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Articles 31 - 57 of 57
Full-Text Articles in Business
Disciplinary Effect Of Internal Control Provisions Of Sox On Corporate Governance Structures, Beng Wee Goh
Disciplinary Effect Of Internal Control Provisions Of Sox On Corporate Governance Structures, Beng Wee Goh
Research Collection School Of Accountancy
This study examines whether the internal control provisions under the Sarbanes–Oxley Act (SOX) have a disciplining effect on the governance structures of firms. We find that audit committee members and outside directors of firms that disclose material weaknesses (MWs) under Section 302 of SOX are more likely to leave the firms compared to their counterparts in a matched sample of control firms without such weaknesses, and they lose more outside directorships than their counterparts in the control firms. These results are consistent with the notion that the labor market imposes reputational penalties for internal control failures. Although the MW firms …
Client Conservatism And Auditor-Client Contracting, Yoonseok Zang, Chee Yeow Lim, Mark Defond
Client Conservatism And Auditor-Client Contracting, Yoonseok Zang, Chee Yeow Lim, Mark Defond
Research Collection School Of Accountancy
Auditors risk costly litigation and loss of reputation when they are associated with clients that engage in substandard financial reporting, and prior research argues that accounting conservatism reduces managements‟ tendency to misreport. Thus, we predict that client conservatism affects auditor-client contracting by reducing auditor litigation and reputation risk. Consistent with our predictions, we find that conservative audit clients are less likely to trigger auditor litigation or issue accounting restatements; and that auditors of conservative clients charge lower audit fees, issue fewer going concern opinions, and resign less frequently. Taken together, these findings are consistent with client accounting conservatism playing an …
R&D Reporting Rule And Firm Efficiency, Nilabhra Bhattacharya, Yoshie Saito, Ram Venkataraman, Jeff Jiwei Yu
R&D Reporting Rule And Firm Efficiency, Nilabhra Bhattacharya, Yoshie Saito, Ram Venkataraman, Jeff Jiwei Yu
Research Collection School Of Accountancy
US GAAP (SFAS 2) requires immediate expensing of research and development (R&D) expenditure. Critics of this rule contend that the current treatment incentivizes managers to cut essential investments in R&D to manage short-term profits, and such actions could lead to longer-term adverse consequences for firms and investors. While other observers argue that there is little rigorous research that suggests that the current accounting treatment has harmful consequences. In this study, we exploit a setting in Germany when the accounting rule for R&D reporting changed from immediate expensing (as in the U.S.) to partial capitalization when Germany adopted International Financial Reporting …
Geographic Proximity Between Auditor And Client: How Does It Impact Audit Quality?, Jong-Hag Choi, Jeong-Bon Kim, Aini Qiu, Yoonseok Zang
Geographic Proximity Between Auditor And Client: How Does It Impact Audit Quality?, Jong-Hag Choi, Jeong-Bon Kim, Aini Qiu, Yoonseok Zang
Research Collection School Of Accountancy
Using a large sample of audit client firms, this paper investigates whether and how the geographic proximity between auditor and client affects audit quality proxied by accrual-based earnings quality. We define an auditor as a local auditor (1) if the auditor’s practicing office is located in the same metropolitan statistical area (MSA) as the client's headquarters and (2) if the geographic distance between the two cities where the auditor’s practicing office and the client’s headquarters are located is within 100 kilometers or they are in the same MSA. As predicted, our empirical results are consistent with local auditors providing higher-quality …
In Search Of A Different Accounting Graduate: Entry-Point Determinants Of Students’ Performance In An Undergraduate Accountancy Degree Programme In Singapore, Poh Sun Seow, Gary Pan, Joanne Tay
In Search Of A Different Accounting Graduate: Entry-Point Determinants Of Students’ Performance In An Undergraduate Accountancy Degree Programme In Singapore, Poh Sun Seow, Gary Pan, Joanne Tay
Research Collection School Of Accountancy
This study investigates the association of prior academic achievement, admission interview, critical thinking, mathematical aptitude, gender and age with successful academic performance in an undergraduate accountancy degree programme at a Singapore university. The purpose of revisiting the determinants of academic performance is twofold: firstly, university accounting education in Singapore has changed greatly since Koh and Koh’s earlier study (1999), so this study examines if determinants previously identified as significant continue to be so in the new setting; secondly, the study tests the usefulness of admission interview in identifying applicants who achieve subsequent academic success. All the data on students’ performance …
Information Systems Procurement Process Risk And Control: Insights From A Public Sector Organization, Shan Chi Gary Pan, Manjari Mehta, Poh Sun Seow
Information Systems Procurement Process Risk And Control: Insights From A Public Sector Organization, Shan Chi Gary Pan, Manjari Mehta, Poh Sun Seow
Research Collection School Of Accountancy
This case highlights the specific risks and issues that may be encountered in the information systems (IS) procurement process in a country where bribery and corruption are more common. PSO is a large Indian public sector organization involved in energy-related business. Being financially deprived, PSO relied on government funding to build its infrastructures. Besides the funding support, PSO also inherited the bureaucratic structure and the corruption practices. Lately, PSO was involved in several IS infrastructure and applications upgrading projects and wanted to review its IS procurement process. Does PSO understand the process risks in public IS procurement? Does PSO have …
Counterparty Responses To Managerial Overconfidence, Paul Hribar, Jaewoo Kim, Ryan Wilson, Holly I-Hwa Yang
Counterparty Responses To Managerial Overconfidence, Paul Hribar, Jaewoo Kim, Ryan Wilson, Holly I-Hwa Yang
Research Collection School Of Accountancy
Existing research links CEO personality traits to a number of corporate decisions including overinvestment, external acquisitions, and earnings management. These findings raise the question of whether counterparties distinguish between differences in individual CEO behavior, and how they respond to it. We focus on two key counterparties – auditors and credit rating agencies – and examine whether audit fees and credit ratings are affected by CEO overconfidence. We find a positive association between audit fees and CEO overconfidence, suggesting that auditors exert more effort or increase the risk premium associated with auditing firms with more overconfident CEOs. We also find a …
Guidance Frequency And Guidance Properties: The Effect Of Reputation-Building And Learning-By-Doing, Sanjeev Bhojraj, Robert Libby, Holly I. Yang
Guidance Frequency And Guidance Properties: The Effect Of Reputation-Building And Learning-By-Doing, Sanjeev Bhojraj, Robert Libby, Holly I. Yang
Research Collection School Of Accountancy
Different firms issue earnings guidance at dramatically different rates. We suggest that frequent guiders more likely represent a type of firm that is attempting to develop a reputation for enhanced disclosures through their guidance issuances. Furthermore, the desire to build a reputation and the opportunities to learn provided by issuing more frequent guidance should translate into frequent guiders providing higher quality guidance than occasional guiders. We examine our hypotheses in three stages. First, we find that guidance frequency is positively correlated with variables associated with reputation with capital market participants and reputation in product and labor markets. Second, our cross-sectional …
Crisis Response Information Networks, Shan L. Pan, Gary Pan, Dorothy E. Leidner
Crisis Response Information Networks, Shan L. Pan, Gary Pan, Dorothy E. Leidner
Research Collection School Of Accountancy
In the past two decades, organizational scholars have focused significant attention on how organizations manage crises. While most of these studies concentrate on crisis prevention, there is a growing emphasis on crisis response. Because information that is critical to crisis response may become outdated as crisis conditions change, crisis response research recognizes that the management of information flows and networks is critical to crisis response. Yet despite its importance, little is known about the various types of crisis information networks and the role of IT in enabling these information networks. Employing concepts from information flow and social network theories, this …
Auditor Reporting Under Section 404: The Association Between The Internal Control And Going Concern Audit Opinions, Beng Wee Goh
Auditor Reporting Under Section 404: The Association Between The Internal Control And Going Concern Audit Opinions, Beng Wee Goh
Research Collection School Of Accountancy
Section 404 of the Sarbanes-Oxley Act introduced integrated audits of internal control over financial reporting and the financial statements. Since the internal control and audit reports are joint products of the audit process, we examine whether the issuance of an internal control material weakness opinion (MWO) influences, other things equal, the issuance of a going concern audit opinion (GCO). Using a sample of financially stressed companies, we find that the issuance of a MWO increases the likelihood of a GCO, suggesting that auditors respond to the uncertainty surrounding a MWO by issuing a GCO. Further, the positive association between MWO …
Accounting Restatements And External Financing Choices, Qiang Cheng, Xia Chen, Alvis Lo
Accounting Restatements And External Financing Choices, Qiang Cheng, Xia Chen, Alvis Lo
Research Collection School Of Accountancy
There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external financing choices. We find that for firms that obtain external financing after restatements, they rely more on debt financing, especially private debt financing, and less on equity financing. The increase in debt financing is more pronounced for firms with more severe information problems and less pronounced for firms with prompt CEO/CFO turnover and auditor dismissal. Our evidence …
Hedge Funds And Analyst Conflict Of Interest, Sung Gon Chung, Melvyn Teo
Hedge Funds And Analyst Conflict Of Interest, Sung Gon Chung, Melvyn Teo
Research Collection School Of Accountancy
Are sell-side analysts reluctant to go against the investment views of their hedge fund clients? We show that analysts tend to upgrade stocks recently bought and downgrade stocks recently sold by hedge funds. Relative to other buy and strong buy recommendations, similar recommendations on stocks predominantly held by hedge funds parlay into poorer three-month and six-month stock returns. Hedge funds concurrently offload their stock holdings when analysts issue flattering reports. In line with an agency based explanation, our results are more pronounced for important brokerage clients such as high dollar turnover hedge funds and hedge funds who are prime brokerage …
On-Market Share Buy-Backs: Asx Disclsoure, Jason David Mitchell, Holub M.
On-Market Share Buy-Backs: Asx Disclsoure, Jason David Mitchell, Holub M.
Research Collection School Of Accountancy
Our paper investigates the compliance of Australian listed firms with the ASX disclosure rules for on‐market share buy‐backs. We find that firm compliance is reasonable for initial buy‐back announcements, but poor for final buy‐back notices. In the latter instance, the disclosure in the appropriate ASX notice is provided in only 53% of cases. Of significant concern is the even lower degree of final notice compliance (42%) for buy‐backs tagged as having ‘unlimited’ duration. Across our total sample of 807 buy‐backs, an alternative form of disclosure of buy‐back completion is provided in 25% of cases, and no proper notification of either …
Cash Is King, Themin Suwardy
Cash Is King, Themin Suwardy
Research Collection School Of Accountancy
What can SMEs do to monitor, manage and improve their cash flow
Productivity Incentive At Work, Yee Loong Sum
Productivity Incentive At Work, Yee Loong Sum
Research Collection School Of Accountancy
On the issue of productivity incentives, Professor Sum Yee Loong from SMU School of Accounting provided some insights into the Production and Innovation Credit (PIC) scheme and how it can help SMEs offset the increase in the Dependency ratio ceilings (DRCs) announced in the recent Singapore Budget 2012.
Capital Market Consequences Of Managers' Voluntary Disclosure Styles, Holly I. Yang
Capital Market Consequences Of Managers' Voluntary Disclosure Styles, Holly I. Yang
Research Collection School Of Accountancy
This paper studies the capital market consequences of managers establishing an individual forecasting style. Using a manager-firm matched panel dataset, I examine whether and when manager-specific credibility matters. If managers' forecasting styles affect their perceived credibility, then the stock price reaction to forecast news should increase with managers' prior forecasting accuracy. Consistent with this prediction, I find that the stock price reaction to management forecast news is stronger when information uncertainty is high and when the manager has a history of issuing more accurate forecasts, indicating that individual managers benefit from establishing a personal disclosure reputation.
The Role Of Accounting Conservatism In Firms' Financial Decisions, Jimmy Kiat Bee Lee
The Role Of Accounting Conservatism In Firms' Financial Decisions, Jimmy Kiat Bee Lee
Research Collection School Of Accountancy
This paper investigates whether financial reporting conservatism is related to firms’ financial flexibility and their access to capital. If conservatism facilitates monitoring and governance by capital providers, they should be more willing to extend financing and increase firms’ access to capital. However, because conservatism leads to systematic understatement of net worth and weakens the appearance of firms’ balance sheet strength, it could also reduce firms’ access to capital. This study tests these two opposing views of the relationship between conservatism and firms’ financial flexibility. Results indicate that firms with greater reporting conservatism exhibit less flexibility in their corporate liquidity management, …
Investor Competition Over Information And The Pricing Of Information Asymmetry, Brian K. Atkins, Jeffrey Ng, Rodrigo Verdi
Investor Competition Over Information And The Pricing Of Information Asymmetry, Brian K. Atkins, Jeffrey Ng, Rodrigo Verdi
Research Collection School Of Accountancy
Whether the information environment affects the cost of capital is a fundamental question in accounting and finance research. Relying on theories about competition between informed investors as well as the pricing of information asymmetry, we hypothesize a cross-sectional variation in the pricing of information asymmetry that is conditional on competition. We develop and validate empirical proxies for competition using the number and concentration of institutional investor ownership. Using these proxies, we find a lower pricing of information asymmetry when there is more competition. Overall, our results suggest that competition between informed investors has an important effect on how the information …
An Analytical And Empirical Measure Of The Degree Of Conditional Conservatism, Dan Segal, Jeffrey L. Callen
An Analytical And Empirical Measure Of The Degree Of Conditional Conservatism, Dan Segal, Jeffrey L. Callen
Research Collection School Of Accountancy
There is a profound gap between models of accounting conservatism and the proxies for conditional conservatism currently used by the empirical literature. Not one of the proxies employed by the empirical literature to date obtains from a rigorous definition of conditional conservatism. In contrast, this study defines conditional conservatism in terms of truncated distributions and derives analytically a nonlinear relation between revisions to returns and earnings news for the conservative firm. This nonlinear relation is shown to be mathematically equivalent to two linear relations conditioned on the firm's degree of conservatism. From these relations, we derive a model-based proxy of …
The Effects Of Political Connections On The Level And Value Of Cash Holdings: International Evidence, Yuanto Kusnadi, K.C. John Wei
The Effects Of Political Connections On The Level And Value Of Cash Holdings: International Evidence, Yuanto Kusnadi, K.C. John Wei
Research Collection School Of Accountancy
In this paper, we examine the role of political connections on corporate liquidity policies and their consequences in an international setting. We find that managers of politically connected firms have a tendency to hoard more cash than their non-connected counterparts. Moreover, presence of political connections reduces the value of cash holdings. Further analysis reveals that our main findings are more pronounced for firms in emerging markets as well as for firms in countries with weak legal protection of investors and high levels of corruption. Overall, our empirical results corroborate previous findings on the agency cost explanation for corporate cash holdings.
Assessing The Valuation And Risk Implications Of Fair Value Accounting For Liabilities: Evidence From Fas 159'S Reported Gains And Losses, Sung Gon Chung, Gerald Lobo, Kevin Ow Yong
Assessing The Valuation And Risk Implications Of Fair Value Accounting For Liabilities: Evidence From Fas 159'S Reported Gains And Losses, Sung Gon Chung, Gerald Lobo, Kevin Ow Yong
Research Collection School Of Accountancy
This study examines the implications of fair value liability gains and losses arising from the adoption of Statement of Financial Accounting Standards No. 159 (hereafter FAS 159). We find a positive correspondence between a firm’s FAS 159 fair value liability gains and losses and stock returns. Further analysis indicates that fair value gains and losses from liabilities attributable to the change in a firm’s own credit risk, which are considered counter-intuitive by critics of fair value accounting for liabilities, are also positively related to returns. Lastly, we document that the volatility of earnings that incorporate FAS 159 liability fair value …
The Party's Over: The Role Of Earnings Guidance In Resolving Sentiment-Driven Overvaluation, I-Hwa Yang, Seybert Nicholas
The Party's Over: The Role Of Earnings Guidance In Resolving Sentiment-Driven Overvaluation, I-Hwa Yang, Seybert Nicholas
Research Collection School Of Accountancy
This paper shows that an important link between investor sentiment and firm over valuation is optimistic earnings expectations, and that management earnings guidance helps resolve sentiment-driven overvaluation.Using previously identified firm characteristics, we find that most of the negative returns to uncertain firms in months following high-sentiment periods fall within the three-day window around the issuance of management earnings guidance. Comparisons of guidance months to nonguidance months show that guidance issuance affects the magnitude and not just the daily distribution of negative returns. There is also some evidence of negative returns around earnings announcements for firms that previously issued guidance, suggesting …
Investor Sentiment, Disagreement, And The Breadth Return Relationship, Hai Lu, Ling Cen, Liyan Yang
Investor Sentiment, Disagreement, And The Breadth Return Relationship, Hai Lu, Ling Cen, Liyan Yang
Research Collection School Of Accountancy
We extend the theory and empirics in Chen, Hong, and Stein (2002) by assuming that investors subject to market sentiment hold a biased belief in the aggregate. With a dynamic multi-asset model, we predict that the breadth-return relationship can be either positive or negative depending on the relative strength of two offsetting forces — disagreement and sentiment. Using the sentiment index developed in Baker and Wurgler (2006, 2007), we find evidence consistent with our predictions. The breadth-return relationship is positive when the sentiment effect is small. However, the relationship becomes negative when (i) the time-series variation of market-wide sentiment is …
Accounting Flexibility And Managers’ Forecast Behavior Prior To Seasoned Equity Offerings, Jae Bum Kim
Accounting Flexibility And Managers’ Forecast Behavior Prior To Seasoned Equity Offerings, Jae Bum Kim
Research Collection School Of Accountancy
This study examines the effect of accounting flexibility on managers’ forecasting behavior prior to seasoned equity offerings(SEO). While SEO firms have strong incentives to convey optimistic information to boost the pre-SEO stock price, they also face enhanced litigation risk arising from SEO-related regulations. Thus, I hypothesize that managers of SEO firms will release optimistic forecasts prior to an SEO only if they have the accounting flexibility to manage subsequent reported earnings to meet or exceed their forecasts. I find that managers with greater accounting flexibility are more likely to issue a forecast prior to the SEO and their forecasts are …
Information Systems Procurement Process Risk And Control: Insights From A Public Sector Organization, Gary Pan, Manjari Mehta, Poh Sun Seow
Information Systems Procurement Process Risk And Control: Insights From A Public Sector Organization, Gary Pan, Manjari Mehta, Poh Sun Seow
Research Collection School Of Accountancy
This case highlights the specific risks and issues that may be encountered in the information systems (IS) procurement process in a country where bribery and corruption are more common. PSO is a large Indian public sector organization involved in energy-related business. Being financially deprived, PSO relied on government funding to build its infrastructures. Besides the funding support, PSO also inherited the bureaucratic structure and the corruption practices. Lately, PSO was involved in several IS infrastructure and applications upgrading projects and wanted to review its IS procurement process. Does PSO understand the process risks in public IS procurement? Does PSO have …
Direct And Mediated Associations Among Earnings Quality, Information Asymmetry And The Cost Of Equity, Nilabhra Bhattacharya, Frank Ecker, Per Olsson, Katherine Schipper
Direct And Mediated Associations Among Earnings Quality, Information Asymmetry And The Cost Of Equity, Nilabhra Bhattacharya, Frank Ecker, Per Olsson, Katherine Schipper
Research Collection School Of Accountancy
Using path analysis, we investigate the direct and indirect links between three measures of earnings quality and the cost of equity. Our investigation is motivated by analytical models that specify both a direct link and an indirect link that is mediated by information asymmetry, but do not suggest which link would be more important empirically. We measure information asymmetry as both the adverse selection component of the bid-ask spread and the probability of informed trading (PIN). For a large sample of Value Line firms during 1993–2005, we find statistically reliable evidence of both a direct path from earnings quality to …
Mutual Fund Size, Fund Family Size And Mutual Fund Performance: The Role Of Regulatory Changes, Sanjeev Bhojra, Young Jun Cho, Nir Yehuda
Mutual Fund Size, Fund Family Size And Mutual Fund Performance: The Role Of Regulatory Changes, Sanjeev Bhojra, Young Jun Cho, Nir Yehuda
Research Collection School Of Accountancy
We examine whether the previously documented positive association between fund family size and fund performance is affected by significant regulatory changes (i.e., Regulation Fair Disclosure (Reg FD), the Global Settlement (GS), and increased scrutiny as a result of trading scandals) that have occurred in the last decade. Using Reg FD as a beginning point for these structural changes, we find that, while fund family size was positively associated with fund performance in the period prior to the regulatory changes, this advantage is significantly weaker in the period subsequent to the regulatory changes. Consistent with the weakened advantage of fund family …