reduced to financial conflicts. The National Institutes of Health’s new rules for managing conflicts of interest in medical research, the first major change to the regulations in over 15 years, address only financial ties. Although several commentators urged that the regulations also cover non-financial interests, the Department of Health and Human Services declined to do so. Similarly, the Institute of Medicine’s influential 2009 Conflict of Interest Report focuses almost exclusively on financial (...) conflicts. Institutional policies at academic medical centers and guidance from professional bodies and medical journals also primarily emphasize financial ties. Even broadly worded rules are applied more readily to financial ties than non-financial interests, such as the regulations that restrict institutional review board members with conflicting interests from participating in protocol reviews. (shrink)

Corporate, Social, Ethical and Environmental Reporting should ideally discharge the accountability of an organisation to its stakeholders. Voluntary reporting has been characterised by a dearth of neutral and objective information such that the advocates of SEER recommend that it be made compulsory. Their underlying rationale is that legally specified disclosure requirements and enforcement mechanisms will enhance the quality of such reporting. This paper sets out to explore how realistic this scenario actually is, in view of the conflicting (...) interpretations in the literature on this subject. To that end, a survey of the reporting patterns of 78 of the largest Spanish companies between 2001 and 2003 examines the extent of their compliance with the ICAC-2002 standard, which obliged them to make environmental disclosures in their financial statements. The results suggest that progressive and improved regulation could increase the volume and quality of SEER disclosures. They also suggest, however, that persistent non-compliance means that the problems associated with voluntary disclosure still exist. Finally, through an impression management perspective, the study reveals, the diverse strategies, ranging from dismissal to concealment, that are employed by companies to avoid transparency. As regulation improves and enforcement expectations rise, it becomes more difficult to dismiss compulsory reporting norms. As a result, some firms engage in more complex concealment strategies to attain corporate legitimacy, depriving stakeholders of regulatory information. The latter point serves to reconcile apparently contradictory explanations in the literature as to whether legitimacy theory might explain partial compliance with SEER regulation. (shrink)

Corporate, Social, Ethical and Environmental Reporting should ideally discharge the accountability of an organisation to its stakeholders. Voluntary reporting has been characterised by a dearth of neutral and objective information such that the advocates of SEER recommend that it be made compulsory. Their underlying rationale is that legally specified disclosure requirements and enforcement mechanisms will enhance the quality of such reporting. This paper sets out to explore how realistic this scenario actually is, in view of the conflicting (...) interpretations in the literature on this subject. To that end, a survey of the reporting patterns of 78 of the largest Spanish companies between 2001 and 2003 examines the extent of their compliance with the ICAC-2002 standard, which obliged them to make environmental disclosures in their financial statements. The results suggest that progressive and improved regulation could increase the volume and quality of SEER disclosures. They also suggest, however, that persistent non-compliance means that the problems associated with voluntary disclosure still exist. Finally, through an impression management perspective, the study reveals, the diverse strategies, ranging from dismissal to concealment, that are employed by companies to avoid transparency. As regulation improves and enforcement expectations rise, it becomes more difficult to dismiss compulsory reporting norms. As a result, some firms engage in more complex concealment strategies to attain corporate legitimacy, depriving stakeholders of regulatory information. The latter point serves to reconcile apparently contradictory explanations in the literature as to whether legitimacy theory might explain partial compliance with SEER regulation. (shrink)

The objective of this study is twofold: to examine the patterns that govern social reporting with reference to an Islamic framework and to identify the moral legitimacy factors that influence them. We select 146 publicly listed Sharia‐compliant companies and classify the disclosures in their annual reports according to an Islamic framework that categorises items as either Required, Expected or Desired to indicate the degree of importance each item carries from an Islamic perspective. Based on this framework, we then analyse (...) moral legitimacy factors, specifically the type of Sharia screening body and the proportion of Muslims in the population, that may influence the prioritisation of the different categories of social reporting. We find that disclosures that fall into the Required category of our framework—especially those that relate to companies’ involvement in “haram” activities (activities not permissible in Islam)—are still few among the companies studied. Our research also reveals that both moral legitimacy factors under investigation influence the three categories of social reporting, although in different ways. This research contributes to the existing literature by empirically examining how organisations prioritise their disclosure of virtues and the moral legitimacy factors that influence that prioritisation. (shrink)

This study investigates how managers in firms that have committed fraud strategically use socially responsible activities in coordination with their fraudulent financial reporting practices. Using propensity score matching to select control firms that have a similar probability of fraud in the pre-fraud benchmark period, we find that the corporate social responsibility performance of fraudulent firms in the fraud-committing period is significantly higher compared with the CSR performance of non-fraudulent control firms during this period, and compared with that during (...) their own pre-fraud benchmark periods. This higher CSR performance by fraudulent firms is achieved by means of investing in both stakeholder and third-party CSR categories and by improving in CSR strengths. Furthermore, the increase in CSR performance is more pronounced for fraudulent firms with a weak governance environment, and for firms located in high-religiosity states. Overall, our findings suggest that fraudulent firms strategically adjust their CSR performance to coordinate with their fraudulent financial activities. (shrink)

The Sarbanes–Oxley Act of 2002 requires audit committees of public companies’ boards of directors to install an anonymous reporting channel to assist in deterring and detecting accounting fraud and control weaknesses. While it is generally accepted that the availability of such a reporting channel may reduce the reporting cost of the observer of a questionable act, there is concern that the addition of such a channel may decrease the overall effectiveness compared to a system employing only non-anonymous (...) reporting options. The rationale underlying this concern involves the would-be reporter’s likelihood of reporting, the seriousness with which the organization treats an anonymous report, and the organization’s ability to thoroughly follow-up the report. Thus, we explore the extent to which the availability of an anonymous reporting channel influences intended use of non-anonymous reporting channels. Further, in response to Sarbanes–Oxley and the environment of financial scandals that led to its passage, many firms are strengthening their internal audit departments, and providing them with greater independence from upper management’s direct control. Accordingly, our examination tests whether the intended use of the internal audit department as an internal reporting channel is greater when the internal audit department is of “high” versus “low” quality. Finally, the study investigates intended reporting behavior across three different cases (e.g., settings). Results show that the existence of an anonymous channel does reduce the likelihood of reporting to non-anonymous channels, that generally the internal audit department quality does not affect reporting to non-anonymous channels, and that case-setting affects the type of channel to be used. Implications from the study are discussed. (shrink)

Corporate social reporting, while not mandatory in most countries, has been adopted by many large companies around the world and there are now a variety of competing global standards for non-financial reporting, such as the Global Reporting Initiative and the UN Global Compact. However, while some companies (e. g., Henkel, BHP, Johnson and Johnson) have a long standing tradition in reporting non-financial information, other companies provide only limited information, or in some cases, no information (...) at all. Previous studies have suggested that there are, country and industry-specific, differences in the extent of CSR reports (e. g., Kolk et al.: 2001, Business Strategy and the Environment 10, 15-28; Kolk: 2005, Management International Review 45, 145-166; Maignan and Ralston: 2002, Journal of International Business Studies 33(3), 497-514). However, findings are inconclusive or contradictory and it is often difficult to compare previous studies owing to the idiosyncratic methods used in each study (Graafland et al.: 2004, Journal of Business Ethics 53, 137-152). Furthermore, previous studies have relied mainly on simple measures, such as word counts and page counts of reports, to compare the extent of reporting that may not capture significant differences in the content of the reports. In this article, we seek to overcome some of these deficiencies by using textual analysis software and a more robust statistical method to more objectively and reliably compare the CSR reports of firms in different industries and countries. We examine a sample of leading companies in four countries (US, UK, Australia, and Germany) and test whether or not membership of the Global Compact makes a difference to CSR reporting and is overcoming industry and country specific factors that limit standardization. We conclude that GlobalCompact membership is having an effect only in certain areas of CSR reporting, related to the environment and workers, and that businesses from different countries vary significantly in the extent to which they promote CSR and the CSR issues that they choose to emphasize in their reports. These country differences are argued to be related to the different institutional arrangements in each country. (shrink)

This paper explores one organisation’s journey into non-financial reporting, initially motivated by a crisis in public confidence that threatened the organisation’s legitimacy to the present with the organisation embracing integrated reporting. The organisation’s journey is framed through a legitimation lens and is illustrated by aligning internal reflections with external outputs guided by predominant paradigms of good practice, such as the GRI guidelines and more recently integrated reporting 〈IR〉. We find that the organisation’s relationship with external guidelines (...) has evolved from pragmatic adoption as a means of seeking external legitimation to the present position where those that prepare external reports are informed by the organisation’s strategic positioning and not constrained by the promulgation of voluntary guidelines. From the case study, we suggest that the International Integrated Reporting Council may face two hurdles: First, organisations may define social norms based on a broader definition of stakeholders than the definition currently published by the IIRC. The second hurdle is to convince report preparers that adopting integrated reporting 〈IR〉 will positively impact on capital flows. (shrink)

This paper reports on an exploratory study of the preferences of users of non-financial reporting for regulatory or voluntary approaches to integrated reporting. While it is well known that companies prefer voluntary approaches to non-financial reporting, considerably less is known about the preferences of the users of non-financial information. IR is the latest development in attempts over 30 or more years to broaden organisational non-financial reporting and accountability to include the wider social (...) and environmental impacts of business. It promises to provide a more cohesive and efficient approach to corporate reporting by bringing together financial information, operational data and sustainability information to focus only on material issues that impact an organisation’s ability to create value in the short, medium and long term. The study found more support for voluntary approaches to IR as the majority of participants thought that it was too early for regulatory reform. They suggested that IR will become the reporting norm over time if left to market forces as more and more companies adopt the IR practice. Over time IR will be perceived as a legitimate practice, where the actions of integrated reporters are seen as desirable, proper, or appropriate. While there is little appetite for regulatory reform, half of the investors support mandatory IR because, in their experience, voluntary sustainability reporting has not led to more substantive disclosures or increased the quality of reporting. There is also evidence that IR privileges financial value creation over stewardship, inhibiting IR from moving beyond a weak sustainability paradigm. (shrink)

The aim of this study is to examine whether gender diversity on audit committees influences financial reporting quality by using panel data of Spanish listed firms. The financial reporting quality of firms is measured by the type of opinion received in the audit report. We estimate various panel data models of audit opinions and control for factors that are traditionally found to impact audit opinions. This study provides evidence to support the hypotheses that the percentage of (...) females on ACs reduces the probability of qualifications due to errors, non-compliance or the omission of information. Furthermore, the results also find that the percentage of female directors on ACs, the percentage of independent female directors on ACs and ACs chaired by females increase the likelihood of further transparency by disclosing audit reports with uncertainties and scope limitation qualifications. (shrink)

Using an experiment with corporate financial managers, we find that when red flags are present in the financial statements under their review, managers identify those red flags and, in turn, have greater concerns over earnings quality. In addition, when pressure to meet a financial target is high, managers are more concerned about earnings quality when red flags are present. We also document that when red flags are present, managers are more likely to report both internally to their (...) CEO and, if their concerns are not resolved internally, externally to their auditor. Pressure to meet a financial target increases the likelihood managers report internally, but decreases their likelihood of reporting externally when red flags are present. Additional analyses document reporting differences between CFOs and controllers, and examine the important roles that short-term personal costs, job tenure, and a non-accounting background play in the ethical dilemma managers face when deciding whether to report externally. (shrink)

The frequency of earnings restatements has been increasing over the last decade. Restating previous earnings erodes perceived trustworthiness and competence of management, giving firms strong incentives to take actions to enhance perceived credibility of future financial reports [Farber, D. B.: 2005, The Accounting Review 80(2), 539–561.]. Using an experimental case, we examine the ability of post-restatement actions taken by a firm to positively influence non-professional investors’ perceptions of management’s financial reporting credibility. Our examination considers credibility judgments following (...) two types of restatements – those resulting from fraud in which the character, ethics, and values of an organization may be called into question [cf. Copeland, Jr., J. E.: 2005, Accounting Horizons 19(1), 35–43.], and those resulting from non-fraud (i.e., aggressive accounting). Based on the information in the experimental case, non-professional investors take the role of potential equity investors and make a judgment about management’s financial reporting credibility after reviewing a set of post-restatement actions taken by a firm. The possible actions include changes in four corporate governance mechanisms (i.e., internal audit function, external audit firm, board of directors, CFO) and a buyback of company stock. Our results provide an important contribution to the literature by demonstrating that among non-professional investors, perceptions of management’s financial reporting credibility are affected both by the post-restatement action taken and the nature of the restatement. These results offer insight into the formation of a key credibility judgment made by non-professional investors following a trust-destroying event, an earnings restatement. (shrink)

The frequency of earnings restatements has been increasing over the last decade. Restating previous earnings erodes perceived trustworthiness and competence of management, giving firms strong incentives to take actions to enhance perceived credibility of future financial reports [Farber, D. 2005, The Accounting Review 80, 539-561.]. Using an experimental case, we examine the ability of post-restatement actions taken by a firm to positively influence nonprofessional investors' perceptions of management's financial reporting credibility. Our examination considers credibility judgments following two (...) types of restatements -those resulting from fraud in which the character, ethics, and values of an organization may be called into question [cf. Copeland, Jr., J. E.: 2005, Accounting Horizons 19, 35-43.], and those resulting from non-fraud. Based on the information in the experimental case, non-professional investors take the role of potential equity investors and make a judgment about management's financial reporting credibility after reviewing a set of postrestatement actions taken by a firm. The possible actions include changes in four corporate governance mechanisms and a buyback of company stock. Our results provide an important contribution to the literature by demonstrating that among non-professional investors, perceptions of management's financial reporting credibility are affected both by the postrestatement action taken and the nature of the restatement. These results offer insight into the formation of a key credibility judgment made by non-professional investors following a trust-destroying event, an earnings restatement. (shrink)

This study examines whether private information exchange between institutional investors and public companies in engagement dialogs on sustainability issues improves the publicly disclosed measurements of the target company’s financial and non-financial performance and transparency. It uses a unique dataset containing 326 private reports related to environmental, social, and anti-corruption recommendations to address material incidents among publicly traded MSCI World Index portfolio companies of Nordic institutional investors. The results indicate that target companies appear to have similar values with matched (...) companies on sustainability performance and transparency ratings in the 3 years following the initiation of private reporting. Unexpected sustainability incidents are subsequently reflected in the next year’s fall in the market value of target companies relative to MSCI World Index. This paper provides empirical evidence for the legitimacy-based provision of private sustainability information used in a larger disclosure system of public companies. (shrink)

We investigate the effectiveness of corporate social responsibility disclosure in protecting corporate reputation following financial restatements. As expected under legitimacy theory, firms can signal their legitimacy via nonfinancial disclosure after the negative effects of financial restatements. Our results show that restating firms make substantial improvements to overall CSR disclosure quality by changing their standalone reports to a more conservative tone, increasing readability and report length, even though they strategically disclose less forward-looking and sustainability-related content. Such improvements are more (...) pronounced in restating firms with prior low-quality CSR disclosure. Moreover, restating firms with CSR disclosure have smaller forecast errors than non-CSR disclosers, yet the change in CSR disclosure after restatements does not further improve analyst forecast accuracy. Finally, we find that compared with nondisclosers, restating firms with CSR disclosure suffer smaller firm value losses. Overall, the evidence supports the view that consistent CSR reporting alleviates reputational damage and plays an insurance-like or value protection role during crisis periods. (shrink)

Background: Financial conflict of interest in clinical research is an area of active debate. While data exist on the perspectives and roles of academic institutions, investigators, industry sponsors, and scientific journals, little is known about the perspectives of potential research participants.Methods: The authors surveyed potential research participants over the internet, using the Harris Interactive Chronic Illness Database. A potential research participant was defined by: self report of diagnosis by a health care professional and willingness to participate in clinical trials. (...) Email invitations were sent to 20 205 persons with coronary artery disease, breast cancer, or depression; a total of 6363 persons were screened; of these, 86% or 5478 met inclusion criteria and completed the survey. The outcome measures were respondents’ ratings on: importance of knowing conflict of interest information, whether its disclosure ought to be required, and its effect on willingness to participate—across seven widely discussed scenarios of financial conflicts of interest .Results: Majority responded that knowing conflict of interest information was “extremely” or “very” important; a larger majority felt financial conflicts of interest should be disclosed as part of informed consent . In all seven scenarios, a majority was still willing to participate but in some scenarios a sizable minority would be wary of participation. Respondents were more wary of individual than institutional conflicts of interest. Illness group and sociodemographic factors had modest effects and did not affect the main trends.Conclusions: The prevailing practice of non-disclosure of financial conflicts of interest in clinical research appears contrary to the values of potential research participants. (shrink)

A growing public awareness of the potential negative impacts of corporate activities on the natural environment and society compels large companies to invest increasing resources in the communication of their responsible conduct. This article employs Appraisal theory in a comparative analysis of BP’s and IKEA’s 2009 social reports, each company’s record of their non-financial performance. The main objective is to explore how, through Appraisal resources, BP and IKEA construct their corporate identity and relationship with their stakeholders. The analysis reveals (...) two markedly different approaches to the construction of a responsible corporate identity. While BP deploys interpersonal resources to portray itself as a trustworthy and authoritative expert, IKEA discloses itself as a sensitive and caring corporation, engaged in a continual effort to improve. These differences are interpreted in light of the legitimization challenges the two companies face. (shrink)

I examine social capital’s impact on financial reports. Based on the social capital literature, I predict that the quality of the financial reports is higher when a firm is headquartered in a region with high social capital. Consistent with this prediction, I find that the firms that are headquartered in this type of region in the USA have a lower probability of committing fraud by misrepresenting financial information. Further, I find that the firms in regions with high (...) social capital have lower levels of discretionary accruals and much more readable annual reports. (shrink)

Companies that have joined the United Nations Global Compact are required to submit a Communication on Progress, which is an environmental, social, and governance report, to the UNGC every year. If they fail to do so, they are marked and listed as non-communicating on the UNGC website. Using the event study methodology, this study shows that a company that fails to report to the UNGC is penalized in the financial markets with an average cumulative abnormal return of −1.6% over (...) a period of 5 trading days around the event. Although a major critique against the UNGC is that the initiative’s voluntary nature and its lack of external monitoring and sanction mechanisms render it ineffective in terms of the business participants’ implementation of the UNGC principles into their operations, this result suggests that investors may be able to pressure UNGC business participants to increase their compliance with the UNGC requirements and to “walk the talk.”. (shrink)

Integrated reporting, as a novel corporate reporting approach, focuses on how six forms of capital promote corporate value. This paper explores whether this kind of multiple capitals disclosure framework has an impact on the capital market. Using a sample of Chinese A-share firms from 2012 to 2016, we examine the relationship between MCD quality and firm value. The results indicate that a higher MCD quality leads to a greater firm value. Our results are robust to a variety of (...) sensitivity tests. Further evidence suggests that MCD quality could increase profitability by affecting the decision-making of non-financial stakeholders and enhance the value relevance of financial information by affecting the decision-making of investors. The paper helps understand how the IR approach affects the perception of investors on the value of a firm. The findings of the paper are of interest to academics, corporate management, investors, and governmental officials. (shrink)

The article examines the effects of non-financial disclosure on corporate social responsibility. We conceptualise trade-offs between two ideal types in relation to CSR. Whereas self-regulation is associated with greater flexibility for businesses to develop best practices, it can also lead to complacency if firms feel no external pressure to engage with CSR. In contrast, government regulation is associated with greater stringency around minimum standards, but can also result in rigidity owing to a ‘one-size-fits-all’ approach. Given these potential trade-offs, we (...) ask how mandatory non-financial disclosure has been shaping CSR practices and examine its potential effectiveness as a regulatory instrument. Our analysis of 24 OECD countries using the Asset4 database shows that firms in countries that require non-financial disclosure adopt significantly more CSR activities. However, we also find that NFD regulation does not lead to lower levels of corporate irresponsibility. Furthermore, our analysis demonstrates that, over time, the variation in CSR activities declines as firms adopt increasingly similar practices. Our study thereby contributes to understanding the impact of government regulation on CSR at firm level. We also discuss the limits of mandatory NFD in addressing regulatory trade-offs between stringency and flexibility in the field of corporate social responsibility. (shrink)

The term collaborative economy itself is relatively new, and according to the European Commission, the term is used interchangeably with the term sharing economy. The term SE was frequently used when early models, such as Airbnb or ZipCar, appeared and gained popularity, especially in the United States, but it was afterwards substituted with the term CE in the European contexts. The country reports in this collection often use the two terms interchangeably, further illustrating the fact that a generally agreed definition (...) is still missing. However, the ambition driving the term CE is to create specific European economic models with greater emphasis on the community’s involvement. In Europe, it is still the case that the definition of the CE and SE remains fuzzy, including both non-profit and for-profit models, supported by both monetary and non-monetary exchanges among participants. The phenomenon is complex, covering various fields of activity, as well as operating at various levels, ranging from the international to the national, regional, and local. Some definitions focus mostly on sustainability, while others highlight technological and financial aspects and business models specific to the phenomenon. This chapter is organized as follows. First, a short overview of the basic theoretical approaches to CE is presented. Further, the structure of the book is discussed in detail, and the text closes with a summary. M4 - Citavi. (shrink)

The term collaborative economy itself is relatively new, and according to the European Commission, the term is used interchangeably with the term sharing economy. The term SE was frequently used when early models, such as Airbnb or ZipCar, appeared and gained popularity, especially in the United States, but it was afterwards substituted with the term CE in the European contexts. The country reports in this collection often use the two terms interchangeably, further illustrating the fact that a generally agreed definition (...) is still missing. However, the ambition driving the term CE is to create specific European economic models with greater emphasis on the community's involvement. In Europe, it is still the case that the definition of the CE and SE remains fuzzy, including both non-profit and for-profit models, supported by both monetary and non-monetary exchanges among participants. The phenomenon is complex, covering various fields of activity, as well as operating at various levels, ranging from the international to the national, regional, and local. Some definitions focus mostly on sustainability, while others highlight technological and financial aspects and business models specific to the phenomenon. This chapter is organized as follows. First, a short overview of the basic theoretical approaches to CE is presented. Further, the structure of the book is discussed in detail, and the text closes with a summary. (shrink)

This research applies the theory of planned behavior to corporate managers’ decision making as it relates to fraudulent financial reporting. Specifically, we conducted two studies to examine the effects of attitude, subjective norm and perceived control on managers’ decisions to violate generally accepted accounting principles (GAAP) in order to meet an earnings target and receive an annual bonus. The results suggest that the theory of planned behavior predicts whether managers’ decisions are ethical or unethical. These findings are relevant (...) to corporate leaders who seek to improve ethical work climates of organizations and to many regulators, accountants, corporate governance officials and investors. (shrink)

Fraudulent financial reporting, financial statements with errors so material as to require restatement, and biased reporting marred by defects such as managed earnings have plagued financial reporting in many countries in recent years. All of those failures are ethics failures that represent breaches of fiduciary duties by individuals who accepted responsibilities but did not fulfill them. The financial reporting system practiced in America is viewed by the parties involved in it as generally (...) satisfactory. However, according to another view, the interests of those primarily and secondarily responsible for those reports conflict with the interests of the intended beneficiaries, or users, of the corporate financial statements. A more realistic view of the actual operation of that reporting system shows that it is fundamentally flawed. Primary responsibility for failures rests with top management and financial management of the reporting corporation who are so strongly motivated to render favorable reports on their stewardship that they neglect their fiduciary responsibilities to investors. Secondary responsibility falls on independent auditors who are so heavily influenced by enterprise management that they, too, fail in carrying out their responsibilities to users of the audited financial statements. Ethics compromises are also found in the performances of academic accountants and members of accounting standards-setting bodies. The conflict between managements interest in reporting its performance in a favorable light and investors interest in decision-useful financial information will always exist and require regulation. However, changes in those regulations and in the basic governance arrangements involving shareholders, management, and auditors could reduce the opportunities and temptations for failures in carrying out fiduciary responsibilities. Most importantly, the close relationships between auditors and management must be loosened in favor of closer relationships between auditors and investors. (shrink)

In response to numerous recent cases involving materially misstated financial information arising from fraudulent financial reporting, companies, auditors, and academics have increased their focus on strengthening internal controls as a means of deterring such unethical behaviors. However, prior research suggests that stronger controls may actually exacerbate the very opportunistic behavior the controls are intended to curb. The current study investigates whether the efficacy of an implemented control is conditioned on not only the strength of the control, but (...) also on how the firm frames the purpose for implementing the control. A monitoring purpose frames controls as reducing managers’ opportunities to engage in self-interested behavior, while a coordinating purpose frames controls as facilitating coordination between the firm and its managers. We posit that the efficacy of stronger controls to reduce unethical fraudulent reporting depends on the control frame. Using an experiment, this study investigates the interactive effect of control strength and control frame on managers’ fraudulent reporting decisions. As predicted, our results show that when controls are framed for monitoring purposes, stronger controls result in less fraudulent reporting than weaker controls. Conversely, when controls are framed for coordinating purposes, stronger controls result in more fraudulent reporting than weaker controls. Our results suggest that an inconsistency between the firm’s choice of the control strength and the control frame reduces the efficacy of the implemented control to curb unethical reporting behaviors. Furthermore, supplemental analysis shows that managers’ rationalization helps explain the interactive effect of control strength and communicated control purpose on fraudulent reporting. (shrink)

Non-financial interests, and the conflicts of interest that may result from them, are frequently overlooked in biomedicine. This is partly due to the complex and varied nature of these interests, and the limited evidence available regarding their prevalence and impact on biomedical research and clinical practice. We suggest that there are no meaningful conceptual distinctions, and few practical differences, between financial and non-financial conflicts of interest, and accordingly, that both require careful consideration. Further, a better understanding of (...) the complexities of non-financial conflicts of interest, and their entanglement with financial conflicts of interest, may assist in the development of a more sophisticated approach to all forms of conflicts of interest. (shrink)

Under present accounting rules, lessees frequently structure contracts for leased assets, in situations where they enjoy benefits similar to outright ownership, in a way that keeps both the leased assets and related liabilities off their books. This method of accounting creates off-balance sheet financing and is called operating lease accounting. The paper debates the ethicality of intentionally structuring lease contracts to avoid disclosing leased asset and liability amounts and describes the “slippery slope” of rule-based accounting for synthetic leases and special (...) purpose entities, that, in the author’s opinion, led to the accounting debacles at Enron and other companies. The ethical intent that is implicit in the Securities and Exchange Commission and Financial Accounting Standards Board regulations is discussed and suggestions for improving the ethicality of financial reporting are provided. (shrink)

The readability of 10-K reports, in terms of linguistic complexity, determines the usefulness of information disclosure for stakeholders, particularly individual investors. Since investors largely depend on the financial communication in 10-K reports, firms have an ethical and legal responsibility to present disclosures in a language investors can understand. However, motivated by self-interest, managers obfuscate such disclosures to mask their own actions and hide unfavourable information. Building on the managerial obfuscation hypothesis grounded in stakeholder-agency and ethical-sensitivity theories, I hypothesize and (...) empirically test the relationship between board gender diversity and the readability of narrative disclosure in 10-K reports. Based on a relatively large sample of Russell 3000 firms for the years 2002–2018, I find a significant positive impact of BGD on 10-K reports’ readability, which in turn improves firm performance. Channel analysis reveals that the findings are driven by female independent directors, and their representation on audit and compensation committees; however, board activity does not appear to drive this relationship. Finally, I find that although gender discrimination in the appointment of directors spurs complex readability, the BGD-readability relationship is consistent in gender-biased and non-discriminant firms. I also check the robustness of our main empirical results in several ways. My study has important regulatory and managerial implications in that corporate governance is an important determinant of the readability of disclosure documents. (shrink)

This article proposes and empirically tests a theoretical framework incorporating Reidenbach and Robin’s (J Bus Ethics 10(4):273–284, 1991 ) conceptual model of corporate moral development. The framework is used to examine the relation between governance and business ethics, as proxied by diversity management (DM), and financial reporting quality, as proxied by the magnitude of earnings management (EM). The level of DM and governance quality are measured in accordance with the ratings of Jantzi Research (JR), a leading provider of (...) social and governance research for institutional investors. This DM score is part of an index developed by JR that investment managers use to integrate DM criteria into their investment decisions. As expected, a negative relation between corporate DM development and financial reporting quality is found while controlling for other factors known in the literatures on governance and accounting choices to affect earnings quality. Despite some caveats presented in conclusion, this study contributes to the ethics, governance, and financial reporting literatures by studying the dynamics between governance and ethics in the prevention of EM. (shrink)

In the last decade, there has been increased recognition of the importance of disclosing and managing non-financial conflicts of interests to safeguard the objectivity, integrity, and trustworthiness of scientific research. While funding agencies and academic institutions have had policies for addressing non-financial interests in grant peer review and research oversight since the 1990s, scientific journals have been only recently begun to develop such policies. An impediment to the formulation of effective journal policies is that non-financial interests can (...) be difficult to recognize and define. Journals can overcome this problem by providing guidance concerning the types of non-financial interests that should be disclosed, including direct research interests, direct professional interests, expert testimony, involvement in litigation, holding a leadership position in a non-governmental organization, providing technical or scientific advice to a non-governmental organization, and personal or professional relationships. The guidance should apply to authors, editors, and reviewers. (shrink)

We examine three characteristics of audit committees and their impact on the financial reporting quality for Singapore-listed companies. The main finding is that financial reporting quality will be higher if audit committees have mixed expertise in accounting, finance, and/or supervisory. In addition, we do not find evidence that incremental independence of audit committees enhances financial reporting quality because audit committees already consist of a majority of independent directors. Finally, we fail to find any impact (...) of overlapping membership on audit and remuneration committees on financial reporting quality. Overall, the results have policy implications on improving corporate governance effectiveness in terms of financial reporting quality. (shrink)

The purpose of this paper is to describe briefly the institutional arrangements which condition the activities of accountants in the United States; to heighten an awareness of the values which are embodied in the existing structures of accountability; to appraise the consistency with which the established ideals of society have been actualised in financial reporting, and to discern the shape of the emerging history of financial reporting in the light of new values and possibilities. I suggest (...) that the tradition of fair presentation in financial reporting is in danger of being eliminated by a purely political response to previous abuses. Mandatory accounting standards do have a role in preventing these abuses, but they can also be seen as instruments of distributive justice. To promote an awareness and discussion of the issues, I point out some of the goals and values underlying a few of the major structures designed for the distribution of economic costs and benefits. (shrink)

One of the fundamental principles of good corporate governance is transparency, i.e., the disclosure of private information to external stakeholders, so that they may make judgments and decisions relating to the corporation. Equally important, but less discussed, is the competing value that corporations need to protect legitimate secrets. Corporations thus need a communication strategy for dealing with external stakeholders which addresses the conflict between disclosure and secrecy. This article focuses on an important element of that communication strategy in the context (...) of financial reporting: the possibility that corporate insiders may consider it in their interest, or in the interest of specific stakeholders, to alter or manipulate the financial information that it discloses publicly. Using concepts from the corporate governance and financial reporting literatures, it addresses the ethical question of who (management or the board of directors) should be responsible for making the fundamental strategic choices whether and (if so) how the corporation alters or manipulates the financial information. This article argues that the board of directors is responsible for formulating (and monitoring) the corporation's communication strategy, and that management is responsible for carrying it out. (shrink)

Malaysia hosts a significant number of refugees, asylum-seekers and migrant workers. Healthcare access for these individuals has always proved a challenge: language barriers, financial constraints and mobility restrictions are some of the frequently cited hurdles. The COVID-19 pandemic has exacerbated these existing inequalities, with migrants and refugees bearing the brunt of chronic systemic injustices. Providing equitable healthcare access for all, regardless of their citizenship and social status remains an ethical challenge for healthcare providers, particularly within the framework of a (...) resource-limited healthcare system. Inclusive healthcare and socio-economic policies are necessary to ensure every individual’s equal opportunity to attain good health. The collective experiences of refugees and migrants in the pursuit of healthcare, as highlighted by the two cases described, showcases the importance of equity in healthcare access and the detrimental implications of non-inclusive healthcare and socio-economic policies. (shrink)

The discussion about the relationship between tone at the top and financial reporting practices has been primarily focused on the oversight role played by the board of directors and other structural elements of corporate governance. Another relevant determinant of tone at the top is the corporate narrative language, since it is a fundamental way in which the chief executive officer enacts leadership. In this study, we empirically explore the association between financial reporting aggressiveness and five thematic (...) indicators capturing different traits of ethical leadership from 535 annual letters to shareholders. We find that aggressive financial reporting is positively associated with CEO letters using a language which is resolute, complex, and not engaging. Our empirical findings highlight the importance of examining discretionary corporate narratives for the auditing process and the role of tone at the top in influencing accounting practices. (shrink)

In the late 1980s there was a series of sensational business scandals in the United Kingdom. There was particular public outrage at the plundering of pension funds by Robert Maxwell, at the failure of auditors to expose the impending bankruptcy of the Bank of Credit and Commerce International, and at the apparently undeserved high pay raises received by senior business executives. The City of London responded by creating a special committee to examine the financial aspects of corporate governance. This (...) paper describes the resulting Code of Best Practice produced by the Cadbury Committee. To reduce the power of executive directors in the boardroom the Code recommends a greater role for non-executive directors, changes in board operations, and a more active role for auditors. The paper reviews the various published reactions to the Cadbury Report, and concludes that the Code is unlikely to halt the incidence of business scandals in the United Kingdom. (shrink)

We examine the equity valuation effect of press releases of upgrades or downgrades reflected in the Covalence Ethical Quote, an index ranking the ethical performance of multinational firms. The index is updated quarterly and is comprehensive enough to include 45 criteria reflecting working conditions, impact of product, impact of production, and company institutional impact. Thus, it captures many dimensions of firms’ ethical performance that are not accounted for in previous research. Our research encompasses a joint test of the value relevance (...) of the index itself and the impact of ethical reputation on a firm’s value. We find first a significant causal relationship between stock market reactions and changes in the CEQ. Specifically, disclosures of positive changes in firm ethical performance cause increases in firm value. Second, cross-sectional analysis indicates a positive association between changes in firm ethical performance and both its financial performance and its financial reporting quality. Collectively, these results suggest that the CEQ conveys information that is useful to investors. Further, corporate measures taken to increase ethical performance are associated with positive benefits to shareholders. Finally, investors have concluded that good news about their firms’ efforts to be ethical is worth the cost. (shrink)

This study examines the relationship between corporate commitment to business ethics and financial reporting quality. We posit that companies with a higher level of ethical commitment exhibit better quality financial reporting than those with a lower level of ethical commitment. Consistent with our prediction, we find that companies with a higher level of ethical commitment are engaged in less earnings management, report earnings more conservatively, and predict future cash flows more accurately than those with a lower (...) level of ethical commitment. We also find that corporate commitment to business ethics has perpetuating effects on future financial reporting quality. (shrink)

In recent years, the “financial-like” behavior of non-financial enterprises has contributed to the “off real to virtual,” which has seriously restricted the virtuous cycle of finance and economy. This study selects non-financial enterprises listed on Chinese A-shares from 2008 to 2019 as the research sample, and empirically analyzes the impact of CEOs’ financial background on the shadow banking business of non-financial enterprises and its mechanism. The results show that: CEOs’ FB has a positive effect on (...) shadow banking business of non-financial enterprises; among which, the positive effect generated by non-banking FB is stronger. The conclusions still hold after robustness tests by replacing the measurement of variables, controlling for other shocks, changing the parameter estimation method, and considering the endogeneity problem. The mechanism analysis reveals the positive effect mainly by reducing the level of entity investment by enterprises. The heterogeneity analysis finds that, on the one hand, with respect to the internal micro characteristics of enterprises, the positive effect is more significant in state-owned enterprises, non-manufacturing enterprises, and non-growth stage enterprises. On the other hand, with respect to the external macro environment, the positive effect is more significant in periods of easy monetary policy, in industries with a higher competition or in regions with a better institutional environment. This study reveals the intrinsic mechanism of CEOs’ FB and non-financial enterprises’ shadow banking business, enriches the study of the influencing factors of non-financial enterprises’ shadow banking business, and provides micro-level empirical support to alleviate the “off real to virtual” of the economy. (shrink)

By addressing social issues, rather than maximizing profits, social enterprises are said to contribute to the well-being of societies. In this paper, we test whether social enterprises fulfil this expectation. The paper applies regression analysis to a unique dataset obtained by merging survey data from the Global Entrepreneurship Monitor with official statistics on social enterprises in Luxembourg. Results suggest that social enterprises contribute to subjective well-being, which is an encompassing measure of people’s satisfaction with their own life. We find that (...) when the share of social enterprises in a city increases, the ill-being of poor and unemployed people declines. Therefore, policy makers who seek to increase the well-being of economically disadvantaged people could adopt policies to promote the creation of social enterprises. (shrink)

Business Ethics, the Environment &Responsibility, Volume 31, Issue 3, Page 823-845, July 2022.