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Research Question: This paper investigates how a firm responds to tax reforms on corporate capital structure decisions. The TCJA 2017 represents one of the most significant tax reforms in the U.S. history, reducing the corporate income tax rate from 35 per cent to 21 per cent while introducing some major provisions, such as bonus depreciation, interest deductibility limits, and restrictions on NOL carry forward, which could have a joint effect on corporate capital structure decisions. Based on traditional capital structure theories, we hypothesized that such a significant tax rate reduction, including the addition of some restrictive provisions, would motivate companies to rely less on debt financing relative to internal financing or equity financing due to decreased tax shield benefits. Methodology: To test our hypotheses, we employ a panel regression model with firm and year-fixed effects. Our sample consists of 42,598 firm-year observations spanning from 2014 to 2020. We utilize multiple proxy measures for capital structure decisions, including short-term debt ratio, long-term debt ratio, and total leverage. We control for firm-specific factors that might influence capital structure choices. We conduct additional analyses based on firms’ financial distress levels (using Altman’s Z-score) and financial flexibility, measured by cash holdings. Findings: Contrary to expectations derived from static trade-off theory, we find that firms’ dependence on external sources financing increases in post-reform periods relative to pre-reform periods. The positive relation between tax reform and short-term financing is more pronounced in financially distressed firms, while safer firms tend to decrease their reliance on short-term financing in the post-reform periods. In contrast, firms with greater financial flexibility exhibit greater reliance on long-term debt in post-reform periods than less financially flexible firms. Originality/Value: This study provides the first comprehensive empirical investigation of TCJA 2017’s impact on corporate capital structure decisions. Our findings contribute to the capital structure literature by providing evidence consistent with dynamic trade-off theory rather than static trade-off models. The results have important implications for policymakers evaluating the effectiveness of tax reforms in influencing corporate financial behavior and for corporate financial managers making capital structure decisions in changing tax environments.

This study explores whether the family firms outperform nonfamily firms in Bangladesh. Secondly, we test whether family firms with political connections outperform non-connected family firms, given that more than 60 percent of Members of Parliament (MPs) have business backgrounds in the same setting. We find that the performance of nonfamily firms is significantly higher than that of family firms. However, we do not find any impact of political connection on the link between family ownership and market-based performance. At the same time, we document a negative impact of political connection on operating performance. Finally, our analysis shows that COVID-19 has negatively affected operating performance but positively affected market valuation, regardless of the firms' category. The paper’s findings will be highly important to researchers, policymakers, and academics in emerging economies.

Purpose This study investigates if the implementation of International Financial Reporting Standard (IFRS)-9: Financial Instruments (IFRS 9 hereafter) affects a firm’s cash holdings from a developing country perspective. Moreover, we explore whether the above nexus varies between Islamic banks and conventional banks in the same setting. Design/methodology/approach This study covers all the listed banks in Bangladesh. The data period is 2015–2022, which allows the study to have a pre- and post-IFRS 9 impact on corporate cash holdings. We use ordinary least square regression models to test our conjectures. Our entire analysis is based on 232 firm-year observations. Findings The overall findings suggest that the cash holding decreased significantly in post-IFRS 9 periods compared to pre-IFRS 9 periods. We further test whether the impact of IFRS 9 presents heterogeneity between Islamic banks and conventional banks in terms of cash holdings. However, we do not find any variation. Our results remain robust through a set of alternative measures of cash holding and sub-sample analysis. Originality/value Our study presents an empirical analysis of IFRS 9 in general, and in a developing country Bangladesh in particular. Prior research overlooked the possible impact of IFRS 9 from a developing country perspective, hence, this paper contributes to policy development and the literature of IFRS in emerging countries.

The study examines economic and non-economic endeavors to explore the association between family involvement and financial decisions within family firms. The non-economic factors of a family drive the need to analyze the impact of socioemotional factors on the financial policies of the family firms. The study explores the impact of family ownership, family management, and family control drawn from agency theory and socioemotional wealth perspectives on the financial decisions of family firms. Our findings in support of the socioemotional wealth perspective show a positive relationship between family ownership and debt financing with a desire to finance growth and avoid control dilution, with an increase in the level of debt. However, the involvement of family members in management and the top management team leads to an adverse relationship between family ownership and debt level, exhibiting the risk-averse behavior of a firm, which drives firms to reduce debt levels. Overall, our findings suggest that the perceptions of the socioemotional wealth theoretical paradigm are important in determining capital structure decisions in family enterprises. The results are resilient to potential endogeneity and heterogeneity difficulties, which may assist scholars and practitioners in assessing capital structure decisions in emerging economies.

PurposeThe main objective of the study is to ascertain the level of independence and the effectiveness of the Shariah Supervisory Board (SSB) members of Islamic banks in Bangladesh. This is because only SSB members are empowered to oversee and certify the overall business functions of Islamic banks.Design/methodology/approachThis paper implements qualitative case research approach to explore the research objective in the context of Bangladesh. We applied purposeful and snowball sampling tactics for selecting respondents. By using a semi-structured questionnaire and face-to-face interviews, we collect data from SSB members, central bank executives and experts in Islamic banking and Shariah governance.FindingsThe study finds that majority Islamic banks' SSB's positions are similar to the Board of Directors (BOD) of the banks. Next, this study finds that in recruiting/selecting SSB members, some banks do not follow the guidelines of the central bank. This study finds mixed evidence regarding the independence of the members of the SSB. Most of the respondents opined that SSBs do not have power; in some cases, members of SSB are not independent and seeming powerless as BOD selects and recruits them. In contrast, they are dependent on management in respect of strategy implementation.Research limitations/implicationsThe study significantly contributed to the national and global regulatory bodies by identifying an important governance determinant of Islamic banks that is the independence of SSB members, which is highly important for both Shariah functions, and to enhance the trust level of the stakeholders. This study makes a theoretical contribution by documenting the violation of stakeholder theory and agency theory in recruiting SSB members by BOD's choice. The lack of SSB members' independence has an impact on Shariah legitimacy of the Islamic banks which is contradictory with the notion of legitimacy theory. This study recommends the central bank to ensure the independence of the SSB and central bank should take initiatives to develop an environment for the Islamic banking sector.Originality/valueThis study extends the literature of corporate governance relating to Islamic banking and financial institutions. More specifically, this paper explores the necessity of independence of members of the monitoring body (here SSB), an important constituent of governance, to ensure high-quality governance and transparency in reporting to increase diverse stakeholders' trust/confidence. The absence of independence of SSB in performing their functions contradicts with the agency, stakeholder and legitimacy theory, which is inconsistent with global evidence, that demands further investigations.

Purpose This paper aims to investigate the association between International Financial Reporting Standards (IFRS) effort due to higher levels of material adjustments and audit fees. In addition, this paper tests whether these associations differ between industry specialist auditors and non-specialist auditors. Design/methodology/approach The authors measure IFRS effort by using differences between local GAAP and IFRS. More specifically, they measure the differences in the balances of accounts that are prepared under IFRS as opposed to the previously used Australian Accounting Standards Board (AASB) standards. They posit that higher material adjustments and more risk to fair presentation of financial statements require additional accounting and auditing effort (“IFRS effort”). Findings The authors find that audit fees are higher when accounting standards are more material and complex at an aggregate level. Nevertheless, not all standards are equally complex and/or material and not all individual standards contribute to higher audit fees. In addition, the results show that the positive association between IFRS effort and audit fees is more pronounced when firms are audited by city-level industry specialists than by non-industry specialists. Originality/value Overall, the results are consistent with the prediction of increasing audit fees for firms requiring higher levels of IFRS effort compared to firms requiring lower levels of IFRS effort. The results contribute to the understanding that not all IFRS are equally complex and, thereby, the standards require different levels of auditor effort. Isolating specific standards based on materiality/risk levels is informative to standard setters for standard setting, standard implementation and post-implementation review of standards.

Purpose The purpose of this paper is to investigate the influence of board of directors (BODs) and management in the decision-making of Shariah supervisory board (SSB) and implementation of their decisions. Design/methodology/approach The paper implements qualitative case research to explore the influences of BODs and management in the context of Bangladesh. To accomplish the research objective, we collected data from the 17 respondents from the regulators, Shariah supervisory boards, Shariah department executives and Shariah experts from the central bank and Islamic banks of Bangladesh. Findings This study found that management of Islamic banks indirectly influences the practices and functions of SSB, their decision-making and other activities. However, from either ethical or moral ground, management cannot influence SSB; management does not have legitimate power to control over their activities. Sometimes the BODs and management use the SSB and Shariah executives as a showcase and rubber stamp to accomplish their goals and to maximize profit in either partially or fully. Management assumes that Shariah officers are accomplishing and minimizing their income and hindering business functions without any contributions. Research limitations/implications The study significantly contributed to the national and global regulatory bodies by providing suggestions that regulatory bodies should be more concerned with the independence of SSB and Shariah executive officers. Besides, the BODs and management should be careful in handling Shariah issues as they were committed to do Islamic banking as per Shariah law. The study has theoretical contributions regarding the stakeholder and legitimacy theories. Originality/value This is the first research which extends the literature of the Islamic banking and Shariah governance mechanisms in perspective of Bangladesh concerning the influence of BODs and management in the decision-making of SSB and implementation of their decisions.

In this study, we examine the association between interim financing and firm performance in an emerging economy. Prior research shows that firms utilize trade credit to boost their operating performance or market valuation. However, recent research on the relation between trade credit as alternative financing and firm performance provides mixed evidence. Nevertheless, limited research has been conducted in developing economies; hence, we attempt to fill this gap in the present paper. We argue that trade credit may not be attractive to external debt financing as trade credit may not contribute to business growth while external debt financing does. To test our conjecture, we employed ordinary least squares (OLS), firm fixed effects, and random effects regressions. By utilizing 1002 firm-year observations, our findings suggest a negative relationship between trade credit and firm performance. To check and control endogeneity and reverse causality issues we use instrumental variable approach (i.e., Heckman two-stage least squares regression). Our results remain robust through different measures of firm performance and trade credit. Our study provides policy implications and contributions to trade credit and firm performance literature.

This paper examines the relationship between firm performance and cost of debt. More specifically this paper empirically shows that fund providers charge lower cost on debt for highly performing companies compared to lower performing companies. We argue that the profitable companies are more resilient, and they have more survivable capacity which impacts on the pricing of the cost of debt. In contrast, lower performing companies are more prone to financial distress or may have higher chances of non-repayment of loans thereby fund providers charge higher interest to compensate the risks. Consistently, analyzing 547 firm year observations for the period of 2015–2019 we find that the cost of debt is significantly lower for the highly performing companies compared to the lower performing companies. The negative relation between the cost of debt and firm performance is highly pronounced in smaller companies compared to bigger companies. It suggests that fund providers create opportunities for smaller companies thereby results in balanced growth in the economy. Our results are robust to a set of alternative measures of firm performance. This study has several policy implications and contributions to the literature of the cost of debt in developing economies.

This study investigated the phycoremediation abilities of Chlorella vulgaris (microalga) and Anabaena variabilis (cyanobacterium) for the detoxification of polluted river water. Lab-scale phycoremediation experiments were conducted for 20 days at 30 °C using the microalgal and cyanobacterial strains and water samples collected from the Dhaleswari river in Bangladesh. The physicochemical properties such as electrical conductivity (EC), total dissolved solids (TDS), biological oxygen demand (BOD), hardness ions, and heavy metals of the collected water samples indicated that the river water is highly polluted. The results of the phycoremediation experiments demonstrated that both microalgal and cyanobacterial species significantly reduced the pollutant load and heavy metal concentrations of the river water. The pH of the river water was significantly raised from 6.97 to 8.07 and 8.28 by C. vulgaris and A. variabilis, respectively. A. variabilis demonstrated higher efficacy than C. vulgaris in reducing the EC, TDS, and BOD of the polluted river water and was more effective at reducing the pollutant load of SO42− and Zn. In regard to hardness ions and heavy metal detoxification, C. vulgaris performed better at removing Ca2+, Mg2+, Cr, and Mn. These findings indicate that both microalgae and cyanobacteria have great potential to remove various pollutants, especially heavy metals, from the polluted river water as part of a low-cost, easily controllable, environmentally friendly remediation strategy. Nevertheless, the composition of polluted water should be assessed prior to the designing of microalgae- or cyanobacteria-based remediation technology, since the pollutant removal efficiency is found to be species dependent.