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This thesis examines whether UK companies engage in classification shifting after the introduction of IFRS in 2005. While IFRS was issued to improve the quality of accounting practices and provides users with more useful and valuerelevant information, non-recurring items disclosures is less regulated under IFRS than under UK GAAP. Therefore, firms may have more opportunity to exercise their discretion on the classification of items within the income statement. Previous studies showed weak evidence of misclassification of recurring items within the income statements in the UK prior to the introduction of IFRS. However, it is unclear whether the flexibility under IFRS has affected the misclassification of recurring items within the income statement. The empirical results reveal that managers are more likely to exercise their discretion in the disclosure of non-recurring items following the adoption of IFRS. More specifically, it is found that managers are more likely to misclassify some recurring items as non-recurring before they engage in new debt contracts in the next period, and when classification shifting allows them to report core earnings increases. However, the results reveal that companies do not engage in classification shifting to avoid reporting core loss. This thesis also examines whether external auditors and corporate governance are able to mitigate classification shifting practices. The results show that high quality auditors are less likely to question the proper classification of recurring items. However, high quality internal governance in terms of board and audit committee are more likely to challenge management accounting practices, especially, the disclosure of exceptional items. These inferences are robust to a number of modelling specifications and variable definitions. The results collectively demonstrate that IFRS provides management with greater opportunity to misclassify some recurring items, and while external auditors do not mitigate such practices, strong internal governance do.

Most prior works focus on the effect of IFRS adoption itself on earnings quality using one dimension of earnings quality, and cover the early years of adoption. The present thesis seeks to investigate how country-specific factors shape accounting quality under IFRS across 23 countries between 2007 and 2010, the global financial crisis period. This is the first study to examine the effect of country-specific factors, using recent indicators, on both accruals and real earnings management under IFRS. It is also the first to explore the impact of country-specific factors on conditional conservatism and value relevance together, which highlights earnings quality from contracting perspective and equity valuation perspective at the same time. The results of the first empirical study indicate that overstating earnings via accruals is less pronounced in countries with strong investor protection, strict enforcement, and large capital markets, and that managing earnings upward utilizing real actions is greater in such countries. Further, the results show that firms engage in both types of earnings management at the same time. The results of the second empirical study show that earnings are more conservative in countries having strong investor protection and rigorous enforcement of accounting standards, and that the value relevance of book values is greater in those countries. Further, the strength of capital markets has no impact on the extent of conservatism, whereas the value relevance of earnings is greater in large capital markets. Overall, the main findings of this thesis suggest that country-specific factors still govern accounting quality under IFRS and that they drive different ‘quality’ earnings. The IASB should emphasise the enforcement mechanisms, not only the mere adoption of IFRS. Auditors and regulators should also consider the possible negative effects of real activities to which managers switch in a bid to escape coming under scrutiny in countries with strong institutions. Additionally, researchers should be cautious when drawing conclusions on earnings quality as quality under contracting perspective may differ from that under equity valuation perspective.

In a world of asymmetric information, firms can use accounting policy as a means to signal information to outsiders and thereby, attempt to reduce the level of asymmetric information that outsiders face. I examine ‘commitment’ mechanisms that can be used by firms to signal information to outsiders. In particular, I examine the use of International Financial Reporting Standards (IFRS) and the use of Fair Value Accounting (FVA). The first paper examine the influence of Uncertainty Avoidance (UAI) as introduced by Hofstede (1980), on the cost of equity for IFRS adopters in the EU. The results suggest that though UAI has a detrimental impact on the cost of equity, UAI interacts with IFRS adoption, leading to a reduction in the cost of equity for firms based in higher UAI countries that use IFRS. The results are being driven by the mandatory adopters group, who were found to benefit from IFRS adoption and a higher UAI, while voluntary and Voluntary/Mandatory adopters appear to suffer from an increase in their cost of equity. The paper therefore suggests that differences in cultural norms towards uncertainty may be able to explain part of the heterogeneity in the cost of equity exhibited by firms that have adopted IFRS. The second paper examines the influence of FVA on the design and renegotiation of debt contracts. The paper is an extension of the Garleanu and Zwiebel (2009) model and incorporates the use of FVA as a disclosure mechanism and compares it to a setting where the firm uses Historical Cost Accounting (HCA). The model suggests that FVA firms would benefit from fewer covenants and a lower cost of debt. In subsequent extensions to the model, I incorporate the different FVA classifications and the model suggests that the Level 1 classification is expected to be more information relevant to lenders compared to the Level 3 classification. The third paper uses the predictions from the second paper and examines the influence of FVA on a sample of US private loans obtained from LPC/Dealscan. The results of the paper suggest that the Level 1 FVA classification results in a lower number of Balance sheet covenants, and a lower cost of debt. However, we do not find positive evidence to suggest that the Level 1 classification leads to a reduction in the Covenant intensity index or an increase in the number of loan amendments. The Level 2 and 3 classifications appear to exhibit results that suggest that they are considered less informationally relevant compared to the Level 1 classification.

This thesis examines the effect of IFRS and SOX-like regulations on earnings management in Asian countries. Firstly, the study finds no strong evidence that IFRS convergence leads to a decline in discretionary accruals in Thailand. Institutional factors including debt and equity financing exhibit a positive relationship with discretionary accruals. Boards of directors and block shareholders appear to play a role in mitigating discretionary accruals, while big-4 auditors do not. Secondly, in the post-IFRS period, listed firms in China, Hong Kong, Malaysia, and Singapore experience a decline in income smoothing, especially those with a high level of income smoothing in the pre-IFRS period. These firms seem to switch from accruals to real activity manipulation, especially overproduction. In the post-IFRS period, however, their income smoothing level is still relatively high compared to those with a low level of income smoothing. Finally, JSOX contributes to a decline in loss avoidance of Japanese firms, especially large firms, but it has no effect on manipulating methods. Japanese firms with a propensity for avoiding losses, used both specific accruals and investment adjusting in both the pre- and post-JSOX periods. The study also finds that firms switch from one specific accrual to another to achieve loss avoidance and are likely to alter capital expenditure rather than research and development expenses. In short, changes in accounting standards and regulations contribute to some decline in earnings management in Asian countries. The institutional factors still negatively affect accounting quality in this region after many years of the changes.

In response to the spectacular financial reporting failures in Western economies in the early 21st century, the UK has undergone a series of regulatory reforms and the Ethical Standards (ES) by the Auditing Practices Board (APB) are among the most prominent. While the issues of joint provision of audit and non-audit services (NAS) and long audit firm tenure died down following the enactment of ES in 2004, they attracted comments from regulators and policymakers in the wake of the 2007-09 financial crisis. This makes such joint provision and extended tenure long-standing, potentially unresolved issues even in a changed regulatory setting. In this context, the current study has been motivated to investigate the impact of NAS and audit firm tenure regulations on de facto auditor independence and financial reporting quality (FRQ) of FTSE350 companies. Using estimates of discretionary accruals and measures for auditors‟ economic dependence, the study finds little support against popular arguments that NAS fees and long audit firm tenure erode FRQ. Out of two measures of auditors‟ economic dependence, „total fees to auditors‟ is documented to be significantly negatively associated with discretionary accruals during the post-APB ES period. The „differencein- differences‟ method provides some evidence at a marginally significant level for ES‟s causal impact in improving FRQ during post-APB ES period, ceteris paribus. Tests of association between audit firm tenure and FRQ suggest, with a caveat of marginally significant results, that audits conducted during the post-APB ES period have a mitigating effect on discretionary accruals and that longer audit firm tenure does not compromise auditor independence but in fact helps to improve FRQ in the form of lower discretionary accruals. These empirical findings have weak support for policymakers‟ views that an outright prohibition on supplying NAS for audit clients and mandating more frequent rotation of auditors would help to improve FRQ. Results from the final set of tests suggest a marginally significant negative association between audit firm tenure and discretionary accruals for companies audited by Big4 auditors but not for those audited by their non-Big4 counterparts. This provides insight to the most recent regulatory concerns about the concentrated audit market with Big4 domination. The study, therefore, makes important empirical contributions with policy implications.

Factors that determine the level and variation in disclosure have been a matter of considerable interest and importance to policy makers and the financial reporting community. Existing studies have not well established the impact of institutions on corporate disclosure because of their macro-level analysis. This thesis investigates the association between firm-level institutional factors and the level of mandatory disclosure in annual reports of Nigerian listed companies. It argues that accounting standards provide the definition of legitimate methods for use in presenting financial statements, and the level of mandatory disclosure reveals organisational commitment to these standards. The thesis uses the Oliver (1991) and Greenwood et al. (2011) institutional framework to identify factors that determine the level and variation in mandatory disclosure. The thesis sampled 100 firm-years across eight industries over three regulatory regimes. The self-constructed measure of mandatory disclosure is based on the Nigerian national accounting standards, which provide guidance for presenting financial statements prior to 2012, and on the IFRS, for first time adopters of IFRS with a financial year-end of 2012/2013. Based on Oliver’s framework, the result indicate that the level of mandatory disclosure is significantly and positively influenced by legitimacy, legal coercion, and voluntary diffusion, however, it is significantly and negatively influenced by economic efficiency, uncertainty, interconnectedness and dependence. These results suggest that Nigerian listed companies confront greater number of factors that encouraged resistance to disclosure in annual reports. Based on the Greenwood et al.’s framework the result indicate that strong regulatory regimes significantly and negatively influenced variation in the level of mandatory disclosure while organisational field, organisation structure, ownership and identities significantly and positively influenced variation. These results suggest strong regulatory regimes reduced variation in disclosure while organisation structure, ownership and identities increased variation in mandatory disclosure. The results provide alternative explanation on determinants of mandatory disclosure.

No description available.

The thesis examines the role of accounting in configuring innovation as the driver of economic progress in modern Britain. Set against a context of changing governmental rationalities and greater attention of economic theory upon issues of R&D productivity, University-Industry interrelations have come to represent, since the 1980s, a laboratory where British government has experimented with programmes for both promoting and decentralising innovation, while maintaining at a distance control through mandated calculations and calculative devices. The thesis brings accounting into the discussion of how private and public agencies of governance steer innovation by exploring the paradoxical phrase: “controlling innovation, innovating control”. The phrase questions the extent to which accounting discipline and practices have changed in order to keep pace with the progressive economic and social agenda of innovation. By means of an in-depth study of accounting practices, corroborated by forty semi-structured interviews, the thesis explores the action of controlling innovation across three main sites where university-industry interrelations are enacted, namely technology transfer, technology incubation, and corporate R&D. Drawing on the concept of socio-technical agencement (Callon 2005) the thesis seeks to identify and analyse the economic agencies that configure and assemble innovation as an actor capable of influencing government policies, corporate strategies, and universities’ mission. The thesis shows that controlling innovation involves calculative action that is mainly distributed across accounting devices (e.g. Discounted Cash Flow, R&D budget, and input-output performance indicators), non-accounting devices, and human entities. Drawing on, and expanding, the work of Beunza & Garud (2007) on calculative frames, the thesis finds patterns of regularity occurring in the mechanisms through which economic action within innovation is organized and distributed. The thesis also accounts for the tensions arising in the negotiation of different versions of the value of innovation. Finally, while controlling innovation is performed through a variety of accounting devices, the thesis shows that such devices are not new to the accounting discipline and practice, but rather are traditional accounting tools that adapted to the innovation rationale in virtue of their fluid and combinable properties.

As an attempt to investigate the adoption, future emphasis and benefits derived from traditional and contemporary western-orientated management accounting practices in Chinese organisations, in particular, in state-owned enterprises and foreign joint ventures located in China, this empirical study was modeled on a similar study undertaken in Australia (Chenhall and Langfield-Smith 1998). It obtained structured information and carried out a comparison between a western capitalist developed country and an eastern socialist developing country (China), which is moving towards a market economy. The effectiveness of the adoption of management accounting practices is influenced by complex contextual factors. Based on cultural, economic, institutional, organisational and innovation theory frameworks established in the research literature, the study therefore explored a wider range of environmental factors which determined the extent to which state-owned enterprises and foreign joint ventures have employed management accounting practices, Thus, the role which joint ventures have played in the diffusion of management accounting practices in China has consequently been evaluated. A cross-sectional survey involving a postal questionnaire method of data collection was adopted. A total of 179 usable responses were received representing a response rate of 19%. The study also conducted some interviews. The results of this research indicated that management accounting practices in Chinese organisations have made considerable progress in recent years compared to previous Chinese studies (He 1997; Lin and Wu 1998; Qiao 1997). However, there is a lower usage of management accounting practices by comparison with western countries. A number of environmental factors such as external authorities, social services, advanced production and management techniques, long-standing traditional practices, the attitude of the leadership, the quality of the accounting personnel have influenced the adoption of management accounting practices in stateowned enterprises and joint ventures. This study also confirmed that joint ventures have played an important role in the diffusion of management accounting practices in China because they have in general higher adoption rates and place greater emphasis on recently developed, strategically focused, market oriented and investment appraisal techniques than state-owned enterprises. In addition, the research has reinforced some support for the findings from previous studies (Chenhall and Langfield-Smith 1998; Firth 1996; O'Connor et al. forthcoming). The study also provided some evidence supporting institutional isomorphism theory; for example, joint ventures have adjusted the management accounting systems and practices to suit the Chinese management context. The distinguishing feature of this study is that it incorporates an empirical investigation and an exploratory study in order to provide new knowledge relating to the adoption of western practices. of management accounting in China and the influence of foreign joint ventures. However, as with other studies, it has a number of limitations that need to be overcome in the future. Also future research directions are highlighted.