Business Commons^™

Audit Firms And Disclaimers: Is The Bar Set Too Low?, Keith Hooper, Jing Wang

Faculty of Business - Papers (Archive)

This paper makes the case for the greater regulation of auditors. It argues that the courts are too sympathetic to the use of disclaimers to escape liability to investors, individual shareholders and third parties. The approach is to review the relevant court cases which established the concept of "opinions" and disclaimers as a means of protection and argue for greater recognition of the wider impact of the audit role. The paper finds that the best explanation as to why auditors use disclaimers is Social Darwinism. The application of professional ethics as adumbrated in various codes is not relevant to this …

Corporate Opacity And Cost Of Debt For Family Firms, Liangbo Ma, Shiguang Ma, Gary G. Tian

Faculty of Business - Papers (Archive)

This paper uses a sample of Chinese firms to examine the impact of corporate opacity on the relationship between family control and firms' cost of debt. We find that family control is associated with a lower cost of debt on average, and a negative impact exists mainly in firms with relatively low corporate opacity. We further provide evidence that the moderating effect of corporate opacity becomes more pronounced when investors' perception of controlling families' moral hazard of expropriation is higher. Our results are robust to alternative opacity proxies and controlling for endogeneity of family control using the instrumental variable method. …

The Effect Of Financial Status On Earnings Quality Of Chinese-Listed Firms, Feng Li, Indra Abeysekera, Shiguang Ma

Faculty of Business - Papers (Archive)

This article investigates the relation between accounting-based earnings quality attributes and the financial status of Chinese companies listed in Shanghai and Shenzhen stock exchanges from 2005 to 2007 by classifying them as either "healthy" or "bankrupt" firms. The authors find that accruals quality, earnings predictability, and earnings smoothness are significantly different between healthy and bankrupt firms, but not earnings persistence. Additional analysis undertaken indicates that firm categories (healthy, financially distressed, and bankrupt) based on financial status does not indicate distinct differences in earnings quality attributes.

Dynamic Forecasts Of Financial Distress Of Australian Firms, Maria Kim, Graham Partington

Faculty of Business - Papers (Archive)

Dynamic forecasts of financial distress have received far less attention than static forecasts, particularly in Australia. This study, therefore, investigates dynamic probability forecasts for Australian firms. Novel features of the modelling are the use of time-varying variables in forecasts from a Cox model. Not only is this one of relatively few studies to apply dynamic variables in forecasting financial distress, but to the authors' knowledge it is the first to provide forecasts of survival probabilities using the Cox model with time-varying variables. Forecast accuracy is evaluated using receiver operating characteristics curves and the Brier Score. It was found that the …

Do Venture Capitalists Play A Monitoring Role In An Emerging Market? Evidence From The Pay-Performance Relationship Of Chinese Entrepreneurial Firms, Jerry Cao, Qigui Liu, Gary Tian

Faculty of Business - Papers (Archive)

This paper investigates venture capitalists' monitoring of managerial behaviour by examining their impact on CEO pay-performance sensitivity across various controlling structures in Chinese firms. We find that the effectiveness of venture capitalists' monitoring depends on different types of agency conflict. In particular, we find that venture capital (VC) monitoring is hampered in firms that experience severe controlling-minority agency problems caused by disproportionate ownership structures. We provide further evidence that VC is more likely to exert close monitoring in firms that have greater managerial agency conflict, and thus require more direct monitoring. However, controlling-minority agency problems have a greater impact on …

Theories To Define And Understand Family Firms, Mary Barrett

Faculty of Business - Papers (Archive)

My earlier chapter in this volume on the four phases of learning in family firms relies on some important theories about the nature of family firms and how they differ from non-family firms. This chapter explains them briefly.

Does Banks' Dual Holding Affect Bank Lending And Firms' Investment Decisions? Evidence From China, Xiaofei Pan, Gary Tian

Faculty of Business - Papers (Archive)

This study investigates the effect of banks' dual holding on bank lending and firms' investment decisions using a sample of listed firms in China. We find that dual holding leads to easier access to bank loans, a result that is more pronounced for non-state-owned enterprises (non-SOEs) than SOEs. We also find that dual holding distorts banks' lending decisions and harms the investment efficiency for SOEs, while resulting in optimal lending decisions and enhanced investment efficiency for non-SOEs. For non-SOEs, further analysis suggests that optimal lending decisions and efficient investment can be achieved for firms with higher ownership concentration, and firms …

Internationalization Of Malaysian Firms And The Effects Of Major External Economic Crises, Ah Ba Sim

Faculty of Business - Papers (Archive)

This paper examines and analyzes the internationalization of international firms from Malaysia over two time periods of major external economic crises, the Asian financial crisis and the global economic crisis based on a study of four case firms. The findings indicate variations and changes in strategies during early and continued internationalization over the 11 year time studied. These findings and their research implications are examined and discussed.

The Puzzle Of Negative Association Of Earnings Quality With Corporate Performance: A Finding From Chinese Publicly Listed Firms, Shiguang Ma

Faculty of Business - Papers (Archive)

Introduction

- Earnings management - Accounting data management. - Real earnings management.

- Earnings quality - Financial statement accurately and unbiased reports corporate operating status and financial position. - Earnings quality as the degree to which earnings persists or sustains into next period.

- Corporate performance - Low earnings quality leads to low corporate performance. - Theoretically approved, but empirical evidences are not consistent.

- The Puzzle of Negative Association of Earnings Quality with Corporate Performance in China - Probably, it is rational in an emerging market.

Political Connection, Founder-Manager And Their Impact On Tunneling In China's Listed Firms, Liangbo Ma, Shiguang Ma, Gary G. Tian

Faculty of Business - Papers (Archive)

Reciprocal relationship, often regarded as mutually beneficial and secure, can actually be destructive and result in inefficiency. We provide evidence of such double-blade by studying the impact of political connection on corporate governance. Private firms in countries where the government controls the allocation of resources have incentives to seek political connections by hiring politicians or ex-politicians as top executives. Such political capital, however, may turn into political constraint when the CEOs fail to perform but use connections to entrench themselves. We take advantage of the unique setting in China to illustrate this argument. We show that politically connected CEOs have …

Survive Or Die? An Empirical Study On Chinese St Firms, Yanran-Annie Zhou, Maria H. Kim, Shiguang Ma

Faculty of Business - Papers (Archive)

A number of listed firms that are experiencing financial distress have had a Special Treatment (ST) 'cap' imposed on them by the China Securities Regulatory Commission. The ST 'cap' can be removed if the firms survive financial distress by becoming profitable. Alternatively, a ST firm which goes bankrupt is delisted from the market. Using a sample of 441 ST firms tracked from 1998 to 2011, this paper employs Cox's proportional hazards model to predict turnaround probability for a distressed firm to remove the ST 'cap'. The predictor variables incorporate: (1) accounting-driven ratios, (2) market-driven variables, and (3) information on ownership …

The Stock Market Implication Of Political Connections: Evidence From Firms' Dividend Policy, Jerry Cao, Sheng Huang, Qigui Liu, Gary G. Tian

Faculty of Business - Papers (Archive)

Political connections are valuable for shareholders of privately-run firms especially in countries with weak legal institutions. We study the effect of a firm's political connections in the public equity market by focusing on its impact on the firms' dividend policy. Prior studies suggest that dividends signal the commitment for proper treatment of minority shareholders and thus high growth firms pay dividends to establish such a reputation for better access to equity market in the future. Using a sample of privately-owned Chinese firms, we find that politically connected firms are less likely to pay dividends and pay less if they pay. …

The Ownership And Ownership Concentration? The Impact On The Performance Of China's Firms, Shiguang Ma, Tony Naughton, Gary G. Tian

Faculty of Business - Papers (Archive)

This paper investigates the impact of ownership and ownership concentration on the performance of China's listed firms. By recognizing the differences between ownership and ownership concentration, and between total ownership concentration and tradable ownership concentration, we find that ownership concentration is more powerful than any category of ownership in determining firm performance and that it has approximately positive linear relations with firm value. The tradable ownership concentration has a more significant and positive influence on firm performance than total ownership concentration. The highest level of firm performance is approached when a firm is characterized with both total ownership concentration and …