Presentation - Accounting and COVID-19

The role of Accounting in the aftermath of Covid-19:
What did we learn and where are we going?
Dante Viana, Jr.

University of Algarve – FEUALG
dbjunior@ualg.pt
September 4, 2023
Summary:
1. Financial accounting as a key tool for capital allocation and development
2. What have we learned from COVID-19? Accounting perspective findings
3. The future of sustainability accounting
4. Research opportunities in accounting during the post-COVID-19 era

1. Financial accounting as a key tool for
capital allocation and development
1. Financial accounting as a key tool for capital
allocation and development
▪ Corporate reporting is a key determinant of the efﬁciency of resource-allocation

decisions and growth to the economies worldwide (Bushman et al., 2004).
▪ From this perspective, the quality of financial reporting is a key use in improving, for
instance, investment efficiency by mitigating the information asymmetry between
corporate managers and capital suppliers, allowing firms to better attract capital from
investors and mitigates underinvestment problems (Zhong, 2018).
4
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▪ Financial accounting literature is a dynamic field with a wide range of research areas.
▪ While the importance of specific research topics can vary depending on the current
business and regulatory environment, here some historically important and
continuously relevant areas of research in financial accounting literature:
+ ESG and Sustainability

Fair value Reporting (later…)
accounting
The quality of financial Regulatory aspects and the

reporting information quality of accounting standards
6
The quality of financial

reporting information
▪ Higher quality accounting...
o enhances investment
efficiency by reducing
information asymmetry
between managers and outside
suppliers of capital (Biddle and
Hilary, 2006, TAR).
o generate positive equity

market returns (Bhojraj et al.,
2009, JAF)
o leads to a lower cost of capital

(Francis et al., 2004, TAR) 7
Fair value
accounting
▪ Higher quality accounting... ▪ Firms with higher fair value

intensity have more accurate
o enhances investment analyst earnings forecasts
efficiency by reducing (Ayres et al., 2017)
information asymmetry
between managers and outside ▪ appear to have an impact on not
suppliers of capital (Biddle and only investors' decision-making,
Hilary, 2006, TAR). but also auditors' decision-
making processes (Ettredge, Xu,
o generate positive equity & Yi, 2014).
2009, JAF)
▪ However, the debates seems
very controverse (Laux and
o leads to a lower cost of capital Leuz, 2009, AOS)
Regulatory aspects and

the quality of accounting
standards
▪ Higher quality accounting... ▪ Firms with higher fair value ▪ Improve the overall
intensity have more accurate information environment
o enhances investment analyst earnings forecasts (Horton et al., 2013).
efficiency by reducing (Ayres et al., 2017)
information asymmetry ▪ Positively affect the market
between managers and outside ▪ appear to have an impact on not financial development
suppliers of capital (Biddle and only investors' decision-making, (Akisik, 2013))
Hilary, 2006, TAR). but also auditors' decision-
making processes (Ettredge, Xu, ▪ It seem also associated to
o generate positive equity & Yi, 2014). lower tax avoidance
(Gallemore and Labro, 2015,
2009, JAF)
▪ However, the debates seems JAE)
very controverse (Laux and
o leads to a lower cost of capital Leuz, 2009, AOS)
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I particularly have a really more optimistic view!
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Question to ChatGPT!
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2. What have we learned from COVID-19?
Accounting perspective findings
▪ The COVID-19 pandemic represents a crisis and major global disruption. The pandemic has
had adverse health, social, economic and political consequences (OECD, 2020).
▪ Communication strategies and the use of numbers in these communications have played
decisive roles in the success/failure of political leaders.
▪ These aspects are, of course, central to the accounting disclosure strategies employed by
business leaders and leaders of other organizations (Villiers & Molinari, 2022, AAAJ).
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▪ Leoni et al. (2022, AAAJ) identify three main emerging themes in accounting literature
that show how accounting, accountability and management practices have played a
multifaceted role in the COVID-19 pandemic.
o The first is the use of accounting and accountability practices by governments when making
extraordinary decisions in response to the pandemic (Mitchell et al., 2021; Ahrens and Ferry, 2021;
Ahmad et al., 2021; Ahn and Wickramasinghe, 2021).
o The second is the use of accounting, numbers and calculative practices by businesses, not-
for-profit organizations and charities to navigate the pandemic (Carungu et al., 2021; Velayutham
et al., 2021; Delfino and van der Kolk, 2021; Passetti et al., 2021; Sargiacomo et al., 2021a; Kober and
Thamber, 2021; Huber et al., 2021).
o The third is the role of accounting in exacerbating existing inequalities during the pandemic
(Andrew et al., 2021; Christ and Burritt, 2021; Nikidehaghani and Cortese, 2021).
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▪ The KPMG survey on firms' sustainability reporting shows that in 1993, 12% of the top 100
companies in 52 countries engaged in sustainability reporting, and in 2020, it increased to
80% (Abeysekera, 2022).
▪ In 1997, 35% of the world's largest 250 companies by revenue listed on the Fortune 500
engaged in sustainability reporting, and in 2020, it increased to 96% (Threlfall et al., 2020).
▪ Throsby (2017) identifies five principles that guide sustainable development:

o intergenerational equity (peoples of different generations have the same advantages from resources);
o intragenerational equity (peoples of the same generation have the same advantages from resources);
o the importance of diversity (diverse processes are required for economic, social and environmental
development towards diverse life);
o interconnectedness (economic, social and environmental systems are interconnected and cannot be
treated in isolation); and
o taking precautions against human actions that can lead to irreversible results on sustainability.
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4. Research opportunities in accounting
during the post-COVID-19 era
4. Research opportunities in accounting during
the post-COVID-19 era
▪ The post-COVID-19 era presents numerous research opportunities in the field of accounting
as businesses adapt to new economic, technological, and regulatory landscapes.
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Bonacchi et al. (2023) provided some interesting topics related to research opportunities:
▪ great opportunities to conduct research because of the unexpected discontinuities in the economy:
o Simultaneity of crisis and policy interventions
o The C19 crisis is health related hence exogenous to the financial regulation and economic environment
▪ The availability of micro-data at no cost is one of the major opportunities to researchers (Data are available from John
Hopkins Univ.)
▪ Policy interventions differed in nature with the issuing Institution: fiscal, monetary or prudential (Governments, Central
Banks and Supervisory Bodies, Accounting Standard Setters) 22
▪ Besides Bonacchi et al. (2023), some (eventual) interesting aspects could be, for instance:
o The influence of remote work on financial reporting
o Financial reporting amidst government stimulus initiatives
o Ethical contemplations in the field of accounting
o Fluctuations in the audit market
o Handling cryptocurrencies and digital assets in accounting
o Intersection of digital transformation and accounting
23
Thank you!
Dante Viana, Jr.
University of Algarve – FEUALG
dbjunior@ualg.pt
Prof. Dante Viana, Jr., PhD

Mestrado em Contabilidade
UC: Contabilidade Pública
2022-2023
September 4, 2023

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The role of Accounting in the aftermath of Covid-19:

What did we learn and where are we going?

Dante Viana, Jr.

1. Financial accounting as a key tool for capital allocation and development

2. What have we learned from COVID-19? Accounting perspective findings

3. The future of sustainability accounting

4. Research opportunities in accounting during the post-COVID-19 era

▪ Corporate reporting is a key determinant of the efﬁciency of resource-allocation

+ ESG and Sustainability

The quality of financial Regulatory aspects and the

The quality of financial

▪ Higher quality accounting...

o generate positive equity

o leads to a lower cost of capital

▪ Higher quality accounting... ▪ Firms with higher fair value

Regulatory aspects and

I particularly have a really more optimistic view!

▪ Throsby (2017) identifies five principles that guide sustainable development:

o Simultaneity of crisis and policy interventions

o The influence of remote work on financial reporting

o Financial reporting amidst government stimulus initiatives

o Ethical contemplations in the field of accounting

o Fluctuations in the audit market

o Handling cryptocurrencies and digital assets in accounting

o Intersection of digital transformation and accounting

Prof. Dante Viana, Jr., PhD

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