The International Journal of Accounting

Synopsis

The research problem

This study examines the relationship between carbon management system quality and firm performance and investigates the mechanisms through which a carbon management system relates to firm performance.

Motivation or theoretical reasoning

Despite growing attention from academia and practice on carbon accounting in recent years, little is known about firms’ strategic implementation of carbon management systems and their impact on firms’ financial outcomes. Drawing on the resource-based view and institutional theory, this study argues that carbon management system implementation can create competitive advantages for firms through product differentiation and cost leadership. However, adopting quality management systems for carbon mitigation can be costly for firms. Additionally, not all firms would achieve such a differentiation advantage through a carbon management system.

The test hypotheses

H₁: There is no relationship between the quality of a carbon management system and firm financial performance.

H₂: Carbon-intensive sectors have no moderating effect on the relationship between the quality of a carbon management system and firm financial performance.

Target population

Corporate managers and stakeholders including investors, international regulators, and standard settees.

Adopted methodology

Ordinary least square regressions.

Analyses

Corporate financial performance is measured by return on assets, calculated as earnings before extraordinary items divided by total assets at fiscal year-end. Our independent variable of interest is the quality measure of a carbon management system (QCMS). Following () and (), QCMS is calculated as the average equal weighted sum of the standardized values from the 10 elements of a carbon management system. For additional tests, alternative performance measures (e.g., Tobin’s Q, return on equity, operating return on assets [ROA], and cash flow from operating activities to total assets) and disaggregated ROA components are employed as dependent variables.

Findings

We find that a firm’s carbon management system quality is positively associated with its financial performance. A better-quality carbon management system is especially associated with higher revenues, margins, and R&D expenditures. In addition, individual carbon management system components exhibit heterogeneous influences on financial performance. Specifically, the areas related to carbon disclosure and external carbon assurance have an incremental impact on financial performance. The positive association between a carbon management system and financial performance is stronger for firms operating in carbon-intensive sectors and firms with a higher level of carbon emissions. The carbon regulation affects the sensitivity of financial performance differently in intensive and non-intensive sectors in response to carbon management system quality.

Synopsis

The research problem

This paper explores the association between postmaterialistic culture and corporate tax-avoidance behavior.

Motivation

Although corporate tax avoidance is prevalent, the degree of tax avoidance varies across countries. Previous studies have suggested that national culture is associated with the level of tax avoidance (e.g., corruption culture in [DeBacker, J., Heim, B. T., & Tran, A. (2015). Importing corruption culture from overseas: Evidence from corporate tax evasion in the United States. Journal of Financial Economics, 117(1), 122–138. https://doi.org/10.1016/j.jfineco.2012.11.009], and societal trust in [Kanagaretnam, K., Lee, J., Lim, C. Y., & Lobo, G. J. (2018). Societal trust and corporate tax avoidance. Review of Accounting Studies, 23(4), 1588–1628. https://doi.org/10.1007/s11142-018-9466-y], among others). Unlike prior studies focusing on longstanding cultural factors, this paper examined the association between corporate tax avoidance and an important current culture trend, i.e., postmaterialistic culture.

The test hypotheses

There is no association between postmaterialistic culture and corporate tax avoidance.

Target population

Various stakeholders that care about corporate tax avoidance including the government, policymakers, investors, auditors, and firm managers.

Adopted methodology

Linear Probability Model and Ordinary Least Squares regressions.

Analyses

We examined the association between postmaterialistic culture and corporate tax-avoidance behavior. We used a proprietary dataset of China tax audits spanning the 2011–2014 period and tested the moderating effect of tax enforcement. We also examined the external validity of our results using a cross-country sample from 21 countries over the 1993–2014 period.

Findings

Using a proprietary dataset of China tax audits, we found that firms owned by investors from countries with higher postmaterialism values were less likely to engage in tax-avoidance behavior in China. In addition, we found some evidence that the negative association between postmaterialism and tax avoidance is more pronounced when tax enforcement is stronger, indicating that national culture and formal institutions act as complements. To check the external validity of our main results, we further used a cross-country sample from 21 countries over 22 years. The evidence from the cross-country sample was consistent with the findings obtained from the China tax audits setting.

Synopsis

The research problem

This study investigates whether algorithmic trading matters to post-earnings-announcement drift (PEAD) across 41 countries.

Motivation

The increasing importance of algorithms has sparked interest in how computer-triggered trades affect the formation of securities prices. Thus, a large body of research has emerged to probe the instantaneous impact of algorithmic trading on price discovery; however, little work explores the role of algorithms in efficient pricing of low-frequency financial statements. In addition, the literature on PEAD always highlights firm-level drivers of this phenomenon, whereas its country-level institutional determinants remain silent.

The test hypotheses

H₁: Earnings-announcement algorithmic trading does not impact PEAD.

H₂: Country-level investor protection does not impact the association between earnings-announcement algorithmic trading and PEAD.

H₃: Country-level information dissemination does not impact the association between earnings-announcement algorithmic trading and PEAD.

H₄: Country-level disclosure requirements do not impact the association between earnings-announcement algorithmic trading and PEAD.

Target population

Various stakeholders include market traders, firm managers, regulators, and scholars.

Adopted methodology

Ordinary Least Square (OLS) Regressions.

Analyses

We follow [() Financial Management, 49, 33–67] to measure algorithmic trading using the transaction-level data. Based on a global sample covering 41 markets, we estimate the regression of PEAD on four proxies for algorithmic trading after considering firm-specific controls and fixed effects of country and year.

Findings

We find a negative and significant association between earnings-announcement algorithmic activity and PEAD. The documented relation retains despite addressing the endogeneity problem. Further analyses indicate that algorithmic participation mitigates investor disagreement, alleviates trader distraction, and reduces market friction, thus facilitating efficient pricing of earnings information. Finally, the impact of algorithmic trading on PEAD is more prominent in countries with stronger investor protection, faster information dissemination, and stricter disclosure requirements.