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Purpose Although the previous literature considers independent directors as an internal mechanism for good corporate governance and higher financial disclosure quality, in contexts characterized by high ownership concentration, they may lack the mandate, the incentives and the ability to be an effective monitoring mechanism. Therefore, this study aims to focus on minority directors and investigate their impact on the earnings management activities for firms with concentrated ownership structures. Design/methodology/approach As the slate voting system is a peculiar feature of Italian corporate governance regulations, which gives minority shareholders the right to appoint at least one member of the board of directors (minority directors), this paper carries out a quantitative empirical analysis based on a sample of non-financial companies listed on the Italian Stock Exchange to test the role played by minority directors in increasing incentives towards higher financial reporting quality. Findings Robust to different model specifications, including the endogeneity test, empirical findings show a negative relationship between minority directors and earnings management, while no relationship holds between the latter and independent directors, suggesting that minority directors might promote greater directors’ accountability than independent directors in highly concentrated ownership structures. Originality/value Relying on the empirical findings, this paper offers new insights on a peculiar internal corporate governance mechanism related to one of the most debated issues among financial market practitioners and regulators, namely, the protection of minority shareholders. Moreover, this paper offers new insights for academics and practitioners on a peculiar governance mechanism that could soon be widely adopted.

PurposeThis paper presents a systematic literature review, including content and bibliometric analyses, of the impact of blockchain technology (BT) in auditing, to identify trends, research areas and construct an agenda for future research.Design/methodology/approachThe authors include studies from 2010 to 2020 in their structured literature review (SLR), using accounting journals on the Scopus database, which yielded 40 articles with blockchain and auditing at its core.FindingsOne of the contributions of the authors’ analyses is to group the prior research, and therefore also the agenda for future research, into three main research areas: (1) Blockchain as a tool for auditing professionals to improve business information systems to save time and prevent fraud; (2) Smart contracts enabling Audit 4.0 efficiency, reporting, disclosure and transparency; (3) Cryptocurrency and initial coin offerings (ICOs) as a springboard for corporate governance and new venture financing. The authors’ findings have several important implications for practice and theory.Practical implicationsThe results of this study emphasise that (1) the disruption of blockchain in auditing is in a nascent phase and there is a need for compelling empirical studies and potential for the involvement of practitioners; (2) there may be a need to reconsider audit procedures especially suited for digitalisation and BT adoption; (3) standards, guidelines and training are required to pivot towards and confront the challenge BT will represent for auditing; and (4) there are two sides to the BT coin for auditing, enthusiasm about the potential and risk upon implementation. These practical implications can also be seen as a template for future research in a quest to align theory and practice.Originality/valueThe authors’ SLR facilitates the identification of research areas and implications, forming a useful baseline for practitioners, professionals and academics, as they draft the state of the art on the disruption of blockchain in auditing, highlighting how BT is changing auditing activities and traditions.

The use of non-GAAP performance measures is a widespread, and certainly not a recent, phenomenon. In fact, companies increasingly believe that non-GAAP financial measures play a critical role in their financial communication strategy, and investors often rely on a wide range of non-GAAP measures to evaluate companies’ performance. However, anecdotal evidence also highlights a misleading use of non-GAAP financial measures, these metrics being disclosed more prominently than comparable GAAP metrics, and inconsistently presented from period to period. The apparent ‘schizophrenic’ nature of non-GAAP measures has often attracted scholars’ attention, while national and international security agencies and standard setters have recently renewed their interest in this topic. Therefore, this paper reviews the nearly two decades of research on non-GAAP reporting to offer insights into what academics have learned so far about non-GAAP reporting practices. In particular, this paper analyses the main objectives of the research, the related setting under investigation, the role of non-GAAP disclosure, and the type of non-GAAP metrics, with the aim of describing the evolution of this field of research over time and providing a structured reference point to carry research forward into specific sub-areas of interest.

In contexts characterized by high ownership concentration, institutional investors may lose their monitoring role and might not be effective in constraining earnings management. So, this study investigates whether directors appointed by institutional shareholders are more effective in inhibiting earnings management for companies with a high ownership concentration, rather than the mere presence of institutional investors. Based on a sample of Italian listed companies, findings suggest a negative relationship between minority directors appointed by institutional shareholders and abnormal accruals, while no relationship is found between the latter and the mere presence of institutional investors. Moreover, results also highlight that the difference between strategic and no strategic institutional investors does not count in a context characterized by high ownership concentration. Overall, this study suggests that institutional investors, regardless of their characteristics, are more effective in constraining earnings management when they can count on an agent on the board of directors.

Purpose The purpose of this study is to analyse the impact of two different financial reporting models (revenue-expense vs asset-liability) on several earnings attributes. Design/methodology/approach The analysis compares the earnings attributes of non-financial private firms using the Italian generally accepted accounting principles (Italian GAAP, based on a revenue-expense model) with those of the Italian non-financial private firms voluntarily adopting the international financial reporting standards (IFRS, based on the asset-liability model). To address major methodological concerns, the research design is based on a single-country analysis and on three different samples as follows: firms voluntarily adopting IFRS; a matched sample of Italian GAAP firms; Italian GAAP firms belonging to the Elite programme, and therefore, comparable to the IFRS adopters in terms of incentives towards financial reporting transparency. Findings The results show that firms reporting under a revenue-expense model are characterized by a stronger revenue-expense matching degree, along with higher earnings’ persistence, earnings’ predictability and conditional conservatism than firms adopting an asset-liability model. In addition, contrary to the expectations, Italian GAAP firms do not present smoother earnings and do not report greater abnormal accruals than IFRS adopters do. Overall, the findings suggest that the switch from a revenue-expense model to an asset-liability model negatively affects several earnings attributes of non-financial private companies, shedding new light on the drawbacks associated with the adoption of the IFRS accounting model. Originality/value This study addresses a theme characterized by sparse research efforts, adding new insights to the debate on the decline in the quality of earnings and on the drawbacks associated with the adoption of the IFRS accounting model.

This study focuses on a specific category of independent directors, namely the independent directors nominated by minority shareholders and analyzes the effectiveness of independent minority directors in preventing earnings management activities. In particular, this paper analyzes the Italian context as it offers an ideal setting to examine the relationship between minority directors and earnings quality

Following the agency theory, this paper contributes to the literature on board independence as a mechanism to mitigate agency costs by investigating the impact of independent minority directors on firm value in a principal–principal setting. Independent minority directors might alleviate agency costs associated to the risk of self-dealing transactions and, in turn, increase firm value. However, since non-controlling shareholders are also self-interested, particularly for firms characterized by strong uncertainty about future financial results and high information asymmetry, independent minority directors might negatively impact firm value by creating frictions within the board, increasing the risks of potential hold-ups by minority shareholders and limiting the ex-ante incentives of the block-holder to undertake profitable idiosyncratic investments. By examining a sample of Italian listed companies, we find some evidence about a positive relationship between the proportion of independent minority directors and firm value. Although weaker, a positive relationship between the proportion of independent minority directors and firm value is also found for firms characterized by high information asymmetry and—therefore—exposed to the risk of opportunistic actions by minority shareholders against the dominant shareholder. Our results shed new light on the relationship between board composition and firm value in a concentrated ownership setting, revealing the role played by independent minority directors in mitigating agency costs.

This study investigates the interrelations between accounting research and the IASB activity. Prior research shows a significant gap between academia, the standard setters and the accounting profession and underlines the failure of academic papers to contribute to accounting practice. Although we find some evidence of the intention of the IASB to fill the gap between accounting theory and practice, our analysis confirms the existence of a significant distance between financial accounting research and the IFRSs. The IASB ‘due process’ definitely influences the academic activity, but the accounting literature does not seem to represent a cornerstone for the IFRSs. Particularly, during the ‘due process’ steps that precede the P.I.R. phase, the IASB only quotes few papers. With the P.I.R. process, the number of research papers analysed by the IASB significantly increases, but it is not yet clear how this ex-post activity might really influence the IFRSs statements. Finally, we find that the traditional academic ranking systems are not a key factor driving the IASB selection of the articles to analyse during the P.I.R. process. This evidence sheds light on the risk of an unfruitful self-referentiality of the accounting academic literature and on the self-feeding nature of the academic world.

Public-private partnerships (PPPs) represent a fundamental instrument to bridge the 'infrastructure gap' in the Eurozone. The accounting treatment for PPPs influences the diffusion of PPP practices and the effectiveness and efficiency of these contracts. Notwithstanding the existence of contrasting theories regarding the way to record PPPs contracts, the International Public Sector Accounting Standard Board (IPSASB) has recently issued the accounting standard IPSAS 32 proposing to switch from the mostly applied 'risks and rewards' to a 'control' approach. Although the 'control' approach presents important advantages relative to the 'risks and rewards' criterion, scientific arguments clearly supporting the former financial reporting model over the latter still lack, while macro-economic drawbacks associated to potential pro-cyclical effects of the 'control' approach are likely to emerge. Therefore, an accurate 'effect analysis' should be carried out by the European Union before adopting the IPSAS 32.

As a performance indicator, net debt conveys information to assess firms’ gearing level and the ability to service the outstanding borrowings. Moreover, net debt is frequently used in debt covenants in order to reduce information asymmetry between borrowers and lenders and to enhance the efficiency of the debt contracting process. Notwithstanding the decision usefulness and the contracting relevance associated to net debt disclosure, contrasting positions have been suggested concerning the notion of- and the information about the net financial position. In particular, a regulated/narrow approach contrasts an unregulated/principle-based one, and both the academic literature and accounting profession are far from being unanimous on this issue. By examining financial statements of 60 Italian listed companies, we compare the content of the net debt disclosure produced in a non-regulated environment with that delivered within a mandatory disclosure regime. Our analysis shows that the adoption of a mandatory disclosure regime has only slightly enhanced the comparability of net debt disclosure and highlights the opportunistic nature of the disclosure about the net financial position. At the same time, the multivariate analysis shows the role that regulation could play as a low-cost commitment device.

This paper analyses the effect of the mandatory adoption of International Financial Reporting Standards (IFRS) within the EU on the cost of corporate debt. In order to avoid the imprecision involved in a large-scale cross-country study, we examine the impact of IFRS in two very clearly different institutional settings, the UK and Italy. The UK is a common-law country characterised by strong enforcement and national generally accepted accounting principles(GAAP) which are equivalent to IFRS. Italy is a typical European code-law country, characterised by a weak outside investor protection system, and national GAAP significantly different from the IFRS model. No IFRS effect is observed in the UK, consistent with it having standards which are close to IFRS. During the post-IFRS period, in Italy more weight is placed on the accounting numbers to assess the cost of debt. We also find that accruals quality improves in Italy, thus suggesting that public financial reporting data are enhanced relative to privately held information about borrowers’ credit ratings.

Purpose – This study investigates the relationship between the ownership structure and the corporate social responsibility (CSR) policies of the Italian listed banks. In particular, it focuses on the impact that institutional investors characterized by a philanthropic orientation (banking foundations) exert on the socially oriented management of the Italian financial institutions. Methodology – This chapter adopts a case study approach. It examines the CSR of the bank Monte dei Paschi di Siena and the role that its controlling shareholder (Fondazione MPS) plays in promoting the social strategy implemented by the Italian bank. Findings – The Monte dei Paschi di Siena CSR strategy appears to be strongly influenced by the activity of its institutional investor. The skills, knowledge, and the cultural proneness toward social issues of the Fondazione MPS are successfully transferred to the bank and shape its social strategy. Research limitations – This chapter suffers of the limitations generally associated to the case study research methodology. In particular, the findings of this study can be extended to other cases only after a detailed examination of market wide, institutional and corporate governance differences. Social implications – The positive relationship between nonprofit institutional investors and the CSR strategy effectiveness unveils corporate governance mechanisms useful to increase the overall value creation process of the organizations. Originality/value of the chapter – This study contributes to the CSR literature by analyzing if and how the philanthropic nature of the blockholders affect the CSR policies carried out by the entities they control.

Related party transactions (RPTs) are potentially either efficient arrangements or tools for self-dealing. Unlike previous empirical studies using data from the United States or developing countries, this article focuses on RPTs in Italy. First, the article compares Italian RPT regulation and disclosure requirements with those of two major Continental European countries (France and Germany). This comparison highlights the burdensome character of the Italian discipline compared with the French and German regulations. Second, it presents data on RPTs disclosed by Italian listed companies. The data indicate that ordinary intra-group commercial and borrowing activities are the most common types of RPTs. Third, the article examines the relationship between RPTs and financial/governance variables used as proxies for costs of, and incentives for, tunnelling. Only a weak association emerges between those variables and RPTs, providing very limited indication of potentially opportunistic behaviour.

Banking Foundations are both non-profit entities and key investors in Italian banks. Since the beginning of the 1990s, they have supported their banking concerns, receiving in exchange growing dividends used to finance their granting activity. However, the recent financial crisis has severely questioned this symbiotic relationship. Due to the high concentration of their resources in the equity capital of the Italian banks, Foundations have dramatically suffered the ongoing market downturn, cutting their grants by 50% in 2011, with negative consequences on the welfare of the local communities in which they operate. The poor attention traditionally showed by Banking Foundations on the adoption of risk diversification techniques is probably due to the existence of weak corporate governance mechanisms and to the lack of transparency characterizing their financial reports. Indeed, the adoption of accounting criteria exclusively based on historical data hampers the comparability of the financial information and allows income-smoothing techniques that threaten the stewardship function of the financial documents. Therefore, this paper proposes the introduction of a mark-to-market disclosure in the Banking Foundations’ financial statements, stressing the fundamental role that financial information based on current values can play in improving the accountability process and, consequently, in increasing the efficiency and the effectiveness of the investment strategies.