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Formal and informal institutions and fair value opinion shopping: an institutional anomie theory perspective

Formal and informal institutions and fair value opinion shopping: an institutional anomie theory... The objective of this study is to examine how formal and informal institutional environment influences managers’ fair value opinion shopping behaviour in the largest International Financial Reporting Standards adopter, China.Design/methodology/approachTo test the hypotheses, I conduct a 2 × 2 between-subject randomised experiment since the inferences about cause and effect are important in this study. The between-subject experimental situations are manipulated on the basis of the financial condition of companies and boards’ oversight.FindingsI find that managers are likely to seek favourable fair value opinions from external valuation professionals when they are under the weak boards’ oversight and high stress to meet the regulation target of the China Securities Regulatory Commission. These results are more pronounced for managers with higher both rent-seeking and favour-seeking guanxi orientations are more likely to engage in fair value opinion shopping.Originality/valueConsistent with theoretical analysis of Balfoort et al. (2017), this study provides empirical evidence that guanxi influences the neutrality and faithful representation in fair value measurement in China. In addition, the findings extend Salzsieder’s study (2015) and reflect the context-embeddedness nature of accounting. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting Literature Emerald Publishing

Formal and informal institutions and fair value opinion shopping: an institutional anomie theory perspective

Cao, June
Journal of Accounting Literature , Volume 45 (2): 25 – Apr 14, 2023
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References (112)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0737-4607
eISSN
2452-1469
DOI
10.1108/jal-10-2022-0103
Publisher site
See Article on Publisher Site

Abstract

The objective of this study is to examine how formal and informal institutional environment influences managers’ fair value opinion shopping behaviour in the largest International Financial Reporting Standards adopter, China.Design/methodology/approachTo test the hypotheses, I conduct a 2 × 2 between-subject randomised experiment since the inferences about cause and effect are important in this study. The between-subject experimental situations are manipulated on the basis of the financial condition of companies and boards’ oversight.FindingsI find that managers are likely to seek favourable fair value opinions from external valuation professionals when they are under the weak boards’ oversight and high stress to meet the regulation target of the China Securities Regulatory Commission. These results are more pronounced for managers with higher both rent-seeking and favour-seeking guanxi orientations are more likely to engage in fair value opinion shopping.Originality/valueConsistent with theoretical analysis of Balfoort et al. (2017), this study provides empirical evidence that guanxi influences the neutrality and faithful representation in fair value measurement in China. In addition, the findings extend Salzsieder’s study (2015) and reflect the context-embeddedness nature of accounting.

Journal

Journal of Accounting Literature – Emerald Publishing

Published: Apr 14, 2023

Keywords: Fair value opinion shopping; Formal and informal institutions; Guanxi orientation

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