Browsing by Author "Dunstan, Keitha"

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ACCY308: Accounting: Advanced Financial Accounting
(Victoria University of Wellington, 2007) Dunstan, Keitha
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ACCY401: Accounting: Methodology in Accounting
(Victoria University of Wellington, 2008) Dunstan, Keitha
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ACCY412: Accounting: Current Issues in Financial Accounting
(Victoria University of Wellington, 2008) Dunstan, Keitha
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ACCY412: Accounting: Current Issues in Financial Accounting
(Victoria University of Wellington, 2008) Dunstan, Keitha
Open Access
Board Ethics and Auditor Choice – International Evidence
(Te Herenga Waka—Victoria University of Wellington, 2010) Houqe, Muhammad Nurul; Dunstan, Keitha; Karim, AKM Waresul; van Zijl, Tony
This study examines whether firms' auditor choice relates reflects the strength of board ethics. Using a large sample of firms 132,853 firm year observations from forty-six countries around the globe. and controlling for a number of firm- and country-level factors, we find that firms in countries where “high board ethical values” prevail are more likely to hire a Big 4 auditor. We also find that the relation between board ethical values and auditor choice is mitigated by the firm's board size. These results establish an indirect link between board ethics and financial reporting quality through the firm's choice of auditor.
Open Access
The Case for the Use of International Financial Reporting Standards in New Zealand: a Briefing Paper Prepared on Behalf of the New Zealand Securities Commission
(Te Herenga Waka—Victoria University of Wellington, 2003) Dunstan, Keitha
The objective of this paper is to examine the issues pertinent to the consideration of the proposal made by the Accounting Standards Review Board (ASRB) that New Zealand adopt the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The purpose of this examination is to provide input to the New Zealand Securities Commission (the Commission) to assist them in their deliberations on making recommendations on the future development of the financial reporting infrastructure for New Zealand’s securities markets. Similar to securities regulators across the world, the Commission has an interest in promoting a strong securities market where the financial reporting framework and its supportive infrastructure results in high quality, transparent and comparable financial reports. There are four identifiable components of the infrastructure that drive the quality of financial reporting in New Zealand. 1) Financial reporting standards; 2) Corporate governance; 3) External audit; 4) Enforcement. The scope of this paper is limited to an assessment of the first of these components financial reporting standards; with an emphasis on an analysis of the consequences of any decision to adopt IFRS in New Zealand. The paper provides a framework for assessing the viability of the IASB reporting framework as an acceptable standard-setting regime for New Zealand that is based on: 1) The quality of IFRS standards; 2) The quality of the IASB standard-setting process; 3) The extent of international acceptance of IFRS.
Open Access
The effect of Investor Protection and IFRS Adoption on Earnings Quality around the World
(Te Herenga Waka—Victoria University of Wellington, 2010) Houqe, Muhammad Nurul; Dunstan, Keitha; Karim, AKM Waresul; van Zijl, Tony
This study examines the effect of investor protection and IFRS on the quality of accounting earnings for forty-six countries around the globe. Two attributes of accounting earnings are studied: the magnitude of discretionary accruals, and the avoidance of loss reporting. The results suggest that IFRS adoption per se doest not lead to increased earnings quality, at least based on the earnings attributes studied in our study. Specifically, accounting earnings quality improves as investor protection regimes become stronger, but only for IFRS adopting countries, that is, the effect of investor protection is mediated through the adoption of IFRS. The results highlight the importance of accounting enforcement to financial reporting quality and the need for standard setters and policy makers to design mechanisms that will limit managers’ earnings management practices.
Open Access
How Do Firms Manage Their Earnings Forecast Strategy? A New Zealand Study
(Te Herenga Waka—Victoria University of Wellington, 2008) Dunstan, Keitha; Gallery, Gerry; Truong, Thu Phuong
In contrast to the trend of research investigating why firms decide to release earnings forecasts to pre-empt any expected change in earnings, our study investigates how firms manage their earnings forecast strategy once they have decided to release earnings forecasts. Using a sample of 350 NZX-listed firm years with balance date ending from 31 January 1999 to 31 December 2005 for 94 companies across the statutory-backed continuous disclosure regime, we document that firms are more likely to adopt a multiple earnings forecast (a portfolio) approach in the statutory sanctions period, particularly for the group of firms expecting favourable earnings change. We also document that these good news firms have a higher propensity to gradually update the market with good news earnings forecasts while those with bad news are more likely to immediately correct current market earnings expectations. These findings indicate that firms expecting better earnings performance are more conservative in their earnings forecasting compared to those expecting worse earnings performance. Although this asymmetrical treatment of good and bad news might not meet the corporate regulators’ objective of a continuously updated market with an unbiased approach to the treatment of information, the overall increase in disclosure frequency in the statutory sanctions period does indicate an improvement in the information flow to the capital market.
Open Access
The Impact of Disclosure Reform and Alternative Sources of Earnings-Related Information on the Market Reaction to Firm-Based Earnings-Related Disclosures
(Te Herenga Waka—Victoria University of Wellington, 2011) Truong, Thu Phuong; Dunstan, Keitha
Our study seeks to investigate changes in the market reaction to earnings-related disclosures following the introduction of the New Zealand continuous disclosure reform. We further extend to study whether these changes are different when there exist the alternative sources of earnings-related information. Using the sample of 580 earnings forecasts and 626 earnings announcements released by 94 firms listed on the New Zealand Exchange during the financial reporting periods ending from 31 January 1999 to 31 December 2005, we find evidence that the introduction of the disclosure reform has impacted to the market reaction to earnings-related disclosures and the availability of alternative sources of earnings-related information plays an important role in shaping this impact. Specifically, the market places less emphasis on post-disclosure reform management earnings forecasts issued by firms of which the alternative sources of earnings-related information are available. There is a significant reduction in the market reaction to earnings announcements in the post-disclosure reform period. This reduction is mainly driven by group of earnings announcements issued by firms of which the alternative sources of earnings-related information are not available. These findings suggest that while the enhancement of disclosure regulation in New Zealand is considered to have some positive impact on the financial environment which is consistent with regulatory intent, the regulators should be aware that the benefits from this disclosure regulation may not be universal and thus the increase in compliance costs borne by all firms could not accordingly be equally justified.
Open Access
The Impact of New Zealand’s Statutory-Backed Continuous Disclosure Regime on Corporate Disclosure Behaviour
(Te Herenga Waka—Victoria University of Wellington, 2008) Dunstan, Keitha; Gallery, Gerry; Truong, Thu Phuong
Since 1 December 2002, the New Zealand Stock Exchange’s (NZX) continuous disclosure listing rules have operated with statutory backing. To test the effectiveness of the new corporate disclosure regime, we compare the change in quantity (frequency), quality (precision and accuracy), and timeliness (horizon) of earnings guidance in NZX disclosures before and after the introduction of statutory backing. Our results provide qualified support for the effectiveness of statutory sanctions. Disclosure frequency has significantly improved; however, a large number of material changes in periodic earnings are either not pre-empted by an earnings forecast or are only pre-empted by an earnings forecast made in conjunction with a routine announcement. In the post-statutory sanctions period, disclosure quality significantly improves in terms of forecast precision and accuracy but at the expense of a decline in forecast horizon, and many forecasts remain qualitative in nature. While these results suggest that the impact of regulatory reforms falls short of the continuous disclosure culture envisaged by New Zealand corporate regulators, the observed positive changes in managers’ forecasting behaviour have been achieved in the absence of strong enforcement action. These findings have important implications for corporate regulators in their search for a superior corporate disclosure regime.
Open Access
The Influence of Board Structure on the Value of NZX Listed Firms and its Association with Growth Options
(Te Herenga Waka—Victoria University of Wellington, 2011) Dunstan, Keitha; Keeper, Trish; Truong, Thu Phuong; van Zijl, Tony
Our study examines the relationship between four indicators of board structure and firm value and the extent to which this relationship may be affected by the level of growth options relative to assets-in-place. These indicators are the level of accounting expertise, gender diversity, the level of independence and the size of the board. Using a sample of 543 firm-years covered by 125 firms listed on the New Zealand Exchange for the 1998-2007 financial years, we found that these board structure indicators together with the level of growth options significantly impact on firm value after effectively controlling for the endogeneity problem. Specifically, firms with a lower number of directors with accounting expertise and/or a higher number of female directors on the board have higher firm value. For firms with a higher level of growth options, a higher percentage of independent directors on the board and/or a larger board are more value relevant. Our findings related to board accounting expertise and board gender diversity particularly may have important implications for corporate regulators.
Open Access
The Influence of Board Structure on the Value of NZX Listed Firms and its Association with Growth Options
(Te Herenga Waka—Victoria University of Wellington, 2011) Dunstan, Keitha; Keeper, Trish; Truong, Thu Phuong; van Zijl, Tony
Our study examines the relationship between four indicators of board structure and firm value and the extent to which this relationship may be affected by the level of growth options relative to assets-in-place. These indicators are the level of accounting expertise, gender diversity, the level of independence and the size of the board. Using a sample of 543 firm-years covered by 125 firms listed on the New Zealand Exchange for the 1998-2007 financial years, we found that these board structure indicators together with the level of growth options significantly impact on firm value after effectively controlling for the endogeneity problem. Specifically, firms with a lower number of directors with accounting expertise and/or a higher number of female directors on the board have higher firm value. For firms with a higher level of growth options, a higher percentage of independent directors on the board and/or a larger board are more value relevant. Our findings related to board accounting expertise and board gender diversity particularly may have important implications for corporate regulators.
Open Access
The Influence of Corporate Governance on Management Earnings Forecast Behaviour in a Low Private Litigation Environment
(Te Herenga Waka—Victoria University of Wellington, 2011) Truong, Thu Phuong; Dunstan, Keitha
We examine the influence of three external corporate governance mechanisms – continuous disclosure regulatory reform, analyst following and ownership concentration and one internal corporate governance mechanism – board structure, on the likelihood, frequency, horizon, precision and accuracy of management earnings forecasts in the low private litigation environment of New Zealand. Based on a sample of 1,082 management earnings forecasts issued by 125 firms listed on the New Zealand Exchange during the 1998-2007 financial reporting periods, we provide strong evidence that these four corporate governance mechanisms have a significant influence on management earnings forecast behaviour after effectively controlling for endogeneity, multicollinearity and self-selection bias problems. Specifically, firms monitored by effective corporate governance mechanisms were more inclined to pre-empt their earnings announcements with earnings forecasts (overall, non-routine and quantitative) and provide these earnings forecasts more frequently. These earnings forecasts issued by these firms were less optimistically biased. In addition, firms having more directors with accounting expertise on their boards and audit committees were more likely to provide earnings forecasts with longer horizon and smaller forecast error. Board size and the existence of a formally established audit committee are shown to have a positive impact on forecast error. A possible interpretation of our findings is that effective corporate governance mechanisms have been able to substitute for private enforcement alternative. Our findings should have important implications for the other low private litigation environments as well as for high private litigation environments such as the United States given the high economic and social costs that have been identified as being related to private litigation.
Open Access
Measuring Service Performance Reporting Quality by New Zealand Universities Using an Information Accessibility Index
(Te Herenga Waka—Victoria University of Wellington, 2005) Dunmore, Paul; Alves, Jenny; Dunstan, Keitha
There has been a widely reported view that the quality of service performance reporting by New Zealand universities is in need of improvement. The purpose of this study is to measure the quality of service performance reporting as provided in the Statement of Service Performance by the university sector of New Zealand in the years 2000, 2002 and 2003. A new methodology is developed that complements existing methodologies employed in research addressing university reporting, specifically the Modified Accountability Disclosure Index (Coy et al. 1993) and the Performance Accountability Index (Coy and Dixon 2002). The Information Accessibility Index introduced here measures the clarity rather than the content of presentation. The rankings afforded by different indices are sensitive to the metric adopted. Future research might further explore the development of alternative methods to further exploit context specific differences between countries.
Open Access
A Simultaneous Equations Approach to Analysing the Relation between Ownership Structure and Performance in Bangladesh
(Te Herenga Waka—Victoria University of Wellington, 2005) Al Farooque, Omar; van Zijl, Tony; Dunstan, Keitha; Karim, Wares
This paper models the managerial (board) ownership and financial performance relationship in Bangladesh using a simultaneous equations approach. This approach is deemed to be the most appropriate methodology to control for the potential endogenous relationship between managerial (board) ownership and performance. Consistent with recent literature employing this method of analysis in developed markets, we document a ‘reverseway’ causality of relationship between them in Bangladesh listed firms. Using an unbalanced/random pooled sample of 660 firm years, our results suggest that board ownership does not have a significant impact on performance as measured by Tobin’s Q or Return on Assets (“ROA”). However, performance does appear to have a significant negative impact on board ownership. With few exceptions, other corporate governance and control variables have effects on performance and ownership consistent with both theoretical and empirical expectations. These results imply that despite huge institutional and governance differences between Bangladesh, an emerging market economy, and developed countries (US, UK, Japan, Germany) there is nevertheless similarity in governance mechanisms, in particular, ‘internal governance mechanisms’ and agency problems.
Open Access
Users of Local Government Annual Reports: an Exploratory Study
(Te Herenga Waka—Victoria University of Wellington, 2001) Mack, Janet; Ryan, Christine; Dunstan, Keitha
The nature of financial reporting in the public sector in Australia has undergone substantial change in the last twenty years. One result has been the promulgation of public sector accounting standards based on the private sector conceptual framework for general purpose financial reports. A central key to this framework is the existence of users and their needs. This framework emphasises the provision of information for users for the purpose of decision making. Critics of the framework as it applies to the public sector claim that it lacks empirical substantiation and ignores the complexity and diversity of public sector institutions. This paper examines and analyses the annual report distribution lists for local government authorities within Queensland and provides empirical evidence on distribution patterns. The study finds that there are user groups which fall outside the categories identified by the conceptual framework. Further, there is a wide variety in the dissemination lists of local government authorities and cross sectional differences in the distribution patterns for urban and rural local government authorities. The results of this research raise important questions for public sector accounting regulators regarding the appropriateness of assuming that there exists a homogeneous set of users for all public sector entity types.
Open Access
The Value of Public Sector Annual Reports and Annual Reporting Awards as a Signal of Management Performance
(Te Herenga Waka—Victoria University of Wellington, 2001) Ryan, Christine; Dunstan, Keitha; Brown, Jennet
Australian public sector reforms have emphasised the accountability of agencies for the performance of management. Despite considerable diversity in public sector organisations, annual reports have been promoted as an appropriate tool to discharge the accountability of all government agencies. However, there remains an absence of consistent empirical evidence as to the value of the annual report for reporting on management performance. Further, debates about the role of public sector annual reports often become intertwined with notions of the quality of reports. Prior research has investigated the incentives of agencies to enter annual reporting awards as a means of signalling the quality of management. However, the research ignores the possibility that the value of annual reports to discharge performance accountability and the value of entry into an annual reporting award may vary depending on the type of public sector agency and on the relationships between stakeholders. This study focuses on the Queensland public sector and the Queensland Annual Reporting Award (QARA) and uses a series of case studies to examine the value of the annual report as a means of discharging accountabilities. The results reveal a cross sectional variation in the perceived value of the annual report in discharging accountabilities. In some cases it was thought that alternative forms of communication provided a more suitable means to discharge the accountability demands of stakeholders. Further, while annual reporting awards provide a mechanism to supply a credible signal of quality, it will only be used in those situations where the participants identify direct benefits of entry.
Open Access
The Value Relevance of Board Gender Diversity for NZX Listed Firms and its Association with Growth Options
(Te Herenga Waka—Victoria University of Wellington, 2011) Dunstan, Keitha; Keeper, Trish; Truong, Thu Phuong; van Zijl, Tony
Our study examines the relationship between board gender diversity and firm value and, in particular, whether the value relevance of female directors is affected by the level of growth options relative to assets-in-place. Using a sample of 865 firm-years covered by 125 firms listed on the New Zealand Exchange during the period 1998-2007, we found that board gender diversity is value enhancing when applying linear modelling. This relationship is strongest for firms with high levels of growth options. We also explore the possibility that the relationship between board gender diversity and firm value is non-linear. This analysis supports the existence of a concave non-linear relationship with the turning point being the appointment of one female director. This suggests that in New Zealand the benefit gained from board gender diversity can be captured with the appointment of one female director. Given the current overseas regulatory developments promoting the appointment of female directors on boards, our findings suggest that there is a value optimising number of women on boards.
Open Access
Why do Queensland Urban Water Entities Resist the Adoption of User Pays Pricing?
(Te Herenga Waka—Victoria University of Wellington, 2007) Dunstan, Keitha; Hunt, Chris
This study is motivated by the apparent reluctance of Australian urban water entities to adopt the user pays pricing formula despite strong encouragement by Australian Governments to do so. Elements of contingency theory, political cost theory and transaction cost economics are employed in developing an empirical model to explain the differences between those Queensland urban water entities which have been persuaded to accept Government policy and those which have not. The Queensland urban water entities most resistant to adopting the user pays pricing formula were found to be those which faced the greatest potential economic wealth transfers combined with a less certain revenue base. The findings highlight the potential strategic uncertainty and political nature of the pricing of water and that this policy friction poses for government and regulators attempting to encourage the voluntary adoption of more efficient pricing formulas.
Open Access
Why do Queensland Urban Water Entities Resist the Adoption of User Pays Pricing?
(Te Herenga Waka—Victoria University of Wellington, 2008) Hunt, Chris; Dunstan, Keitha
This study is motivated by the apparent reluctance of Australian urban water entities to adopt the user pays pricing formula despite strong encouragement by Australian Governments to do so. Elements of contingency theory political cost theory and transaction cost economics are employed in developing an empirical model to explain the differences between those Queensland urban water entities which have been persuaded to accept Government policy and those which have not. The Queensland urban water entities most resistant to adopting the user pays pricing formula were found to be those which faced the greatest potential economic wealth transfers combined with a less certain revenue base. The findings highlight the potential strategic uncertainty and political nature of the pricing of water and that this policy friction poses for government and regulators attempting to encourage the voluntary adoption of more efficient pricing formulas.