Audit and Accounting Review

Impact of Audit Committee Attributes and Liquidity on Sustainability Reporting

Fareeha Waseem — 2024-06-28

This research aims to investigate the impact of audit committees, liquidity, leverage, and return on assets (ROA) on the sustainability reporting of firms. Additionally, the study conducts a comparative analysis of sustainability reporting practices between Pakistani food companies and BRICS food companies. The collected data included 360 samples of food companies for the period 2017-2022, including data from Pakistan and the top five (05) emerging market economies comprising BRICS, namely Brazil, Russia, India, China, and South Africa. Secondary data was employed in this study, utilizing information from sustainability reports and annual reports. Logistic regression analysis was used to analyze the results. The findings indicate that audit committee members and independent audit committee members significantly impact sustainability reporting, while audit committee meetings, board meetings, and liquidity do not. These findings provide valuable insights for investors seeking to understand the determinants of sustainability reporting, as well as for researchers exploring the interplay between corporate governance and financial performance in emerging markets. Furthermore, this study contributes to the literature by highlighting the relationship between audit committees, liquidity, and sustainability reporting in the context of the food sector in Pakistan and BRICS countries.

Conditional Multifactor Assets Pricing Model: An Empirical Analysis of Anomalies in the State Space Framework

Hamid Hussain — 2024-06-28

Factor pricing models are commonly used to assess portfolio risk and predict returns. Factor pricing models are commonly used to assess portfolio risk and predict returns. These models establish a connection between portfolio risk and a set of common factors, which may each have multiple dimensions. The effectiveness of a factor model depends on the selection of risk factors and their perceived sensitivity. In this paper, a Kalman filter-based conditional multifactor price model is employed to examine the influence of fundamentals and macroeconomics on industry portfolios. The approach taken in this study differs from the existing literature in the sense that the time-varying sensitivity of each factor is treated as a series of random processes. In a cross-sectional setting, a sector-based factor model can be used to reduce the possibility of measurement error caused by uncontrolled variables, in particular factor sensitivities. The empirical analysis demonstrates that, with the exception of the travel and leisure industry, the market factor has a substantial impact on the returns of most industries. On the other hand, fundamental components showed statistical significance at 1%, 5%, and 10% levels in explaining sector returns across all industries. The results underline the everlasting significance of fundamental variables across all sectors and the central role of the market factor in generating profits for most enterprises.

Corporate Governance and Performance in Islamic and Conventional Financial Institutions: Moderating Role of Institutional Quality

Muhammad Akmal — 2024-06-28

This study explores the impact of corporate governance (CG) indicators on the financial performance of Islamic and conventional financial institutions. It also scrutinizes the impact of institutional quality (IQ) as a moderator in the nexus between corporate governance and performance. The study also examines a panel dataset of Pakistani financial institutions for the period 2006-2017. The estimation of a two-step system GMM signifies that CG significantly contributes towards improving the overall performance of financial institutions (FIs). However, the results display differential effects of CG on the performance of Islamic financial institutions (IFIs) and conventional financial institutions (CFIs). Moreover, institutional quality (IQ) significantly moderates and shapes the impact of CG on the performance of both types of FIs. Hence, institutional quality is an important element in strengthening the contributions of CG in increasing the performance of FIs. The study provides important suggestions to policymakers to improve the quality of institutions by implementing the rule of law and controlling corruption. This may enhance the effectiveness of CG and consequently institutional performance.

A Sectoral Perspective for Unveiling Earnings Manipulation: Evidence from Pakistani Non-Financial Firms

Faiza Saleem — 2024-06-28

The major issue with the financial statement is earnings management (EM). The problem has a long history of documentation in accounting theory and practice. Researchers have employed a variety of models to identify earnings manipulation (EMN) in different economies. However, the Pakistani setting has been the focus of very few studies on this issue. The current study is an attempt to determine whether EMN exists in any of Pakistan's listed non-financial sectors. The study employed data collected from seven primary industries listed on the Pakistan Stock Exchange (PSX) between 2012 and 2019. These industries included cement, chemical, food, oil and gas, manufacturing, sugar, and textile. The study utilized Beneish's (1999) M-Score Model (MSM) to identify the existence of EM. According to the findings, 46% of the Pakistani non-financial companies listed on PSX were engaged in EM. Moreover, the sample chosen also appeared suitable for use with Beneish’s MSM. The conclusion indicated that MSM can be successfully used by businesses to determine EMN. The results can be used by bankers and investors to identify the instances of EMN in financial statements. Moreover, the results can also be used to improve the caliber of financial reporting. Academics and professionals interested in predicting future profits should also take note of the outcomes.

Mapping the Impact of Green Finance on Corporate Sustainability: A Bibliometric Analysis

Nasir Abbas — 2024-06-28

This study examines the impact of green finance on corporate sustainability during the period 2015-2024. The study utilizes the systematic literature review approach based on 120 articles published during the above-mentioned period. These articles were obtained from the Scopus database which include themes regarding green finance and corporate sustainability. Bibliometric analysis was used to determine the intellectual evolution of thought in these articles, while their citation patterns were mapped using VOS Viewer software. The theme of green finance exhibited a significantly positive impact on digital finance mechanisms, policies, and programs, making it instrumental in promoting corporate sustainability. Specifically, it was established that firms utilizing green finance are more likely to invest in energy efficiency and other environmentally friendly technologies and also employ sustainable practices. Some other factors were found to stand in the way of consistent performance, such as financial constraints and regional differences. However, policy calibration is a highly promising way of averting such limitations. In this regard, policymakers and researchers need to develop effective green financing policies. They also need to ascertain the nature of the market and environmental problems they seek to solve. Businesses that have to take strategic investment decisions informed that green finance has a consistently positive impact on corporate sustainability, showing a better environmental performance that ensures sustainability and competitiveness for an extended period of time. Moreover, investors and fund managers need to consider green finance, since the existing evidence suggests that it would have positive outcomes and would bolster sustainability patterns. This study synthesizes the literature on green finance in corporate sustainability and provides extensive evidence regarding the issue, as well as some important implications and future research directions. It also provides important lessons and implications of green finance among developing countries, especially in China.