Is risk reporting a possible link between financial and management accounting in private firms?

By | 2022-02-03T12:06:33+01:00 February 3rd, 2022|

Chiara Crovini, Giovanni Ossola / Financial Reporting / 1-2021

This study represents a theoretical analysis with the purpose to continue the discussion on the relationship between management accounting (MA) and financial accounting (FA), by concentrating on the role of risk reporting as a possible manifestation of their convergence. Moreover, the analysis focuses on the private-firm sector as private firms represent the backbone of the economic system of several countries and little is known about financial and non-financial reporting. Drawing on the neo- Durkheimian institutional theory, this paper develops a conceptual framing that considers risk as an embedded element of the business domain and risk reporting as a direct outcome of the convergence between MA and FA in private firms. Furthermore, the neo-Durkheimian institutional theory emphasizes that the owners and managers’ risk attitude is a crucial element affecting risk disclosure, especially in private firms.


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Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

By | 2017-12-22T10:25:33+01:00 December 6th, 2017|

Mafrolla Elisabetta, Nobili Viola/ Financial ReportingRiviste / Fascicolo: 1-2017

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers’ financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms’ discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

Keywords: Discretionary accruals, private firms, bank loans, non-performing loans, private loans.

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The Association between Big4 and Cost of Debt in Private Firms

By | 2017-12-22T10:24:25+01:00 December 6th, 2017|

Azzali Stefano, Mazza Tatiana/ Financial ReportingRiviste / Fascicolo: 1-2017

This study investigates the association between choice of a Big4 audit firm and Cost of Debt compared with non-Big4 in Italian firms. Based on a sample of Italian companies audited by an audit firm in the period 2007-2012, we perform OLS regressions to test the Big4 association with Cost of Debt. Results confirm our expectation that audit firm size is a significant criterion of audit firm choice and we find that Big4 is associated with lower Cost of Debt than non-Big4 in private firms. The choice of Big4 audit firm reduce the specific agency conflict between banks and owner/management in private firms. We also find that private firms benefit from lower Cost of Debt than public companies. This research makes a contribution to the literature by extending previous results (Gul et al., 2013, Cano Rodriguez and Alegria, 2012, Karjalainen, 2011) to private firms and to the setting of Italy. Results may also be useful for companies choosing auditors in private firms and in the mitigation of agency conflict.

Keywords: Big4, cost of debt, private firms.

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