Ownership Structure, Earnings Manipulation, and Organizational Performance: The Case of Jordanian Insurance Organizations

Alrobai F., Alrashed A.A., Albaz M.M.

This research aims to examine the drivers of earnings quality (EQ) in emerging stock markets. By testing the impact of firm attributes and ownership structures on the level of earnings quality. The research followed a mixed-method approach (qualitative and quantitative) and was conducted based on a sample of 75 listed firms in Egypt as an emerging market from 2015 to 2022. The results of the research found that each firm attribute has a mixed impact on earning quality, such as firm size (positive on persistence and no impact on consistency) and ROA (U-shape on persistence and consistency). In addition, ownership structures uniquely and dynamically impact earnings, following positive, U-shape, and N-shape. This research sheds light on the drivers of the earnings quality (firm attributes and ownership structures) in the Egyptian-listed firms and helps policymakers implement appropriate corporate governance mechanisms. Our findings in Egypt can motivate future research to further investigate the most relevant factors that explain variations in earning persistence and consistency as a dimension of financial reporting quality in other emerging markets.

Abu Afifa M., Saleh I., Abu Al-Nadi R.

PurposeThe purpose of this research is to investigate the link between external audit quality and integrated reporting (IR) quality in the Jordanian market, a developing market. Furthermore, the research model considers the mediating effect of earnings management practices and the moderating effect of board gender diversity. As a result, it intends to provide further empirical evidence in this area.Design/methodology/approachThis research investigates its model using data from Jordanian services companies listed on the Amman Stock Exchange (ASE) during the period 2013–2022. With 430 company-year observations, the current research’s sample includes all companies in the research population for which complete data were available during the period under investigation. Data relevant to the research setting were obtained from annual disclosures and the ASE's database.FindingsThe findings of this research show that audit firm size and audit firm specialty have a positive influence on IR quality, but audit firm tenure does not. External audit quality (as proxied by the size, specialty and turnover of the audit firm) had a negative impact on earnings management practices, while earnings management practices had a negative impact on IR quality. Additionally, the findings reveal that earnings management practices completely mediate the relationship between two external audit quality proxies (audit firm size and audit firm specialty) and IR quality. Furthermore, in terms of the moderating impact of board gender diversity, it is obvious that board gender diversity favorably moderates the relationships between all external audit quality proxies and IR quality.Originality/valueUsing agency theory and stakeholder theory, this investigation fills a gap in previous literature by adding scientific explanations and empirical evidence from the Jordanian market, a developing market, in the context of the impact of audit quality on IR quality, mediated by earnings management and moderated by board gender diversity.

Vo D.T., Abu Afifa M., Bui D.V., Van H.V., Nguyen N.

Purpose This paper aims to examine the nexus among cloud-based accounting (CBA), employee job performance (EJP) and operational performance (OPP) in the circumstances of Vietnam, an emerging nation. In which the authors examine EJP as a mediator variable inside the research model. Furthermore, the employee digital skills (EDS) factor is examined as a moderating variable for the CBA-EJP nexus and the CBA-OPP nexus, respectively. Design/methodology/approach The study’s sample was acquired through extensive screening methods. This study used email surveys to acquire data. The survey was sent to 1,200 chief financial officers of Vietnamese firms. For analysis, the ending pattern of 401 e-surveys was used. Findings By using partial least squares structural equation modeling, the results imply that the CBA has a favorable effect on EJP and OPP. Furthermore, EJP favorably mediates the linkage between CBA and OPP, whereas EDS play a significant moderator role in the CBA-EJP nexus and CBA-OPP nexus, respectively. Practical implications This study highlights the crucial role of human factors (i.e. EDS and EJP) for the internal modern applying behaviors (i.e. CBA) and firm value (i.e. OPP) of firms in emerging markets. Therefore, managers should scrutinize the performance of human factors in an essential interval to improve modern applied behaviors and make them more powerful, thus improving the OPP of their firms. Substantially, firm managers should focus on employing the EDS, which enhances the CBA-EJP nexus and the CBA-OPP nexus, respectively. Originality/value This study enlarges the OPP documentation by detailing the beneficial effects of human factors as well as the CBA. Furthermore, the study recognizes the effectiveness of EDS as a moderator variable in the context of developing economies. Finally, this work has been regarded as earlier empirical research that integrates all of the aforementioned components into a single model in emerging economies, particularly Vietnam.

Shaban O.S.

This study aimed to examine the impact of capital adequacy on banking risks in Jordanian commercial banks. In order to achieve the objectives of the study, the quantitative approach was adopted in this study, which focuses on describing the study sample and its variables, and then testing the hypotheses. The study population included all the Jordanian commercial banks in the Amman Stock Exchange (ASE). After verifying the published financial reports, all 13 commercial banks were accredited during the time period (2016–2021). The results of the study concluded that capital adequacy has a statistically significant effect in reducing risks in Jordanian commercial banks. The main recommendation encourages banks to focus on maintaining high levels of capital adequacy in order to reduce both credit risk and liquidity risk.

Al-Shouha L., Khasawneh O., Nur Syahida Wan Ismail W., Mohd Norfadzilah Nik Mohd Rashid N.

Firm value is considered a primary and essential driver for investors when making investment decisions, so they are interested in the quality of the financial data in companies’ annual reports related to firm value in an attempt by the owners to improve the company’s image and raise its value. Therefore, this study examined the relationship between ownership structure and firm value through the mediating role of accrual earnings management. Panel data were extracted from the financial reports of 88 non-financial companies listed on the Amman Stock Exchange for 11 years (2009–2019). The Barron and Kenny, Sobel, and other test approaches were applied to investigate the mediation effect and mediating relationships. The outcomes identified a positive impact of managerial ownership on firm value and a positive impact of foreign ownership on firm value. Also, it showed a negative impact of managerial ownership and foreign ownership on accrual earnings management, while accrual earnings management positively impacted firm value. Regarding mediating relationships, the results identified a mediating effect of accrual earnings management on the relationship between managerial ownership and firm value and a mediating effect of accrual earnings management on the relationship between foreign ownership and firm value. However, accrual earnings management does not mediate the relationship between family ownership and firm value. This shows the importance of reducing accrual earnings management through the identities of investors (managerial and foreign), which helps increase control and improve the value of a company.

Tran T.T., Afifa M.A., Nguyen N.M.

This study strives to describe how the nexus between capital structure (CAS) and firm performance (FIP) changes with and without earnings management (EAM), which previous studies have not fully addressed. For this purpose, we divide the FIP into discretionary performance (DIP) and non-discretionary performance (NDIP). Subsequently, we examine the effect of CAS on both with each studied separately to recognize the conceptual drivers in the nexus between CAS and FIP. We use the dataset of firms listed on Ho Chi Minh Stock Exchange (HOSE) during the period from 2018 to 2022. Our findings reveal that there is a negative and noteworthy impact of CAS proxied by leverage on both DIP and NDIP, which is in line with trade-off theory (TOT) and pecking-order theory (POT). Because non-discretionary accruals (NDA) play an important role in EAM, firm action is consistent with TOT or POT and, thus, this study suggests dividing EAM into discretionary accruals (DA) and NDA to test CAS theories. Additionally, Vietnamese firms use EAM to lessen the negative effect of CAS and firm size. Finally, besides the theoretical contributions, the findings of this study have important empirical implications for managers, shareholders and other stakeholders.

Abu Afifa M.M., Saleh I., Taqatqah F.

Purpose This paper aims to recognize the direct influence of audit quality (AQ) on earnings management practices (EMP) and company value (CV), as well as the mediating role of EMP in the link between AQ and CV. It presents new factual proof from the Jordanian market, which is still in its early stages. Design/methodology/approach A pattern of 43 service firms listed on the Amman Stock Exchange (ASE) was collected for the timeframe (2012–2019), giving an amount of 344 firm-year observances. The data was collected from the annual reports extracted from the ASE’s database and tested with panel data analysis. Findings The results show that audit firm industry specialization positively affects EMP while its size and tenure do not, which implies that its industry specialization does not restrict earnings management but rather leads to an increase in opportunistic behaviors. Audit firm size and audit firm industry specialization positively affect CV, whilst audit firm tenure does not. Additionally, the findings indicate that EMP negatively affect CV, and EMP act as a mediator for the AQ–CV nexus. Research limitations/implications Stakeholders can use the findings to enhance the capacity and effectiveness of Jordan’s fiscal market. For example, our results will boost policymakers’ eagerness to institute suitable statutes improving Jordan’s fiscal market performance. Besides, the results can assist existing and potential investors make sound adjudication by using AQ proxies and earnings management as signals to predict future company’s value. Originality/value The paper differentiates itself from previous papers through initiating a new proposed model by exploring the role of earnings management as a mediator in the nexus between AQ and CV by presenting new factual proof from the Jordanian market.

Saleh I., Afifa M.A., Al-Hawatmah Z., Albakkar O.

This study seeks to analyse the direct association between earnings management (EM), earnings quality (EQ) and the cost of equity capital (CoEC). It also studies the mediating role of EQ and the moderating role of board gender diversity (BGD) in the context of the EM–CoEC nexus. Contradictions in the results of earlier investigations inspired the current study, with the findings filling a gap in the existing literature. This study presented a novel empirical model based on a mediation–moderation model, which sheds light on the mechanism of effect of numerous factors on the CoEC. The findings of this study reveal that the influence of EM practices on EQ is negative. Furthermore, the impact of EM practices on CoEC was positively significant, implying that the more EM practices there were, the higher the CoEC. At the same time, the findings show that EQ has a negative significant influence on CoEC. Additional findings confirm that EQ fully mediates the EM practices–CoEC nexus. Following that, in terms of BGD’s moderating role, the findings indicate that BGD has a significant negative impact on CoEC, and the interaction impact (EM × BGD) is positive and significant.

Abdi S., Soroushyar A.

Purpose The purpose of this study is to examine the impact of anti-money laundering (AML) regulations on accrual earnings management (AEM) and real earnings management (REM) in Iran’s emerging capital market. Design/methodology/approach The panel data regression is used to testing hypotheses. The sample includes 2,020 data and 202 companies listed on the Tehran Stock Exchange (TSE) over a period of ten years from 2012 to 2021. Also, the companies covered in this study include financial and nonfinancial companies. Furthermore, the data related to the research variables were extracted from the annual financial statements and the TSE database. Findings The results show that compliance with AML regulations leads to a reduction in AEM and REM. In other words, companies with higher money laundering (ML) tend to manage their earnings, which is in line with agency theory. Practical implications This study has implication for policymakers and regulators, auditors and managers. Considering the negative impact of AML regulations on earnings management (EM), Iranian auditing firms need to emphasize on the full implementation of AML regulations in TSE. Also, the results of this research may aid policymakers and regulators to detect financial crimes through accounting signals. Originality/value To the best of the authors’ knowledge, this is the first study in an Iran capital market to examine the impact of AML regulations on EM in financial and nonfinancial companies. Previous research has not controlled for the effects of financial companies. Prior studies have not examined the effects of financial companies. In addition, this study differentiates itself from previous studies by introducing a new method for measuring the independent ML variable based on auditor opinions. The obtained data can aid international bodies to better understand compliance with ML regulations in Iran and can reduce their concerns in negotiations.

Eng K.S., Phua L.K., Lok C.

Today, social media has changed the mode of communication, and the way information is disseminated, bringing significant impact to individuals and organisations. Hence, the present study attempts to develop a model in line with Stakeholder Theory to examine stakeholder management as determinants of community involvement information disclosure on social media by Malaysian Public Listed Companies. The study's hypotheses are then tested using regression analyses on 114 Malaysian Public Listed Companies that owned official social media. The findings showed that companies’ reputation and industry sensitivity have a positive relationship with the community involvement information disclosure on social media. Besides, companies under the Star stage of business life cycle also reported marginally significant result. The study attempts to contribute to voluntary disclosure literature by examining factors that motivate companies to engage with social media. This study also provides information to regulators interested in monitoring the corporate social responsibility disclosure on social media.

Abu Afifa M., Saleh I., Al-shoura A., Vo Van H.

PurposeThe direct nexus between board characteristics, earnings management (EM) practices and dividend payout is examined in this study, followed by an examination of the indirect mediation impact of EM practices in the nexus between board characteristics and dividend payout. It aims to provide new empirical evidence from the Jordanian market, which is an emerging market.Design/methodology/approachThe study population consists of all service firms that were listed on the Amman Stock Exchange (ASE) between 2012 and 2019. Due to the lack of availability of their complete data during the period, four service firms were omitted from the population; hence, a sample of 43 service firms was acquired over the time frame (2012–2019), yielding a total of 344 firm-year observations. Moreover, panel data analysis was employed in this study, and data for the study were acquired from yearly reports as well as the ASE's database.FindingsBased on the GMM estimator findings, board size and independence have a negative and significant influence on the EM, but CEO/chairman duality has a positive and significant impact. Simultaneously, the impacts of female representation on the board of directors and the number of board meetings were both positive but insignificant. The findings also found that four board characteristics, including board size, female representation on the board of directors, CEO/chairman duality and the number of board meetings, had a significant negative or positive effect on dividend payout, while board independence did not. Additional findings show that EM practices have a direct negative insignificant effect on dividend payout, whereas EM practices partially mediate the relationship between board characteristics and dividend payout.Research limitations/implicationsThe current study's limitation is that it only searched in Jordanian service firms listed on ASE from 2012 to 2019 to fulfill the study's objectives; thus, we urge that future work explores the study models for other sectors, whether in Jordan or other growing markets such as the Middle East and North Africa.Practical implicationsThe findings of this study may be utilized by analysts, investors and other strategic decision-makers to enhance Jordan's financial market's efficiency and efficacy. These findings will improve policymakers' willingness to impose appropriate constraints, perhaps boosting Jordan's financial market performance and efficacy. These findings may also help investors make more enlightened judgments by utilizing board characteristics and EM factors that predict firm dividend policy.Originality/valueContradictions in the results of earlier investigations inspired the current study, with the findings filling a gap in the existing literature. This study differs from previous studies by constructing a novel research model and analyzing the mediating influence of EM in the nexus between board characteristics and dividend payout.

Nguyen L.

Purpose This study aims to investigate the relationship between corporate sustainability performance and earnings management in emerging East Asian economies. Design/methodology/approach The authors base on the triple bottom line approach to measure corporate sustainability performance. In terms of earnings management, two models are applied to detect real activities manipulation and discretionary accruals. The authors use panel data analysis of 410 listed non-financial firms in emerging East Asian economies from 2016 to 2020 that are collected from the Thomson Reuters Eikon database. Findings The authors find a negative influence of corporate sustainability performance on real activities manipulation and discretionary accruals. The findings highlight the long-term perspective of sustainable development strategies in relation to earnings management. The authors conclude that sustainable firms in emerging East Asia are less likely to engage in earnings management. Practical implications The study would be of interest to investors who need more detailed assessments of financial reporting quality to facilitate their investment decision-making and to policymakers who need more understanding of business practices and reporting behaviors of East Asian firms. Originality/value The study has shed light on the role of corporate sustainability performance in constraining earnings management and the role of corporate ethics in providing transparent and reliable financial reporting in emerging East Asian economies.

Abu Afifa M.M., Saleh I.H., Haniah F.F.

Purpose The purpose of this study is to look at the direct relationship between audit quality, earnings management (EM) practices and company performance, as well as the indirect influence (mediation) of EM practices in the relationship between audit quality and company performance. It offers empirical evidence from the Jordanian market, which is considered an emerging market. Design/methodology/approach The population of this study is represented in Jordanian service companies listed on the Amman Stock Exchange (ASE), with a total of 344 company-year observations. Furthermore, panel data analysis was used in this study, and data for the study were acquired from yearly reports as well as the ASE’s database. Findings Based on generalized method of moments model, the present findings demonstrate that the size of the audit firm and the tenure of the audit firm have a positive and negative influence on EM practices, respectively, but that industry-specialist audit firm has a negative and insignificant effect. EM practices have a negative impact on two company performance proxies (ROA and ROE), but have no effect on earnings per share (EPS). Furthermore, the size of the audit firm has a positive and significant influence on the performance proxies of the company [i.e. return on assets (ROA) and return on equity (ROE)]. The presence of an industry-specialist audit firm has a positive and significant influence on two proxies of company performance (ROE and EPS), but a negative and significant impact on ROA. An audit firm’s tenure has a negative and significant impact on two performance proxies (ROA and EPS), but a positive and significant impact on ROE. Then, EM practices either fully or partially mediate the relationship between audit quality proxies and company performance as assessed by ROA, ROE and EPS. Research limitations/implications The current study’s limitation is that it only searched in Jordanian service companies listed on ASE from 2012 to 2019 to meet the study’s objectives; thus, the authors recommend that future work investigate the study model for other sectors, whether in Jordan or other emerging markets such as the Middle East and North Africa. Another limitation of this study is that the study models lack important variables, which may affect EM and company performance, such as corporate governance and ownership structure characteristics; as a result, the authors recommend that future work includes such variables in future research models to have more explanations in this context. Practical implications Analysts, investors and other strategic decision makers may use the findings of this study to improve the efficiency and efficacy of Jordan’s financial market. These findings will enhance policymakers’ willingness to establish appropriate regulations, which might improve Jordan’s financial market performance and efficacy. These findings may help investors make better judgments by using audit quality proxies and EM indicators, which can forecast business success. Originality/value First, this study distinguishes itself from prior studies through establishing a new research model, by investigating the mediating effect of EM in the relationship between audit quality and company performance. It provides empirical evidence from the Jordanian market; hence, it increases the body of the knowledge in this context. Second, to the best of the authors’ knowledge, this is the first study to look into the link between audit quality, EM and company performance together; hence, the model of this study is developed using agency theory and information asymmetry theory. Third, the current study adds new evidence to the role of audit quality and EM in companies, as well as how audit quality and EM practices affect company performance in emerging markets such as Jordan.