Auditor choices and auditor reporting practices: evidence from Finnish small firms

Abstract

This paper examines whether book-tax conformity (i.e. reducing the gap between financial and taxable incomes) can restrain managers from opportunistically reporting financial profits and taxable income. Empirical work on this relation so far is limited and provides contradictory results. Using publicly available financial statements from 1994 to 2007 for 16,739 firms across 32 countries, I construct a new proxy for mandatory conformity and document that high book-tax conformity is associated with lower levels of earnings management and tax avoidance. These results persist even after controlling for firm characteristics and institutional factors, such as legal enforcement, investor protection, legal systems, capital market development, and the adoption of International Financial Reporting Standards (IFRS). Additional tests reveal that the deterrent effect of conformity on earnings management is more pronounced in code-law countries but does not differ between IFRS and non-IFRS adopters, and between developed and developing capital markets.     

Accountability – are We Better off Without It?

Abstract

Public managers increasingly lament about negative effects of accountability. Despite these reports and the importance of accountability in public organizations, it is yet unknown when it has positive or negative effects on managers. Overcoming two major obstacles in accountability research, this study therefore investigates ‘how accountability affects public manager's work behaviour’. Firstly, this study applies a cognitive theory offering a promising way out of the current theoretical dead-end. Secondly, the quasi-experimental research design makes the complex concept of accountability more tangible and findings transferable to practice. Moreover, individual level characteristics such as motivation are used to investigate a potential interaction between contingency and individual level characteristics. Results indicate both positive and negative effects of accountability on work behaviour and hence strongly challenge the positive normative connotation of accountability.     

Do Greenhouse Gas Emissions Affect Financial Performance? – an Empirical Examination of Australian Public Firms

Previous studies that have attempted to relate corporate environmental performance to financial performance have generated conflicting results. This paper presents the findings of a study on the relationship between greenhouse gas (GHG) emissions and the financial performance of Australian corporations. Using multiple regression models and data from a sample of 69 Australian public companies, this paper finds a positive correlation between GHG emissions and corporate financial performance. By testing the statistical significance of GHG emission factors in determining company Tobin's q, this study finds that a stronger Tobin's q often correlates with higher GHG emissions across all industry sectors. This finding is contrary to evidence found in previous studies conducted in other countries. The positive correlation found in this study could be explained with reference to the unique economic structure and development of Australia, particularly its dominant mining industry. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment     

THE ROLE OF LAW IN ECONOMIC GROWTH: A LITERATURE REVIEW

Abstract Compared with other explanatory variables, such as capital accumulation, technological innovations, geographical endowments, economic openness, and cultural factors, institutions, especially legal institutions have been regarded as a crucial condition for economic growth in recent years. The importance of legal rules is systematically revealed by a series of cross‐country econometric studies conducted by La Porta et al., who claim that legal origins are central to understanding the divergence in living standards across the regions and countries of the world and, compared with civil law countries, especially those countries with French civil law tradition, common law countries have enjoyed superior economic outcomes. The controversies set off by La Porta et al.'s proposition indicate that there are a number of questions that are difficult to explain by La Porta et al.'s theory, and hence call for more work on comparative analysis of different legal families before a consensus can be reached.     

THE PREVENTION OF FINANCIAL CRIME WITHIN AN ISLAMIC LEGAL FRAMEWORK1

The risks associated with financial crime threaten to undermine the stability of the international financial system. This paper explores the Islamic legal approach to the prevention of financial crime and how this can be integrated into international regulatory frameworks.     

Work values preferences of Generation Y: performance relationship insights in the Australian Public Service

Empirical research to date has provided few insights into the values and performance norms of Generation Y in the workplace. Our exploratory qualitative study treats work values preferences as inferred performance behavior in an attempt to shed light on the Generation Y performance relationship in the Australian Public Service (APS). Adopting a person–organization values fit framework, our study draws attention to how Generation Y employees (N = 60) and older managers (N = 20) shape key aspects of performance around their own different values judgments of APS operational procedures (i.e. ‘unnecessary bureaucracy’ vs. ‘legitimate governance’) and merit-based promotion (i.e. ‘it’s just wasting people’s time’ vs. ‘younger employees expect too much, too soon’). Findings suggest areas of work supportive of an efficient Generation Y performance relationship (i.e. Generation Ys’ work ethic), as well as inefficient areas of performance where managers and Generation Y hold different work values preferences (i.e. unrealistic expectations; underperforming colleagues; decision-making processes). Performance implications associated with how managers may respond to the work values preferences of Generation Y are discussed.     

A comparative analysis of the work values of Greece's ‘Millennial’ generation

This study adds to the growing body of international evidence concerning the millennial generation (i.e. those born after 1980), by documenting the work values of millennial-aged undergraduate students (N = 649) in Greece, using an adapted version of the Lyons Work Value Survey. Our results show that millennial-aged Greeks place most importance on intrinsic and social aspects of work, and less importance on extrinsic and prestige values. We statistically compare our results to those of published studies of millennial-aged respondents from other countries and find that Greek respondents hold a unique work value profile, although they demonstrate some similarities to counterparts in other countries. Our findings do not clearly support the notion of a ‘global youth generation’, as young people in various countries hold different work value priorities. This suggests that employers seeking to recruit, engage and retain young workers internationally must tailor their offerings to the specific cultural context.     

Non-family-members in the family business management team: a multinational investigation

The purpose of this study was to investigate, in a multi-country context, the inclusion of family-member managers and non-family-member managers in family businesses, and the relationship of this variable to certain management activities, styles and characteristics. A large sample (N = 593) of family businesses was generated from six countries (Croatia, Egypt, France, India, Kuwait and the United States), countries with significant differences in cultures, economies, levels of entrepreneurial activity, and family business demographics. Correlation and then Regression results indicate that, as the percentage of non-family-managers in the management team increases, there is an increase in the use of outside assistance, the use of sophisticated financial management, and the consideration of going public; but a decrease in family member conflict, in the original founder’s influence, and in the formulation of succession plans. Implications of these findings, for practitioners, consultants and researchers, are presented.     

Indigenous Peoples’ Health Care: New approaches to contracting and accountability at the public administration frontier

Abstract

This article analyses reforms to contracting and accountability for indigenous primary health care organizations in Canada, New Zealand, and Australia. The reforms are presented as comparative case studies, the common reform features identified and their implications analysed.

The reforms share important characteristics. Each proceeds from implicit recognition that indigenous organizations are ‘co-principals’ rather than simply agents in their relationship with government funders and regulators. There is a common tendency towards more relational forms of contracting; and tentative attempts to reconceptualize accountability. These ‘frontier’ cases have broad implications for social service contracting.     

Muhammad's Conception of Property as A Bundle of Rights

Property was first conceived of as a bundle of rights in early Islam. The legal instrument that crystallised this Islamic conception was the waqf, a legal entity delivering public welfare in accordance with the wishes of a benefactor. Trusts, which evolved in the thirteenth century, have a rationale analogous to that of waqfs, and in fact may have replicated the legal template of waqfs. The finding that waqfs are germane to Islam has ramifications for policies on waqfs in contemporary Islamic societies.     

The Information Content of Stock Prices,Legal Environments,and Accounting Standards: International Evidence

Abstract

In this paper, we investigate the impact of accounting standards on the information content of stock prices using a sample of 44 countries from around the world. We find that the adoption of International Financial Reporting Standards or US Generally Accepted Accounting Principles per se does not make stock prices more informative, but that better accounting standards are helpful only in countries having effective legal environments. In particular, we find a significantly negative relationship between stock price synchronicity and the quality of accounting standards in countries with a common-law legal origin and generally better shareholder protection. Our findings are consistent with the theoretical prediction in Zhang [(2013). Accounting standards, cost of capital, resource allocation, and welfare in a large economy. The Accounting Review, 88(4), 1459–1488] that improving accounting standards effectively would increase social welfare in general.     

A Daunting Task in Asia

Abstract

This article deals with the question of how to transform the public sector in Asia towards transparency and accountability. What are the main challenges and constraints in promoting transparency and accountability? What kind of strategies can we suggest to enhance and sustain transparency and accountability? It will start with the introduction, including environmental changes in public affairs, and a brief overview of transparency and accountability. Then it will look at what major challenges and constraints there are in enhancing transparency and accountability. This will be followed by a discussion of key strategies for the transformation and sustainability of transparency and accountability for further development in the Asian public sector.     

Coming to Terms with Accountability

Abstract

In this article, we develop a theoretical argument that leads to a more optimistic outlook on the present state of accountability. By combining the different forums and functions of accountability in a multidimensional manner, the possibilities to hold power to account may be larger than often assumed. The main reason is that functions no longer depend on the well-functioning of a single forum and each forum serves multiple functions. In order to study accountability on a more systematic basis, we urgently need a solid conceptual framework. We aim to contribute to this much wanted coming to terms with accountability.     

A comparative study of domestic,European and international job-related relocation

This paper explores a number of relocation outcomes for geographically mobile employees in the following three regions: Germany as the home country and destination for domestic assignments (n = 115), Western Europe (n = 116) and other countries (n = 236). The satisfaction with various aspects of the post-relocation environment, the perception of change between the pre- and post-relocation environment and the attachment to the post-relocation environment at various levels were compared between the three groups. For the European and international sub-samples differences in the ideal country and future plans were also investigated. The group that stood out most clearly was the domestic sub-sample. It emerged as the group least satisfied with their job or task characteristics, perceived significantly fewer changes in the environment and was comparatively eager to leave the site they were currently working at and the job they were currently employed in. The sometimes proposed redefinition of intra-European assignments as ‘quasi-domestic’ relocation appears to be inappropriate.     

Introducing benchmarking in the Czech Republic and Slovakia

Abstract

In many cases the introduction of performance evaluation, performance management and performance financing schemes do not produce the expected results and even create perverse effects. The risks connected with their improper implementation are much higher in developing and transition countries, where the public sector is over-politicized, policy and management capacities are inadequate and resources and experience are limited or often almost absent.

Our study provides basic selected data on the use of benchmarking in public administration bodies in the Czech Republic and Slovakia. The findings are clear. In spite of its high potential, benchmarking is not used regularly and properly either in Slovakia or in Czechia. Subjective barriers of its implementation, for example lack of accountability, the rent seeking attitudes of elected politicians and ineffective public services schemes might be most important limits. The situation is slowly improving, but the progress will be naturally limited by territorial fragmentation.     

Enforcement Releases,Firm Characteristics,and Earnings Quality: Insights from Germany's Two‐tiered Enforcement System

The implementation of a two‐tier external enforcement mechanism in Germany in 2004 permits the examination of the interrelationship of enforcement releases, firm characteristics, and earnings quality in a unique institutional framework. A total of 151 cases are examined where the announcement of errors in prior disclosed and audited financial statements was mandatorily ordered by the enforcement authority. Prior literature documents the correlation between underperformance in financial ratios and the probability of erroneous disclosure of financial statements. Evidence is provided of differences in characteristics between firms with enforcement releases and control firms as well as all German publicly listed firms. The research affirms the connection of financial ratios to earnings quality metrics. Overall, the results document the underperformance in important financial ratios as well as indicate an inferior earnings quality of firms subject to enforcement releases vis‐à‐vis the control groups. These results hold with regard to both different earnings quality specifications and different periods observed. This study adds to the earnings quality discussion and contributes to the development of a comprehensive picture of accounting quality in the unique institutional settings of Germany. The findings show that a conjoint two‐tier public and private enforcement system is effective and could be a model for consideration by other countries.     

Financial reforms and money demand: Evidence from 20 developing countries

The effects of financial reforms on money demand (M1) are analysed with estimates for two sets of sub-samples and two break dates for twenty developing Asian and African countries. In all cases, the magnitude of income elasticity does not change significantly when compared with sub-samples and whole sample periods. Using CUSUM and CUSUMSQ tests, we find that the demand for money functions in our selected countries are temporally stable and therefore the respective monetary authorities may target money supply as the conduct of monetary policy.     

Employee isolation and support for change in the public sector: a study of the internal audit profession

ABSTRACT

We investigate the preferences of public sector internal auditors for changes in their work practices. Informed by the literature, we posit that feelings of trust in the workplace and/or frustrations arising from perceived organizational ‘isolation’—a dimension of work alienation—motivate support and acceptance of change. We also argue that professional bodies directly and indirectly influence these relationships. These conjectures are tested using structural equation modelling and a survey of Canadian public sector internal auditors. The findings provide valuable insights into the process of adaptation and transformation in public sector settings across countries, jurisdictions, and accountability functions.     

The impact of US GAAP reconciliation requirements on choice of foreign stock exchange for firms from common law and code law countries

Abstract

The aim of this study is to investigate whether the impact of the SEC's Form 20-F reconciliation requirements on non-US firms' choices of foreign stock exchanges was different for firms from common law and code law countries, that is, for firms with different accounting, legal and financial systems. We examined attributes of 253 cross-listed firms from the UK, Australia, France, Germany and Japan in the 1999 financial year. We found the ability to raise further capital in the home market was relevant for firms from both groups. In addition, firms from code law countries listing on the NYSE or NASDAQ were more likely to have greater foreign revenue and lower leverage. We expected differences in accounting requirements to be a greater barrier to listing on the NYSE or NASDAQ for code law firms. However, we found firms from code law countries were more likely to select a Form 20-F exchange than firms from common law countries, providing support for suggestions that a NYSE/NASDAQ cross-listing has a bonding role for code law firms.     

Is the liberalization policy effective on improving bivariate cointegration of current accounts, foreign exchange, stock prices? Further evidence from Asian markets

This paper fist examines three set of bivariate cointegrations between any two of current accounts, stock markets, and currency exchange markets in 10 Asian countries. Furthermore, this work examined the effect of country characters on this bivariate cointegration. Our findings suggest that for three sets of cointegration test, each sample country at least exists one cointegration. India consistently exhibited a bi-directional causal relationship between any two of three indicators. Unlike Pan et al. (Int Rev Econ Financ 16:503–520, 2007 and Phylaktis and Ravazzolo (J Int Money Financ 24:1031–1053, 2005), this study found that such cointegration is influenced by three characteristics: capital control; flexibility in foreign exchange rates; and the ratio of trade to GDP. These characteristics are the result of liberalization in each Asian country. This implies that liberalization policies are effective on improving the cointegration between any two of financial markets and current account for 10 Asian countries.