Browsing by Author "Gerged, Ali"

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    Auditing in the time of social distancing: The effect of COVID-19 on auditing quality
    (Emerald, 2020-08-26) Albitar, Khaldoon; Gerged, Ali; Kikhia, Hassan; Hussainey, Khaled
    Purpose: Our paper aims to discuss the theoretical impact of Covid-19 social distancing outbreak on audit quality. Design/methodology/approach: Our paper uses a desk study method to explore the possible impact of COVID-19 crisis on five key considerations for audit quality during the pandemic. These include audit fees, going concern assessment, auditor human capital, audit procedures and audit personnel salaries. Findings: As many believe that the COVID-19 outbreak is as yet not a financial crisis, we, on the contrary, believe that the effects of the COVID-19 pandemic would be the toughest challenge for auditors and their clients since the 2007-2008 global financial crisis. Specifically, we believe that the COVID-19 social distancing can largely affect audit fees, going concern assessment, audit human capital, audit procedures, audit personnel salaries, and audit effort, which ultimately can pose a severe impact on audit quality. Practical implications: Due to the implementations of work-from-home strategy, audit firms are highly recommended to invest more in digital programs, including artificial intelligence, blockchain, network security, and data function development. This can help them to be more adaptable to working from home experience, which is ultimately expected to enhance the effectiveness and the flexibility of communication between auditors and their clients. Also, we recommend stock markets and other governmental bodies to provide temporary relaxations in compliance requirements to corporations. This procedure is expected to help firms that apply work-from-home strategy to report better earnings figures, which is appeared to be positively associated with audit quality. Originality/value: To date, to the best of our knowledge, there is no academic study that explores the potential impact of the COVID-19 outbreak on audit quality. This paper, therefore, fills an important research gap in the auditing literature. In addition, our paper can be used as a base to construct a research instrument (e.g., questionnaire or interviews) to provide empirical evidence on the potential impact of COVID-19 on audit quality.
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    Corporate environmental disclosure and earnings management - the moderating role of corporate governance structures
    (John Wiley and Sons Ltd, 2021-02-18) Gerged, Ali; Albitar, Khaldoon; Al-Haddad, Lara
    Our study examines whether internal corporate governance (CG) mechanisms moderate the relationship between a firm’s engagement in Corporate Environmental Disclosure (CED) and Earnings Management (EM) practices in an emerging economy. Using a sample of 100 Jordanian listed firms from 2010 to 2014 (i.e., 500 firm-year observations), our findings reveal that while the relationship between CED and earnings manipulations is negative, the links between CG arrangements and EM are heterogeneous in that they might have either reduced or increased earnings manipulations in Jordan. Furthermore, some CG structures, such as board size, managerial and institutional ownership structures, have moderating effects on the CED-EM nexus. Our research highlights the significance of considering internal CG mechanisms to explain the link between CED and EM in the context of emerging economies. Our results help to explain and place into setting the earlier mixed results on the association between CED and earnings manipulations and most importantly add to the debate about whether CG structures detrimental to the CED-EM nexus. This study allows for a richer understanding of how managers respond to CED initiatives and CG reforms in relation to reducing earnings manipulations, which offers policymakers, board directors and managers, a set of context‐specific recommendations related to the crucial need for more concerted efforts to ensure corporate sustainability in emerging economies.
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    Determinants of Corporate Environmental Disclosures in Sri Lanka: the role of Corporate Governance
    (Emerald, 2021-02) Nuskiya, M.N.F.; Ekanayake, E.M.A.S.B.; Beddewela, Eshani; Gerged, Ali
    Purpose – This study explores the levels of, and trends in corporate environmental disclosure (CED) among a sample of Sri Lankan listed companies from 2015 to 2019. Further, this article examines the firm-level determinants of CED, including corporate governance (CG) mechanisms, in Sri Lanka from a multi-theoretical perspective. Design/methodology/approach – Using a sample of 205 firm-year observations, this paper distinctively applies a panel quantile regression (PQR) model to examine the determinants of CED in Sri Lanka. This method was supported by estimating a 2-step generalised method of moment (GMM) model to tackle any possible existence of endogeneity concerns. Findings – Our findings indicate an increasing trend in CED practice among the sampled companies (i.e., 41 firms, the only adopters of the GRI framework) in Sri Lanka from 2015 to 2019. However, it is still considered at an early stage compared with other developed counterparts. Furthermore, this study suggests that board size, board independence, board meetings, industry type, profitability and firm size are positively associated with CED level. In contrast, and consistent with our expectation, CEO duality is negatively attributed to the disclosed amount of environmental information in the Sri Lankan context. Research limitations/implications– Our empirical evidence reiterates the crucial need to propagate and promote further substantive CG reforms, mandating CED in Sri Lanka. Originality/value – Our findings provide much-needed insights for indigenous companies, operating across similar emerging economies, to understand how CED can be incorporated into their reporting process based on the GRI framework in order to enhance their firm value, reduce legitimacy gaps and mitigate other operational risks.
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    Did corporate governance compliance have an impact on auditor selection and quality? Evidence from FTSE 350
    (Palgrave Macmillan, 2020-07-04) Gerged, Ali; Babikir, Bechir Mahamat; Elmghaamez, Ibrahim
    This paper examines the possible effects of corporate governance (GC) on audit quality (AQ) among the FTSE 350 companies. Using a sample of 180 companies from 2012 to 2017 (i.e., 1080 firm-year observations) a binary logistic model has been employed to investigate the CG-AQ nexus. This analysis was supported by conducting a probit logistic model as a sensitivity analysis. Our findings are associative of a heterogeneous impact of CG on AQ post the implementation of the 2012 CG reforms in the UK. For example, although institutional ownership and management ownership are positively associated with auditor selection and AQ, board independence, non-executive directors and audit committee are not attributed to AQ in the UK. This implies that corporate compliance with good CG practices has a limited impact on the decision to select a Big4 auditor in the UK. Despite the limitations of our study, we hope it can motivate further investigations in this area.
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    Does the quality of country-level governance have an impact on corporate environmental disclosure? Evidence from GCC countries
    (Wiley, 2021-01-26) Gerged, Ali; Beddewela, Eshani; Cowton, Christopher
    Despite the growth in corporate environmental disclosure (CED) across the world, there remains considerable heterogeneity in the extent to which firms disclose their environmental impacts. To better understand these changes and variations, we identify possible macro-level determinants of CED. Drawing on institutional theory, we examine the influence of country-level governance (CLG) upon CED amongst the non-financial sectors in the Gulf Cooperation Council (GCC) countries. Descriptive findings obtained using a cross-country sample of 500 firm-year observations suggest that CED is still in its infancy in the region. Nevertheless, the data confirm an increasing trend in environmental information published in GCC companies’ annual reports, but with notable differences between countries. Using measures derived from the World Governance Index (WGI), we examine the extent to which three CLG factors – voice and accountability (VA), government effectiveness (GE) and control of corruption (CC) – explain the patterns observed. We employ a panel data approach with various robustness checks and find that VA's association with CED is insignificant. In contrast, GE is positively related to CED, and CC is – contrary to our expectation – negatively associated with CED. Our study contributes to the literature by providing a picture of CED in the GCC region and adding to the understanding of CED macro-level determinants. Suggestions for future research and for policy and practice are also provided.
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    Does the quality of voluntary disclosure constrain earnings management in emerging economies? Evidence from Middle Eastern and North African Banks
    (Emerald, 2020-08-10) Salem, Rami; Ezani, Ernest; Gerged, Ali; Usman, Muhammad; Alqatamin, Rateb Mohammad
    Purpose This study examines the influence of the quality of voluntary disclosure (QVD) on earnings management (EM) among a sample of commercial banks in the Middle East and North Africa (MENA) region. Design/methodology/approach Using a sample of 1,060 bank-year observations for the period 2006–2015, we developed a three-dimensional framework to measure the QVD, which considers the quantity, spread and usefulness of the information. Furthermore, this study examines the QVD-EM nexus employing an ordinary least squares (OLS) regression model. This technique is supplemented with conducting an instrumental variable (IV) regression model and a two-stage least squares (2 SLS) model to overcome the potential occurrence of endogeneity problems. Findings Our findings suggest that QVD is negatively attributed to EM in the context of MENA banks. The findings also confirm that the quality of financial reporting is enhanced by QVD dimensions that were considered in our framework, leading banks to less engagement in EM practices. In contrast, the influence of the quantity dimension (level) of the disclosed information has an insignificant impact on EM, while the spread and usefulness dimensions of voluntary disclosure (VD) are negatively and significantly associated with EM in the region. Originality/value Our study distinctively develops an innovative measurement for QVD using a new multidimensional model. We also bring new evidence on QVD complexity and its impact on EM practice from an under-researched developing context, namely the MENA region.
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    ESG disclosure and firm performance before and after IR: The moderating role of governance mechanisms
    (Emerald, 2019-12-31) Albitar, Khaldonn; Hussainey, Khaled; Kolade, Nas; Gerged, Ali
    Purpose This paper aims to investigate the effect of environmental, social, and governance disclosure (ESGD) on firm performance (FP) before and after the introduction of integrated reporting (IR) further to exploring a potential moderation effect of corporate governance (CG) mechanisms on this relationship. Design/methodology/approach Ordinary least squares (OLS) and firm-fixed effects models were estimated based on data related to FTSE 350 between 2009 and 2018. The data has been mainly collected from Bloomberg and Capital IQ. This analysis was supplemented with applying a two-stage least squares (2 SLS) model to address any concerns regarding the expected occurrence of endogeneity problems. Findings The results show a positive and significant relationship between ESGD score and firm performance before and after 2013, among a sample of FTSE 350. Furthermore, the study is suggestive of a moderation effect of CG mechanisms (i.e., ownership concentration, gender diversity and board size) on the ESGD-FP nexus. Additionally, this paper finds that firms voluntarily associated with IR have a tendency to achieve better firm financial performance. Practical implications The findings of the present study have several policy and practitioner implications. For example, managers may engage in ESGD to enhance their firms’ financial performance by the voluntary involvement in IR, which believed to help investors to rationalise their investment decisions. Likewise, the results reiterate the crucial need to integrate more social, environmental and economic regulations to promote sustainability in the UK. The paper also offers a systematic picture for policymakers in the UK as well as future researchers. Social implications The findings of this paper indicate that IR plays a significant role in the relationship between ESGD and FP, where IR firms seemed to be achieving better FP as compared with their non-IR counterparts. This implies that stakeholders may have played a magnificent effort to encourage firms’ voluntary engagement in IR in the UK. Originality/value To the best of the authors’ knowledge, this is the first study to explore the potential moderating effect of ownership concentration, gender diversity and board size on the relationship between ESGD and FP and to examine whether firms’ voluntary involvement in IR can lead to better FP after the introduction of IR in 2013 in the UK.
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    Factors affecting corporate environmental disclosure in emerging economies – the role of corporate governance structures
    (Wiley, 2020) Gerged, Ali
    This study seeks to examine whether internal corporate governance (CG) mechanisms affect Corporate Environmental Disclosure (CED) in emerging economies. Using a sample of 500 firm-year observations, this study distinctively applies a linear panel quantile regression (PQR) model to examine the CG-CED nexus in Jordan. This technique is supplemented with conducting a two-step dynamic generalised method of moment (GMM) model to overcome any potential occurrence of endogeneity problems. This study reports an increasing trend in CED practice among the sampled companies over the period of analysis, yet it is still at an early stage as compared with their developed counterparts. Furthermore, this study suggests that board size, board independence, CEO-duality, and foreign ownership have positive associations with CED. In contrast, managerial ownership, institutional ownership, and ownership concentration are negatively associated with the disclosed amount of environmental information in the Jordanian context. Theoretically, board structures appeared to be more efficient than ownership structures in reducing agency conflicts by addressing the asymmetric gap of information and promoting the disclosure of environmental information. These findings add to the debate about whether ownership structures detrimental to CED in developing economies. Specifically, when it comes to spending money on CED, owners seemed to be more concerned about any reductions in their ‘share of the pie’ and may, therefore, be less motivated to disclose their companies’ environmental information. This paper provides managers, owners and policymakers with a set of context‐specific recommendations related to the crucial need for a more concerted effort to integrate governance and environmental regulations in order to ensure sustainability in emerging markets.
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    Financial Market Consequences of Early Adoption of International Standards on Auditing: International Evidence
    (Emerald, 2020-07-02) Elmghaamez, Ibrahim; Gerged, Ali; Ntim, Collins
    Purpose: This paper investigates the effects of the early adoption of International Standards on Auditing (ISAs) on Financial Market Indicators (FMIs) from a Diffusion of Innovation (DOI) theory perspective. Design/methodology/approach: Using panel data from 110 countries in a period that spans from 1995 to 2014, this study applies an ordinary least squares (OLS) regression model to investigate the financial consequences of adopting ISAs. This analysis was supplemented with estimating a fixed-effects and two-stage least squares (2SLS) regression models in order to address any concerns regarding the possible existence of endogeneity problems. Findings: This study reports three key findings. First, we find that early ISAs adoption has a negative effect on several financial market consequences, namely stock market integration, market capitalisation, market turnover, market return, market development, stock price volatility, and stock trading volume. Second, using an alternative measure to the one that is proposed by DOI theory, we found that some financial indicators have been significantly improved after ISAs adoption, but only for listed firms that prepared their financial statements under International Financial Reporting Standards (IFRS) and audited by ISAs simultaneously. Finally, the financial indicators of European stock markets, however, have insignificantly shrunk post the mandatory adoption of ISAs in 2006. Practical implications: Our empirical evidence raises questions about how ISAs were enforced and implemented. For example, countries that adopted ISAs at early stages may have been dominated mostly by recently established stock exchanges. This implies a crucial need to determine and apply the best type of auditing regime that can increase investors trust and enhance the credibility of stock markets information, which might ultimately advance the FMIs over time significantly. Originality/value: To-date, studies investigating the impact of the adoption of ISAs on FMI from a DOI theory perspective are virtually non-existent. Our study, therefore, seeks to contribute to the extant literature by examining the influence of ISAs adoption on a wide range of financial market indicators. Keywords: International Standards on Auditing, Financial Market Indicators, Financial Consequences, Diffusion of Innovation Theory, Stock Market. Research Classification: Research paper
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    How Can National Governance affect Education Quality in Western Europe?
    (Emerald, 2020-01-20) Gerged, Ali; Elheddad, Mohamed
    Purpose – As the international society faces unprecedented challenges associated with resource scarcity, governance scandals, increasing injustice and inequality, new opportunities for higher education institutions are emerging. This paper investigates the association between national governance standards and education quality across nine western European countries; namely, the United Kingdom, Germany, France, Finland, Norway, Switzerland, Sweden, Denmark, and Ireland. Design/methodology/approach - Using panel data from 2002 to 2017, this article employs fixed-effects and random-effects models to examine the relationship between national governance (proxied by voice and accountability indicator) and education quality (proxied by Human Development Index: Education index). This analysis is supplemented with conducting Instrumental Variable (IV) estimations to address any concerns regarding the expected occurrence of endogeneity problems. Findings - Our findings are suggestive of a significant and positive relationship between national governance and education quality in Europe. This implies that national governance standards, such as voice and accountability, are essential actors in the enhancement of the quality of educational institutions outcomes. Policy and Practitioner Implications - Policymakers should implement stricter regulations and ensure that accountability indicators are motivated if they wish to increase the spending on education, which is associated with better qualities of educational institutions. A culture of continuous review of education policies needs to be upheld in the Western Europe region to be watchful of any emerging problems while maintaining a sustainable relationship between the rule of law and the education administration. Originality/value - So far, a minimal number of studies focused on examining the role of country-level governance in advancing education quality. This study, therefore, extends the body of prior literature by investigating the possible effect of national governance structures on education quality across a sample of Western European countries.
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    How Corporate Governance affect Firm Value and profitability? Evidence from Saudi Financial and Non-Financial Listed Firms
    (InderScience, 2019) Gerged, Ali; Agwili, Ahmed
    This paper investigates the possible effects of corporate governance (CG) mechanisms on the firm market and accounting value (FV) in Saudi Arabia after the 2011 CG reforms using a sample of 300 annual reports of financial and non-financial companies listed on Tadawul from 2012 to 2016. Our results are suggestive of heterogeneous effects of CG mechanisms on firm value and profitability in that they might have either encouraged or discouraged FV in Saudi Arabia. This means that, averagely, better-governed firms tend to achieve better market value, but not necessarily a better accounting value. Our findings indicate that implementing a voluntary ‘comply-or-explain’ CG regime in Saudi Arabia has, so far, a limited impact on FV. This implies that developing other enforcement mechanisms for CG provisions, such as appending good CG practices to listing rules for companies to comply with, might lead to better financial results for those well-governed companies in Saudi Arabia. Despite the limitations, it is hoped that our study can inspire further examinations in this research area.
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    Is corporate environmental disclosure associated with firm value? A multi-country study of Gulf Cooperation Council firms
    (Wiley, 2020-07-28) Gerged, Ali; Beddewela, Eshani; Cowton, Christopher
    Several studies have found a relationship between corporate social and environmental disclosure and firm value or accounting profitability. Where environmental disclosure has been the focus, though, only single-country studies have been published; and most of the previous research concerns the developed world. This study examines the association between corporate environmental disclosure (CED) and firm value (FV) in the Gulf Cooperation Council (GCC) countries, where CED has been increasing from its previous low base. Findings from a multi-country sample of 500 firm-year observations using a 55-item unweighted environmental disclosure index suggest that CED is significantly and positively related to FV as measured by Tobin’s Q (TBQ). The relationship is robust to using a weighted version of the disclosure index, individual countries and environmental disclosure sub-indices. Some evidence of a positive relationship between CED and return on assets (ROA) is also found, but even where statistically significant, the relationship is much weaker than in the case of TBQ. For empirical and theoretical reasons, we recommend that future studies pay greater attention to market-based proxies, if possible when investigating the value relevance of CED in both developed and developing countries. Our results suggest that both managers and policymakers in GCC countries should take a positive view of expanded CED.
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    Is earnings management associated with corporate environmental disclosure? Evidence from Kuwaiti listed firms
    (Emerald, 2018-12-21) Gerged, Ali; Al-Haddad, Lara M.; Al-Hajri, Meshari O.
    Purpose: This study investigates the association between corporate environmental disclosure (CED) and earnings management (EM) in a Gulf Cooperation Council (GCC) emerging market, namely Kuwait. Design/methodology/approach: Using panel data from firms listed on the Kuwaiti stock exchange from 2010 to 2014, this paper applies a fixed-effects model to examine the CED-EM nexus. This analysis was supplemented with estimating a two-stage least squares (2SLS) model and a generalised method of moment (GMM) model to address any concerns regarding endogeneity problems. Findings: The results are suggestive of a significant and negative relationship between CED and EM in Kuwait. This implies that the environmentally responsible managers are less likely to be engaged in EM practices in Kuwait. Research limitations/implications: The theoretical implication of the results of this study is that managers in Kuwait seem to employ CED as a method to decrease the possibility of any formal or informal actions that could be imposed upon their activities. Originality/value: So far, a limited number of studies focused on examining the CED-EM nexus internationally. Furthermore, research carried out to examine the CED-EM link within a GCC market is virtually non-existent. This study, therefore, presents the first empirical analysis of this relationship in Kuwait. Also, this research is of a significant value stemming from the environmental challenges that are facing Kuwait as an oil-reliant economy coupled together with the crucial economic development in Kuwait and its critical contribution to the GCC economy.
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    Managing earnings using classification shifting: Novel evidence from Jordan
    (Allied Academies, 2019-05-09) Al-Haddad, Lara; Gerged, Ali; Saidat, Zaid
    In response to McVay calls for more research to provide additional cross-sectional tests of classification shifting, the current paper examines whether Jordanian public companies engage in earnings management through classification shifting. Using a sample consisting of 112 public firms from Jordan during the 2010-2014 period, this study applies McVay (2006) Model to investigate the relationship between the non-recurring items (NREC) and the variation in unexpected core earnings (UCE). This analysis was supplemented with employing Fan et al., (2010) Model as a robustness check. Our empirical results reveal that managers in Jordan misclassify their recurring expenses to inflate their core earnings. More precisely, we find that non-recurring items (NREC) are significantly and positively associated with the variation in unexpected core earnings (UCE); thus, classification shifting is a common practice among Jordanian firms. Additionally, we find out stronger evidence on classification shifting when our sample was restricted to those firms with a more significant opportunity to misclassify recurring items (firms with positive NREC). This study contributes to the body of accounting literature by providing the first empirical evidence in the Middle East region overall on the use of classification shifting by Jordanian firms. We are also the first to apply McVay (2006) and Fan et al., (2010) models in the Middle East region. Our findings have important policy implications for standard setters, regulators, auditors and investors in their attempts to constrain earnings management practices and improve the financial reporting quality in Jordan.
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    Relational capital, environmental knowledge integration and environmental performance of SMEs in emerging markets
    (John Wiley and Sons Ltd, 2021-05) Zahoor, Nadia; Gerged, Ali
    Although several prior studies have examined associations between firm social capital and environmental sustainability, the links between relational resources (i.e., relational capital and ties strength), environmental knowledge integration, and environmental performance have yet to be well-established at the micro-level. This study, therefore, aims to determine (1) how environmental knowledge integration serves as a mediating mechanism for the relationship between relational capital and environmental performance? And (2) how does this impact differ at different levels of ties strength? A quantitative approach has been adopted to examine the main hypotheses using a structural equation model (SEM) technique. Two groups of actors were surveyed, including chief executive officers (CEOs) and financial officers of SMEs operating in Dubai, UAE. In total, 216 survey responses were gathered, suggesting a response rate of 73.22%. Our findings suggest that environmental knowledge integration is a vital mediating mechanism for the relationship between relational capital and SMEs’ environmental performance. Also, we find that ties strength moderates the indirect effect of relational capital on SMEs’ environmental performance via environmental knowledge integration. Our empirical evidence provides recommendations for SMEs’ managers and policymakers to promote environmental sustainability in the emerging market context.
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    Towards Sustainable Development in the Arab Middle East and North Africa Region: A Longitudinal Analysis of Environmental Disclosure in Corporate Annual Reports
    (Wiley, 2017-12-19) Gerged, Ali; Cowton, Christopher J.; Beddewela, Eshani S.
    This paper presents the first comprehensive analysis of corporate environmental disclosure (CED) in the Arab MENA region. Using a detailed research instrument containing 55 items, content analysis of the annual reports of 180 non-financial companies listed on nine major stock markets was conducted over a five-year period. The calculation of an unweighted disclosure index indicates that, although the level of disclosure might be considered relatively low by international standards, it varies by country. Perhaps of greater significance for the future of sustainable development in the region, disclosure is shown to have increased significantly over the period 2010-2014. Further analysis shows that, although there are some differences relating to categories of disclosure, this is a region-wide phenomenon not driven by a subset of countries or types of company. This benchmark study provides a systematic picture for policy makers in the region and, for future researchers, both substantive findings and methodological insight.