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Articles 1 - 23 of 23
Full-Text Articles in Business
Cfo Alert: Do You Know What Your Board Audit Committee Is Up To?, Clarence Goh
Cfo Alert: Do You Know What Your Board Audit Committee Is Up To?, Clarence Goh
Research Collection School Of Accountancy
In October 2014, American Realty Capital Properties – one of the largest real estate investment trusts in the US – stunned the market. Its CEO, David Kay, disclosed that the company had overstated its income in the first quarter of the year – and that executives chose not to correct the error in the second quarter “in order to conceal the error.”
Cross-Listings And Corporate Cash Savings: International Evidence, Yuanto Kusnadi
Cross-Listings And Corporate Cash Savings: International Evidence, Yuanto Kusnadi
Research Collection School Of Accountancy
This paper examines foreign firms that are cross-listed on the U.S. stock exchanges and finds that they exhibit higher cash savings sensitivity to stock price than their non-cross-listed counterparts. This finding is robust even after controlling for alternative regression specifications and samples, country-level institutional infrastructures, different listing types, and the endogeneity of the cross-listing decision. Further cross-sectional tests reveal that the increase in cash savings sensitivity to stock price is more pronounced for cross-listed firms with stock prices that are more informative, which is consistent with the influence of the managerial learning channel. The empirical evidence sheds more light on …
The Inclusion Of General Counsel In Top Management And Tax Avoidance, Beng Wee Goh, Jimmy Lee, Jeffrey Ng
The Inclusion Of General Counsel In Top Management And Tax Avoidance, Beng Wee Goh, Jimmy Lee, Jeffrey Ng
Research Collection School Of Accountancy
We examine whether the inclusion of general counsel in top management is associated with a firm’s tax avoidance. We find that firms with general counsel as part of the top management team have lower GAAP effective tax rate, more uncertain tax positions, a higher likelihood of engaging in tax shelter activities, and more tax haven countries in which the firm reports a significant subsidiary, relative to firms without a general counsel in top management. In addition, we find that among firms with general counsel in top management, tax avoidance is greater when (1) the general counsel has tax-related expertise, (2) …
Auditor Switching For Opinion Shopping, And Subsequnt Audit Quality And Audit Fee: Evidence From Post-Sox Period, Jong-Hag Choi, Heesun Chung, Catherine Heyjung Sonu, Yoonseok Zang
Auditor Switching For Opinion Shopping, And Subsequnt Audit Quality And Audit Fee: Evidence From Post-Sox Period, Jong-Hag Choi, Heesun Chung, Catherine Heyjung Sonu, Yoonseok Zang
Research Collection School Of Accountancy
Theory suggests that firms engage in opinion shopping to obtain better audit opinions. However, there is scarce evidence on the economic consequences of the opinion shopping behaviors. In this paper, we examine the effect of auditor switches for opinion shopping on audit quality and audit fees. Using 30,333 firm-year observations over the 2004-2012 period in the U.S., we first document evidence that firms switch their auditors in search for better audit opinions. Next, we find that the audit quality of clients that switch auditors for opinion shopping is significantly lower than that of clients that did not switch auditors or …
Internal Control And Operational Efficiency, Qiang Cheng, Beng Wee Goh, Jae Bum Kim
Internal Control And Operational Efficiency, Qiang Cheng, Beng Wee Goh, Jae Bum Kim
Research Collection School Of Accountancy
In this study, we examine whether and how internal control over financial reporting affects firmoperational efficiency. We find that operational efficiency, derived from the frontier analysis, issignificantly lower among firms with material weaknesses in internal control relative to firmswithout such weaknesses. We document some evidence suggesting that effective internal controlleads to greater operational efficiency through reducing the likelihood of misappropriation ofcorporate resources and through enhancing the quality of internal reports for decision making.We also document that smaller firms benefit more from having effective internal control in termsof operational efficiency. In addition, we find that the market appears to understand the …
Family Firm Research: A Review, Qiang Cheng
Family Firm Research: A Review, Qiang Cheng
Research Collection School Of Accountancy
This article reviews family firm studies in the finance and accounting literature, primarily those conducted using data from the United States and China. Family owners have unique features such as concentrated ownership, long investment horizon, and reputation concerns. Given the distinguishing features of family ownership and control, family firms face unique agency conflicts. We discuss the agency problems in family firms and review the findings of recent family firm studies. We call for more research to understand the unique family effects and encourage more research on Chinese family firms. Part I of the article discusses the fundaments of family firms: …
Conservatism And Equity Ownership Of The Founding Family, Shuping Chen, Xia Chen, Qiang Cheng
Conservatism And Equity Ownership Of The Founding Family, Shuping Chen, Xia Chen, Qiang Cheng
Research Collection School Of Accountancy
We investigate the impact of founding family ownership on accounting conservatism. Family ownership is characterised by large, under-diversified equity stake and long investment horizon. These features give family owners both the incentives and the ability to implement conservative financial reporting to reduce legal liability and mitigate agency conflicts with other stakeholders. Since CEOs can have different incentives towards conservatism, we focus on ownership of non-CEO founding family members in our investigation. We find that conservatism increases with non-CEO family ownership, supporting our prediction. This relationship becomes insignificant in family firms with founders serving as CEOs, either due to founder CEOs' …
Should Singapore Adopt 'Say On Pay'?, Clarence Goh
Should Singapore Adopt 'Say On Pay'?, Clarence Goh
Research Collection School Of Accountancy
SoP may require disclosures that could harm a firm's competitive interests.
Should Singapore Adopt 'Say On Pay'?, Clarence Goh
Should Singapore Adopt 'Say On Pay'?, Clarence Goh
Research Collection School Of Accountancy
SoP may require disclosures that could harm a firm's competitive interests.
The Triangular Relationship Between Audit Committee Characteristics, Audit Inputs, And Financial Reporting Quality, Jae Bum Kim, Benjamin Segal, Dan Segal, Yoonseok Zang
The Triangular Relationship Between Audit Committee Characteristics, Audit Inputs, And Financial Reporting Quality, Jae Bum Kim, Benjamin Segal, Dan Segal, Yoonseok Zang
Research Collection School Of Accountancy
Using the exogenous reforms to audit committees mandated by the Sarbanes-Oxley Act of 2002 and a difference-in-difference approach, we examine the impact of changes in audit committee attributes (financial expertise, size, and independence) on firms’ audit inputs and financial reporting quality. Firms directly affected by the reforms experienced a larger improvement in audit inputs (measured by audit fees and the appointment of an industry specialist auditor) and a larger increase in financial reporting quality (measured by restatements of financial reports) relative to firms that were already compliant. Importantly, we find that the decline in restatements is not related to the …
Societal Trust And Corporate Tax Avoidance, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald J. Lobo
Societal Trust And Corporate Tax Avoidance, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald J. Lobo
Research Collection School Of Accountancy
Using an international sample of firms and a country-level index for societal trust, we study how differences in trust across countries relate to corporate tax avoidance. Consistent with our prediction, we find strong evidence that societal trust is negatively associated with corporate tax avoidance by firms, even after controlling for other determinants such as home country tax system characteristics. We also explore the effects of three country-level institutional characteristics – level of investor protection, disclosure requirement, and tax enforcement – on the relation between societal trust and tax avoidance. We predict and find that the effects of trust on tax …
Activist Directors: Determinants And Consequences, Ian D Gow, Sa-Pyung Sean Shin, Suraj Srinivasan
Activist Directors: Determinants And Consequences, Ian D Gow, Sa-Pyung Sean Shin, Suraj Srinivasan
Research Collection School Of Accountancy
This paper examines the determinants and consequences of hedge fund activism with a focuson activist directors, i.e., those directors appointed in response to demands by activists.Using a sample of 1,969 activism events over the period 2004–2012, we identify 824 activistdirectors. We find that activists are more likely to gain board seats at smaller firms and thosewith weaker stock price performance. Activists remain as shareholders longer when they haveboard seats, with holding periods consistent with conventional notions of “long-term” institutionalinvestors. As in prior research, we find positive announcement-period returns of around4–5% when a firm is targeted by activists, and a 2% …
Managers' Pay Duration And Voluntary Disclosures, Qiang Cheng, Young Jun Cho, Jae Bum Kim
Managers' Pay Duration And Voluntary Disclosures, Qiang Cheng, Young Jun Cho, Jae Bum Kim
Research Collection School Of Accountancy
In this paper, we examine the effect of managers’ pay duration on firms’ voluntary disclosures. Pay duration refers to the average period that it takes for managers’ annual compensation to vest. We hypothesize and find that pay duration can incentivize managers to provide more bad news earnings forecasts. This result holds after controlling for the level of stock-based compensation and the endogeneity of pay duration. In addition, we find that the effect of pay duration is more pronounced for firms with weaker governance and for firms with a more opaque information environment, where the marginal benefits of additional disclosures are …
Causes And Consequences Of Corporate Asset Exchanges By Listed Companies In China, Fang Lou, Jiwei Wang, Hongqi Yuan
Causes And Consequences Of Corporate Asset Exchanges By Listed Companies In China, Fang Lou, Jiwei Wang, Hongqi Yuan
Research Collection School Of Accountancy
China's listed companies often exchange corporate assets with their parent companies. We find that listed companies that have been incompletely restructured from former state-owned enterprises and in sound financial condition tend to exchange higher quality assets for lower quality assets (i.e., tunneling). However, when there is a need to avoid reporting a loss and to raise additional capital, listed companies tend to exchange lower quality assets for higher quality assets (i.e., propping). We also find that the market reacts indifferently to asset exchange announcements. Finally, we find asset exchanges motivated by a tunneling (propping) incentive to be associated with poorer …
Short Sellers And Corporate Disclosures, Qiang Cheng, Xia Chen, Ting Luo, Heng Yue
Short Sellers And Corporate Disclosures, Qiang Cheng, Xia Chen, Ting Luo, Heng Yue
Research Collection School Of Accountancy
We examine how short sellers affect corporate disclosures using a natural experiment. From May 2005 to July 2007, the SEC implemented a pilot program by randomly selecting one third of Russell 3000 stocks and removing the short sale price tests for these stocks (referred to as pilot firms), leading to lower short-selling constraint, without changing the requirement for other firms (referred to as control firms). We compare the change in corporate disclosures between the pilot firms and the control firms during this period. We find that compared to the control firms, the pilot firms are more likely to issue good …
An Examination Of Earnings Surprises For Urban And Rural Firms, Bok Baik, Jong-Hag Choi, Yoonseok Zang
An Examination Of Earnings Surprises For Urban And Rural Firms, Bok Baik, Jong-Hag Choi, Yoonseok Zang
Research Collection School Of Accountancy
In this paper, we examine the association between firm location and management’s opportunistic financial reporting at earnings announcements. Because of investors’ preference for local stocks and the existence of large investment communities in urban areas, firms located in urban areas (i.e., urban firms) tend to have a higher level of visibility and attention. We predict that this tendency in turn motivates urban firms to opportunistically behave in an earnings surprises game. Consistent with our prediction, we find that (1) urban firms are more likely to report non-negative earnings surprises than rural firms; (2) urban firms are more likely to report …
Active Cds Trading And Managers’ Voluntary Disclosure, Jae Bum Kim, Pervin K. Shroff, Dushyantk Umar Vyas, Regina Wittenber
Active Cds Trading And Managers’ Voluntary Disclosure, Jae Bum Kim, Pervin K. Shroff, Dushyantk Umar Vyas, Regina Wittenber
Research Collection School Of Accountancy
No abstract provided.
Does Corporate Governance Make Financial Reports Better, Or Just Better For Equity Investors?, Dan Segal, Benjamin Segal, Shai Levi
Does Corporate Governance Make Financial Reports Better, Or Just Better For Equity Investors?, Dan Segal, Benjamin Segal, Shai Levi
Research Collection School Of Accountancy
Financial reports should provide useful information to both shareholders and creditors, according to U.S. accounting principles. However, directors of corporations have fiduciary duties only toward equity holders, and those fiduciary duties normally do not extend to the interests of creditors. We examine whether this slant in corporate governance biases financial reports in favor of equity investors, and in particular leads to a downward bias in reported debt that can hurt creditors. We focus on firms’ decision to issue structured debt securities that are classified as equity in financial reports and can circumvent debt covenants. We find that when the local …
Do Managers Use Meeting Analyst Forecasts To Signal Private Information? Evidence From Patent Citations, Katherine Gunny, Tracey Chunqi Zhang
Do Managers Use Meeting Analyst Forecasts To Signal Private Information? Evidence From Patent Citations, Katherine Gunny, Tracey Chunqi Zhang
Research Collection School Of Accountancy
This study examines whether firms manage earnings to meet analyst forecasts to signal superior future performance. Prior research finds that firms use earnings management to just meet analyst forecasts and that these firms have a positive association with future performance (Bartov et al., 2002). There are two potential explanations for the positive association – signaling and attaining benefits that allow for better future performance (i.e., the real benefits explanation). Prior studies cannot provide evidence of signaling because they do not control for the real benefits explanation. Our research design enables us to control for the real benefits explanation because we …
Financial Reporting Opacity And Expected Crash Risk: Evidence From Implied Volatility Smirks, Jeong-Bon Kim, Liandong Zhang
Financial Reporting Opacity And Expected Crash Risk: Evidence From Implied Volatility Smirks, Jeong-Bon Kim, Liandong Zhang
Research Collection School Of Accountancy
The recent financial crisis has stimulated a renewed interest in understanding the determinants of stock price crash risk (i.e., left tail risk). Recent research shows that opaque financial reports enable managers to hide and accumulate bad news for extended periods. When the accumulated bad news reaches certain tipping point, it will be suddenly released to the market at once, resulting in an abrupt decline in stock price (i.e., a crash). This study extends this line of research by examining the impact of financial reporting opacity on perceived or expected crash risk. Prominent economists, such as Olivier Blanchard, argue that removing …
Seeing Is Believing: Do Analysts Benefit From Site Visits, Qiang Cheng, Fei Du, Xin Wang, Yutao Wang
Seeing Is Believing: Do Analysts Benefit From Site Visits, Qiang Cheng, Fei Du, Xin Wang, Yutao Wang
Research Collection School Of Accountancy
Using the unique data of analysts’ site visits to Chinese listed companies, we examine whether and how analysts’ site visits help improve their forecast performance. We find that the forecast accuracy of analysts improves after they visit the target firms and this improvement still holds after controlling for the concurrent change in the forecast accuracy of analysts who do not conduct site visits. Such an improvement is more pronounced for firms with better corporate governance; for more experienced analysts; and for firms with higher earnings volatility. Moreover, the improvement of forecast accuracy is less pronounced when current site visits are …
Is The Decline In The Information Content Of Earnings Following Restatements Short-Lived?, Xia Chen, Qiang Cheng, Alvis K. Lo
Is The Decline In The Information Content Of Earnings Following Restatements Short-Lived?, Xia Chen, Qiang Cheng, Alvis K. Lo
Research Collection School Of Accountancy
Prior research finds that the decline in the information content of earnings after restatement announcements is short-lived and the earnings response coefficient (ERC) bounces back after three quarters. We re-examine this issue using a more recent and comprehensive sample of restatements. We find that material restatement firms experience a significant decrease in the ERC over a prolonged period—close to three years after restatement announcements. In contrast, other restatement firms experience a decline in the ERC for only one quarter. We further find that among material restatement firms, those that are subject to more credibility concerns and those that do not …
Media Coverage And Firm Valuation: Evidence From China, Jiwei Wang, Kangtao Ye
Media Coverage And Firm Valuation: Evidence From China, Jiwei Wang, Kangtao Ye
Research Collection School Of Accountancy
Drawing on both a managerial discipline perspective and an information intermediary perspective, we explore how media coverage of a firm’s controlling shareholder influences firm valuation in corporate China. Using 366 listed family firms in China from 2003 to 2006, we find that firms in which controlling shareholders receive more neutral media reports enjoy higher valuation, whereas negative media reports on controlling shareholders impose adverse effects on firm valuation. Interestingly, favorable media coverage of the controlling shareholders does not enhance firm value. Further analyses reveal that ownership structure and audit quality moderate the relationship between media coverage and firm valuation. Our …