Accounting Commons^™

Segment Disclosure Transparency And Internal Capital Market Efficiency: Evidence From Sfas No. 131, Young Jun Cho

Research Collection School of Accountancy

Using the adoption of SFAS 131, I examine the effect of segment disclosure transparency on internal capital market efficiency. SFAS 131 requires firms to define segments as internally viewed by managers, thereby improving the transparency of managerial actions in internal capital allocation. I find that diversified firms that improved segment disclosure transparency by changing segment definitions upon adoption of SFAS 131 experienced an improvement in capital allocation efficiency in internal capital markets after the adoption of SFAS 131. In addition, I find that the improvement in internal capital market efficiency was greater for firms that suffered more severe agency problems …

Singapore Accounting Professors Receive International Honour For Innovative Teaching, Singapore Management University

SMU Press Releases and News

Seow Poh Sun, Associate Professor of Accounting (Education) and Associate Dean (Teaching and Curriculum) and senior lecturer Wong Suay Peng of the School of Accountancy at Singapore Management University recently were honoured with the 2015 Innovation in Accounting Education Award from the American Accounting Association (AAA). The award, sponsored by the Ernst & Young Foundation, was given to Prof Seow and Ms Wong in recognition of their outstanding achievement in innovative teaching in the use of a mobile game app. Their work "Accounting Challenge: Mobile-Gaming App for Learning Accounting" is the first mobile-gaming app developed for teaching financial accounting. It …

Corporate Real Estate’S Rising Profile In The Banking And Finance Industry, Clarence Goh

Research Collection School Of Accountancy

Seven years after the financial crisis, profits have returned to the banking and finance industry – statistics compiled by the Federal Deposit Insurance Corporation (FDIC) for banks in the US showed that overall industry profits hit near record highs in 2014.

Economic Freedom, Investment Flexibility, And Equity Value: A Cross-Country Study, Chih-Ying Chen, Peter F. Chen, Qinglu Jin

Research Collection School Of Accountancy

Prior studies show that equity value has convex relations with earnings and book value of equity, respectively, due to growth and adaptation options (Burgstahler and Dichev 1997a; Zhang 2000). These studies, however, do not consider the role of institutions in affecting firms' ability to exercise growth and adaptation options. In this study, we investigate whether these convex relations vary with the degree of a country's economic freedom, which may influence the frictions and costs of exercising these options. We develop four hypotheses: In countries with greater economic freedom, (1) a firm's capital investment in response to profitability is greater; (2) …

Ceo Contractual Protection And Managerial Short-Termism, Xia Chen, Qiang Cheng, Alvis K. Lo, Xin Wang

Research Collection School Of Accountancy

How to address managerial short-termism is an important issue for companies, regulators, and researchers. We examine the effect of CEO contractual protection, in the form of employment agreements and severance pay agreements, on managerial short-termism. We find that firms with CEO contractual protection are less likely to cut R&D expenditures to avoid earnings decreases and are less likely to engage in real earnings management. The effect of CEO contractual protection is both statistically and economically significant. We further find that this effect increases with the duration and monetary strength of CEO contractual protection. The cross-sectional analyses indicate that the effect …

Comments On The Exposure Draft On The Conceptual Framework For Financial Reporting (Ed/2015/3), Tan, Pearl Hock-Neo

Research Collection School Of Accountancy

No abstract provided.

Default Clauses In Debt Contracts, Ningzhong Li, Yun Lou, Florin Vasvari

Research Collection School Of Accountancy

We examine the determinants of events of default clauses in syndicated loan and bond contracts, provi- sions that allow lenders to request the repayment of principal and to terminate lending commitments. We document significant variation in the use of default clauses and their restrictiveness within the same type of lending contract but also across loans and bonds. We find that default clauses in public bond contracts are less restrictive than those in syndicated loan contracts. We also document that two ex ante proxies for bankruptcy costs, the level of intangible assets and capitalized research and development expenditures at the time …

Analytics And Cybersecurity: The Shape Of Things To Come, Gary Pan, Poh Sun Seow, Calvin Chan, Chu Yeong Lim

Research Collection School Of Accountancy

No abstract provided.

Kpmg Global Anti Bribery And Corruption: Rising To The Challenge In The Age Of Globalization, Themin Suwardy, Poh Sun Seow, Pan, Gary

Research Collection School Of Accountancy

Corruption continues to corrode the global economy, 18 years after member governments of the Organization for Economic Co-operation and Development (OECD) signed a convention1 that establishes legally binding standards to criminalize the bribery of public officials. Since then, a growing number of governments have passed anti-bribery and corruption (ABC) laws. The U.S. is no longer the lone policeman on the beat; the UK and other European governments have implemented anti-corruption regulations too, as have emerging economies including China and Brazil.

Despite tougher enforcement of regulations to combat bribery and corruption, illicit payments to counter-parties continue to burden economies, diverting resources …

Opaque Financial Reporting Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, Holly I. Yang

Research Collection School Of Accountancy

This paper examines the link between rank-and-file employees’ unemployment concerns and financial reporting opacity. Following Agrawal and Matsa (JFE, 2013), we use exogenous variations in state unemployment insurance benefits to capture changes to unemployment concerns. We find that when unemployment concerns are lower, there is less opaque financial reporting. This relation is stronger when workers face higher unemployment risk, labor union participation is high, and executives have higher equity incentives. Using Tobin’s Q to capture firm value, we also find that the economic rationale to engage in opaque financial reporting reduces when unemployment benefits are high. Our findings suggest that …

From Data Analysis To Intelligent Accounting: Impact Of Analytics On Accounting Function, Gary Pan, Poh Sun Seow

Research Collection School Of Accountancy

No abstract provided.

Opaque Financial Reporting Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, Holly I. Yang

Research Collection School Of Accountancy

This paper examines the link between rank-and-file employees’ unemployment concerns and financial reporting opacity. Following Agrawal and Matsa (JFE, 2013), we use exogenous variations in state unemployment insurance benefits to capture changes to unemployment concerns. We find that when unemployment concerns are lower, there is less opaque financial reporting. This relation is stronger when workers face higher unemployment risk, labor union participation is high, and executives have higher equity incentives. Using Tobin’s Q to capture firm value, we also find that the economic rationale to engage in opaque financial reporting reduces when unemployment benefits are high. Our findings suggest that …

Data And Analytics In Corporate Real Estate: Do You Have The Right Talent?, Clarence Goh

Research Collection School Of Accountancy

Is the lack of suitable data and analytics talent in your corporate real estate (CRE) team preventing you from contributing to the wider business strategy?

Fair Value Hierarchy Measures: Post-Implementation Evidence On Ifrs 7, Pearl Tan

Research Collection School Of Accountancy

Using a balance sheet valuation model, this study examines if information on the fair value hierarchy of on-balance sheet financial assets and financial liabilities are incorporated in the market’s valuation of companies’ equities in Singapore. The results of the study show significant associations between as-reported Level 1 and Level 2 fair value measures of financial assets and market values. However, the results are not significant for Level 3 fair value measures of financial assets and each of the three levels of fair value measures of financial liabilities. The results also show that returns are more positively associated with as-reported gains …

Customer's Short Positions And Supplier's Investment Decisions, 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 …

Does Increased Board Independence Reduce Earnings Management? Evidence From Recent Regulatory Reforms, Qiang Cheng, Xia Chen, Xin Wang

Research Collection School Of Accountancy

In this paper, we examine whether recent regulatory reforms requiring majority board independence are effective in reducing earnings management. Firms that did not have a majority of independent directors prior to the reforms (referred to as non-compliance firms) are required to increase their board independence. We find that overall, compared to the other firms, noncompliance firms do not experience a significant decrease in the extent of earnings management from prior to the reforms to afterwards. However, we find that non-compliance firms with low information acquisition cost experience a significant reduction in earnings management compared with the other firms. The results …

Examining How Firms Leverage It To Achieve Firm Productivity: Rbv And Dynamic Capabilities Perspectives, Gary Pan, Shan Ling Pan, Chu Yeong Lim

Research Collection School Of Accountancy

Firm productivity is one of the major drivers of firm's growth. Information Technology (IT) has the potential to be a key enabler of firm productivity. IS researchers have suggested strong association between investments in IT and firm productivity. Yet, uncertainty and concern about the actual impact of IT on firm productivity remain. This calls for an urgent need for research on how firms can leverage IT for productivity gains. Through a case study, this research aims to answer the above question by developing a process model that explicates the roles of firm capabilities in driving IT-enabled productivity.

Does Increased Board Independence Reduce Earnings Management? Evidence From The Recent Regulatory Reform, Xia Chen, Qiang Cheng, Xin Wang

Research Collection School Of Accountancy

We examine whether recent regulatory reforms requiring majority board independence reduce the extent of earnings management. Firms that did not have a majority of independent directors before the reforms (referred to as noncompliant firms) are required to increase their board independence. We find that, while noncompliant firms on average do not experience a significant decrease in earnings management after the reforms compared to other firms, noncompliant firms with low information acquisition cost experience a significant reduction in earnings management. The results are similar when we examine audit committee independence and when we use alternative proxies for information acquisition cost and …

An Investigation Of Credit Borrower Concentration, Heng Yue, Pingui Rao, Jigao Zhu

Research Collection School Of Accountancy

Credit borrower concentration arises when a bank or financial institution lends a large amount of its funds to a few large borrowers. We find that borrower concentration is positively related to non-performing loans and negatively related to financial performance. We also find that the voting power of bank’s controlling shareholder is positively related to the borrower concentration. The evidence is consistent with the view that controlling shareholders divert resources away from banks by extending a high volume of loans to a few related parties, which leads to high borrower concentration. Further evidence indicates that some seemingly unrelated large borrowers, as …

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 …

Corporate Tax Aggressiveness And Managerial Rent Extraction: Evidence From Insider Trading, Sung Gon Chung, Beng Wee Goh, Kiat Bee Jimmy Lee, Terry J. Shevlin

Research Collection School Of Accountancy

Recent studies argue that aggressive forms of tax avoidance can be used to facilitate managerial rent extraction from shareholders (e.g., Desai 2004; Desai and Dharmapala 2006; Desai et al. 2007). Despite this agency view of tax avoidance receiving increasing attention in the literature, there is limited empirical evidence that managers actually extract rents generated from tax avoidance activities. In this paper, we examine the association between corporate tax aggressiveness and managerial rent extraction in the form of insider trading profitability. We document that, on average, insider purchase profitability, but not sale profitability, is significantly higher in more tax aggressive firms. …

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 …

Corruption In Bank Lending: The Role Of Timely Loan Loss Provisioning, B Atkins, Y Dou, Jeffrey Tee Yong Ng

Research Collection School Of Accountancy

Building on the recent literature on corruption in bank lending, we examine the effect of country-level timely loan loss provisioning by banks on such corruption using a unique World Bankdataset that covers more than 3,600 firms across 44 countries. We find evidence consistent with timely loan loss provisions constraining lending corruption because it increases the likelihood of problem loans being uncovered earlier. This result is robust to using the tax-deductibility of loan loss provisions as an instrumental variable. In further analysis, we find timely loan loss provisioning less associated with reduced corruption in countries with deposit insurance schemes and significant …

Audit Committees And Financial Reporting Quality In Singapore, Kwong Sin Leong, Jiwei Wang, Themin Suwardy, Yuanto Kusnadi

Research Collection School Of Accountancy

No abstract provided.

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 firm operational efficiency. We find that operational efficiency, derived from the frontier analysis, is significantly lower among firms with material weaknesses in internal control relative to firms without such weaknesses. We document some evidence suggesting that effective internal control leads to greater operational efficiency through reducing the likelihood of misappropriation of corporate 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 terms of operational efficiency. In addition, we find …

Smu Names Next Dean For School Of Accountancy: Professor Cheng Qiang Appointed To Head Soa, Singapore Management University

SMU Press Releases and News

The Singapore Management University (SMU) has announced today that SMU Professor of Accounting Cheng Qiang has been selected as the next dean of the SMU School of Accountancy (SoA). Prof Cheng who is currently the Associate Dean for Research, will assume the role from July 1, 2015. Prof Cheng, 42, will be the youngest dean in the university’s history. After an extensive global search that included open meetings with SMU Deans, SoA faculty, staff and Advisory Board members, SMU Provost and Deputy President (Academic Affairs) Professor Rajendra K Srivastava is pleased to recommend Prof Cheng as the new dean of …

Market Pricing Of Banks’ Fair Value Assets Reported Under Sfas 157 Since The 2008 Financial Crisis, Beng Wee Goh, Dan Li, Jeffrey Ng, Keng Kevin Ow Yong

Research Collection School Of Accountancy

We investigate how investors price the fair value estimates of assets as required by Statement of Financial Accounting Standards No. 157 (SFAS 157) since the financial crisis in 2008. We observe that Level 3 fair value estimates are typically priced lower than Level 1 and Level 2 fair value estimates between 2008 and 2011. However, the difference between the pricing of the different estimates reduces over time, suggesting that as market conditions stabilize in the aftermath of the 2008 financial crisis, reliability concerns about Level 3 estimates dissipated to some extent. Next, we examine whether Level 3 gains affect the …

Executive Compensation And Regulation Imposed Governance: Evidence From The California Non-Profit Integrity Act (2004), Sandip Dhole, Saleha B. Khumawala, Sagarika Mishra, Tharindra Ranasinghe

Research Collection School Of Accountancy

This study examines the impact of the California Nonprofit Integrity Act of 2004 on CEO compensation costs in affected organizations. Contrary to the stated objective of the Act that executive compensation is “just and reasonable,” we find that CEO compensation costs for affected nonprofits during the post-regulation periods have increased by about 6.3 percent when compared with a control group of comparable unaffected nonprofits. In addition, the relative increase in CEO compensation appears to come from nonprofits that have experienced greater regulatory cost increases. We do not find evidence that the Act resulted in a change in CEO pay performance …

Splitting Specified Foreign Sourced Income Between Tax Exempt And Taxable Portions: An Optimal Solution (Part 3 Of 3), Teng Aun Khoo, Clement Kai Guan Tan

Research Collection School Of Accountancy

No abstract provided.

Income Smoothing Due To Unemployment Concerns, Jeffrey Ng, Tharindra Ranasinghe, Guifeng Shi, I-Hwa Yang

Research Collection School Of Accountancy

Economic theory predicts that top executives and lower-level employees have incentives to smooth income due to compensating wage differential costs and fear of job loss, respectively. Following Agrawal and Matsa (JFE, 2013) who rely on exogenous variations in unemployment insurance benefits to examine how unemployment concerns affect corporate leverage, we examine the link between such benefits and income smoothing. We find that when unemployment insurance benefits are higher and concerns about unemployment are hence lower, there is less income smoothing. This relation is stronger when employees face higher unemployment risk and weaker when the firms’ information and internal control environments …