We investigate the relationship between internal performance evaluation and the ability of external market participants to assess the effectiveness of management's quality strategy for a sample of 156 Australian manufacturing firms that link executive compensation to non-financial performance measures (NFPM). We find that for firms where management compensation is tied to non-financial performance measures, organisational financial performance, as measured by return on investment, has no significant direct association with the extent of disclosure of non-financial performance measures in the financial statements by Australian manufacturing firms. However, we find that the origination of a firm's non-financial performance measures indirectly and significantly affects the financial performance of an organisation through the implementation of quality based strategy. Further, we find that manufacturing firms that place greater emphasis on quality strategy disclose more information regarding non-financial performance measures in their annual reports, and that only for firms following a quality strategy, the disclosure of non-financial performance measures positively impacts operating financial performance.

Purpose: This paper aims to explain the fundraising and valuation processes of startups and discuss the conflicts of interest between entrepreneurs, venture capital (VC) firms and stakeholders in the context of startup corporate governance. Further, this paper uses the examples of WeWork and Zenefits to explain how a failure of stakeholders to demand an external audit from an independent accounting firm in early stages of funding led to an opportunity for fraud. Design/methodology/approach: The methodology used is a literature review and analysis of startup valuation combined with the Fraud Triangle Theory. This paper also provides a discussion of WeWork and Zenefits, both highly visible examples of startup fraud, and explores an increased role for independent external auditors in fraud risk mitigation on behalf of stakeholders prior to an initial public offering (IPO). Findings: This paper documents a number of fraud risks posed by the “fake it till you make it” ethos and investor behavior and pricing in the world of entrepreneurial finance and VC, which could be mitigated by a greater awareness of startup stakeholders of the value of an external audit performed by an independent accounting firm prior to an IPO. Research limitations/implications: An implication of this paper is that regulators should consider greater oversight of the startup financing process and potentially take steps to facilitate greater independence of participants in the IPO process. Practical implications: Given the potential conflicts of interest between VC firms, investment banks and startup founders, the investors at the time of an IPO may be exposed to the risk that the shares of the IPO firms are overvalued at offering. Social implications: This study demonstrates how startup practices can be extended to the Fraud Triangle and issue a call to action for the accounting profession to take a greater role in protecting the public from startup fraud. This study then offers recommendations for regulators and standards entities. Originality/value: There are few academic papers in the financial crime literature that link the valuation and culture of startup firms with fraud risk. This study provides a concise explanation of the process of valuation for startups and highlights the considerations for stakeholders in assessing fraud risk. In addition, this study documents an emerging role for auditors as stewards of proper valuation for pre-IPO firms.

We examine the characteristics of firms using reverse takeovers and self-underwritten IPOs as an alternative to the traditional underwritten IPO. We find that at the time they go public, firms that use alternative mechanisms tend to be less profitable than contemporaneously issued IPO firms of comparable size in the same 3 digit SIC code, but they do not exhibit significantly higher distress. However, by two years post going public, they have significantly increased debt and experience declines in profitability and balance sheet liquidity. Furthermore, we find that RT and SU firms are characterized by lower levels of trading liquidity and significantly higher volatility, as measured by the standard deviation of returns. While the combined sample of RT and SU firms have comparable institutional ownership post going public to their control IPO firms, RT firms are characterized by significant lower institutional ownership than their matches, and while IPO firms experience significant increases in institutional support, those using RTs and SUs experience declines. We also find evidence that firms utilizing alternative going public mechanisms outperform their matched traditional IPO counterparts in the short term, and exhibit comparable performance in the three years following going public as indicated by equal-weighted buy and hold returns.

Purpose: For the present generation of entrepreneurs, the operating environment in Afghanistan has been among the most tenuous in the world. Numerous regime changes, civil unrest and war have created tremendous uncertainty, making civilian business planning difficult. These challenges incrementally impact female entrepreneurs. This paper aims to investigate the relationship between one aspect of entrepreneurial psychological capital – optimism regarding enterprise success of Afghan female entrepreneurs – and aspects of the marketing function.Design/methodology/approach: Primary data collection was used for this study. A total of 248 women business owners were surveyed via telephone from five provinces of Afghanistan. Over half (133) of respondents were from the Afghan capital, Kabul. A total of 49 respondents were obtained from Herat, 44 from Mazar, 12 from Nangarhar and ten were obtained from Kandahar.Findings: We find that a focus on marketing positively and significantly impacts reported optimism by female Afghan entrepreneurs, as do marketing planning efforts. However, self-reliance and orientation toward the outside world do not impact the perceived success of the entrepreneurial venture.Research limitations/implications: Like other empirical studies, this research has its own limitation. First, we would have liked a larger sample size, but date collection in a war-torn country and from female business women in a male-dominated society is proofed very challenging task. Also, some cities had less representation due to security concerns especially Kandahar province.Practical implications: Our results have significant relevance for economic development policymakers, non-governmental organizations and entrepreneurs throughout the developing world. What drives the psychological capital of these entrepreneurs under these extreme conditions should be of interest not only from the perspective of the entrepreneurship literature, but also for policymakers who are often uninformed regarding on the ground conditions under which individuals in the environment function.Social implications: It is our hope that our results inform those in a position of power so that they support the development of human capital of Afghan women who are or who seek to be entrepreneurs. We also hope to raise questions for other researchers related to the importance of human capital investment and the business functions for entrepreneurs in other less developed, conflict-prone environments with low mean educational levels.Originality/value: This paper is the first to use proprietary, hand collected survey data from Afghani female entrepreneurs to collect, analyze and draw conclusions and recommendations from a sample of 248 women-owned businesses regarding the relationship between the marketing function and one aspect of psychological capital – perceived optimism – in five Afghan cities.

We show how capital structure is influenced by the strength of shareholder rights. The empirical evidence shows an inverse relationship between leverage and shareholder rights, suggesting that firms adopt higher debt ratios where shareholder rights are more restricted. This is consistent with agency theory, which predicts that leverage helps alleviate agency problems. This negative relationship, however, is not found in regulated firms (i.e., utilities). We contend that this is because regulation already helps alleviate agency conflicts, and hence, mitigates the role of leverage in controlling agency costs.