Accounting and Financial Analysis Journal

Impact of Environmental, Social, and Governance (ESG) Disclosures on Firm Valuation: A Comparative Study of Emerging vs. Developed Markets

Tedi Herdianto — 2024-12-09

This study examines the impact of environmental, social, and environmental sustainability (ESG) disclosures on firm valuation in developed and emerging markets. The study employs a quantitative research design, using a comparative approach to examine the relationship between ESG disclosures and firm valuation across emerging and developed markets. Data collection will involve secondary data extraction from financial databases and corporate annual reports covering a period of five years (2019-2023). The findings demonstrate that firms with higher ESG scores demonstrated a consistent increase in market capitalization and Tobin's Q ratio, indicating a favorable market perception linked to ESG transparency. The sectoral analysis revealed that the financial sector in developed markets exhibited the highest sensitivity to the ESG reporting practices, with a 25% increase in valuation per unit increase in ESG score. The findings highlight the necessity for companies to tailor their ESG strategies to meet the expectations of their specific market contexts, enhancing investor confidence and market valuation.

The Effect of Corporate Governance Practices on Earnings Management: Moderating Role of Firm Size and Market Conditions

Faqihudin Faqihudin — 2024-12-09

Corporate governance has emerged as a pivotal mechanism to enhance the transparency and accountability of financial reporting worldwide. However, challenges remain in mitigating earnings management, particularly in varying market conditions and across firms of different sizes. This study aims to assess whether smaller firms and companies operating in volatile markets require distinct governance strategies to mitigate earnings manipulation effectively. The study employs a quantitative research approach with an explanatory research design to investigate the relationship between corporate governance practices and earnings management with firm size and market conditions as moderating variables. The results indicate that firms in stable environments better meet stakeholder expectations by minimizing earnings manipulation, thereby enhancing transparency and trust. Even well-governed large firms demonstrate vulnerability in turbulent market conditions, suggesting that market dynamics play a critical role in influencing managerial behavior. The findings provide practical implications for investors, emphasizing the importance of assessing a firm's governance quality, especially in volatile market environments.

The Role of Internal Audit Quality in Mitigating Financial Misstatements: Evidence from Publicly Listed Companies

Mar’atus Solikah — 2024-12-09

Internal audit quality is a key factor in ensuring the accuracy of financial statements. However, there remains a research gap in understanding how specific attributes of internal audit affect the detection and prevention of financial misstatements. This study aims to address this gap by examining the influence of external audit quality on financial mistatements across diverse industries and geographical contexts. The study utilizes a cross-sectional dataset of publicly listed companies from both developed and emerging markets, providing a comprehensive analysis of how regional differences impact internal audit effectiveness. The results indicate that internal audit independence, expertise, and audit frequency are significant predictors of financial errors, particularly in industries with complex regulatory environments. The findings suggest that companies with robust internal audit practices experience fewer financial discrepancies, reinforcing the importance of internal controls in maintaining corporate transparency and investor trust.

Financial Performance Implications of Digital Transformation in Accounting Practices: An Empirical Study of Small and Medium Enterprises

Rayhan Arief Wicaksono — 2024-12-09

Digital transformation in accounting practices has been recognized as a strategic resource for improving the financial performance of small and medium enterprises (SMEs). However, little is known about the impact of digital transformation on SMEs' financial performance. This study employs a quantitative research approach with a descriptive and causal research design to examine the relationship between digital transformation and the financial outcomes of SMEs across different industries. The study aims to assess whether the adoption of digital tools such as cloud accounting, AI-driven financial analysis, and automated bookkeeping leads to measurable improvements in profitability, cost efficiency, and financial transparency. The correlation analysis shows a strong positive relationship (r = 0.68, p 0.01) between the level of digital tool adoption and financial performance, indicating that SMEs with higher adoption rates experience better financial outcomes. The findings provide practical guidance for policymakers, business owners, and accounting professionals, guiding them in decision-making processes related to technology adoption.

Assessing the Influence of Fair Value Accounting on Asset Impairment Decisions: A Sectoral Analysis

Amelia Amelia — 2024-12-09

Fair value accounting is a commonly used accounting method for asset valuations. However, little is known about the impact of fair value accounting on asset impairment decisions across different sectors. This study aims to investigate how fair value measurements are applied in impairment assessments, exploring the potential impact of market conditions and asset characteristics on impairment decisions. The data analysis reveals a distinct pattern in asset impairments across the selected sectors, highlighting that the Energy sector has the highest level of impairments over the analyzed period. A regression analysis confirms a statistically significant relationship between fair value adjustments and impairment decisions (p 0.01). The findings highlight the need for adjustments in fair value practices to account for the limitations of market efficiency, particularly during periods of economic uncertainty. For auditors, the study underscores the importance of sector knowledge when assessing fair value measures, ensuring that impairment testing reflects the unique characteristics of each industry. The findings can inform policymakers in refining their valuation practices, ultimately leading to more reliable financial disclosures.