Impression management, myth creation and fabrication in private social and environmental reporting: insights from Erving Goffman

This paper explores the nature of private social and environmental reporting (SER). From interviews with UK institutional investors, we show that both investors and investees employ Goffmanesque, staged impression management as a means of creating and disseminating a dual myth of social and environmental accountability. The interviewees’ utterances unveil private meetings imbued with theatrical verbal and physical impression management. Most of the time, the investors’ shared awareness of reality belongs to a Goffmanesque frame whereby they accept no intentionality, misrepresentation or fabrication, believing instead that the ‘performers’ (investees) are not intending to deceive them. A shared perception that social and environmental considerations are subordinated to financial issues renders private SER an empty encounter characterised as a relationship-building exercise with seldom any impact on investment decision-making. Investors spoke of occasional instances of fabrication but these were insufficient to break the frame of dual myth creation. They only identified a handful of instances where intentional misrepresentation had been significant enough to alter their reality and behaviour. Only in the most extreme cases of fabrication and lying did the staged meeting break frame and become a genuine occasion of accountability, where investors demanded greater transparency, further meetings and at the extreme, divested shares. We conclude that the frontstage, ritualistic impression management in private SER is inconsistent with backstage activities within financial institutions where private financial reporting is prioritised. The investors appeared to be in a double bind whereby they devoted resources to private SER but were simultaneously aware that these efforts may be at best subordinated, at worst ignored, rendering private SER a predominantly cosmetic, theatrical and empty exercise.

Impression management, fabrication and myth creation in private social and environmental reporting: insights from Erving Goffman

This paper explores the nature of private social and environmental reporting (SER). From interviews with UK institutional investors, we show that both investors and investees employ Goffmanesque, staged impression management as a means of creating and disseminating a dual myth of social and environmental accountability. The interviewees’ utterances unveil private meetings imbued with theatrical verbal and physical impression management. Most of the time, the investors’ shared awareness of reality belongs to a Goffmanesque frame whereby they accept no intentionality, misrepresentation or fabrication, believing instead that the ‘performers’ (investees) are not intending to deceive them. A shared perception that social and environmental considerations are subordinated to financial issues renders private SER an empty encounter characterised as a relationship-building exercise with seldom any impact on investment decision-making. Investors spoke of occasional instances of fabrication but these were insufficient to break the frame of dual myth creation. They only identified a handful of instances where intentional misrepresentation had been significant enough to alter their reality and behaviour. Only in the most extreme cases of fabrication and lying did the staged meeting break frame and become a genuine occasion of accountability, where investors demanded greater transparency, further meetings and at the extreme, divested shares. We conclude that the frontstage, ritualistic impression management in private SER is inconsistent with backstage activities within financial institutions where private financial reporting is prioritised. The investors appeared to be in a double bind whereby they devoted resources to private SER but were simultaneously aware that these efforts may be at best subordinated, at worst ignored, rendering private SER a predominantly cosmetic, theatrical and empty exercise.

Do IMF and World Bank programs induce government crises? an empirical analysis

We examine whether and under what circumstances World Bank and International Monetary Fund (IMF) programs affect the likelihood of major government crises. We find that crises are, on average, more likely as a consequence of World Bank programs. We also find that governments face an increasing risk of entering a crisis when they remain under an IMF or World Bank arrangement once the economy's performance improves. The international financial institution's (IFI) scapegoat function thus seems to lose its value when the need for financial support is less urgent. While the probability of a crisis increases when a government turns to the IFIs, programs inherited by preceding governments do not affect the probability of a crisis. This is in line with two interpretations. First, the conclusion of IFI programs can signal the government's incompetence, and second, governments that inherit programs might be less likely to implement program conditions agreed to by their predecessors.

IFRS for SMEs: the IASB’S due process

This study explores the role of the International Accounting Standards Board’s (IASB) due process in developing its International Financial Reporting Standards for Small and Medium-sized Entities (IFRS or SMEs)standard. There were tensions between the IASB’s desire to minimise divergence from full IFRS and preserve recognition and measurement principles, and the primary reasons for undertaking the project – to meet the needs of users of financial statements of SMEs and to reduce the financial reporting burden on SMEs. Examination of events during the development of the project reveals much that was not apparent from material in the public domain. Most significantly, the IASB recognised that the final title of the standard, IFRS for SMEs, does not necessarily describe the scope of the standard. This paper also shows that the due process followed in the case of the IFRS for SMEs project barely reflected the ‘will of people’ but was more inclined towards acting as a communicative function for the IASB without any commitment to change its stance on the SME standard.

Accrual-based and real earnings management before and after IFRS adoption: the case of Greece

Purpose – The purpose of this study is to examine the use of accrual-based vs real earnings management (EM) by Greek firms, before and after the mandatory adoption of International Financial Reporting Standards (IFRS). The research is motivated by the fact that past studies have indicated the existence of significant levels of EM for Greece in particular before IFRS. Design/methodology/approach – Accrual-based earnings management (AEM) is examined by assessing performance-adjusted discretionary accruals, while real earnings management (REM) is defined in terms of abnormal levels of production costs, discretionary expenses, and cash flows from operations, for a three-year period before and after the adoption of IFRS in 2005. Findings – The authors find evidence on a statistically significant shift from AEM to REM after the adoption of IFRS, indicating the replacement of one form of EM with the other. Research limitations/implications – The validity of the results depends on the ability of the empirical models used to efficiently capture the existence of AEM and REM. Practical implications – IFRS adoption aims to improve accounting quality, especially in countries with high need for such an improvement; however, the tendency to substitute one form of EM with another highlights unintended consequences of IFRS adoption, which do not improve the informational content of financial statements if EM continues under different forms. Originality/value – Under the expectation that IFRS adoption should lead to improvements in accounting quality, this study examines whether IFRS actually led to a reduction of EM practices for a country with exceptionally high levels of EM before IFRS, by accounting for all possible forms of EM.

The impact of deregulation and re-regulation on bank efficiency: evidence from Asia

Following the 1997 crisis, banking sector reforms in Asia have been characterised by the emphasis on prudential regulation, associated with increased financial liberalisation. Using a panel data set of commercial banks from eight major Asian economies over the period 2001-2010, this study explores how the coexistence of liberalisation and prudential regulation affects banks’ cost characteristics. Given the presence of heterogeneity of technologies across countries, we use a stochastic frontier approach followed by the estimation of a deterministic meta-frontier to provide ‘true’ estimates of bank cost efficiency measures. Our results show that the liberalization of bank interest rates and the increase in foreign banks' presence have had a positive and significant impact on technological progress and cost efficiency. On the other hand, we find that prudential regulation might adversely affect bank cost performance. When designing an optimal regulatory framework, policy makers should combine policies which aim to foster financial stability without hindering financial intermediation.

O canal de empréstimos bancários no Brasil: uma evidência microeconômica

The aim of this thesis is to investigate the existence and relevance of the bank-lending channel in Brazil. For that purpose we use balance-sheet data of Brazilian financial institutions, and adopt a methodology based in Kashyap and Stein (2000), who use twostage and panel estimations. We find that restrictive monetary policy – represented by interest rate increases – lower the sensibility of bank lending to the liquidity of its assets. In other words, increases in the interest rate lead to less binding bank liquidity restrictions. Therefore, the existence of a bank-lending channel for the transmission of monetary policy in Brazil is refused.

Risco operacional - modelos de alocação de capital aplicados aos bancos no Brasil

Nos últimos tempos, mensurar o Risco Operacional (RO) tornou-se o grande desafio para instituições financeiras no mundo todo, principalmente com a implementação das regras de alocação de capital regulatório do Novo Acordo de Capital da Basiléia (NACB). No Brasil, ao final de 2004, o Banco Central (BACEN) estabeleceu um cronograma de metas e disponibilizou uma equipe responsável pela adaptação e implementação dessas regras no sistema financeiro nacional. A Federação de Bancos Brasileiros (FEBRABAN) também divulgou recente pesquisa de gestão de RO envolvendo vários bancos. Todo esse processo trouxe uma vasta e crescente pesquisa e atividades voltadas para a modelagem de RO no Brasil. Em nosso trabalho, medimos o impacto geral nos banco brasileiros, motivado pelas novas regras de alocação de capital de RO envolvendo os modelos mais básicos do NACB. Também introduzimos um modelo avançado de mensuração de risco, chamado Loss Data Distribution (LDA), que alguns especialistas, provenientes do Risco de Mercado, convencionaram chamar de Value-at-Risk Operacional (VaR Operacional.). Ao final desse trabalho apresentamos um caso prático baseado na implementação do LDA ou VaR

Past and future of the bankruptcy law in Brazil and Latin America

This paper studies the Bankruptcy Law in Latin America, focusing on the Brazilian reform. We start with a review of the international literature and its evolution on this subject. Next, we examine the economic incentives associated with several aspects of bankruptcy laws and insolvency procedures in general, as well as the trade-offs involved. After this theoretical discussion, we evaluate empirically the current stage of the quality of insolvency procedures in Latin America using data from Doing Business and World Development Indicators, both from World Bank and International Financial Statistics from IMF. We find that the region is governed by an inefficient law, even when compared with regions of lower per capita income. As theoretical and econometric models predict, this inefficiency has severe consequences for credit markets and the cost of capital. Next, we focus on the recent Brazilian bankruptcy reform, analyzing its main changes and possible effects over the economic environment. The appendix describes difficulties of this process of reform in Brazil, and what other Latin American countries can possibly learn from it.

Inflation and debt indexation : the equivalence of two alternative schemes for the case of periodic payments

The presence of inflation has induced the financial institutions to implement procedures devised to protect the real values of theirs loans. Two of such procedurcs, the floaaing rale scheme and the monetary correction mechanism, tend to lead to very different streams of payments. However, whenever the floating rate scheme follows the rule of Strict adhercnce to lhe Fisher equation, lhe two procedures are financially equivalent.

Economic growth with foreign saving?

Highly indebted countries, particularly the Latin American ones, presented dismal economic outcomes in the 1990s, which are the consequence of the ‘growth cum foreign savings strategy’, or the Second Washington Consensus. Coupled with liberalization of international financial flows, such strategy, which did not make part of the first consensus, led the countries, in the wave of a new world wide capital flow cycle, to high current account deficits and increase in foreign debt, ignoring the solvency constraint and the debt threshold. In practical terms it involved overvalued currencies (low exchange rates) and high interest rates; in policy terms, the attempt to control de budget deficit while the current account deficit was ignored. The paradoxical consequence was the adoption by highly indebted countries of ‘exchange rate populism’, a less obvious but more dangerous form of economic populism.

Uma análise dos efeitos da regulação do setor de microfinanças brasileiro: o caso das Sociedades de Crédito ao Microempreendedor

The purpose of this work is to analyze the process of regulation of the sector of microfinance in Brazil, based on the regulation of the Societies of Credit to Microentrepreneurs - SCMs, the only specialized institucional form in microfinance in the National Financial System, and that, in sight of this, has its performance regulated and supervised by the Brazilian Central Bank. The regulation of the SCMs has been one of the strategies adopted by the Federal Government in our country to stimulate the generation of job and income for the population that usually is excluded from the traditional financial system, for the microentrepreneurs, who have difficulties in getting financing for its productive activities at the traditional financial institutions. However, despite the governmental measures that have been taken in the direction to try to stimulate the sector of microfinance in our country, it is considered that the current model of regulation based on the regulation of the SCMs presents obstacles that must be surpassed in order to reach the objective to facilitate the access of the formal credit to the microentrepreneurs.

A Teoria de segmentação face à satisfação do consumidor de serviços bancários: um estudo de caso em um banco de varejo

There is a intensity change within financial services industry: deregulation, technology, joint ventures and, in Brazil, privatization, increase of foreign competitors and fall of industry participating from 31 per cent to 5,4 per cent in Brazilian GDP.In this context financial institutions are working very hard to improve their market share, besides promoting customer retention and creating customer loyalty.In this paper we are presenting the scenario of industry in the 90's, opportunity to use segmentation and relationship strategies used by banks through distribution channels.The purpose of this study is to examine the relationship between customer satisfaction and segmentation. To ascertain whether such a link exists, a primary study of 3.378 individuals was conducted in two branches at Rio de Janeiro in March 2001. The results suggest that there is little relationship between customer satisfaction and segmentation, besides other qualitative findings.