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Articles 1 - 30 of 302
Full-Text Articles in Business
The Effect Of Pcaob Inspections On Corporate Innovation: Evidence From Deficiencies About The Valuation Of Intangibles, Jungbae Kim
Research Collection School Of Accountancy
I examine the economic consequences on corporate innovation when PCAOB inspections cite auditors for insufficient procedures in auditing the valuation of intangibles. I find that the clients of deficient auditors recognize larger and timelier impairments of intangibles, suggesting that affected auditors increase scrutiny about the valuation of intangibles in subsequent audits. This effect obtains only for valuation-related deficiencies and is salient for the clients of auditors who receive such deficiencies repeatedly. I also document real effects that the clients of deficient auditors exhibit less use of external mergers and acquisitions—which yield recognizable intangibles whose valuation is subject to increased auditor …
Postmaterialism And Corporate Tax Avoidance, Jiwei Wang, Jiwei Wang, Kangtao Ye
Postmaterialism And Corporate Tax Avoidance, Jiwei Wang, Jiwei Wang, Kangtao Ye
Research Collection School Of Accountancy
Using a proprietary dataset of China tax audits, we found that firms owned by investors from countries with higher postmaterialism values were less likely to engage in tax-avoidance behavior in China. In addition, we found some evidence that the negative association between postmaterialism and tax avoidance is more pronounced when tax enforcement is stronger, indicating that national culture and formal institutions act as complements. To check the external validity of our main results, we further used a cross-country sample from 21 countries over 22 years. The evidence from the cross-country sample was consistent with the findings obtained from the China …
Trust And Contracting: Evidence From Church Sex Scandals, Gilles Hilary, Sterling Huang
Trust And Contracting: Evidence From Church Sex Scandals, Gilles Hilary, Sterling Huang
Research Collection School Of Accountancy
Firms located in communities in which people are, on average, more trusting enjoy some benefits in terms of the power of CEO contracts. We present two pieces of empirical evidence to support this claim: (1) higher average trust in a county is associated with “flatter” executive contracts and (2) when an exogenous shock occurs (such as a scandal involving an important social institution), both trust and contracting move in similar directions. We obtain the first result in a panel specification and the second in a “difference-in-difference” specification that uses the revelation of sex scandals involving the Catholic Church across different …
Sustainability: Jobs And Skills For The Accountancy Profession, Jiwei Wang, Holly I. Yang, Liandong Zhang
Sustainability: Jobs And Skills For The Accountancy Profession, Jiwei Wang, Holly I. Yang, Liandong Zhang
Research Collection School Of Accountancy
Sustainability is a megatrend that is changing the way we think about business and offering new opportunities and jobs for the accountancy sector. At the 26th Conference of the Parties (COP26), also known as the United Nations Climate Change Conference, the international business community was galvanised into action. Singapore, too, has intensified its sustainability plans with the Singapore Green Plan 2030
Contracting With Controllable Risk, Christopher S. Armstrong, Stephen A. Glaeser, Sterling Huang
Contracting With Controllable Risk, Christopher S. Armstrong, Stephen A. Glaeser, Sterling Huang
Research Collection School Of Accountancy
We examine how executives' ability to control their firms' exposure to risk affects the design of their incentive-compensation contracts. Our natural experimental evidence shows that exchange-traded weather derivatives allow executives to control their firms' exposure to weather risk. Once these derivatives became available, those executives who use them to hedge experience relative reductions in their total compensation and equity incentives. The decline in compensation is consistent with a reduction in the risk premium that executives receive for exposure to weather risk. The decline in equity incentives is consistent with the relation between risk and incentives shifting in a complementary direction …
Managerial Trustworthiness And Buybacks, Sterling Huang, Kaisa Snellman, Theo Vermaelen
Managerial Trustworthiness And Buybacks, Sterling Huang, Kaisa Snellman, Theo Vermaelen
Research Collection School Of Accountancy
CEO trustworthiness is positively related to long-term excess returns after buyback announcements. When the CEO is trustworthy, statements that the stock is undervalued are more credible. CEO trustworthiness is initially measured by the extent to which people in the county where the company headquarters is located trust each other. Further, the positive impact of trustworthiness on excess returns is higher when the CEO has been a long-term resident of a high-trust county, and correspondingly, trustworthy CEOs are less likely to be accused of financial misreporting. Our conclusions are confirmed when we use alternative measures of trustworthiness such as employee trust …
Short Interest And Corporate Investment: Evidence From Supply Chain Partners, Xia Chen, Guojin Gong, Shuqing Luo
Short Interest And Corporate Investment: Evidence From Supply Chain Partners, Xia Chen, Guojin Gong, Shuqing Luo
Research Collection School Of Accountancy
Short interest contains valuable information about a firm’s business fundamentals. We investigate whether such information affects business partners’ real investment decisions in the supply-chain setting. We predict and find that a supplier’s future investments (including inventory, R&D, and tangible asset investments) decrease with its customer’s current short interest. This negative relation is stronger when the supplier faces greater difficulty in assessing its customer’s business fundamentals and when short interest is more likely to indicate longlasting deterioration in the customer’s fundamentals. Additional analysis does not support the alternative explanation that the supplier adjusts investments in response to unfavorable information obtained via …
Active Independent Directors And Earnings Quality, Yuanto Kusnadi, Bin Srinidhi
Active Independent Directors And Earnings Quality, Yuanto Kusnadi, Bin Srinidhi
Research Collection School Of Accountancy
We examine the relationship between active independent directors and earnings quality for U.S. firms. We construct measures that proxy for activeness of independent directors and find that the proportion of active independent directors is under half on average. Our finding shows that earnings quality increases with the percentage of active independent directors on the board. Once the active independent directors are separated out, the other independent directors do not have any effect on earnings quality. This finding supports the hypothesis that the activeness of independent directors is incrementally significant over just the proportion of independent directors for the quality of …
Institutional Cross-Ownership Of Peer Firms And Investment Sensitivity To Stock Price, Young Jun Cho, Holly I. Yang
Institutional Cross-Ownership Of Peer Firms And Investment Sensitivity To Stock Price, Young Jun Cho, Holly I. Yang
Research Collection School Of Accountancy
Theory suggests that stock price guides managers in corporate decisions as managers learn from price. We reason that cross-ownership lowers information processing costs and increases industry specialization, improving revelatory price efficiency (Bond, Edmans, and Goldstein 2012). Consistent with our expectations, we find that a firm’s investment-q sensitivity increases as its cross-ownership increases, suggesting that cross-ownership facilitates managerial learning from price and thus investment efficiency. We strengthen the causal inference by conducting a difference-in-differences analysis using financial institution mergers as an identification strategy. We also find that the increase in the investment-q sensitivity associated with cross-ownership is more pronounced for firms …
Major Government Customers And Loan Contract Terms, Daniel A. Cohen, Bin Li, Ningzhong Li, Yun Lou
Major Government Customers And Loan Contract Terms, Daniel A. Cohen, Bin Li, Ningzhong Li, Yun Lou
Research Collection School Of Accountancy
We examine the relation between the presence of U.S. government as a major customer and a supplier firm’s loan contract terms, using major corporate customers as a benchmark. We find that firms with major government customers are associated with fewer covenants and a lower likelihood of having performance pricing provisions in their loan contracts. In contrast, we do not find such associations for firms with major corporate customers. Further, we find no evidence that the existence of major government customers is related to the supplier firm’s loan spread, security, or maturity. We conjecture that lenders benefit from the stricter monitoring …
The Influence Of Corporate Income Taxes On Investment Location: Evidence From Corporate Headquarters Relocations, Travis Chow, Sterling Huang, Kenneth J. Klassen, Jeffrey Ng
The Influence Of Corporate Income Taxes On Investment Location: Evidence From Corporate Headquarters Relocations, Travis Chow, Sterling Huang, Kenneth J. Klassen, Jeffrey Ng
Research Collection School Of Accountancy
This study examines the effects of jurisdictions’ corporate taxes and other policies on firms’ headquarters (HQ) location decisions. Using changes in state corporate income tax rates across time and states as the setting, we find that a one-percentage-point increase in the HQ state corporate income tax rate increases the likelihood of firms relocating their HQ out of the state by 16.8%, and an equivalent decrease in the HQ state rate decreases the likelihood of HQ relocations by 9.1%. Exploiting the unique tax policy features within the state apportionment system lends strong support to the interpretation that taxation drives this effect. …
Cfo Gaps: Determinants And Impact On The Corporate Information Environment, Xia Chen, Na Li, An-Ping Lin
Cfo Gaps: Determinants And Impact On The Corporate Information Environment, Xia Chen, Na Li, An-Ping Lin
Research Collection School Of Accountancy
A CFO gap arises when the CFO position is left vacant for a period between the departure of the old CFO and the appointment of a new CFO. We find that CFO gaps are fairly common; over the sample period 2004–2016, approximately one-third of CFO turnovers are associated with a CFO gap, lasting on average two quarters and two months. CFO gaps are more likely for firms that face more labor market search frictions and with financial reporting and performance issues, and are less likely for firms with succession plans and with greater growth opportunities. While CFO gaps are not …
Turning The Covid-19 Pandemic Into An Opportunity For Digital Disruption In The E-Commerce Industry: A Case Study Of Digital Commerce Intelligence Pte Ltd, Yuanto Kusnadi, Gary Pan
Turning The Covid-19 Pandemic Into An Opportunity For Digital Disruption In The E-Commerce Industry: A Case Study Of Digital Commerce Intelligence Pte Ltd, Yuanto Kusnadi, Gary Pan
Research Collection School Of Accountancy
No abstract provided.
Financial Capacity And The Demand For Audit Quality, Chee Yeow Lim, Gerald J. Lobo, Pingui Rao, Heng Yue
Financial Capacity And The Demand For Audit Quality, Chee Yeow Lim, Gerald J. Lobo, Pingui Rao, Heng Yue
Research Collection School Of Accountancy
Prior research documents that financial capacity could be positively or negatively associated with the demand for audit quality. We re-examine this relation using changes in local real estate prices as exogenous shocks to corporate financial capacity. Using auditor size, auditor industry specialisation, and auditor fees as measures of audit quality, we find robust evidence that an increase (decrease) in financial capacity significantly reduces (increases) the demand for audit quality, and that this relation is more pronounced when firms are more financially constrained, when external monitoring by institutional investors and financial analysts is weaker, and when there is more negative news …
Audit Adjustments Matter: What They Reveal About Companies' Financial Reporting, Themin Suwardy, Chu Yeong Lim
Audit Adjustments Matter: What They Reveal About Companies' Financial Reporting, Themin Suwardy, Chu Yeong Lim
Research Collection School Of Accountancy
This study investigates the characteristics, nature and extent of proposed audit adjustments to the financial statements of listed companies in Singapore. Data was gathered from the 2018 to 2020 financial statements of 412 companies, along with views of close to 280 audit committee chairs and heads of finance (or similar designations) on the effectiveness of their companies’ finance function.
Postmaterialism And Corporate Tax Avoidance, Yujia Cui, Jiwei Wang, Kangtao Ye
Postmaterialism And Corporate Tax Avoidance, Yujia Cui, Jiwei Wang, Kangtao Ye
Research Collection School Of Accountancy
This paper explores how postmaterialism culture influences corporate tax avoidance behavior. Using a proprietary dataset of China tax audits, we find that firms owned by investors from countries with higher postmaterialism values are less likely to engage in tax avoidance behavior in China. In addition, we find some evidence that the negative association between postmaterialism and tax avoidance is more pronounced when tax enforcement is stronger, indicating that national culture and formal institutions act as complements. To check the external validity of our main results, we further use a cross-country sample from 21 countries over 22 years. The evidence from …
The Impact Of The Ifrs 9 Expected Loss Approach On Accounting Conservatism, Clarence Goh, Chu Yeong Lim, Kevin Ow Yong
The Impact Of The Ifrs 9 Expected Loss Approach On Accounting Conservatism, Clarence Goh, Chu Yeong Lim, Kevin Ow Yong
Research Collection School Of Accountancy
Using an experimental setting, this paper examines the impact of the International Financial Reporting Standard (IFRS 9) expected credit loss (ECL) approach on accounting conservatism. The ECL approach enables banks to incorporate loan loss provisions (LLP) on a timelier basis and help bank regulators anticipate weaknesses in banks’ loan portfolios. Conversely, the ECL model could be more susceptible to managerial discretion. More conservative bank managers might make excessivecredit provisions. Our findings show that high conservatism is positively associated with higher levels of LLP. In addition, the effect of accounting conservatism is contingent upon the type of loan loss model. We …
What Are The Four Traits Of Digitally Mature Organizations?, Clarence Goh, Gary Pan, Poh Sun Seow, Yuanto Kusnadi, Gek Choo Shirlena Tan
What Are The Four Traits Of Digitally Mature Organizations?, Clarence Goh, Gary Pan, Poh Sun Seow, Yuanto Kusnadi, Gek Choo Shirlena Tan
Research Collection School Of Accountancy
A study conducted by Deloitte Southeast Asia and the Singapore Management University said there are four traits that could identify digitally mature organisations based on how they manage the governance, risk, and compliance aspects of digital transformation.
Local Political Corruption And M&As, Chun Liu, Yang Chen, Shanmin Li, Liang Sun, Mengjie Yang
Local Political Corruption And M&As, Chun Liu, Yang Chen, Shanmin Li, Liang Sun, Mengjie Yang
Research Collection School Of Accountancy
We examine the relation between local political corruption and firms' cross-province M&As using provincial-level data on corruption in China. The results show that firms in more corrupt regions are less likely to engage in cross-province M&As. Further analyses reveal that the effects of local corruption on the probability of cross-province M&As are stronger when corrupt officers have greater impeding benefits or lower impeding costs. Meanwhile, Both ex-ante intervention and ex post punishment are important channels through which corrupt officers hinder firms' cross province M&As. Moreover, informal institutions, such as social capital and informal networks can help to alleviate the negative …
Trust In Fair Value Accounting: Evidence From The Field, Clarence Goh, Chu Yeong Lim, Jeffery Ng, Gary Pan, Kevin Ow Yong
Trust In Fair Value Accounting: Evidence From The Field, Clarence Goh, Chu Yeong Lim, Jeffery Ng, Gary Pan, Kevin Ow Yong
Research Collection School Of Accountancy
We survey stakeholders in the financial reporting process to examine trust in fair value accounting. Although respondents demonstrate high confidence in financial statements, they believe that fair value accounting decreases trust in financial reporting and that preparing fair value numbers is costly but beneficial. They also strongly believe in the Conceptual Framework underlying standard setting. Using multivariate regression analyses, we find that perceiving fair value accounting as beneficial is positively associated with trust in it, consistent with the theory of reasoned action that people engage in behavior (e.g., trust) based on expected positive outcomes of that behavior. We find that …
The Impact Of Ceo/Cfo Outside Directorships On Auditor Selection And Audit Quality, Jaeyoon Yu, Byungjin Kwak, Myung Seok Park, Yoonseok Zang
The Impact Of Ceo/Cfo Outside Directorships On Auditor Selection And Audit Quality, Jaeyoon Yu, Byungjin Kwak, Myung Seok Park, Yoonseok Zang
Research Collection School Of Accountancy
We examine whether outside directorships of chief executive officer/chief financial officer (CEO/CFO) and resulting network ties to auditors affect auditor selection decisions and subsequent audit quality. The network ties arise when the CEO/CFO of a firm (home firm) serves as an outside director of another firm that hires an auditor (connected auditor). Using a sample of firms that switch auditors in the post-Sarbanes-Oxley Act period, we find that home firms are more likely to appoint connected auditors. We also find that home firms hiring connected auditors experience a significant decline in subsequent audit quality, compared to those hiring …
Terrorist Attacks, Managerial Sentiment, And Corporate Disclosures, Wen Chen, Haibin Wu, Liandong Zhang
Terrorist Attacks, Managerial Sentiment, And Corporate Disclosures, Wen Chen, Haibin Wu, Liandong Zhang
Research Collection School Of Accountancy
This study investigates the effect of managerial sentiment on corporate disclosure decisions. Using terrorist attacks in the United States as adverse shocks to managerial sentiment, we find that firms located in the metropolitan areas attacked issue more negatively biased earnings forecasts. The effect is stronger for firms with higher operating uncertainty and firms with younger, inexperienced, or less confident executives and it is weaker for firms located in states with increasing violent crime rates. A potential alternative explanation is that managers could strategically bias earnings forecasts downward and attribute the poor performance to terrorist attacks. To address this issue, we …
Managers' Pay Duration And Voluntary Disclosures, Qiang Cheng, Young Jun Cho, Jae B. Kim
Managers' Pay Duration And Voluntary Disclosures, Qiang Cheng, Young Jun Cho, Jae B. Kim
Research Collection School Of Accountancy
Given the adverse effect on their welfare, managers are reluctant to disclose bad news in a timely fashion. We examine the effect of managers' pay duration on firms' voluntary disclosures of bad news. Pay duration refers to the average period that it takes for managers' annual compensation to vest. We hypothesize and find that pay durations can incentivize managers to provide more bad news earnings forecasts. This result holds after controlling for the endogeneity of pay duration. In addition, we find that the effect of pay duration is more pronounced for firms with weaker governance and with poorer information environments, …
Repatriation Taxes, Internal Agency Conflicts, And Subsidiary-Level Investment Efficiency, Harald J. Amberger, Kevin S. Markle, Daniel M. P. Samuel
Repatriation Taxes, Internal Agency Conflicts, And Subsidiary-Level Investment Efficiency, Harald J. Amberger, Kevin S. Markle, Daniel M. P. Samuel
Research Collection School Of Accountancy
Using a global sample of multinational corporations (MNCs) and their foreign subsidiaries, we find that repatriation taxes impair subsidiary-level investment efficiency. Consistent with internal agency conflicts between the central management of the MNC and the manager of the foreign subsidiary being the driver, we show that this effect is concentrated in subsidiaries with high information asymmetry and in subsidiaries that are weakly monitored. Quasi-natural experiments in the U.K. and Japan establish a causal relationship for our findings and suggest that a repeal of repatriation taxes increases subsidiary-level investment efficiency while reducing the level of investment. Our paper provides timely empirical …
Labor Market Mobility And Expectation Management: Evidence From Enforceability Of Noncompete Provisions, Michael Tang, Rencheng Wang, Yi Zhou
Labor Market Mobility And Expectation Management: Evidence From Enforceability Of Noncompete Provisions, Michael Tang, Rencheng Wang, Yi Zhou
Research Collection School Of Accountancy
This study examines how managers' use of expectation management is affected by their labor market mobility, which we measure by the enforceability of noncompete provisions in their employment contracts. Exploiting quasinatural experiments, our difference-in-differences analyses provide new causal insights to the growing literature on how managers' career concerns affect their disclosure choices. Consistent with a less mobile labor market imposing more pressure on managers to achieve earnings expectations, we predict and find that managers in US states that tightened enforcement of noncompete provisions are more likely to manage analyst expectations downward. We also find that downward expectation management is used …
Generalist Ceos And Audit Pricing, Zhiming Ma, Rencheng Wang, Kaitang Zhou
Generalist Ceos And Audit Pricing, Zhiming Ma, Rencheng Wang, Kaitang Zhou
Research Collection School Of Accountancy
We analyze the consequences of a firm hiring a generalist CEO in terms of the audit fees paid by the firm. We find that audit fees of clients with generalist CEOs are higher than those of clients with specialist CEOs. This relation is robust to considering managerial ability, other CEO characteristics, various fixed effects, instrumental variables, and change analyses. We further show that fee differences are larger for firms with weaker monitoring and higher corporate litigation risks. Through path analysis, we find that both client business risk and misreporting risk contribute to the fee difference. Finally, we find that auditors …
Business Combinations Under Common Control (Part 2), Pearl Hock-Neo Tan, Chu Yeong Lim, Tracey Chunqi Zhang
Business Combinations Under Common Control (Part 2), Pearl Hock-Neo Tan, Chu Yeong Lim, Tracey Chunqi Zhang
Research Collection School Of Accountancy
In Part 1 of the article, published in the March issue of this IS Chartered Accountant Journal, we explained the conditions for a BCUCC and the two methods of accounting for BCUCC. We also explained how accounting standards need to address the gap in accounting for the BCUCC from the receiving entity’s perspective. In this Part 2 of the article, we propose a contextual approach in determining the accounting method on BCUCC for the receiving entity (that is, the entity which receives control of the transferred entity from another group entity). We propose that a BCUCC that has commercial substance …
The Role Of Convex Equity Incentives In Managers’ Forecasting Decisions, Young Jun Cho, David Tsui, Holly I. Yang
The Role Of Convex Equity Incentives In Managers’ Forecasting Decisions, Young Jun Cho, David Tsui, Holly I. Yang
Research Collection School Of Accountancy
Prior literature suggests that voluntary disclosures of forward-looking information tend to lead to capital market benefits, but these disclosures may also result in negative capital market consequences if subsequent performance falls below expectations. We, therefore, hypothesize that convex equity incentives, which reward managers for stock price gains while limiting their exposure to losses, should promote greater voluntary forward-looking disclosure. Consistent with our hypothesis, we find a significantly positive association between equity incentive convexity and forecast issuance and frequency. We also find that the positive association is more pronounced for firms with higher sales volatility and managers with shorter tenure, in …
Corporate In-House Tax Departments, Xia Chen, Qiang Cheng, Travis Chow, Yanju Liu
Corporate In-House Tax Departments, Xia Chen, Qiang Cheng, Travis Chow, Yanju Liu
Research Collection School Of Accountancy
In-house human capital tax investment is a significant input to a firm's tax decisions. Yet, due to the lack of data on corporate in-house tax departments, there is little empirical evidence on how tax departments are associated with tax planning and compliance outcomes. We expect the size of tax departments to be positively associated with the effectiveness of tax planning and compliance. Using hand-collected data on the number of corporate tax employees in S&P 1500 firms over the 2009–2014 period, we find that firms with larger tax departments are associated with lower and less volatile cash effective tax rates. Furthermore, …
Business Combinations Under Common Control (Part 1), Pearl Hock-Neo Tan, Chu Yeong Lim, Tracey Chunqi Zhang
Business Combinations Under Common Control (Part 1), Pearl Hock-Neo Tan, Chu Yeong Lim, Tracey Chunqi Zhang
Research Collection School Of Accountancy
In a business combination under common control (BCUCC) the same party (or parties) ultimately controls the combining entities both before and after the business combination and this control is not transitory. BCUCC is not governed by any International Financial Reporting Standard (IFRS) issued by the International Accounting Standards Board (IASB). The IASB is undertaking a research project in response to stakeholder feedback of the diversity in accounting practice and released a Discussion Paper (DP) in November 2020 that sets out the Board’s preliminary views on reporting requirements. Our paper contributes to the discussion by proposing a contextual approach in determining …