Towards sustainability engaged accounting: A behavioral approach

ID: 78457

Authors: Eduardo Codevilla Soares, Nilton Cesar Lima, Arnaldo Fernandes Matos Coelho.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: accountability , accounting , corporate social responsibility , sustainability , Theory of Planned Behavior

Document type: Article (Portuguese) Show Abstract

This study focuses on how accountants’ attitudes, subjective norms, and perceived behavioral control towards accountability can shape a company’s sustainability performance via the use of accounting information. While much is known about the role of accounting in sustainability, there is a shortage of insights into how aspects of accountants’ behavior influence sustainability outcomes. The applicability of the Theory of Planned Behavior in this context, especially in Brazil, remains largely uncharted. This research seeks to bridge this knowledge gap by exploring the interplay between accountants’ behavioral traits, the use of accounting data, and organizational sustainability. The findings reveal a positive correlation between accountability and organizational commitment, highlighting the indispensability of accountability for sustainable organizational outcomes. Based on the Theory of Planned Behavior, a derivative of the Theory of Reasoned Action, this study uses a quantitative point of view. Data were collected through a structured survey distributed among Brazilian accountants. Using a non-probabilistic convenience sampling technique, 383 accountants participated. Data were collected using a snowball method, initiated by 32 primary contacts. This research contributes to the accounting literature in three main ways. First, it highlights the role of accounting in promoting sustainable organizational development, positioning the Theory of Planned Behavior as a valuable tool in the sustainability discourse. Second, it sheds light on the importance of accounting within the culture of accountability, giving greater weight to its usefulness in guiding organizations to attain business objectives. Lastly, it emphasizes the full role of sustainability in organizational growth, highlighting accounting as a strategic tool in formulating and implementing business strategy.

Long- and short-term corporate debt and economic policy uncertainty in Brazil

ID: 78456

Authors: Cláudio Marcelo Edwards Barros, Leandro Menezes Rodrigues.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: capital structure , economic policy uncertainty , long-term corporate debt , short-term corporate debt

Document type: Article (Portuguese) Show Abstract

This article aimed to investigate the relationship between economic policy uncertainty (EPU) and long- and short-term debt of Brazilian firms traded on the Brasil, Bolsa, Balcão (B3) stock exchange. The discrepancy in previous results raises questions about the current understanding of the relationship between debt and EPU. Separate analyses of long- and short-term debt provide different insights into how corporate decisions are affected. This discrepancy challenges our existing understanding of the complex dynamics between debt and EPU. The research sample consists of 163 Brazilian firms listed on the B3 between 2010 and 2019 on a quarterly basis. The baseline models considered long- and short-term debt as endogenous, taking into account firm and country characteristics. We employed a two-stage system generalized method of moments (GMM-sys) panel approach to deal with potential endogeneity in the estimates. As the debt market plays a crucial role in corporate valuation and performance, it is increasingly important to study the dynamics of long- and short-term corporate debt amidst the challenges triggered by the spread of EPU in the business environment. Clarifying how both long- and short-term debt perform under such pressure is particularly relevant since it reinforces already observed and potential implications for corporate adaptability in the use of external funds. The impact of this study lies in revealing the coexistence of firms’ cautious decisions in seeking representative funds and the conservative position for corporate investments regarding uncertainties that surround economic policy. The findings suggest that higher levels of EPU are associated with a decrease in the use of long-term debt and an increase in short-term debt. In response to increased EPU, companies tend to rely less on long-term debt and instead opt for increased use of short-term debt. These results hold consistently across different proposed specifications.

Impact of the COVID-19 outbreak on credit ratings: Application of the through-the-cycle approach

ID: 78455

Authors: Dante Domingo Terreno, María Eugenia Donadille.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: COVID-19 , credit rating , financial information , through-the-cycle approach

Document type: Article (Portuguese) Show Abstract

The objective of this study was to analyze how the COVID-19 crisis has affected the determinants and predictability of the domestic credit rating issued by Fitch Ratings in Argentina. Additionally, it aims to evaluate the effects of credit rating agencies using the through-the-cycle method. Given the subjective nature of credit rating categorization, researchers have developed models for explaining and predicting credit ratings. This subjectivity is significant during economic events. Therefore, it is important to investigate whether the factors that determine and predict credit ratings remained consistent before and during the COVID-19 crisis. This paper contributes significantly to understanding how the application of the through-the-cycle method affects the determinants and predictability of credit ratings in economic crises. The application of the through-the-cycle method by credit rating agencies as a criterion during the COVID-19 crisis resulted in a breakdown of the usual correlation between determinants and credit rating. Understanding whether variables are permanent or transitory components is crucial for investors and borrowers to anticipate credit rating changes during economic downturns. The dependent variables are the long-term domestic credit rating categories. The independent variables are derived from the Fitch Ratings credit rating methodology and the literature, which includes quantitative and qualitative variables. The statistical methods used are ordinal logistic regression, generalized ordinal logistic regression, and support vector machines. The COVID-19 crisis was considered a transitory event due to the application of the through-the-cycle approach by rating agencies. During the pandemic, specific determinants of credit ratings are not considered due to their transitory nature. The study identifies interest coverage ratio and competitive position as transitory components. This approach led to less predictability but a more stable credit rating.

Quality or quantity? The impact on the cost of equity capital

ID: 78454

Authors: Samantha Valentim Telles, Jeice Catrine Cordeiro Moreira.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: cost of equity capital , information quality , information volume , readability

Document type: Article (Portuguese) Show Abstract

This study aimed to investigate the simultaneous impact of information quality and quantity on the cost of equity capital for Brazilian firms listed on the B3 from 2011 to 2021. We also assessed which of the two, quality or quantity, has a greater impact on the cost of equity capital. Accounting quality and information volume are key factors in determining a company’s cost of equity capital. While several studies have explored the relationship between these variables, few have examined them simultaneously, and we were unable to find any that focused on these aspects in the Brazilian market. Our results suggest that companies should prioritize enhancing the quality of information they disclose to investors over simply disclosing more information. Standard setters have a rationale for providing additional guidance on improving information disclosure. A better informed market facilitates better decision-making and reduces information asymmetry. Our results contradict previous studies that have found a positive relationship between information quantity and the cost of equity capital, suggesting that future research on information volume must also consider the quality of that information. We used a sample of 1,347 firm-year observations and employed various methodologies to assess the levels of accounting quality and information volume. Our study controlled for firm size, leverage, market-to-book ratio, beta, growth, internationalization, and the impact of COVID-19 to enhance the robustness of our results. To ensure the validity of our findings, we conducted additional tests using alternative methods to measure quality and quantity, and the results were consistent with our original findings. We found that the quality of financial information impacts the cost of equity capital, whereas the volume does not. Our results underscore the importance of improving information quality and support regulatory requirements for more relevant and understandable disclosure.

IFRS adoption and credit ratings: A comparative study in emerging and developed markets

ID: 78453

Authors: Bruno Ferraz Ferreira, Lucas A. B. de C. Barros, Renê Coppe Pimentel.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: credit market , governance , IFRS , international accounting , ratings

Document type: Article (Portuguese) Show Abstract

The study examined the effects of mandatory International Financial Reporting Standards (IFRS) adoption on the quality of accounting information from three perspectives: the ability of accounting figures to explain credit ratings and their evolution after IFRS adoption; the difference in information gains from mandatory IFRS adoption between emerging and developed countries; and the identification of aspects of national governance capable of explaining these information gains. This article differs from the existing literature in three respects: it uses a more comprehensive and heterogeneous sample of emerging and developed countries; it uses the bootstrapping resampling method for a consistent analysis of the results; and it examines the heterogeneity of the effects of IFRS adoption as a function of country-level development and governance characteristics. The study reinforces the relevance of accounting information for analyzing companies’ credit risk and makes new contributions to the literature on the heterogeneity of the effects of IFRS adoption. By using a multi-country sample, the article has potential implications for national and international accounting and finance literature, and is also useful for regulators and international portfolio managers. The analyses were based on the ratings and annual accounting data of 566 companies domiciled in 36 countries over the period from 2005 to 2017, using a bootstrapping resampling method. This article documented that mandatory IFRS adoption increased the ability of accounting data to explain the credit ratings assigned by rating agencies. Moreover, it was found that this relationship is, on average, more pronounced in emerging economies. The analysis also showed a positive relationship between the control of corruption and the information gain associated with IFRS adoption.

Evaluating momentum in Brazil using quantile regressions

ID: 78452

Authors: Rodrigo Abbade da Silva, Newton da Costa Jr., Manuel J. da Rocha Armada.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: disposition effect , momentum , prospect theory , quantile regression , uninformed investors

Document type: Article (Portuguese) Show Abstract

The purpose of this study was to measure the relationship between expected returns and capital gains overhang (CGO) (a proxy for the disposition effect) in the Brazilian financial market. It also investigated the ability of the disposition effect to induce momentum. Quantile regression allows the study of the importance of extreme values in the regression. In this way, it is possible to study the relationship between the disposition effect and the expected return between losing and winning stocks using data for the Brazilian financial market.This may help explain the conflicting results found in the literature when studying this relationship in other countries. This study contributes to the development of the topic of the relationship between the disposition effect and unrealized capital gains in the financial market. For this, we apply Fama-MacBeth regression and quantile regression models. Initially, we study the relationship between CGO and expected return. Subsequently, we investigate the ability of the disposition effect to generate the momentum effect at extreme quantiles of expected return (0.05th – losing stocks and 0.95th – winning stocks). We used a sample of 227 shares of companies listed on the Brazilian stock exchange (B3) and monthly historical series from January 2000 to October 2018. We found a significant and positive relationship between CGO and expected return across different levels of expected return, decreasing from the lowest to the highest quantile of expected return. This indicates that Brazilian investors, who are prone to the disposition effect, operate at the extreme quantiles of expected return.

Integrated reporting and shareholder value creation: International evidence

ID: 78451

Authors: Talieh Shaikhzadeh Vahdat Ferreira, Orleans Silva Martins.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: disclosure , earnings predictability , information asymmetry , integrated reporting , stock price synchronicity

Document type: Article (Portuguese) Show Abstract

This study analyzes the relationship between integrated reporting and shareholder value creation of public companies in 39 countries, between 2011 and 2018. The integrated report has emerged as a means of meeting the different information needs of stakeholders, but as its presentation is voluntary, there is little information about the different ways of integrating this information and its relationship with the value creation process of companies, a gap that this study seeks to fill. Considering the integrated report in general format (RG) and the specific frameworks of the Global Reporting Initiative (GRI) and the International Reporting and Connectivity Council (IRCC), we present three effects on shareholder value creation: information asymmetry, stock price synchronicity, and earnings predictability. This study expands academic knowledge on the effects of the adoption of different integrated report formats, but can also help policymakers make decisions related to the imposition of forms of disclosure. For companies, it provides evidence that integrated reporting can be used as a market differentiation tool. Firms were grouped into three subsamples using the propensity score matching (PSM) method and their data were analyzed using multilevel regressions and difference-in-differences models. Our findings show that after the adoption of a general integrated report, shareholders gain value in the three selected perspectives (information asymmetry, stock synchronicity, and earnings predictability), mainly for companies located in developed countries. It is not the adoption of a specific disclosure format that matters, but the implementation of an integrated reporting process for financial and non-financial information. Thus, the adoption of integrated reports cannot be reduced to a symbol of legitimization, as it creates value for the shareholder regardless of the framework adopted.

Impacts of investors’ rational and irrational sentiment on the Brazilian market

ID: 78450

Authors: Paulo Fernando Marschner, Paulo Sérgio Ceretta, Marcelo Augusto Ambrozini.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: Ibovespa , investor sentiment , stock market

Document type: Article (Portuguese) Show Abstract

This article aimed to determine how rational and irrational investor sentiments impact the return and volatility of the Brazilian market. The role of sentiment in financial markets is still a recent, controversial and limited subject, and this study explores this relationship in the Brazilian market. The evidence from this research adds to the limited number of studies on investor sentiment in emerging markets and extends the evidence already documented in Brazil. Our results are expected to have an impact on investors, policymakers and monetary authorities. Investors must be aware of economic fundamentals when formulating their investment strategies and also when choosing the stocks that will make up their portfolios. Policymakers and monetary authorities should take sentiment into account when formulating political, economic and monetary strategies, as economic changes can affect investor psychology and be reflected in their stock market trading. Consumer and business confidence indexes were used as proxies for investor sentiment and were regressed against a set of economic fundamentals to isolate their rational and irrational components. Then, autoregressive vector models were estimated and impulse response functions and variance decompositions were generated to verify the impact of sentiment on the return and volatility of the Ibovespa. There are three main results. First, investor sentiment impacts both returns and volatility in the Brazilian market. Second, economic fundamentals were important determinants of returns and volatility in the Brazilian market, indicating that fundamental trading induced by rational sentiment had a greater effect than trading induced by irrational sentiment. Third, in terms of magnitude, consumer-based sentiment had a greater impact than business-based sentiment.

The moderating effect of CEO narcissism on pay-performance sensitivity

ID: 78449

Authors: Yuri Gomes Paiva Azevedo, Sílvio Hiroshi Nakao.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: CEO narcissism , corporate governance , pay-performance sensitivity , personality traits

Document type: Article (Portuguese) Show Abstract

This study aims to examine whether the Chief Executive Officer (CEO) narcissism has a moderating effect on pay-performance sensitivity. We fill a gap in the existing literature, which overlooks the behavioral aspects of agents in the design of executive compensation plans, by providing evidence of the moderating effect of CEO narcissism on pay-performance sensitivity. We shed light on the fact that shareholders and potential investors might face higher agency costs when investing in firms led by narcissistic CEOs, considering that narcissistic CEOs tend to receive higher levels of compensation than their peers, regardless of the company’s performance. This study also has implications for board members and recruiters, who may take this psychological aspect into account when proposing compensation schemes to CEOs.The results extend the prior discussion on low pay-performance sensitivity (or its non-significance) by suggesting that this might be partially attributed to the psychological characteristics of CEOs, which play a role in the design of executive compensation. A sample of 1,057 non-financial U.S. firms (8,869 firm-year observations) during the period 2002-2018 was analyzed using system generalized method of moments (GMM-SYS) regressions due to the endogenous relationship between CEO compensation and firm performance. The main results show that CEO narcissism reduces the association between CEO compensation and firm performance, supporting the prediction that narcissism can be viewed as a “dark side” in the design of executive compensation plans. This finding is robust to alternative measures of pay-performance sensitivity, and further robustness checks indicate that our results are not driven by CEO overconfidence. Therefore, this study contributes to the literature by providing, to the best of our knowledge, the first empirical evidence of the moderating effect of CEO narcissism on pay-performance sensitivity

Evaluation of the behavior of Brazilian banks in merger and acquisition transactions

ID: 78448

Authors: Perla Calil Pongeluppe Wadhy Rebehy, Allan Pétris Angeli.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Keyword: banking , DEA , efficiency , mergers and acquisitions , performance metrics

Document type: Article (Portuguese) Show Abstract

This study aims to determine the impact of an M&A on the performance of the consolidating bank in relation to its competitors in both the intermediation and profitability approaches, in addition to proposing an M&A ranking metric for a more accurate performance analysis. Although some studies assess the performance of banks in M&As, the explanation of their impact on institutions in the market can be better explored by proposing a financial-operational metric, different from valuations by the stock market, complemented with the point of view of organizational strategies that appear in the literature as essential for the continuity of the resourcefulness of the topic. Assessing the consequences of bank M&As and understanding their intentions provides better management of both institutions and the country’s socioeconomic aspects. It also provides guidelines and new tools for performance evaluation for academics, managers, and government officials on M&A processes. The research method is quantitative-qualitative. In the quantitative approach, the data envelopment analysis (DEA) technique with a second stage of multiple linear regression was used. The database was formed by information from the banks’ financial statements from 2000 to 2018 (representing the CAMELS), supplemented with macroeconomic and market structure information. In the qualitative approach, the impact of these regressed variables was determined in the quantitative stage for four case studies, which are the Big4 banks that represent approximately 87% of the Brazilian financial market. Although some studies deal with the topic of the relationship between efficiency and M&As, this study shows that there is no clear and direct relationship between M&As and the performance (efficiency) of banks in the market. The results suggest that banks carry out M&As for reasons other than the search for efficiency, leaving efficiency as a consequence of the operation. This article contributes to the proposal of a new metric for measuring the efficiency of M&As, whose function is to establish a ranking and relativize the analysis of banks’ performance in relation to the market as a whole, allowing the visualization of the relative effect vis-à-vis competitors.

Incorporando agendas de sustentabilidade nas organizações: uma perspectiva de mensuração de desempenho e controle gerencial

ID: 78447

Authors: Jennifer Grafton.

Source: Revista Contabilidade & Finanças, v. 35, n. 95, p. 0-0, May-August, 2024. 1 page(s).

Document type: Editorial (Portuguese)