Institutional monitoring and litigation risk: Evidence from employee disputes

In this article, we investigate how institutional investors help mitigate business‐related risks in a corporate environment. Using a large sample of employment disputes, litigations, and court cases, we find that institutional investors play a significant role in reducing employment litigation. We observe that firms with larger shares of institutional ownership have a lower incidence of employment lawsuits and that long‐term institutional investors are more effective at decreasing employee mistreatment. Our results suggest that institutional investors can improve the employee work environment and help mitigate future employee litigation. The improvement in employee work conditions has been shown to increase a firm's value through increased employee output, reduced litigation, and direct and indirect costs. Our results shed light on the effectiveness of institutional monitoring on a firm's litigation risk.     

经济转型时期我国劳动争议增长的影响因素实证研究

在我国经济转型的过程中,劳动关系发生了巨大的变化,劳动关系更为直接和对立,劳资纠纷日益常态化。以劳动争议作为代表劳动关系状况的一个综合性指标,考察影响劳动争议案件的因素,包括新《劳动合同法》的颁布、经济转型、经济发展水平、劳动力教育水平、工会组建、劳动报酬六个主要因素,并进行实证检验,在此基础上提出相应的解决办法与建议,对于正确认识和处理我国新时期劳动关系具有重要的理论与实践意义。     

Forum Selection in International Business Contracts: Home Bias Portfolio Puzzle and Managerial Moral Hazard

We provide an economic analysis of forum selection in international business contracts. International business contracts or multi-state transactions within federally structured countries might be subject to more than one sovereign adjudication system. In case of conflict between the transacting parties, the appropriate tribunal must be identified. We examine the question of business firms' optimal choice of the forums to adjudicate future business disputes. We extend the investment model approach to litigation by applying a portfolio theory type analysis. We show that firms that prefer higher expected income and lower income volatility are better off diversifying the forums under which they litigate business disputes. This stands in contrast to real-world business practice that consistently shows a clear preference to selecting the home court and legal system to settle international business disputes. In a fraction of the cases, both parties gain by selecting a certain forum, because of specialization for example, and it becomes optimal to ignore diversification. In most cases, however, the relevant factors that affect forum selection are zero sum and priced ex ante, court bias, for example. Once priced, there is no incentive to disregard diversification. We hypothesize that, in addition to specialization, factors such as managerial moral hazard explain the real-world behavior of firms: managers are less likely to be blamed, ex post, for choosing the home court. We suggest that, as international barriers decline and international trade grows, firms will diversify the forums in which they adjudicate international business disputes.     

不真正连带债务理论在保险活动中的应用——兼评“无责免赔”问题

保险活动中,保险人与其他责任人对同一损失同时负有补偿义务的情形时常发生,保险界对其如何处理至今尚未找到明确统一的、具有说服力的理论或者法律依据,以致于虽然《保险法》第60条对相关问题进行了规定,但保险实务中仍然出现了包括机动车保险中"无责免赔"这类被法院认定为无效条款的约定,交通事故人身损害赔偿纠纷中保险人也被不当地判决承担连带责任。将不真正连带债务理论应用于保险活动中,能够为保险竞合和包括保险人补偿义务在内的补偿义务竞合情形提供广为接受的处理方案,能够为保险条款和《保险法》的完善提供理论指导,能够为"无责免赔"争议和交通事故人身损害赔偿纠纷中保险人权利义务合理确定等现实问题的解决提供思路。     

Legal Costs and Accounting Choices: Another Test of the Litigation Hypothesis

This paper provides another test of the litigation hypothesis proposed by Hall and Stammerjohan (1997) and provides evidence that subtle differences in the underlying business environment may be very important in predicting the accounting reaction of management to major events. The litigation hypothesis predicts that firms that are defendants in litigation with potentially large damage awards (major litigation) will attempt to reduce the size of those damage awards by making income‐decreasing accounting choices. The oil firms in the Hall and Stammerjohan study appeared to systematically reduce reported earnings during the litigation periods by under‐reporting new reserves. The fourteen chemical and pharmaceutical firms, involved in fifteen litigation events, examined by this study produce a very different result. The chemical and pharmaceutical firms faced a different business environment during their litigation periods and appear to have made income‐increasing accounting choices. These firms appear to have been able to perpetuate earnings growth without corresponding sales revenue growth during the litigation periods through unexpected reversals in deferred income tax expense.     

论机动车保险中高风险车辆的风险管理

高风险车辆赔付率的高低对机动车保险业务的经营效益有极大的影响,是保险公司风险管理的重点。按照风险管理的基本原理,保险公司应从风险规避、风险转移和风险控制三个方面着手,采取适当措施,加强对高风险车辆的风险管理,降低赔付率,保证业务的稳定性。不仅如此,由于风险具有可变性,实施风险管理不能一成不变,必须根据风险变化的情形随时加以调整和修改,按照科学的程序进行。     

The impact of the Social Security Fund on auditor litigation risk

In this study, we examine the effect of the Social Security Fund on auditor litigation risk. Using audit fees as a proxy for auditor perceptions of litigation risk, we find that the Social Security Fund significantly reduces auditor litigation risk. Furthermore, we show that the Social Security Fund influences auditor litigation risk through reducing both the audit risk and the business risk of public companies. In addition, the impact of the Social Security Fund for reducing auditor litigation risk is more obvious in the group of firms with low levels of internal governance, which indicates that the Social Security Fund plays an important governance role as a high-quality institutional investor. In summary, we verify that the Social Security Fund, when acting as an institutional investor, plays an important role in corporate governance, and that it helps to reduce auditor litigation risk. Our results provide empirical support for expanding the governance role of the Social Security Fund as an institutional investor in China’s A-share market.     

Customers' perceptions on the dispute resolution clauses in Islamic finance contracts in Malaysia

This empirical legal study examines the perceptions of retail customers on the dispute resolution clauses contained in the governing law and jurisdiction clauses in Islamic finance contracts in Malaysia. Since Islamic financial institutions and their customers are more likely to opt for litigation in the event of a dispute, this study explores ways of providing for unambiguous dispute resolution clauses that are well understood by the parties. Such clauses are expected to incorporate effective dispute resolution processes such as mediation and arbitration through a multi-tiered mechanism. Primary data collected through survey questionnaire administered on 160 Islamic bank customers is analysed using both factor analysis and structural equation modelling. The empirical legal study reveals that there is a statistically significant direct effect of dispute resolution clauses in Islamic finance contracts on the legal awareness and understanding of the customers and indirect effect on the customers' dispute resolution channels. It therefore follows that there is a need to provide for more effective clauses that allow for mediation and arbitration in the governing law and jurisdiction clauses of Islamic finance contracts in Malaysia. Such alternative dispute resolution processes can be structured in a multi-tiered manner that will only allow for litigation as a last resort. This will allow Islamic financial institutions and their customers to make informed decisions about the best option for effective dispute management.     

论大数据背景下金融合规管理中的隐私问题及其伦理对策

大数据技术在金融领域的广泛应用,一方面,改善了金融服务;另一方面,由于大数据技术自身的属性而可能导致更多、更大的隐私风险.在这种背景下,金融领域的合规管理面临双重的隐私风险:一是金融实体之业务活动所可能产生的隐私风险,二是合规管理自身所可能产生的隐私风险.因此,为了应对金融领域中合规管理所可能遭遇的隐私问题,也就需要有两个方面的伦理对策:一是针对金融实体全部业务活动中隐私风险的伦理对策,二是针对有权接触、利用金融客户数据、信息的合规管理人员的伦理对策.除了基本的伦理对策之外,为了使得柔性的伦理对策不至于成为花瓶般的摆设,有必要为其设置相应的制度保障.     

Betting on the future: the virtues of contingent contracts

It happens all the time. Two parties with common interests fail to reach an agreement--about a sale, a merger, a technology transfer--because they have different expectations about the future. They are both so confident in their prediction, or so suspicious of the other side's motives, that they refuse to compromise. Such impasses are hard to break through. Fortunately, they can often be avoided altogether by using a straightforward but frequently overlooked type of agreement called a contingent contract. The terms of a contingent contract are not finalized until the uncertain event in question--the contingency--takes place. In some areas of business, such as compensation, contingent contracts are common: a CEO's pay is tied to the company's stock price, for instance. But in many business negotiations, contingent contracts are either ignored or rejected out of hand. That's mistake, according to the authors. In an increasingly uncertain world, flexible contingent contracts can actually be more rational and less risky than rigid, traditional ones. In particular, contingent contracts offer six benefits: they enable a difference of opinion to become the basis of an agreement, not an obstacle to it; they cancel out the biases of negotiators; they level the playing field by reducing the impact of asymmetric information; they provide a means of uncovering deceitful dealings; they reduce risk by sharing it among parties; and they motivate parties to fulfill their promises. While contingent contracts are not appropriate in all instances, they are much more broadly applicable than managers may think.     

Litigation environment and auditors’ decisions to accept clients’ aggressive reporting

This study contributes to accounting and auditing literature by addressing two empirical questions: (1) whether litigation environment affects auditors’ decisions to accept clients’ aggressive reporting and (2) whether litigation environment, client business risk, and client retention pressure interact and jointly affect auditors’ decisions to go along with clients’ preferred accounting choices. Fifty-nine (59) US and sixty-one (61) Hong Kong auditors employed by the Big-4 accounting firms participated in this study. The result shows that litigation environment has a significant effect on auditors’ decisions. Auditors who practice in more litigious environments tend to be less willing to go along with clients’ aggressive reporting than those who practice in less litigious environments. This study also confirms that there is a significant interactive effect between litigation environment, client business risk, and client retention pressure on auditors’ decisions to accept clients’ aggressive reporting choices. Implications of the empirical findings for policymakers, standard-setting organizations, and international accounting firms, as well as directions for future studies, are discussed.     

Estimating unobservable valuation parameters for illiquid assets

A problem that often arises in applied finance is one where decision‐makers need to choose a value for some parameter that will affect the cash flows between two parties involved in the operation of an illiquid asset. Because the values of the cash flows also depend on various unobservable parameters, identifying the value of the policy parameter that achieves the desired allocation between the parties is no simple task, often resulting in disputes and the invocation of ad hoc approaches. We show how this problem can be solved using an extension of the well‐known ‘implied volatility’ technique from option pricing, and apply it to the determination of equilibrium rental rates on ground leases of commercial land.     

商品融资业务中的质押风险及其对策研究

商品融资是以商品质押为担保方式的一种短期融资业务,商品融资能够有效地盘活借款企业的存货,帮助解决企业的资金融通问题,近年来在国内取得了蓬勃发展.但由于商品本身处于一种动态流转的经营过程,在转移交付、质物监管、滚动质押、物权竞合等方面必然会给商业银行的信贷资产安全带来一些不利的影响,从而可能产生纠纷.因此,本文着重探讨商...     

Bank Mergers and Small Firm Finance: Evidence from Lender Liability

As a merger approaches, the value of repeat business for the target bank can drop sharply, so loan relationships between this bank and small businesses are often disrupted. Small firms sometimes experience serious value destruction as a consequence of this sudden lack of credit. This paper shows that lender liability may result from bank mergers and bankers involved in mergers often engage in aggressive, scorched‐earth defense tactics to discourage further litigation. I summarize six lender liability cases to illustrate these points. Bank mergers have been shown to reduce credit availability in a number of studies. Since small firms depend on credit for their daily existence, owners of small firms do have a reason to fear a merger of their bank with a larger institution. Analyzing merger effects with survey data of firms obtained after a bank merger, an empirical strategy used in a number of studies, raises problems since the only firms considered are the ones that survived the bank merger. Suggesting that the problem will cure itself in the long run, an argument advanced in other studies, ignores small firms' daily dependence on credit. In the long run we are all dead. Bank examiners need to evaluate an institution's litigation experience and measure a bank's organizational architecture – its ethical climate. Banks which are repeatedly involved in lender liability lawsuits should be denied future mergers until there is a change in organizational architecture. To assist in evaluating organizational architecture, banks should be required to report their litigation expense on their call reports. Furthermore, regulators should seriously consider the recent suggestion of Carow, Kane and Narayanan (2006) that they take steps to ensure that participants in bank mergers preserve target bank relationships. Otherwise negative effects on small business lending and economic growth will continue as bank consolidation proceeds.     

制度变迁、集团客户重要性与非标准审计意见

客户重要性是否影响审计师独立性,是审计理论界和实务界都非常关注的话题。本文以企业集团作为一个整体来研究集团客户重要性对审计师独立性的影响,发现集团客户经济依赖性会损害审计师的独立性,这种现象对于小规模事务所而言尤为严重。此外,本文还进一步考察了2007年新会计准则、审计准则及事务所民事诉讼风险加强等制度环境变化对审计师行为的影响。研究发现,在制度环境改善之后,审计师执业总体上变得更加谨慎,大规模事务所尤其如此。     

What was privacy?

Why is that question in the past tense? Because individuals can no longer feel confident that the details of their lives--from identifying numbers to cultural preferences--will be treated with discretion rather than exploited. Even as Facebook users happily share the names of their favorite books, movies, songs, and brands, they often regard marketers' use of that information as an invasion of privacy. In this wide-ranging essay, McCreary, a senior editor at HBR, examines numerous facets of the privacy issue, from Google searches, public shaming on the internet, and cell phone etiquette to passenger screening devices, public surveillance cameras, and corporate chief privacy officers. He notes that IBM has been a leader on privacy; its policy forswearing the use of employees' genetic information in hiring and benefits decisions predated the federal Genetic Information Nondiscrimination Act by three years. Now IBM is involved in an open-source project known as Higgins to provide users with transportable, potentially anonymous online presences. Craigslist, whose CEO calls it "as close to 100% user driven as you can get," has taken an extremely conservative position on privacy--perhaps easier for a company with a declared lack of interest in maximizing revenue. But TJX and other corporate victims of security breaches have discovered that retaining consumers' transaction information can be both costly and risky. Companies that underestimate the importance of privacy to their customers or fail to protect it may eventually face harsh regulation, reputational damage, or both. The best thing they can do, says the author, is negotiate directly with those customers over where to draw the line.     

The Wild West of executive coaching

Annual spending on executive coaching in the United States is estimated at 1 billion dollars. Yet information about coaching's effectiveness is scarce and unreliable. No one has yet demonstrated conclusively what qualifies an executive coach or what makes one approach to executive coaching better than another. Barriers to entry are nonexistent--many executive coaches know little about business, and some know little about coaching. The coaching certifications offered by various self-appointed bodies are difficult to assess, and methods of measuring return on investment are questionable. But strategic coaching can provide critical help both to individuals and to organizations. In this article, Stratford Sherman, a senior vice president of Executive Coaching Network, and Alyssa Freas, the founder and CEO, explore the popularity of executive coaching and investigate ways to make the most of the experience. They argue that coaching is inevitably a triangular relationship between the client, the "coachee," and the coach. Its purpose is to produce behavioral change and growth in the coachee for the economic benefit of the client. The best way to maximize the likelihood of good results is to qualify all the people involved. Even so, many triangular relationships continue to generate conflict among all three parties. At the most basic level, coaches serve as suppliers of candor, providing leaders with the objective feedback they need to nourish their growth. Coaching gets executives to slow down, gain awareness, and notice the effects of their words and actions. On a larger scale, the best coaching fosters cultural change for the benefit of the entire organization. It provides a disciplined way for businesses to deepen relationships with their most valued employees while also increasing their effectiveness.     

Trust in cross-cultural b2b financial service relationships: The role of shared values

Trust in business-to-business supplier–customer relationships in financial services is an area of considerable research interest. The bulk of prior empirical research in this field has concentrated on trust in business relationships within a Western cultural context. However, shared values are acknowledged to be an important antecedent to trust. The premise of this study is that in circumstances where there are substantial cultural differences between parties to a supplier–customer relationship, these differences will be reflected in shared values, which will in turn be reflected in differences in the nature of trust. A qualitative study was conducted among business bankers and their corporate clients in the context of the United Arab Emirates. In all 170 respondents were interviewed; of these, 160 were paired respondents, that is, where a client and banker from the same business relationship were interviewed (yielding 80 interview dyads). Substantial differences with respect to trust were found between relationships that involved only Emiratis, those that involved Emiratis and non-Emiratis, and those that involved only non-Emiratis. For Emiratis mutual trust is substantially based on family and clan ties and exhibits strongly affective characteristics. For non-Emiratis trust is largely based on business considerations, and exhibits strongly cognitive characteristics.     

The effects on financial statements of the litigation cost rule in a civil action for negligence against the auditor

The litigation cost rule relates to which of the two parties in a civil lawsuit has to pay the legal costs. In those countries where the American system applies, each has to pay their own legal costs. In most other countries, the British system applies and the loser pays all the legal costs. By means of a single person decision-theoretic model, I examine the effects of this on auditing and financial statements under certainty and uncertainty conditions. Generally, the American system has the effect of restraining shareholders from suing unless they are able to cover their legal costs, thereby providing scope for under- or over-statements, depending on management’s wishes. This scope is denied under the British system and, as a result, audited financial statements will not be similarly biased.     

Auditors' Conflict Management Styles: An Exploratory Study

This study explores the conflict management styles used by auditors when resolving disputes with clients concerning financial statement issues. Rahim's (1983a, 1990) ROCI–II conflict management instrument was used to establish both the styles generally used and also those used in a scenario concerning possible inventory obsolescence. Size of the client and the strength of its corporate governance mechanisms were manipulated in the scenario. It was found that auditors indicate that they primarily use the integrating style to resolve disputes. The compromising and dominating styles are used to a lesser extent while the obliging and avoiding styles are rarely used. Partners are more likely than managers to use more assertive styles of conflict management. The size of the client and the strength of corporate governance mechanisms in place have a significant but relatively minor impact on the choice of styles. The study also identifies the parties whom the auditor would expect to help resolve the dispute. It was found that, when resolving a dispute with the client's chief financial officer, the audit committee is perceived to give the most assistance, followed by the chief executive of icer.