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The purpose of this study is to examine the individual and combined effect of managerial ownership and external audit quality, as two control mechanisms, on earnings management.

This study applies ordinary least squares estimates on fixed-time effects panel regression model to test the impact of the investigated variables on earnings management for the whole population of banks and insurance companies listed at Damascus Securities Exchange (DSE) during the period from 2011 to 2018.

The empirical evidence suggests a negative non-linear relationship between managerial ownership (as proxied by board of directors’ ownership) on earnings management. However, neither audit quality nor the simultaneous effect of the managerial ownership and audit quality (Big 4) affects earnings management.

DSE is dominated by the financial sector and the number of observations is constrained by the recent establishment of DSE and the small number of firms listed at DSE. In addition, the non-availability of data on executive directors’ and foreign ownerships restrict our ability to uncover the impact of different dimensions of ownership structure on earnings management.

First, it stimulates investors to purchase stocks in financial firms that enjoy both high managerial ownership, as they seem enjoying higher earnings quality. Second, the findings encourage external auditors to consider the ownership structure when choosing their clients as the financial statements’ quality is affected by this structure. Third, researchers may need to consider the role of managerial ownership when analyzing the determinants of earnings management.

It fills the gap in the literature, as it investigates the impact of both managerial ownership and audit quality on earnings management in a special conflict context and in an unexplored emerging market of DSE. It suggests that managerial ownership exerts a significant role in controlling earnings management practices when loose regulatory environment combines conflict conditions. However, external audit quality fails to counter earnings management practices when conditions are fierce.

This study aims to examine the impact of aggregate and individual corporate governance provisions on firm performance on all firms listed at Damascus Securities Exchange (DSE) for the period between 2011 and 2015. In addition, it disentangles ownership structure provision to ownership concentration and foreign ownership and investigates which component of ownership structure stands behind the significance of ownership structure in explaining firm performance.

The study uses multiple linear regression models to analyze the relationship between aggregate corporate governance index and its provisions and firm performance. A corporate governance index is built on the basis of four mechanics (i.e. board of directors, audit, disclosure and ownership structure) for all firms listed at DSE. On the other hand, the dependent variable (firm performance) is measured using Earnings Per Share (EPS) and Return On Assets (ROA). The authors capture current war conditions using political stability and absence of violence indicator, one of Worldwide Governance Indicators accumulated by the World bank.

This study finds that ownership structure is the only significant corporate governance provision in determining Syrian firms’ performance, as it loads positively and significantly on firm performance proxies (ROA and EPS). Moreover, the analysis of ownership structure items shows that foreign ownership is the main source of this positive and significant impact. This result is robust for both measures of firm performance and in the presence of political stability indicator.

This paper provides evidence on corporate governance measures from Syrian Arab Republic, a developing country with an emerging stock exchange. It examines board structure, ownership structure, audit committee and disclosure in a period of crisis because of the war in this country. Moreover, it uncovers that foreign ownership is the only influential provision affecting firm performance at DSE. Furthermore, it combines firm-level governance indicators with country governance indicator of political stability and absence of violence.

The choice between different financing sources is governed by a number of finance theories, particularly, trade-off theory and pecking order theory. However, the special characteristics of Islamic finance, which forces the exclusion of conventional bonds, leave Islamic banks with limited number of alternatives. Tier 1 sukuk are distinguished type of sukuk that combines the features of conventional bonds and stocks. This paper aims to answer the following question: Does the issuance of Tier 1 sukuk positively affect Islamic banks’ profitability or is their impact concentrated on enhancing Islamic banks’ capital adequacy ratios?

The data set used in this study consists of all United Arab Emirates (UAE) Islamic banks that issued Tier 1 sukuk over the period 2010–2020. Pooled and fixed effects panel regressions of Tier 1 sukuk and other control variables on three proxies of Islamic banks’ profitability were run. The selection of fixed-effect model is based on Hausman test, redundant fixed effects and likelihood ratio test.

This study reveals novel findings. Tier 1 sukuk increases both earnings per share (EPS) and capital adequacy ratios. That is, this study finds that there is a positive significant impact of Tier 1 sukuk on EPS, which indicates that issuing more Tier 1 sukuk will generate more return to shareholders in terms of higher EPS because of the lower cost of Tier 1 sukuk compared to equity. However, this study finds that there is an insignificant impact of Tier on sukuk on both return on assets and return on equity. Hence, it is concluded that Tier 1 sukuk does not increase the risk appetite of UAE Islamic banks.

Tier 1 sukuk is a niche instrument that has been recently used by Islamic banks. Hence, there are a limited number of Islamic banks that have issued this type of sukuk and consequently limited number of observations. Therefore, with the increased use of this instrument, a larger set of data will be available for examination. In addition, future research could examine the relationship between issuing Tier 1 sukuk and profitability in other countries where such sukuk have loss absorption feature. The impact of other types of sukuk, such as liability sukuk, on Islamic banks’ profitability could also be an interesting field of study.

This study recommends Islamic banks to issue more Tier 1 sukuk to enhance their profitability indicators while meeting Basel III accord. This study also recommends investors to purchase the stocks of Islamic banks that issue Tier 1 sukuk because they are able to offer them higher EPS. The authors advise the UAE regulators to allow Islamic banks to issue Tier 1 sukuk with loss absorption feature to enable Islamic banks engage in more risky activities that usually provide larger profits. This study also suggests that the Islamic Financial Services Board (IFSB) reclassifies Tier 1 sukuk, with loss absorption feature, within the highest quality of capital, common equity Tier 1, to encourage Islamic banks to issue this type of sukuk, especially Basel III accord and IFSB 15 require higher ratios of common equity Tier 1 to risk-weighted assets.

This research contributes to the existing literature in two ways. First, it adds to the existing literature on the impact of sukuk on Islamic banks profitability. That is, contrary to prior studies that merely investigate the impact of issuing ordinary sukuk on profitability, this study explores a distinguished type of sukuk, that is Tier 1 sukuk, that has been surprisingly ignored so far. Second, this study shows that it is not only capital adequacy ratios that have improved as a result of issuing Tier 1 sukuk but also Tier 1 sukuk reduce the cost of capital of UAE Islamic banks which has been reflected in a higher profitability proxied by EPS. Hence, these sukuk serve a dual function for Islamic banks by improving both capital adequacy and profitability ratios.

This paper aims to investigate the impact of qualified audit opinions on the returns of stocks listed at Amman Stock Exchange (ASE) after the introduction of the recent amendments by the International Auditing and Assurance Standard Board (IAASB) on audits reporting and conclusions. It further investigates if results differ between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern.

Audit opinions’ announcements and stock returns data are collected from companies’ annual reports for the fiscal years 2016 to 2019 while stock returns are computed from stock closing prices published at ASE website. The authors apply the event study approach and use the market model to calculate normal returns. Cumulative abnormal returns (CARs) and average abnormal returns (AARs) are computed for all qualified audit opinions’ announcements.

The empirical evidence suggests that investors at ASE do not react to qualified audit opinions announcements. That is, the authors find an insignificant impact of qualified audit opinion announcements on stock returns using both CAR and AAR estimates. The results are robust to first time and sequenced qualifications, and for qualifications with going concern. Results are also robust to the use of risk adjusted market model.

The insignificant impact of qualified audit opinions on stock returns have two potential conflicting research implications. First, the new amendments introduced to auditors’ report made them more informative and reduce the negative signals contained in the qualified opinions. That is, investors are now aware of the real causes of qualifications and not overreacting to the qualified opinion. Second, the documented insignificant impact confirms that ASE is not a semi-strong form efficient.

The apparent excessive use of qualifications should ring the bell on whether auditors misuse their power or companies are really in trouble. Hence, the Jordanian regulatory bodies need to warn auditors against the excessive use of qualifications on the one hand, and to raise the awareness of investors on the implications of auditors’ opinions on the other hand.

This study is innovative in twofold. First, it explores the impact of qualified audit opinions on stock returns after the introduction of new amendments by IAASB at ASE. In addition, it uses event study approach and distinguishes between first time qualified and sequenced qualifications, and between plain qualified opinion and qualifications with going concern. The results are consistent with efficient market theory and behavioral finance explanations.

The purpose of this paper is to explore why students decide to enrol in a business postgraduate programme at Damascus University in the current Syrian crisis.

Exploration of students’ motives was generated in this study using semi-structured interviews. On the basis of saturation sampling, 11 interviews took place in the leading Syrian university providing postgraduate programmes, Damascus University.

The results from the interviews indicate the existence of six different motives for students to enrol in a postgraduate study: self-motives, professional motives, social motives, academic motives, lack of vision, and delaying military service, which is directly caused by the current war conditions in Syria.

Understanding postgraduates’ motives is essential at the national level, the institutional level, and also at the individual level to make better future plans related to opening new programmes or altering admission criteria. Recommendations to higher education policy makers are highlighted in the study.

The majority of previous studies concentrate on students’ motives to pursue postgraduate studies during financial crisis. However, very little is known on why students decide to enrol in a business postgraduate programme in a war context.

The aim of this paper is twofold. First, it aims to provide better understanding for the main sources behind the value premium in the UK. Second, given that the value factor (HML) in the Fama‐French three‐factor model is itself a proxy for value premium, this paper seeks to illustrate the component of HML responsible for explaining UK portfolio returns.

For the period July 1991 to June 2006, value premium is broken into two components: one is related to small stocks and the other to big stocks. Then monthly time‐series regressions are used to test which component of value premium provides better explanatory power for UK portfolio returns.

The empirical results indicate that the value premium in average returns is due to small market capitalization stocks. Moreover, value stocks do not seem riskier than growth stocks according to their market beta. Furthermore, the significance of the value factor (HML) in explaining UK portfolio returns is mainly due to its small stock component (HMLS). The paper suggests a revision for the Fama‐French three‐factor model that replaces HML by HMLS.

Academics are interested in understanding the main sources of value premium and the reasons behind the significance of the value factor in explaining UK portfolio returns. Investors and fund managers who wish to exploit the value premium will tilt their portfolios towards value stocks that have low‐market capitalization. Both academics and practitioners may consider altering the Fama‐French model, as suggested by the paper, when estimating the cost of capital.

This paper aims to identify the most significant governance provision in enhancing the financial information quality of UK listed firms. In addition, it investigates the influence of this governance provision in explaining stock returns of 20 UK industry portfolios.

To identify the main governance provision in enhancing the accruals quality, the paper runs regressions of accruals quality variable on the total governance variable, on the governance provisions individually, and on the governance provisions taken together with and without integrating control variables. Next, Asset Pricing tests are employed to examine the capacity of the audit provision, as proved the most influential governance provision on accruals quality, to explain stock returns. The quantitative approach used in the paper enables to investigate the relationship between corporate governance, accruals quality, and stock returns.

Results indicate that audit provision is the most important governance mechanism affecting accruals quality. In addition, this mechanism is comparable with the book-to-market factor in explaining the time-series variation in portfolios returns. Furthermore, the introduction of the Audit factor to Fama-French model reduces the significance of the size factor and the book-to-market factor in explaining stock returns. This suggests that size and the book-to-market factors contain information related to the audit provision.

The findings of the paper carry implications for investors as they do not need to equally weight all corporate governance provisions in their resource allocation decisions. The significant influence of audit provision on accruals quality needs to be taken into consideration when investment decisions are made. Audit factor is important in predicting future returns. It is also found to be as good as book-to-market factor in explaining portfolios returns. Also, the findings have many implications for regulatory bodies in their efforts to enhance financial information quality. Establishing roles for best governance in reducing information risk should focus, among other things, on the significant elements of corporate governance in improving accruals quality. The main limitation of the study is the restricted variation in the Audit governance factor which comes from the source of corporate governance data, i.e. CGQ. Firms in the sample do not exhibit diversified levels of Audit scores. Accordingly, when constructing audit risk factor it was found that firms could only be split into two portfolios according to their Audit scores instead of five.

This study identifies audit provision as the most significant governance mechanism in enhancing the financial information quality of UK listed firms. In addition, a factor representing audit provision is constructed to investigate the influence of this provision on stock returns. To the authors' knowledge, this is the first study that examines the capacity of the audit provision to explain stock returns in an asset pricing framework.

The purpose of this paper is to update and re‐examine the role of corporate narrative reporting in improving investors' ability to better forecast future earnings change. The paper also aims to construct a risk factor for disclosure quality (DQ) and test whether such a factor is useful in explaining the time‐series variation of UK stock returns.

The paper uses the return‐future earnings regression model to update and re‐examine the value relevance of DQ for investors. It also constructs a DQ factor and adds it to Fama‐French three‐factor model. This is undertaken in order to investigate the usefulness of such a factor in explaining the time‐series variation of UK portfolio returns over and above the role of the original Fama‐French factors.

The paper contributes to the market‐based accounting research in three crucial ways. First, it offers updated evidence on the usefulness of corporate narrative reporting to investors. Second, it offers evidence that the DQ factor is a significant risk factor in the UK. Third, and finally, it finds that the Fama‐French factors might contain DQ‐related information.

The results suggest that narrative reporting contains value‐relevant information for the stock market. Therefore, regulators should think about asking companies to produce compulsory narrative sections (i.e. operating and financial reviews) in their annual reports.

To the best of the authors' knowledge, this paper is the first to construct and add the DQ factor in the original Fama‐French factors.

The purpose of this paper is to examine the impact of a firm’s corporate governance (CG) mechanisms on the number of financial analysts following UK firms. The potential effect of the number of analysts following firms in the UK on the association between CG mechanisms and firm value was also examined.

Multiple regression models were used to examine the association between CG, analyst coverage and firm value for a large sample of UK firms listed in London Stock Exchange with financial year ends between January 2003 and December 2008.

It was found that the aggregate level of CG quality is positively associated with the number of analysts following UK firms. In addition, the compensation score is the main component that affects the number of analysts following UK firms. The results suggest that financial analysts are particularly concerned with how much compensation executives and directors receive. This is consistent with Jensen and Meckling (1976) who argue that chief executive officer (CEO) compensation can be used as effective mechanisms for mitigating agency costs. Hence, higher levels of CEO compensation attract more financial analysts to follow the firm. Surprisingly, when the joint effect of both CG quality and the number of analysts following on firm value was examined, no significant effect was found for both variables on firm value.

This paper contributes to prior research by providing the first empirical evidence on the impact of disaggregated levels of CG on analyst following and firm value for a large sample of UK firms.

This editorial aims to provide an overview of the four papers included in this special issue. It discusses the development of voluntary disclosure research and its potential future directions.

The editorial adopts a review approach, identifying key issues and provides a context for future research.

The editorial highlights some of the difficulties with research into voluntary disclosure, calls for further reflection and suggests factors to consider in future research in this area.

The editorial provides a review of current issues in disclosure research and reviews these papers which demonstrate a particular approach to research that is relevant to both practitioners and academics.