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Purpose This paper aims to determine the role governance plays in the voluntary adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Disclosure Standards by Islamic insurance (takaful) operators in the Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions. Design/methodology/approach This study uses a sample of 44 takaful operators in the SEA and the GCC regions. While corporate governance (CG) strength is measured by the use of the frequently examined variables of the board of directors and audit committee, Shari’ah governance strength is measured by the characteristics of the Shari’ah Supervisory Board (SSB). Content analysis is used to extract disclosure items from the 2014 annual reports. Agency theory, stakeholder theory and political economy theory are argued to support the hypotheses. Findings The results show that CG strength has a positive and significant effect on the voluntary adoption of AAOIFI Disclosure Standards by takaful operators, indicating that CG plays an important role in the disclosure of information in the annual reports of takaful operators. However, the results show a lack of association between SSB strength and voluntary adoption of AAOIFI Disclosure Standards. Our results suggest that the SSBs may not be as involved as the other CG mechanisms (such as a board of directors and audit committees) in reviewing financial reports. On another note, the level of the political right and civil liberties has a negative and significant effect on the voluntary adoption of AAOIFI Disclosure Standards, providing an indication that stakeholders in a community with greater freedom tend to be more active in pressuring takaful operators to provide more information to justify their existence in the community. Similar to SSB strength, the legal system is also found to have no significant association with the voluntary adoption of the AAOIFI disclosure standards. Practical implications This study provides stakeholders with a tool to evaluate the effectiveness of the governance role in increasing the transparency of takaful operators by examining the governance factors using a self-constructed disclosure index. Originality/value Our study is among the first to provide an in-depth analysis of voluntary adoption of AAOIFI Disclosure Standards for takaful operators in these two regions; therefore, this study has implications for regulators and standard setters. The findings of this study are expected to provide information to regulators and standard setters on the role of governance in improving the transparency of takaful operators.

We investigate the determinants of voluntary corporate governance disclosure practices of 67 Islamic banks in the Southeast Asian and Gulf Cooperation Council regions. We expect that the risks inherent in Islamic banking will lead to a demand for greater corporate governance disclosures. However, we find that the mean level of voluntary governance disclosure is less than 40 per cent. We provide evidence that stronger corporate governance is associated with a higher level of voluntary corporate governance disclosure. Other factors that influence voluntary governance disclosures are the size of Islamic banks, the level of political and civil repression and the legal system. Our results inform the global debate on the need for corporate governance reform by Islamic banks by providing insights on the part played by corporate governance mechanisms in encouraging enhanced disclosure in the annual reports of Islamic banks.

We investigate the association between asset revaluations of non-current assets and audit fees, using a sample of ASX 300 companies from the years 2003–2007.We report that there is a significant increase in the audit fees paid when non-financial assets (PPEs, investment properties and intangible assets) are measured at fair values. Moreover, we provide evidence that an independent valuer or appraiser significantly weakens the positive association between asset revaluations and audit fees. Furthermore, companies whose noncurrent assets are revalued upwards and those that revalue their non-current assets upwards every year have significantly higher audit fees. Additional tests provide empirical evidence that the strength of corporate governance has a moderating effect on the level of audit fees. This study contributes to the ongoing debate on the role of fair value accounting. The findings suggest agency costs associated with fair value estimates may offset the benefits from the use of fair value accounting.

The disclosure of non-GAAP earnings in Australian annual reports has risen steadily in recent years. These non-statutory earnings measures are generally disclosed in the unaudited section of the annual report and are not consistent with statutory profit as defined under generally accepted Australian accounting standards (GAAP). Recent research conducted in the United States (US) has provided evidence that non-sophisticated investor decisions are influenced by the presence and prominence of non-GAAP earnings information. Further evidence suggests that investor perception changed after non-GAAP earnings disclosures became subject to regulation in that jurisdiction. Australia has high investor participation rates by international standards, including investors operating self-managed superannuation funds, resulting in a significant number of active individual investors. This study employs an experimental design to investigate the impact on non-sophisticated investors of the reporting of non-GAAP earnings information in addition to GAAP earnings information in Australian annual reports. The results of this study show a positive association between the prominent disclosure of non-GAAP earnings information and non-sophisticated investor reliance on this information. These results provide important evidence to Australian regulators as these narrative disclosures are not subject to regulation, in contrast to the US where mandatory regulation has been in place since 2003.

We examine the nature and extent of statutory executive stock option (ESO) disclosures by Australian listed companies over the 2001 to 2004 period, and the influence of corporate governance mechanisms on these disclosures. Our results show a progressive increase in overall compliance from 2001 to 2004. However, despite the improved compliance, the results reveal managements’ continued reluctance to disclose more sensitive ESO information. Factors associated with good internal governance, including board independence, audit committee independence and effectiveness, and compensation committee independence and effectiveness are found to contribute to improved compliance. Similarly, certain external governance factors are associated with improved disclosure, including external auditor quality, shareholder activism (as proxied by companies identified as poor performers by the Australian Shareholders’ Association), and regulatory intervention.

PurposeThe purpose of this study is to examine the impact of recent corporate governance reforms on the association between governance practices and earnings management.Design/methodology/approachThis study examines the impact of corporate governance reforms by using a firm fixed‐effect, cross‐sectional analysis of 200 firms listed on the Australian Stock Exchange (ASX) for the financial years ending in 2000 and 2005. This paper examines the association between firms' corporate governance practices and the quality of financial reports as measured by the magnitude of earnings management pre‐ and post‐the governance reforms (CLERP 9 and ASX Corporate Governance Council (CGC)).FindingsThe results of this study indicate that certain governance practices are important in limiting earnings management. In particular, board independence and audit committee (AC) independence, are associated with lower performance‐adjusted discretionary accruals, one commonly used measure of earnings management. However, increasing executive shareholdings provides incentives to manage earnings.Practical implicationsThis study is important to investors, academics and policy makers as it demonstrates that governance reforms that encourage firms to adopt better governance practices reduces the likelihood of earnings management.Originality/valueThere is limited research on the association between corporate governance practices or the recent corporate governance reforms (ASX CGC Recommendations and CLERP 9) on earnings management in Australia. This study extends the literature by demonstrating the impact of recent corporate governance reforms on board independence, AC effectiveness and executive directors' shareholding and the association with earnings management.

PurposeThe paper's aim is to investigate the stock option disclosures of directors and the five most highly remunerated officers in the directors' report of Australian companies for the years 2000 and 2002 and the choice to position these disclosures in the notes to the financial statements as opposed to the directors' report.Design/methodology/approachThe study examines the compliance with mandatory disclosures for stock options for companies in the top 400 and also ascertains if there is consistent compliance across all required categories, including sensitive disclosures.FindingsAlthough compliance is high for most of the required stock option disclosures, 43 of the 153 firms in the sample did not disclose the amount (value) of the options issued. Another 27 of the companies disclosed a “Nil” value for the value of options issued. Most of the companies disclosed the information in the directors' report, with larger companies and companies in the finance industry more likely to disclose in the notes to the financial statements, where the information is less visible.Originality/valueThe results indicate that companies were secretive about the most sensitive of the required disclosures, the amount (value) of the options issued. Regulators and researchers need to be cautious in conducting compliance studies as although companies appear to be transparent in their disclosures about stock options for directors, closer examination reveals secrecy about sensitive components of the required disclosures.

We investigate the role played by a firm’s corporate governance framework in the decision to voluntarily disclose forward-looking information in the published financial reports of Australian companies in 2000 and 2002. With respect to the year 2000, the corporate governance category, audit quality, consisting of the presence and independence of the audit committee, its meeting frequency, the use of a big 6 auditor and the auditor’s independence, is positively associated with the disclosure of forward-looking information. The corporate governance category, board committees, consisting of the appointment and independence of a compensation committee and the creation of a nomination committee, and the overall efficacy of the corporate governance system are also positively associated with the disclosure of forward-looking information. However, corporate disclosure does not seem to be driven by the same factors in 2002 since in that year none of the governance categories is significantly associated with the firm’s decision to publish forward-looking information in financial reports.

We investigate whether the use of a high-quality auditor and increased regulatory monitoring of R&D reporting influence both the level of R&D expenditure capitalized by Australian companies from 1992 to 2002 and the market's perception of the reliability of these figures. The results indicate that firms with a higher quality auditor capitalize lower levels of R&D costs, and that in the period following increased regulatory monitoring, firms capitalize fewer R&D costs. Analysis of the value relevance of R&D expenditure indicates that the market positively values R&D costs when expensed as incurred. These results are consistent using both price and returns models. Results are less persistent for capitalized R&D amounts. The finding from the returns model indicates that the quality of the auditor appears to enhance the reliability of capitalized R&D costs, while the price model suggests that the cumulative R&D asset is less relevant in the period following ASC monitoring.

This study examines the content of concise reports in Australia to ascertain whether deficiencies identified by ASIC in 1999 have been rectified. Second, the concise reports are compared with the full financial report to establish if the presence of a concise report has in any way altered the full financial report. Third, the discussion and analysis (D&A)section required in the concise reports is examined to provide descriptive evidence on its content. Although several shortcomings identified by ASIC in concise reports for 1999 have been resolved for 2000, role confusion surrounds the concise and full financial reports. It appears that, for many companies, AASB 1039 has resulted in the concise report becoming the full financial report.

Recently in Australia, regulations have been proclaimed requiring companies to make cashflow disclosures in addition to earnings disclosures from 30 June 1992. This paper provides evidence on relationships between earnings and cash flow measures and in so doing examines the external validity of a U.S.A. study of these relationships by Bowen, Burgstahler and Daley [1986]. We also extend their study through an industry analysis of the relationships. Evidence is presented first that shows low correlations between traditional cash flow measures (i.e., net income plus depreciation and amortisation; and working capital from operations) and a more refined cash flow measure (with additional adjustments for changes in non-cash current assets and current liabilities). Second, traditional cash flow measures exhibit high correlations with earnings, while the more refined cash flow measure has a lower correlation with earnings. Finally, traditional cash flow measures better predict future cash flows than models based on earnings or a more refined cash flow measure. The industry evidence, albeit on small sample sizes, shows that the results on the first two issues, but not the latter issue, are generalisable across industry categories.