Theme: Accounting for Value and Governance

JOINT ANNUAL CONFERENCE OF BRITISH ACCOUNTING AND FINANCE ASSOCIATION (BAFA)NORTHERN AREA GROUP AND INTERDISCIPLINARY PERSPECTIVES SPECIAL INTEREST GROUP

THEME: ‘ACCOUNTING FOR VALUE AND GOVERNANCE’

MONDAY 9TH AND TUESDAY 10TH SEPTEMBER 2013

NOTTINGHAM CONFERENCE CENTRE

NOTTINGHAM BUSINESS SCHOOL

NOTTINGHAM TRENT UNIVERSITY

Welcome

We are pleased to welcome you to Nottingham Business School, Nottingham Trent University for the 2013 joint annual conference of the British Accounting and Finance Association (BAFA) Northern Area Group and Interdisciplinary Perspectives Special Interest Group. We appreciate your presence and hope that the conference will provide you with the opportunity to meet and socialise, discuss research ideas, and present current research and receive constructive feedback that will help you take your research forward.

A special welcome to our keynote speakers Professor Andy Stark, Manchester Business School and Professor Richard Taffler, Warwick Business School. We feel privileged to have them here today and would like to extend our appreciation to them for agreeing to speak during this conference. We hope that you will enjoy and benefit from their talk and expertise over the course of the conference.

We would also like to extend our appreciation to the Journal of Applied Accounting Research (JAAR) for agreeing to devote a special issue for selected papers presented at this conference to be published at the end of 2014. The special issue will be edited by Professor Musa Mangena and Dr Jia Liu. The papers submitted to the special issue will be subjected to double-blind peer review in line with the journal’s normal practice. Submissions to the JAAR special issue must be made online by 30 November 2013 via: and should indicate that the manuscript is intended for this special issue.Please prepare your manuscript according to JAAR author guidelines on

We hope you have an enjoyable, productive and sociable conference.

Organisers:

Professor Musa Mangena

Dr Mohammed Faisal Ahammad

Shish Malde

Keynote Speakers

Professor Andrew Stark

Andrew Stark is the Coutts Professor of Accounting and Finance at Manchester Business School, having held prior faculty positions at Yale School of Management (visiting), and the universities of Essex, Ulster, Maryland and Manchester. He was given the British Accounting Association Distinguished Academic Award in 2003. He is currently one of the editors of the Journal of Business Finance and Accounting and is a past joint-editor of the British Accounting Review. He is a past chairperson of the British Accounting Association. He is a member of 2008 Research Assessment Exercise Main Panel I and is the chairperson of Sub-Panel 35 (Accounting and Finance), having previously been on the Research Assessment Exercise Panels for Accounting and Finance in 1996 and 2001 and for Business and Management in 2001. He was chairperson of the Quality Assurance Agency Subject Benchmarking Group for accountancy.

Professor Richard Taffler

Richard Taffler is Professor of Finance and Accounting at Warwick Business School. Previously he held a chair at Manchester Business School and was the Martin Currie Professor of Finance and Investment at the University of Edinburgh. An authority on behavioural finance, he has published over a hundred academic and professional papers and books, and is frequently quoted in the media. His work has been published in top academic journals such as the Journal of Accounting and Economics, Journal of Accounting Research, Journal of Business Finance and Accounting and Journal of Banking and Finance. Richard's interests include the identification and exploitation of stock market anomalies, including the market's inability to deal with bad news appropriately, fund manager storytelling, performance and nature of their investment decisions, financial distress, retail investor gambling in the market and the impact of CEO overconfidence and narcissism on firm performance.He has recently been developing the new area of emotional finance which explores the role unconscious fantasy plays in investment and financial decisions.

LIST OF DELEGATES

CONFERENCE PROGRAMME

DAY 1: MONDAY, 9 SEPTEMBER 2013

• A Preliminary Investigation of the Role of IFRS 6 in Harmonising Accounting for the Extractive Industries, by Hafez Abdo and Theresa Dunne

• Fair value accounting, statutory audit and global financial crisis - an empirical analysis by KamilOmoteso and Umar Aziz

• The Information Content of Interim Management Statements, by Sheehan Rahman, Thomas Schleicher and Martin Walker

• Customer profitability analysis in support of strategic decisions by Graham Simons Pitcher

• Exploring the literature on Cost Accounting Systems (CAS) within the changing dynamics of organisations in a Sri Lankan (Developing Country) context, by Nagirikandalage, P and Binsardi, A

• The impact of participative budgeting on subordinates’ performance-the Nigerian experience, by BabatundeGbadeAdeyeye, Olatunde Julius Otusanya and OlayinkaMarteUadiale

• The integration of stakeholders’ interactions in corporate social responsibility disclosure practice: Customers’ Perspective by Audrey Boyd and Abeer Hassan

• Corporate social responsibility and competitive advantage for UK apparel companies by Juh Yan Tan and Mei Yu

• Risk management and organisational stakeholders by Shishir Malde

• An analytical framework of corporate narrative reporting research by Doris Merkl Davies and Niamh Brennan

• Accounting as differentiated universal for emancipatory praxis: accounting delineation and mobilisation for emancipation(s) recognising democracy and difference by Sonja Gallhofer, Jim Haslam and Akira Yonekura

• Understanding the nature and assessing the impact of institutional logic on the CIR practices adopted by Egyptian listed companies by Iman M Arafa and OmneyaAbdelsalam

• Which XBRL Implementation? by Hermann Rapp

• Format of intellectual capital disclosure and their relations with market factors by Jing Li and Musa Mangena

• Tax credits: How does the HMRC affect the financial hardship of claimants? By Sarah Closs-Stacey

• Cooperatives or public services? Social housing and accountability by Stewart Smyth

• Corporate and operational strategy, resource allocation and the interface with performance management systems in the UK university sector, by Carl Bridge

• Substantive management or green wash - Environmental reporting following a public controversy with a stakeholder by Doris Merkl-Davies and Sherie Ann Harding

• Sustainable development disclosure by Egyptian Listed companies by Atef Mohamed Ahmed

• CSR, CFP and Investment ranking - A fair reflection on value? By Elaine Conway

• The impact of audit committee characteristics on Non-audit service fees: An empirical analysis of large UK companies by ChaudhryGhafran

• The effect of corporate governance on bank financial performance: Evidence from the Middle East by Ehab K. A. Mohamed , Mohamed A. Basuony and Ahmed M. Al-Baidhani

• Executive compensation and Performance: An Examination of the UK Nonprofit Organisations by Girlie Ndoro, AgyenimBoateng and Musa Mangena

DAY 2: TUESDAY, 10 SEPTEMBER 2013

• The Impact of Severe Loss Events on Board Quality by Mark Mulcahy

• Sustainable reporting and the role of corporate governance by Chris Kelsall

• Corporate governance and bidder returns: Evidence from China’s domestic mergers and acquisitions by Christopher Muganhu and Jia Liu

• The role of forensic accounting in anti-corruption by Atef Mohamed Ahmed

• Corruption: Can External Auditors Detect It? By Rasha Kassem

• Improving audit report information value : evidence from auditor's assessment justification based on the French experience by OdileBarbe and Sophie Raimbault

• Determinants of attribution statements on corporate financial performance outcomes in the annual report - an empirical analysis of UK listed firms by Florian Meier and Musa Mangena

• Compliance with International Best Practices in Emerging Stock Exchanges- The Case of Egypt and Jordan by Marwa Hassaan

• Corporate governance and greenhouse gases voluntary disclosures in united kingdom: a mixed-method approach by LytonChithambo and VenTauringana

• Efficiency in the banking sector of a developing country by Roman Matousek, Thao Ngoc Nguyen and Chris Stewart

• The Life Cycle of IPO firms in China by Dairui Li and Jia Liu

• Ownership Concentration and Regulatory Capital Adequacy: Implications to Bank Risk Taking by HebaAbou El Sood

ABSTRACTS

The abstracts are given in presentation order.

A Preliminary Investigation of the Role of IFRS 6 in Harmonising Accounting for the Extractive Industries

Hafez Abdo (Nottingham Business School) and Theresa Dunne (University of Dundee)

Abstract

The extractive industry is characterised as a sizable, capital intensive, profitable industry, however, it lacks a direct cost-revenue relationship. Investments in this industry go through four distinct stages: (i) acquisition; (ii) exploration and evaluation; (iii) development; and (iv) production; and the time lag between the initial investment and cash flow collection could be 15 years or more.

Accounting for extractive industries has historically been practiced by one of two methods: successful efforts (SE) or full cost (FC) method. The choice of method adopted leads to different accounting figures; the main dilemma relates to determining “when is a cost an asset and when it is an expense” (Luther, 1996: 70). Whilst the SE method capitalises only the costs that lead to successful discoveries and expenses all other costs, the FC method capitalises every cost incurred by an entity in searching for minerals. This difference in the treatment of the costs, which could be billions of dollars, leads to different accounting figures being disclosed in the income statement and the balance sheet of a reporting entity. The significant effects of the uncertainty associated with exploration for mineral resources on smaller companies lead them to use FC (Malmquist, 1990), while larger and more profitable companies tend to use SE.However, the use of two methods makes it difficult for stakeholders to make like with like comparisons for decision making purposes. Therefore efforts have been geared towards harmonising accounting practices for the extractive industries. One of the most sustained efforts culminated in the release IFRS 6: an international financial reporting standard for the extractive industries. This paper, through a preliminary analysis of the accounting policies of a number of oil and gas companies, investigates the role of IFRS 6 in harmonising accounting practices by extractive industries.

This paper will build on previous research and investigate the usefulness of IFRS 6 in bridging the differences between the accounting treatment of exploration and evaluation costs under the successful efforts and full costing methods of accounting.

Fair Value Accounting, Statutory Audits and the Global Financial Crisis: An Empirical Analysis

Umar-Farook Aziz and KamilOmoteso

Abstract

This paper primarily examines the role of the Fair Value Accounting (FVA) and the statutory audit function in the current global financial crisis (GFC) with a view to strengthening the financial reporting system in preventing a future GFC. The perceptions of accountants, auditors and accounting academics on role of FVA in the GFC and the measures that were most likely to enhance the audit function. These views were gathered through semi-structured online and postal questionnaires. Based on the theory of inspired confidence, the findings from the survey suggested that auditors were not a significant contributor to the current GFC even though they should have taken greater care in auditing high risk financial institutions. This conclusion was reinforced by the results of the financial statement analysis of ten US and UK-based financial institutions through the Altman's Z-scores and the Ohlson'sLogit bankruptcy models. The study’s result does not show FVA to be a primary cause of the current GFC as it considered to be superior to the historic cost model. FVA was, however, considered to have made the auditor's job more difficult when verifying asset valuations. In addition, factors relating to accounting curriculum, expansion of the auditor's role, frequent meetings between regulators and auditors, mandatory rotation and knowledge required from other disciplines were identified as the most important factors in enhancing the statutory audit function that will restore stakeholders’ confidence and minimise the risk of a future GFC.

Keywords: Fair Value Accounting, Auditing, Global Financial Crisis

The Information Content of Interim Management Statements

Sheehan Rahman, Thomas Schleicher, and Martin Walker*

Abstract

We contribute to the current EU debate about mandatory versus voluntary quarterly reporting. We make this contribution by empirically examining a key argument made by the proponents of a voluntary quarterly reporting regime, namely that interim management statements, IMSs, are unlikely to provide any incremental information to equity investors and hence should be made voluntary.

The empirical analysis proceeds in two stages. In the first stage we follow Beaver (1968) and calculate price variability and trading activity on the IMS publication day and test whether these metrics are significantly greater than comparable metrics from a non-report period. In the second stage we follow Beaver et al. (1980) and examine, through a reverse regression of earnings on returns, whether IMS publication day returns are informative of same-year earnings changes.

Our empirical findings provide strong evidence of abnormal price and abnormal trading activity on the IMS publication date. Our results also indicate that this price activity is highly predictive of impending annual earnings changes. These findings are inconsistent with the argument that IMSs are unlikely to contain value-relevant information and are unlikely to be informative of future firm fundamentals.

Keywords: EU Transparency Directive, Interim Management Statement, Kay Report, Share returns, Share trading volumes.

Customer profitability analysis in support of strategic decisions

Dr Graham Simons Pitcher (Nottingham Trent University, Nottingham Business School)

Purpose

The purpose of the paper is to explore the extent to which the management accounting technique of customer profitability analysis can be utilised to support strategic decision making within organisations.

Method

The analysis is based on participative observations supported by key informant interviews within four separate organisations. The use of multiple case studies enables a range of customer relationships to be explored.

Findings

A variety of measures are used in practice to ascertain the relative profitability of customers. There is evidence that customer profitability analysis supports strategic decisions. There is a strong link to marketing strategy and customer development and as a consequence customer profitability analysis can provide insight into resource allocation and long term planning.

Limitations

The four cases selected were based on existing contacts of the author and were selected because of the knowledge of their use of customer profitability analysis.