Public Attention and Auditor Behavior: The Case of Hurun Rich List in China

Adverse client publicity can entail regulatory scrutiny over audited financial statements and impose political costs on auditors. We use the changes in client publicity caused by their controlling owners’ presence on the Hurun Rich List (the rich listing) in China to test the hypothesis that auditor conservatism increases with client publicity. Our evidence indicates auditors issue more adverse audit opinions to clients and charge higher fees following the rich listing events. Moreover, we observe that auditors strategically respond to clients with different attributes—for clients whose owners accumulated wealth in a more questionable manner, auditors choose more stringent audit reporting to better defend themselves from regulatory scrutiny; for clients without such attributes, auditors primarily rely on increasing audit fees to cope with any post-listing increase in audit risks. Our analyses also suggest the impacts of rich listings tend to be concentrated among large audit firms with stronger reputation concerns or among engagement auditors with more conservative reporting styles. By showing how auditors manage political risks associated with heightened public scrutiny, we contribute to both the auditing and political cost literature.     

The effects of board structure on corporate performance: Evidence from East African frontier markets

The effectiveness of the well-known corporate governance practices may not be universal due to fundamental differences in the environments under which firms operate. By using hand-collected data from all the non-financial firms listed on the unexplored East African frontier markets (i.e., Kenya, Tanzania and Uganda), we examine the effect of board characteristics on the performance of firms. Our results show that board size has a negative and significant effect on firm performance. The presences of foreigners and civil servants on the board play positive roles on financial performance, where the agency and resource dependence theories apply. Further, we find that board members with higher education also contribute to firm performance. These findings still hold when we consider the 2008–2009 financial crisis period. Overall, we show that in a business climate where ownership is largely dominated by few shareholders, the conventional governance mechanisms do not work effectively.     

Security regulations,access to capital markets,and firm performance: Evidence from China

This study explores the cost of security regulations in China, where firms are required to meet a certain profitability benchmark before applying for permission to raise more equity via secondary equity offerings (SEOs). Using a difference-in-differences setting, we show that firms affected by the regulation (i.e., firms with high external financing demands (EFD) but profitability lower than the regulatory requirement) significantly underperform their counterparts, while unaffected firms do not. The affected firms’ performance decline increases (decreases) when the requirement of profitability is more (less) restricted. Consistently, the three-day cumulative abnormal return (CAR) of firms with high EFD is significantly negative (positive) when the regulation is tightened (loosened). Our study provides evidence on how the cost of regulation affects companies that have growth opportunities.     

Government contracts and US bond yield spreads: A study on costs and benefits of materialized political connections

In a 1991–2013 sample of bonds issued by US public firms, we find that the cost of debt (yield spread relative to comparable Treasuries) of suppliers to government agencies is contingent on the strategic importance of the supplier's industry. The yield spreads for strategically unimportant government suppliers are higher than for firms that are not government suppliers. If government contracts serve as tangible evidence of political connections, these higher yield spreads indicate that weaker corporate governance as a cost of political connections outweighs the benefits of said connections. For the subsample of government suppliers from strategically important industries, where the benefits of implicit bailout guarantees and revenue stability outweigh the corporate governance problems, the cost of debt is lower than for firms that are not government suppliers. The higher (lower) cost of debt for strategically unimportant (strategically important) suppliers is confined to contracting with the federal government. Our findings are robust to alternative variable and sample specifications, and to endogeneity concerns.     

Bioelectricity in Malaysia: economic feasibility,environmental and deforestation implications

We investigate the economic feasibility of bioelectricity production from biomass in Malaysia and its impact on greenhouse gas (GHG) emissions and storage, agricultural prices, agricultural employment and deforestation. For this purpose, we develop a partial equilibrium model that projects agricultural prices, production, imports, exports, domestic consumption and land use in 5‐year increments between 2015 and 2065. Our results show that by 2030 biomass‐generated electricity can supply 36.5 per cent of the electricity generated in Malaysia, 16 times more than the 2016 electricity supply from biomass. Increased bioelectricity production from biomass will significantly reduce GHG emissions and will help Malaysia meet its commitment in the Paris Agreement to mitigate GHG emission by 45 per cent before 2030. Our modelling shows that biomass‐generated electricity creates a derived demand for waste biomass that expands the area of oil palm plantations. The expansion lowers agricultural prices, boosts agricultural employment and leads to some deforestation as landowners clear rainforest to plant oil palm trees. Nonetheless, the deforestation does not increase GHG emissions since GHG gains from bioelectricity significantly exceed GHG losses from deforestation.     

人工智能发展对通胀动态的影响及政策挑战——基于动态随机一般均衡模型的分析

人工智能的发展是生产力进步的表现，但广泛使用人工智能技术的经济效应尚待深入研究。基于人工智能对劳动的替代作用，将人工智能投资引入动态随机一般均衡模型，通过比较静态分析和短期动态分析考察人工智能发展对通胀动态的影响。稳态分析表明：人工智能投资效率提高和使用范围扩大均会提升劳动生产率进而提高产出水平，但对长期或趋势通胀没有影响；在人工智能发展初级阶段人工智能的发展会引起实际工资下降，而在相对高级阶段人工智能的发展会引起实际工资上升。短期动态分析显示：人工智能发展水平的提高，无论是投资效率的提高还是使用范围的扩大，都会导致通胀及实际边际成本对偏好冲击和技术冲击等外生冲击的反应变弱。人工智能的发展会使通胀动态与实际经济活动变化间的联系减弱，其原因是人工智能对劳动的替代作用使工资调整不再是应对外生冲击的必然选择，进而改变了外生冲击通过影响工资来影响通胀的传导机制。因此，发展人工智能在促进生产率提升和产出增长的同时，还会改变宏观经济变量间的传导机制，进而对通胀等政策调控目标变量的准确预测以及政策调整和实施的有效性带来新的挑战，也为金融理论研究提出新的课题。     

制度距离、投资动机与企业OFDI区位选择——中国对外直接投资“制度风险偏好”的一种解释

由于企业的对外直接投资（OFDI）存在制度适应成本，东道国与母国之间的制度距离会对企业OFDI产生负向影响。基于2003—2015年中国对140个国家和地区OFDI的分析表明：中国企业的OFDI具有明显的市场寻求动机和战略资源寻求动机，其中，市场寻求型OFDI表现出显著的互补效应，战略资源寻求型OFDI表现出一定程度的挤出效应；东道国与中国的制度距离会通过投资动机影响中国企业OFDI的区位选择，即倾向于向制度距离较小的国家和地区进行OFDI，且制度距离会弱化市场寻求型OFDI的互补效应和战略资源寻求型OFDI的挤出效应。站在企业角度来看，中国企业在进行OFDI时并不具有“制度风险偏好”，而是表现出“制度风险规避”特征：选择对其自身发展来讲制度风险较小（制度距离较小）的目标市场进行OFDI。因此，中国应深化市场经济体制改革，提升国内制度质量，加强国际经济合作，并增强企业的制度适应能力，以有效减小制度距离对企业OFDI区位选择的约束，进而优化OFDI区位分布，提高OFDI效益和质量。     

Joint audits and mutual ties of audit firm networks

There has been a lively debate following the 2007 financial crisis regarding the role of joint audits. Prior research argues that joint audits may improve audit quality because of shared audit efforts. However, empirical evidence has been inconclusive. To gain insight into how Big 4 audit firm imprimaturs have become a source of legitimacy in the audit industry, this article investigates how audit networks drive the audit industry in Saudi Arabia. Based on the application of quantitative and qualitative research methods, we conclude that the Big 4 audit firms have strong mutual ties, but ties with other local and international audit firms are weak. We also find the oligopolistic nature of the Big 4 audit firms and international audit firms. Specifically, Ernst & Young, KPMG, PwC, and PKF are controlling over 68% of the audit market. Interviews with accounting professionals suggest that several benefits of joint audits exist, but certain additional costs are also implicated. Our findings are particularly relevant for regulators and local and international policymakers in rethinking and evaluating the appropriateness of either the mandatory or voluntary nature of joint audits in developing countries.     

Shipping cost and development of the landlocked developing countries: Panel evidence from the common correlated effects approach

We estimate the impact of shipping cost on development for landlocked developing countries (LLDCs). Since container trade is important to them, we construct a country-specific measure of shipping cost, called HarpexCost, which combines the global cost of container shipping with information on how exposed to container shipping each LLDC is. We employ the common correlated effects (CCE) estimator of Pesaran (Econometrica, 2006; 55: 967) to first estimate the impact of HarpexCost on the LLDCs’ development, and then recover the actual impact of shipping cost from these estimates. Overall, we observe that shipping cost has large negative effects on the LLDCs. Building upon these results, we provide new estimates on the cost of landlockedness and how trade benefits their development.     

Economic modelling of costs associated with outcomes reported for type 2 diabetes mellitus (T2DM) patients in the CANVAS and EMPA-REG cardiovascular outcomes trials

Aims: To model direct medical costs associated with reductions in cardiovascular disease (CVD) events in T2DM patients reported in the CANVAS and EMPA-REG trials, which assessed the cardiovascular safety of canagliflozin and empagliflozin, respectively.

Materials and methods: Costs were modeled from a US managed care organization (MCO) perspective for the CVD outcomes included in both trials: three-point major adverse cardiovascular event (MACE) and its components (cardiovascular-related death, nonfatal myocardial infarction, nonfatal stroke), as well as heart failure requiring hospitalization. The rate of CVD events averted (difference between study drug and placebo) was projected to the portion of an MCO T2DM population matching the respective trial’s inclusion criteria. A targeted literature search for paid amounts directly associated with each CVD event provided the unit costs, which were applied to the projected number of events averted, to calculate costs avoided per member per year (PMPY). One-way sensitivity analyses were performed on events averted, unit costs, and percentages of trial-applicable patients.

Results: Based on three-point MACE events averted, costs avoided PMPY of $6.17 (range: $1.27–$10.94) for CANVAS and $2.75 ($0.19–$4.83) for EMPA-REG were estimated. Costs avoided for individual components of MACE ranged from $0.77 to $3.84 PMPY for CANVAS and from -$0.97 (additional costs) to $1.54 for EMPA-REG. PMPY costs avoided for heart failure were $2.72 for CANVAS and $1.32 for EMPA-REG.

Limitations and conclusions: Models assumed independent, non-recurrent outcomes and were restricted to medical costs directly associated with the trial-reported events. The reductions in CVD events in T2DM patients reported for both CANVAS and EMPA-REG project to a positive cost avoidance for these events in an MCO population. The analysis did not include an assessment of the impact on total cost, as the costs associated with adverse events, drug utilization or other clinical outcomes were not examined.