PurposeThis study explores the determinants of corporate tax fraud utilizing a "dynamic framework of the corporate fraud pyramid". The debate regarding firm-specific and governance-related attributes explaining corporate tax fraud remains inconclusive, particularly during financial crises. Furthermore, few studies have utilized panel data to examine tax aggressiveness and tax evasion. In addition, while some studies have investigated the effect of corporate governance on firm performance during a financial crisis, its impact on corporate tax fraud remains unknown. This study aims to bridge these gaps by examining the effects of these attributes on corporate tax fraud, including in the pre-, during and post-2007-2009 financial crisis.Design/methodology/approachThe study uses a sample of 198 matched pairs of tax fraud and non-tax fraud firms from 30 global jurisdictions for the period 2005-2017. The primary data source for this study is the Refinitiv (Thomson Eikon) database. It uses a quantitative research design employing Probit regression analysis to explore the immediate environment related to corporate tax fraud and the contextual, governance and regulatory aspects of the sample firms. The study employs an instrumental variable (IV) approach to control for endogeneity and an alternative specification to ensure that the results are robust.FindingsThe study finds that strong internal corporate governance mechanisms decrease the probability of tax fraud controversies. However, a strong regulatory environment, large audit fees, Big4 auditors and firm size were positively associated with the probability of tax fraud controversies. Moreover, higher executive compensation tends to curb the incidence of tax fraud controversies. These results were generally consistent for the pre-crisis, crisis and post-crisis periods of the financial crisis of 2007-2009.Research limitations/implicationsThe research contributes to the academic literature on corporate tax fraud and has implications for firm, industry and country level policy regimes. The study contributes to fraud theory by introducing an analytical and 'dynamic framework of corporate fraud pyramid'. Our research results imply that effective corporate governance mechanisms and higher executive compensation protect shareholders' interests through intensive monitoring and interest alignment, thereby decreasing the likelihood of tax fraud controversies. We use quantitative data primarily from the Refinitiv database. Future fraud studies could use alternative data with varying sample sizes and periods covering both listed and private firms.Practical implicationsThe findings on tax fraud have important implications for tax authorities, regulators and policymakers, leading to greater transparency and accountability. Regulators will need to pay special attention to corporate board structures and introduce regulatory policies that can guarantee the existence of effective board oversight. Tax authorities in different countries are expected to make further efforts to detect tax fraud, even when firms operate in strong regulatory environments and are audited by large audit firms.Social implicationsThe colossal economic losses caused by corporate tax fraud and its impact on societies worldwide are key motivations for this research. The findings of this study help enhance our understanding of the occurrence of tax fraud in both developed and developing countries, particularly in times of financial crises. Policymakers and regulators can use these insights to develop mitigating strategies that may have important social benefits by reduding the incidence of corporate tax fraud.Originality/valueFirstly, the study claims the ideation of a "dynamic framework of corporate fraud pyramid" as a theoretical research contribution. It focuses on four conceptual determinants: internal corporate governance mechanisms, firm-specific attributes, managerial aspects and an external regulatory environment. Secondly, this study contributes to the literature in the context of the 2007-2009 financial crisis and demonstrates that strong internal corporate governance mechanisms and firm-specific attributes moderate the relationship between the crisis and corporate tax fraud incidence.

This study examines whether acquiring firms incur lower premiums in mergers and acquisitions (M A) deals involving target firms reporting conservatively over the years preceding the deal. Using a sample of M A deals between U.S. publicly listed firms over the period 1985–2022, we find that the target’s conservative accounting is negatively associated with the takeover premium. We also find that the negative association between the target’s conservative accounting and the takeover premium holds only when the target’s ex ante information asymmetry is high. These findings suggest that the target’s conservative accounting protects acquirers from an overpayment by mitigating the adverse consequences of uncertainty about the target’s value arising from the target’s high ex ante information asymmetry. In further analysis, we show that the target’s conservative accounting is also associated with the shareholder wealth of target firms, as reflected by the stock market reaction to the announcement of M A deals. This study has important implications for accounting standard-setters regarding the informational role of accounting conservatism in the efficient allocation of economic resources in the M A market.

This research examines how climate claims by companies from the United Kingdom have changed over the years, especially when they became certain about the mandate of the Taskforce on Climate-related Financial Disclosure (TCFD). We use text data from FTSE 100 companies for eight consecutive years, starting from 2016, and apply the robust ClimateBERT algorithm to analyse company statements related to climate claims, where they claim how they take care of climate in their business operations. Our findings show that the total number of corporate climate claims made has substantially increased since 2016, resulting in an overall improvement in corporate environmental claims till 2023. This coincides with the official announcement of the TCFD mandate.Our analyses also indicate that the proportion of claims in each report has increased over the years despite economic uncertainties. Additionally, the study findings reveal that even industries with minimal or negligible climate claims can still be associated with carbon-intensive activities. The complementary features of the legitimacy and stakeholder theories support our findings. By applying ClimateBERT, our research mitigates existing data challenges, yielding an efficient framework for analysing text through a robust natural language processing model. Our findings will assist policymakers in identifying necessary modifications to corporate climate disclosure and will help assess the impact of the Taskforce intervention on climate-related financial disclosure.

This paper examines the association between environmental, social, and governance (ESG) ratings and firm performance, taking into account the role of firms' strategic investments in research and development (R&D) and advertising. Drawing on resource-based view and signalling theory perspectives and employing the generalised method of moments (GMM) estimator for a sample of UK firms over the 2002-2018 period, our findings suggest a significantly positive association of firms' aggregate ESG rating with accounting and market-based measures of firm performance. Further, we find that R&D and advertising expenditures positively moderate firms' ESG-performance relationship. The moderating role of R&D and advertising persists when we analyse the three (environmental, social, governance) pillars of ESG separately. The results suggest that strategic investments in R&D and advertising complement firms' ESG efforts. The findings remain robust after using alternative measures of performance, an ESG combined score that takes both positive and negative aspects of ESG into account, propensity score matching and controlling for self-selection bias. Our findings provide useful insights for managers in the evaluation of the efficacy and disclosure of strategic investments in ESG, R&D and advertising and for policy makers and standard setters in the deliberation of sustainability standards and disclosure regulations.

This paper investigates the impact of peer environmental and social (E&S) incidents on the value of corporate social responsibility (CSR) for non-incident firms. We find that high-CSR engagement backfires in the presence of peer E&S incidents. Following negative peer events, non-incident firms with high-CSR ratings experience a 3.2% greater decline in firm value than those with low CSR ratings. The negative impact of peer E&S incidents on the value of CSR operates through two mechanisms: (1) cash flow effect, driven by reduced sales growth and profitability, and (2) cost of capital effect, evidenced by increased implied cost of equity and decreased institutional ownership for high-CSR firms. Cross-sectional analyses further reveal that the impact is more pronounced among larger firms, when incident peers have high-CSR standing, and in industries characterized by stronger CSR norms, greater competitive intensity, and more standardized products. Our findings challenge the view of CSR as an "insurance-like" mechanism during uncertain times, showing that peer E&S incidents can trigger the industry-wide spillovers of mistrust and raise concerns about industry ethics, ultimately diminishing the value of CSR.

Purpose This study aims to examine the effects of accounting harmonization, through the adoption of IFRS, for the financial reporting quality of small and growing UK companies listed on the Alternative Investment Market of the London Stock Exchange. The authors do not question the quality of the accounting standards themselves but, rather, the consequences of implementation of the standards for small companies. Design/methodology/approach This study takes a cost-benefit approach, considering the principal qualitative characteristics of financial reporting as symbols of quality, and evaluates user perceptions about the costs and benefits of accounting harmonization through the application of a multi-method research approach. The authors also investigate the application of fair value accounting and the true and fair view concept under IFRS and financial reporting quality. The survey instrument focuses on the informed views of senior financial executives of the sample companies. Findings The results of the quantitative analyses did not find any support for a positive relationship between IFRS and financial reporting quality. The findings also fail to find any significant effects on accounting quality from the application of fair value accounting and the true and fair view concept under IFRS. The survey results were supported by the findings of the semi-structured interviews where most of the respondents regard the change to IFRS as a policy matter that has not achieved the IASB’s intended objectives. The findings of this study, therefore, question the mandatory implementation of IFRS and raise the wider policy issue of questioning the benefits of applying complex international accounting standards to small companies. Research limitations/implications A cross-country approach would provide a wider perspective on the implications of IFRS for the market as it would make the sample bigger and would give enduring tests for the hypothesis of this research. Originality/value This study provides key insights on a major change in accounting regulations, which may inform future regulatory changes, including the Promulgation IFRS for private companies or in reporting. It is an attempt to contribute to the ongoing academic discourse on IFRS adoption and financial reporting quality. Unlike much of the prior literature that focuses on measurement differences in reporting, this research examines the adoption of IFRS in terms of compliance costs and improved disclosure practices, particularly for Alternative Investment Market-quoted companies.

This study examines how dividend policy affects the performance of Shariah-compliant (SC) non-financial firms in Pakistan. These firms operate under Islamic law, which restricts interest-based and speculative activities. Because of these rules, their financial structures differ from conventional firms. The study uses data from 2013 to 2023 for all non-financial SC firms listed on the Pakistan Stock Exchange. The screening criteria of Karachi Meezan Index (KMI) were used to identify these firms. A fixed-effects model was applied after conducting the Breusch–Pagan Lagrange Multiplier (BPLM) and Hausman tests. The results show that the dividend payout ratio (DPR) has a significant adverse effect on firm performance. Firm size (FS) and sales growth (SG) have positive, significant effects, while leverage has an adverse, significant effect. Dividend yield (DY) and dividend per share (DPS) were not significant. The findings support the agency, bird-in-hand, and signaling theories. The study contributes to the limited research on Islamic equity markets in Pakistan and shows how dividend policy influences profitability in Shariah-compliant firms. The results can help investors, managers, and policymakers design better dividend policies and strengthen Islamic financial governance in Pakistan. Keywords: Dividend policy, Firm performance, Shariah-compliant, Dividend payout ratio, Dividend yield, Dividend per share

This study investigates the relationship between internal corporate governance mechanisms and firm survival during a financial crisis. Using a sample of FTSE 350 listed companies for the time period 2003–2010, our results show significant differences in the corporate governance mechanisms of firms that survived and those that failed during the 2007–2009 financial crisis. The findings indicate that compliance with the UK Corporate Governance Code is negatively associated with the survival of firms when they experience exogenous shocks. However, the existence of insider CEOs and a higher number of board committees in organisations increase the chances of survival during an economic downturn. These findings have policy implications and show that non-compliance with a prescribed code of corporate governance does not necessarily lead to poor governance. Moreover, the establishment of extra board committees and CEO succession planning are shown as important dynamics in firms' strategic decisions, as they have implications for the survival of firms during difficult economic conditions.

This paper investigates how human capital in the financial sector affects corporate innovation. Based on China's National Economic Census in 2008, we construct a measure of the financial sector's human capital across prefecture-level cities and then match the data with nonfinancial listed firms over 2009–2017. We find that human capital in the financial sector plays a significant and positive role in firms' patent quantity and quality; this effect is more pronounced for firms with higher R&D intensity, more serious financial constraints, lower industry competition and those located in regions with lower bank density and lower marketization levels. Furthermore, the mechanism tests show that debt issuance and R&D investment increase as more highly educated workers flow into the financial sector, while the cost of debt and the cash flow sensitivity of fixed assets investment decrease, consistent with the credit constraints channel. Our findings argue that increasing human capital in the financial sector does not impede corporate innovation but strengthens corporate innovation by reducing the information asymmetry between the financial and productive sectors.

This paper investigates the role of independent directors’ attributes in corporate propensity to research and development (R&D) investment. Using a sample of FTSE350 non-financial companies over the period 2005-2018, this study shows a positive association between independent directors’ tenure (moderate) and firms’ investment in R&D projects. Early, and extended tenures are however observed as negatively related to firms’ spending on R&D activities. The findings further show that independent directors’ who hold similar positions in three or fewer boards positively influence firms’ investment in R&D. However, those independent directors who are sitting on more than three boards negatively influence firms’ propensity to invest in R&D projects. Moreover, presence of independent directors with financial expertise are negatively associated with R&D investment, suggesting that due to their expertise such directors may resist funding projects beyond an optimal risk level. Our findings further show that independent directors’ competence in monitoring and advising the board improves as they spend time on the board, however, extended tenure was found as counterproductive as it impairs the directors’ impartiality. Furthermore, independent directors’ capital (resources) accruing from their connections to multiple boards is only beneficial for the firm if their monitoring role is not compromised because of their over-commitment.

Manipulating real activities is generally regarded as more damaging to a firm’s long-term growth and value than accrual-based manipulations. We consider this point of view and build on the agency theory framework for investigating the role of independent directors’ (INDs’) tenure and connection to several boards in controlling real-earnings management (REM) practices. We analyze a sample of UK listed non-financial companies over the period between 2005 and 2018. The potential endogeneity issue was controlled by the application of the two-step system-GMM estimations. The research findings suggest that REM was lower in those firms whose INDs were connected to several boards at a time. The findings also show that the association between INDs’ tenure and REM varied with the phases of their tenure. Directors in the early stage of their tenure are less effective at controlling REM, however, as their tenure grew, they generate better oversight over the management conduct, thereby reducing REM. Contrary to this, extended tenure is shown as positively associated with higher REM practices. The overall findings thus suggest that the board monitoring role protects the stakes of the shareholders by constraining REM when INDs have better expertise and rich information acquired through their presence on multiple boards—and when they have moderate board tenure, which is neither too short nor too long. We argue that due to the importance of the role of INDs in the current global scenario this study has policy implications.

Purpose This study aims to compare capital structure determinants' effect on the leverage levels of Shariah-compliant (SC) and noncompliant (NC) firms in Pakistan. This study also estimates and compares the capital structure adjustment speed for both firm types. Design/methodology/approach Based on the Karachi Meezan Index screening criterion, a balanced panel of 117 SC and 68 NC firms listed on the Pakistan Stock Exchange from 2008 to 2018 was constituted. This study used the generalized method of moments to identify the significant determinants of capital structure and estimate the speed of adjustment. In addition, the F-test was used to check whether the effect of the determinants on the leverage is same for SC and non-SC firms. Findings The authors found that different determinants affect both firm types' leverage levels (book and market) differently. The authors also found that the adjustment speed of SC firms toward their target leverage ratio is slower than their NC peers. Lastly, significant variation was observed in the results under different screening criteria. Research limitations/implications This study fills the literature gap by providing a comprehensive comparison of the capital structure decisions of the SC and non-SC firms. Because this study is limited to Pakistan, generalizability would be an issue. Practical implications This study will guide the management of SC and non-SC firms about which factors are reliably important in choosing their capital structure. The findings also call for bringing harmony in the different Shariah screening criteria being in practice. Originality/value To the best of the authors’ knowledge, this is the first comparative study that identifies the significant capital structure determinants for SC and NC firms and investigates their effect on the leverage of both firm types. By testing joint hypotheses of same relationship, this study seeks to determine if, because of Shariah restrictions, the capital structure determinants of SC firms are similar to NC firms or they exhibit different behavior. The authors also repeat their analysis using other prominent screening criteria to assess the consistency of their results.

Purpose The purpose of this study is to comparatively analyze the effect of dividend policy on shareholders’ wealth in Shariah-compliant (SC) and noncompliant (NC) nonfinancial firms in Pakistan. Design/methodology/approach All the nonfinancial firms listed on the Pakistan stock exchange have been taken as a sample for 2016–2021. The Karachi Meezan index screening criteria were applied to screen SC firms. Based on the BPLM and Hausman test results, the authors used the fixed-effect and pooled OLS model for SC and NC firms, respectively. The F -test was used to compare the effect of each dividend policy variable on shareholders’ wealth for both firm types. Findings The findings reveal that the dividend policy does affect the shareholders’ wealth in both firm types. Dividend per share (DPS), dividend yield (DY) and earnings per share significantly affect the shareholders’ wealth in SC firms. For NC firms, the dividend payout, DPS and DY are critical. Moreover, the F -test results show that the DPS, DY and leverage effect on the shareholders’ wealth significantly differ for both firm types. Research limitations/implications This study fills the research gap in the Pakistani context specifically as well as globally by providing important insights into the relationship between a firm’s dividend policy and shareholders’ wealth for SC and NC firms. In addition, this study comprehensively compares the results for both firm types, which is also lacking in the existing literature. Because this study is based in Pakistan, the generalizability of the results would be limited. Practical implications The findings of this study are helpful for the management of SC and NC firms in devising their dividend policies that can maximize their shareholders’ wealth. This study also provides guidance and knowledge to investors in choosing companies for their investments that can maximize their wealth. Originality/value To the best of the authors’ knowledge, this is the first study that analyzes the relationship between dividend policy and shareholders’ wealth for SC firms in Pakistan. It is also the first study that comprehensively compares the dividend policy relationship with shareholders’ wealth for SC and NC firms. In addition, using the F -test for joint hypotheses to compare the specific effect of each dividend policy variable is a methodological contribution of the study.

The study investigates the economic dimensions of war. It considers empirical literature through structure review to explore the different effects of war on businesses. The scope of the study covers all geographical areas and studies dealing with any respective event in the 20 th and 21 st centuries. However, the study caters for quality, relevance, and recentness in publications. Hence, publications in 4*, 4, and 3 stars journals that are placed in Association of Business Schools of UK Guidelines in 2015 are reviewed. The study with its extant literature presents an important realization that against the stereo‐typed opinion about war being devastating to businesses indicates that war affects in various dimensions, that is, positive, negative, or even no effects depending on the nature and place of business. Whereas businesses, in general, may be negatively affected in wartime, businesses critical to war may get an unprecedented boost. The study also indicates a dire need of developing a framework for investigating this important relationship on sound footings.

This paper aims to establish a link between aggregate organizational resilience capabilities and managerial risk perception aspects during a major global crisis. We argue that a multi-theory perspective, dynamic capability at an organizational level and enactment theory at a managerial level allow us to better understand how the sensemaking process within managerial risk perception assists organizational resilience. We draw from in-depth interviews with 40 managers across the UK's food industry, which has been able to display resilience during the pandemic. In sensing supply chain risks (SCRs), managers within both authority-based and consensus-based organizational structures utilize risk-capture heuristics and enact actions related to effective communications, albeit at different information costs. In seizing, we found that managers adhere to distinct heuristics that are idiosyncratic to their organizational structures. Through limited horizontal communication channels, authority-based structures adhere to rudimentary how-to heuristics, whereas consensus-based structures use obtainable how-to heuristics. We contribute to the organizational resilience and dynamic capabilities literature by identifying assessment as an additional step prior to transforming, which depicts a retention process to inform future judgements. Our study presents a novel framework of organizational resilience to SCRs during equivocal environments, by providing a nuanced understanding of the construction of dynamic capabilities through sensemaking.

This paper investigates whether shareholder value is affected by non‐compliance with the prescriptions of a principle‐based ‘comply or explain’ system of corporate governance in the context of the global financial crisis of 2007–2009. Using System Generalized Method of Moments estimates to control for different types of endogeneity, the main findings of this paper suggest that non‐compliance with the UK Corporate Governance Code adversely affects shareholder value. Furthermore, ex‐post estimates reveal that compliance with certain corporate governance mechanisms is more beneficial than others. With regard to this, compliance with provisions related to board independence is more important than complying with performance‐related pay requirements of the code. These findings have implications for policy makers and financial institutions regarding the usefulness of compliance with a prescribed code of corporate governance, specifically during periods of financial distress.

This study aims to contribute to the relevant accounting, corporate governance, and corporate social responsibility (CSR) literature by examining the value relevance of mandatory CSR disclosures in China. Using a difference‐in‐differences (DID) research design and a sample based on propensity score matching (PSM) over the period from 2003 to 2020, our findings suggest that mandatory CSR disclosures are negatively associated with firm' values. We also find that firms with a high level of institutional ownership and leverage experience a relatively lower drop in firms' values as a result of the mandatory CSR disclosures. These findings remain robust to alternative sampling design, use of market to book value as an alternative measure of firms' market‐based performance, and a parallel test to validate our DID analysis. Our findings have useful implications for managers, regulators, policy makers and other stakeholders.