The relations among accounting conservatism,institutional investors and earnings manipulation

Most scholars have indicated corporations using accounting conservatism to reduce earnings manipulation, although certain scholars believe that firms have more incentive to increase earnings manipulation. Institutional investors play an important external monitoring role, and affect firm's earnings manipulation. Previous studies adopted accruals as an earnings manipulation proxy to detect the relationship among accounting conservatism, institutional investor shareholdings, and earnings manipulation. We further investigate the relationship among accounting conservatism, institutional investor shareholdings, and earnings manipulation by using Benford's law. Our results indicate that firms with more conservative financial reporting have less probability of engaging in earnings-manipulative activities. We also find the negative association between earnings management and institutional investor shareholdings. However, if corporate financial statements tend toward conservatism, institutional investor shareholdings could increase managers' incentive to manage earnings. Our findings have important implications for investors to make investment decisions.     

An empirical study of the determinants of UK oil and gas voluntary disclosures

Significant oil and gas firm market value is derived from their physical reserve quantum, assets which are not recorded on their statements of financial position. This article provides empirical evidence regarding voluntary disclosure of such reserves in line with the previously unresearched UK sector with regard to its unique reporting guidelines. The study considers both the reporting of the reserve quantum and the quality of that reporting. This article seeks to inform the International Accounting Standards Board’s (IASB’s) on-going consideration of mineral resource reporting. Listed companies are considered to evidence forms of reserve disclosure with a logistical regression approach applied to measure determinants of reporting. The risk associated with mineral reporting reserves is hypothesized as the key disclosure driver whilst controlling other relevant variables. The majority of firms disclosed reserve quantities in some form but only a minority disclosed in line with recommended practice, disclosure quality being more variable between companies. The findings indicate that a voluntary disclosure approach is ineffective, partially explained by agency related behaviour. Risk, proxied by the stage of production, drives reserve disclosure showing that producer firms are more likely to disclose reserve quantum balances and of a significantly higher quality.     

Main banks’ influence on financial reporting quality in Japan

This study investigated main banks’ influence on the quality of accounting firms’ audits and corporate firms’ earnings, focusing on companies on Japan’s Nikkei 500 index. We posed three questions in this research study about main banks’ influence on corporate clients’ earnings management. First, does a weakened main bank relationship influence corporate clients’ financial reporting quality? Second, does Japan’s firewall deregulation influence firms’ earnings quality? Finally, does the relationship between accounting firms and main banks affect client firms’ earnings quality? Our main findings were that main banks are not related to client firms’ earnings management; however, main banks mitigate client firms’ earnings management after firewall deregulation. On the other hand, firewall deregulation does motivate firms to manipulate their earnings management. Finally, using Pong and Kita’s (2006) study as a framework, we found that main banks and client firms using the same accounting firms had no influence on earnings management. Based on these evidences presented, our findings suggest that the quality of corporate clients’ financial reporting changes before and after firewall deregulation.     

The supply of and demand for accounting information

The article analyzes the use of accounting information in Russia. We assess reporting behaviour in the lending process for a sample of Russian companies in the years 1999–2004 and postulate that Russian companies manage their earnings in order to avoid showing losses when applying for bank financing. Once a credit has been granted, companies are predicted to manage earnings because of the bank's monitoring activities. By means of univariate and multivariate analysis we are able to attribute the discontinuity around a zero target in the earnings distribution with firms’ response to the banks’ assessment of accounting performance. This implies that financing considerations affect the reporting incentives of Russian companies.     

Estimated annual and lifetime labor productivity in the United States, 2016: implications for economic evaluations

Abstract

Background: Human-capital based lifetime productivity estimates are frequently used in cost-of-illness (COI) analyses and, less commonly, in cost-effectiveness analyses (CEAs). Previous US estimates assumed that labor productivity and real earnings both grow by 1% per year.

Objectives: This study presents estimates of annual and lifetime productivity for 2016 using data from the American Community Survey, the American Time Use Survey, and the Current Population Survey, and with varying assumptions about real earnings growth.

Methods: The sum of market productivity (gross annual personal labor earnings adjusted for employer-paid benefits) and the imputed value of non-market time spent in household, caring, and volunteer services was estimated. The present value of lifetime productivity at various ages was calculated for synthetic cohorts using annual productivity estimates, life tables, discount rates, and assumptions about future earnings growth rates.

Results: Mean annual productivity was $57,324 for US adults in 2016, including $36,935 in market and $20,389 in non-market productivity. Lifetime productivity at birth, using a 3% discount rate, is roughly $1.5 million if earnings grow by 1% per year and $1.2 million if future earnings growth averages 0.5% per year.

Conclusions: Inclusion of avoidable productivity losses in societal-perspective CEAs of health interventions is recommended in new US cost-effectiveness guidelines. However, estimates vary depending on whether analysts choose to estimate total productivity or just market productivity, and on assumptions made about growth in future productivity and earnings.     

Adoption and use of technology with low litigation risk – the case of financial reporting on Twitter by ASX companies

ABSTRACT

Corporate adoption of technology faces challenges such as resource constraints and litigation risk. To investigate if low litigation risk encourages technology adoption and its use, this paper investigates corporate financial reporting on Twitter, a voluntary corporate disclosure practice without obvious litigation risk in Australia. This study reviews 4,540 financial reporting related tweets from 222 ASX listed companies’ Twitter accounts. An examination of tweet sentiment reveals a positive reporting bias, as listed companies are more willing to disclose positive financial reporting information on Twitter. A comparison of corporate financial reporting tweets prior to and after 2013 reveals that use of Twitter for opportunistic voluntary disclosure is gaining popularity, a trend that warrants close attention by regulators in order to protect investors from selective disclosure with reporting bias.     

Australian Company Mergers 1960-1970*

This study recorded 340 international mergers and 1992 domestic mergers in Australia in the period mid 1959-December 1970. In the 1,460 mergers for which price information was available, the total merger value amounted to $2,283.3 million. The merger movement was most intensive in the later years of the period, with $1,034.8 million being paid for 429 firms during 1968-1970. This compares with some 1,157 mergers transacted at a total cost of $558.4 million recorded by Mr Bushnell [2] in the period 1947-to mid 1959.²³ While mergers took place in almost all industries, they were not uniformly distributed. More than two-thirds of foreign take-overs occurred in manufacturing, compared with less than one-half of domestic mergers in manufacturing. Foreign companies have purchased the largest or leading Australian firms in their respective industries. Moreover, United States take-overs were important in basic chemicals and flour mill and cereal products; on the other hand, United Kingdom take-overs were prominent in beverages and malt, other industrial machinery and fabricated metal products. Among the foreign acquiring companies, merger activity was more concentrated in United Kingdom-based companies than among United States-based companies. For the period as a whole, domestic take-overs outnumbered foreign take-overs by more than 5·5 to 1. In examining the limited evidence for foreign take-over activity in the period 1946-59,²⁴ it is apparent that foreign firms have accounted for a much higher share of merger activity during the nineteen-sixties. In addition, mergers overseas have brought together the Australian subsidiaries of the merging companies. Mr Bushnell [2] rated the tax structure including all its ramifications as probably the single most important cause for mergers.²⁵ While tax factors have continued to play an important role in merger activity, it appears that, during the sixties, a far more important reason for mergers in many industries has been the so-called proliferation effect of mergers. As some firms, especially the multinationals, took over leading local companies making for cost and competitive advantages, invariably the smaller remaining independent firms were compelled to resort to mergers for defensive reasons. The owners of many of these firms, fearing a war of attrition, took advantage of avoiding risks by capitalizing future profits in the form of tax-free capital gains, by selling out before a situation emerged where their bargaining power would have been seriously eroded. Most of these firms disappearing into mergers, did so with partners closely related to their existing operations. Approximately three-fourths of domestic and foreign take-overs were of the broad horizontal class.     

The determinants of cybersecurity risk disclosure in firms’ financial reporting: Empirical evidence

This paper examines the relationship between cybersecurity risk disclosure and financial reporting deficiencies. Using a difference-in-difference approach based on a large, matched sample of breached and non-breached US firms for the period 2006 to 2016, a differential effect is seen between cybersecurity risk disclosures in pre- and post-Breach financial reporting related to cybersecurity incidents. The association between the cybersecurity risk disclosure and subsequent reported financial deficiencies is positive and significant, providing some evidence for regulators that more firm-specific disclosure may provide increased audit quality, to which the auditor responds by increasing audit effort. The empirical findings suggest that firms with prior cybersecurity risk disclosures are more likely to experience financial reporting deficiencies. The results obtained are robust to a variety of sensitivity checks.     

Directors network centrality and earnings quality

This study examines whether firms with network central boards of directors behave differently from other firms in terms of financial reporting quality. We find that earnings quality among firms is low when board networks are channels of incorrect information transmission (including earnings management information) and for firms whose directors are awarded equity-based compensation have connections through boardroom networks, but earnings quality is better for firms with good performance in spite of their networks. These results are robust to controlling for firm information environment, growth, size, age, leverage, performance, volatility in firm operations, and corporate governance.     

Short Selling Pressure,Reporting Transparency,and the Use of Real and Accruals Earnings Management to Meet Benchmarks

Abstract

Prior literature finds that short selling is beneficial to the market because it increases liquidity and helps to discipline optimistic market prices. The authors use 2 controlled experiments to examine the potential for an unintended consequence of allowing short selling or easing short selling restrictions. Because prior research identifies short sellers as sophisticated market participants who have the ability to see through accrual earnings management choices, we predict and find that, when reporting is transparent, managers are more likely to use real earnings management relative to accrual earnings management when short selling restrictions are relaxed. This is consistent with the idea that real earnings management activities are more defensible as the result of legitimate operating decisions and are therefore more likely to hold up to scrutiny from short sellers. Overall, the results suggest that regulations that are unrelated to financial reporting can affect how managers respond to the transparency that arises from financial reporting regulations.     

The future of farming: The value of ecosystem services in conventional and organic arable land. An experimental approach

In the current work, a novel, experimental ‘bottom-up’ approach is used to quantify the economic value of ecosystem services (ES) associated with highly modified arable landscapes in Canterbury, New Zealand. First, the role of land management practices in the maintenance and enhancement of ES in agricultural land was investigated by quantifying the economic value of ES at the field level under organic and conventional arable systems. This quantification was based on an experimental approach in contrast with earlier value transfer methods. Total economic value of ES in organic fields ranged from US $1610 to US $19,420 ha^− 1 yr^− 1 and that of conventional fields from US $1270 to US $14,570 ha^− 1 yr^− 1. The non-market value of ES in organic fields ranged from US $460 to US $5240 ha^− 1 yr^− 1. The range of non-market values of ES in conventional fields was US $50 — 1240 ha^− 1 yr^− 1. There were significant differences between organic and conventional fields for the economic values of some ES. Next, this economic information was used to extrapolate and to calculate the total and non-market value of ES in Canterbury arable land. The total annual economic and non-market values of ES for the conventional arable area in Canterbury (125,000 ha) were US $332 million and US $71 million, respectively. If half the arable area under conventional farming shifted to organic practices, the total economic value of ES would be US $192 million and US $166 million annually for organic and conventional arable area, respectively. In this case, the non-market value of ES for the organic area was US $65 million and that of conventional area was US $35 million annually. This study demonstrated that arable farming provides a range of ES which can be measured using field experiments based on ecological principles by incorporating a ‘bottom-up’ approach. The work also showed that conventional New Zealand arable farming practices can severely reduce the financial contribution of some of these services in agriculture whereas organic agricultural practices enhance their economic value.     

Profit persistence and stock returns

This article attempts to assemble further empirical evidence on the relationship between the product and the financial market. Drawing back on work in industrial organization, we analyse the relationship between profit persistence and factor-adjusted stock returns looking at about 2000 listed US firms over the last 34 years. While the relationship between (current, lagged and unexpected) profits/earnings and returns has been extensively analysed before, to our knowledge this is the first study to look at the relationship between stock returns and profit persistence. We interpret profit persistence as a result of market competition and innovation of the firm. It is shown that firm-specific long-run profit persistence after correction for other additional economic fundamentals of the firm has a positive impact on four-factor adjusted returns and a negative impact on their volatility.     

盈余管理、股权再融资与公司业绩表现*

在公司股权结构集中的情况下，控股股东实施盈余管理并进行股权再融资后会引起公司利润回调，并可能对公司长期经营能力造成影响。本文以沪深两市实施股权再融资的A股上市公司为样本，研究发现盈余管理导致公司股权再融资后业绩下降。进一步地，在热发市场中公司实施盈余管理的幅度更大，引起股票错误定价的程度更高，导致股权再融资后会计业绩和市场业绩下滑的作用更为明显。此外，在发生控股股东股权稀释的公司中，盈余管理引起公司股权再融资后业绩下降的程度更为严重，这表明控股股东利用股价高估的“机会窗口”侵占外部投资者利益的动机非常强烈。     

Do price-earnings ratios explain investment decisions better than Tobin’s q? Evidence from German firm-level data

This article tests the additional information content of price-earnings ratios, with respect to Tobin’s q, in explaining firms’ investment behaviour. While Tobin’s q describes the expected future earnings related to those projected by the book value, the price-earnings ratio compares future growth of earnings based on the projection of current earnings. In other words, a high price-earnings ratio might indicate that investors are willing to rely on future earnings growth, even though current earnings are low. By using an unbalanced panel of about 500 listed firms from Germany over the period 1987–2007, we find that including the price-earnings ratio in the investment equation does not change the explanatory power of Tobin’s q. Most notably, the price-earnings ratio exerts a positive and significant impact on investment. These results are robust to the inclusion of a measure of the firm’s internal funds and of fixed effects and also to the use of different estimators.     

Risk aversion and the earnings of US immigrants and natives

The literature on the earnings of natives and immigrants has heretofore ignored differences in compensating wages for job risks. It is possible that the risk involved in migration may indicate a greater willingness on the part of immigrants to accept riskier jobs than natives. Alternatively, immigrants may attempt to protect their migration investment by choosing occupations with less risk, indicating a higher degree of risk aversion. This paper examines differences in risk aversion between US immigrants and natives, and corresponding differentials in wage premiums for job risk. Our analysis suggests that on average immigrants are exposed to 21% less risk than natives, but receive a 25% higher risk premium. The higher degree of risk aversion of immigrants and their lower exposure to risk, and thus lower earnings, explains 5% of the higher observed earnings of natives. We also find that earlier immigrant cohorts (pre-1970) are employed in riskier jobs than are recent cohorts, but the difference accounts for only a small portion of the observed earnings differential. Finally, we estimate statistical values of life of $3.6 million for US natives and $4.6 million for immigrants, well within the range of previous studies.     

Economic burden of hepatitis C-associated diseases: Europe,Asia Pacific,and the Americas

Abstract

Background:

Globally, hepatitis C virus (HCV) infects ～3% of the population. The objective of this study was to review published work and determine the direct medical costs for diseases associated with HCV infection globally, with the exception of the US.

Methods:

A systematic literature search was conducted to identify studies reporting the costs of hepatitis C sequelae between January 1990 and January 2011. Over 400 references were identified, of which 45 were pertinent. The costs were compiled, converted to US dollars, and adjusted to 2010 costs using the medical component of the consumer price index.

Results:

The median cost of liver transplants was estimated at $139,070 ($15,430–$443,700), refractory ascites at $16,740 ($8990–$35,940), hepatocellular carcinoma (HCC) at $15,310 ($3370–$84,710), decompensated cirrhosis at $14,660 ($3810–$48,360), variceal hemorrhage at $12,190 ($3550–$46,120), hepatic encephalopathy at $9180 ($5370–$50,120), diuretic sensitive ascites at $3400 ($1320–$7470), compensated cirrhosis at $820 ($50–$2890), and chronic hepatitis C at $280 ($90–$1860). The variation among studies was mainly due to the methodology used to assess cost, local cost and government reimbursement, and country-specific treatment protocols.

Limitations:

All costs were adjusted to 2010 US dollars using the US medical component of the consumer price index (CPI) which may not reflect the change in medical costs in other countries. In addition, the costs, in the local currency were converted to US dollars in the year of the study. However, medical expenses may not vary with exchange rate, leading to artificial variations. Finally, there was no assessment of the quality of individual studies, which resulted in the same weighting to all studies.

Conclusions:

Hepatitis C imposes a high economic burden globally. Knowing the burden of HCV sequelae is useful for policy decisions as well as serving as a basis for determining the value of HCV screening and treatment.     

Q-theory of investment and earnings retentions—evidence from Scandinavia

In a frictionless milieu, retentions should have no impact on investment behavior. Empirical studies, however, typically find that retentions are an important determinant of investment. Managerial discretion and financial constraints are two alternative explanations that have been suggested. This article uses a panel of listed Scandinavian firms to examine the importance of earnings retentions as a determinant of investment. Measures of Tobin’s Q, marginal q, and sales accelerator are used to control for investment opportunities. Scandinavian firms are found to depend on earnings retentions to a high degree, more so than in other developed economies. This high dependence on retentions suggests that the Scandinavian capital markets are suffering from allocational inefficiencies. This can be assumed to have detrimental effects on the speed of structural change. Moreover, these market frictions appear too large to per se be caused by information asymmetries or managerial discretion phenomena. Possible institutional explanations are suggested.     

关于两类金融资产划分动机的实证分析

笔者以上市公司初次实施金融工具的会计准则为研究契机,通过对两类金融工具在损益处理上的差异分析,研究了公允价值在我国实施的经济后果。研究发现管理层初次划分两类资产的动机受该股票过去储存利润的影响,即截至2007年初的公允价值变动损益越大,越可能被列入可供出售金融资产。此外,相对于民营企业,国有企业利用两类金融资产的划分进行盈余管理的动机更强。     

Right anterior thoracotomy aortic valve replacement is associated with less cost than sternotomy-based approaches: a multi-institution analysis of ‘real world’ data

Background:

Large institutional analyses demonstrating outcomes of right anterior mini-thoracotomy (RAT) for isolated aortic valve replacement (isoAVR) do not exist. In this study, a group of cardiac surgeons who routinely perform minimally invasive isoAVR analyzed a cross-section of US hospital records in order to analyze outcomes of RAT as compared to sternotomy.

Methods:

The Premier database was queried from 2007–2011 for clinical and cost data for patients undergoing isoAVR. This de-identified database contains billing, hospital cost, and coding data from >600 US facilities with information from >25 million inpatient discharges. Expert rules were developed to identify patients with RAT and those with any sternal incision (aStern). Propensity matching created groups adjusted for patient differences. The impact of surgical approach on outcomes and costs was modeled using regression analysis and, where indicated, adjusting for hospital size and geographical differences.

Results:

AVR was performed in 27,051 patients. Analysis identified isoAVR by RAT (n?=?1572) and by aStern (n?=?3962). Propensity matching created two groups of 921 patients. RAT was more likely performed in southern hospitals (63% vs 36%; p?p?p?p?p?Conclusions:

Outcomes analyses can be performed from hospital administrative collective databases. This real world analysis demonstrates comparable outcomes and less cost and ICU time with RAT for AVR.     

The Determinants of Capital Structure Choice: Evidence from Polish Companies

The main objective of this paper is to investigate which of the two competing capital structure theories – the pecking order of financing choices or the traditional static trade-off model – better describes the financing decisions in Polish companies traded on the Warsaw Stock Exchange (WSE). The data come from financial statements of the companies and cover a 5-year period, 2000–2004. First, a correlation is run in order to separate a set of significant factors influencing the capital structure from the list of the following independent variables: assets structure, profitability, growth opportunities, liquidity, firm size, product uniqueness, earnings volatility, non-debt tax shields, dividend policy, and the effective tax rate. Next, in order to test the relationship between capital structure and its potential determinants, multiple regression is run. The evidence generally suggests the relevance of the pecking order hypothesis in explaining the financing choices of Polish firms.