Audit and Accounting Review

Nexus between Financial Reporting Fraud and Delegated Investments: Mediating role of Emotions and Delegated Investments Decisions

2025-07-03T13:04:52+00:00

Financial reporting fraud is an important area of study in finance. However, reporting this fraud encounters new challenges with the changes in time and the state of affairs. Hence, this study is envisioned to investigate the mediating role of emotions and investment decisions in between financial reporting fraud and the performance of investment professionals under the delegated investment mechanism. The research is based on the responses collected through a self-administered questionnaire from 248 investment professionals in Pakistan selected through judgmental sampling. The proposed relationship was analyzed through the application of Partial Least Square Structure Equation Modeling (PLS-SEM) by using Smart PLS 4. The study discovered the full mediation of both emotions and short- and long-term investment decisions in the relationship between financial reporting fraud and investment performance. Cognizant to the fact that emotions and investment decisions mediate between fraudulent financial reporting and the performance of investment professionals; real investors may have a better understanding about who to hire to manage their investments. A well-selected competitive professional, at one end, is expected to safeguard the investors’ interest in the times of crises. While, at the other end, these professionals would bring economic stability by strengthening the investors’ trust on the financial market mechanisms as a result of their resilient professional support.

Determinants Affecting Systematic Risk in Pakistan’s Oil and Gas Sector

2025-07-03T13:04:52+00:00

The current study aimed to investigate the effect of different determinants on systematic risk in Pakistan’s oil and gas sector. In this study, the data of six systematic risk determinants, namely liquidity, firm size, operating efficiency, profitability, growth, and leverage, was collected from Pakistan Stock Exchange (PSX). Moreover, the firm’s monthly stock return and Karachi Stock Exchange (KSE) 100 index return data for the period of 2018-2022 was obtained from the website of ZHV Securities. Random effect regression analysis was performed to test hypothesis based on the Hausman test to validate the absence of multicollinearity, heteroskedasticity, and serial autocorrelation. Regression results showed that liquidity, profitability, operating efficiency, and leverage had a negative and significant effect. On the other hand, size and growth had a negative but insignificant effect on systematic risk regarding oil and gas companies in Pakistan. The obtained results were consistent with the existing literature and Capital Market Theory (CMT) and Capital Asset Pricing Model (CAPM). Policymakers are recommended to consider implementing measures in order to improve access to finance for companies in the sector, improve operational efficiency, and diversify sources of financing. Furthermore, the researchers are recommended to conduct comparative studies between different sectors to provide more valuable insights considering other determinants as per their country, industry, and sector dynamics.

Sustainability Disclosure, Corporate Tax, and the Value of Quoted Firms in Industrial Goods Sector in Nigeria

2025-07-03T13:04:53+00:00

This study examines the moderated effect of corporate tax on the relationship between sustainability disclosure and the value of industrial goods firms listed on the Nigeria Exchange Group from 2013 to 2022. The study adopted the modified Linear Information Model of firm value using Generalized Method of Moments (GMM) for regression via Stata. The results reveal that economic and environmental disclosure performances have a positive and significant effect on firm value. Moreover, results of this research reveal that Environmental performance disclosure has a positive and significant effect on the value of listed industrial goods firms in Nigeria. Corporate tax has a positive and significant moderating effect on economic disclosure and the value of listed industrial goods firms in Nigeria. However, disclosing social performance related activities has a negative but significant effect. The study recommends that listed firms in Nigeria should keep reporting their economic and environmental performance activities, although more awareness regarding social disclosure be encouraged.

Financial Leverage Dynamics: The Roles of Liquidity and Profitability in Shaping Firms’ Financial Health

2025-07-03T13:04:53+00:00

The current study investigates the relationship between financial leverage (FL), profitability, and liquidity among non-financial firms listed on the Karachi Stock Exchange (KSE) in Pakistan. Despite extensive research on capital structure and profitability, limited studies exist on the debt structure and liquidity exist, particularly in the developing economies where concentrated ownership patterns are prevalent. The study used a panel dataset of 305 firm-year observations from 50 non-financial firms for the time period 2016-2022. The study applied a Random Effects Model (REM) or Generalized Method of Moments (GMM) for empirical analysis and found that profitability is positively related to financial leverage, as profitable firms use more debt to maximize tax benefits, while liquidity is negatively related, suggesting firms use lower debt to mitigate financial distress costs. The study provides practical implications for companies, investors, corporate managers, and policymakers to select the optimal capital structure. This emphasizes the importance to understand liquidity and the positive relationship between PROF and FL. It suggests that wise debt use can maximize tax benefits and balance financial risks, particularly in developing markets. Policymakers should create tax policies to promote investments while mitigating risks. The study also highlights the need for further research by incorporating more control variables and extending the analysis across different markets and time periods.

Volatility Transmission of Oil and Gas Sector Stocks Returns with Stock Futures and Commodity Futures

2025-07-03T13:04:54+00:00

Pakistan is a very volatile market in the eyes of both international and national investors. Market participants mostly use derivative instruments to protect their investments from price fluctuations. However, the use of a particular type of derivative in a trading strategy depends on the type of investors. Speculators and short-term profit seekers use stock futures, while portfolio managers use commodity futures to minimize their portfolio risk. Both types of traders need to develop strategies at the company level; therefore, this study aims to analyze volatility transmission between the stocks of oil and gas sector companies with stock futures and commodity futures (oil, gas, and gold). In this study, the relationship of selected companies in Pakistan’s oil and gas sector (exploration and marketing) are studied on three levels: the relationship of stock with its stock futures at the first level, related commodity futures at the second level, and with unrelated commodity futures at the third level. BEKK-GARCH was used to examine volatility transmission and asymmetric stock linkage with each future. The spillover index was calculated for every stock, with stock futures and each commodity future to determine each pair’s net transmitter or net receiver of volatility. The results determined that stock futures of all companies have no significant volatility transmission. In case of commodity futures, it was found that oil and gas have a natural relevance with the oil and gas sector; therefore, most companies from this sector have significant volatility transmission. Whereas, in case of gold as an unrelated instrument, it has no significant volatility transmission in most companies, thus proving itself to be an alternative investment option for portfolio managers.