Accountants’ Whistle‐Blowing Intentions: The Impact of Retaliation,Age, and Gender

Accounting practices and the role of auditors have been widely implicated in many corporate scandals. Accountants are likely to witness serious wrongdoings at their workplace, presenting them with a difficult choice as to whether or not to whistle‐blow. This study reports online survey results of whistle‐blowing intentions of the members of Certified Practising Accountants of Australia. The study provides data on the effect of threat of retaliation, age and gender on accountants’ propensity to blow the whistle. The results show a complex interaction effect of retaliation, participants’ age, and gender on their propensity to blow the whistle. Among the early career accountants, male accountants are more likely than female accountants to blow the whistle. Accountants in the mid‐age group are not only likely to whistle‐blow when there is retaliation but also tend to be more willing to do so when that retaliation involves a direct personal loss rather than a loss to their associates. Accountants in the age group of 45 years or above respond to retaliation differently depending on their gender. Specifically, female accountants’ propensity to blow the whistle in this age group tends to decline as the retaliation threat increases from weak to strong, yet the change in retaliation threat has little impact on male accountants’ propensity to blow the whistle. These results and their implications are discussed.     

Does the Presence of Female Executives Curb Earnings Management? Evidence from Korea

We investigate the role of female executives in curbing earnings management behaviour in Korea, a country known for its strong male‐dominant culture. In a sample of Korean firms from 2002 to 2010, we find that female presence in top management is negatively associated with discretionary accruals, suggesting that gender diversity in senior management deters opportunistic financial reporting even in a highly male‐dominant corporate environment. Further, this association is primarily observed in firms with stronger (weaker) female (male) dominance. This finding is consistent with the idea that female executives can exert more influence on corporate decisions in a more female‐friendly environment. These findings have implications for academics and practitioners seeking to understand the impact of the role of top executive gender diversity in corporate accounting practices.     

Health Information and Subjective Survival Probability: Evidence from Taiwan

The effect of new health information on individuals' expectations about their longevity is examined using a Bayesian learning model. Using two‐period panel‐structured survey data from Taiwan, we find that subjective probabilities of living to age 75 and 85 are significantly smaller for respondents with more abnormal medical test outcomes and for those receiving more extensive advice on health behavior from their physicians. The subjective probability of survival declines with health shocks such as developing heart disease. Using pooled cross‐sectional data, we find that males and married persons are more optimistic about their longevity expectations than females and single persons, and that income is strongly correlated with the subjective probability of living to age 75. Consistent with previous studies, the longevity of the same‐sex parent is strongly associated with an individual's own expectation of living to age 75.     

Retail Financial Advice: Does One Size Fit All?

Using unique data on Canadian households, we show that financial advisors exert substantial influence over their clients' asset allocation, but provide limited customization. Advisor fixed effects explain considerably more variation in portfolio risk and home bias than a broad set of investor attributes that includes risk tolerance, age, investment horizon, and financial sophistication. Advisor effects remain important even when controlling flexibly for unobserved heterogeneity through investor fixed effects. An advisor's own asset allocation strongly predicts the allocations chosen on clients' behalf. This one‐size‐fits‐all advice does not come cheap: advised portfolios cost 2.5% per year, or 1.5% more than life cycle funds.     

Political corruption shielding and corporate acquisitions

Corruption includes rent‐seeking behavior by public officials (e.g., lavish in‐kind benefits and monetary kickbacks for contracts/permits/regulatory leniency, improper political contributions/support, etc.) that can negatively affect firm valuations, performances, and strategic choices. Shielding strategies are used to diminish rent‐seeking attractiveness of firms. Acquisitions provide a better channel than cash or leverage for assessing the wealth effects of shielding strategies. We find that the mean 3‐day announcement returns for acquirers for a large sample of U.S. domestic acquisitions between 1990 and 2014 is significantly lower for firms headquartered in relatively higher corruption states. Our results survive an array of robustness tests.     

Generational differences in perceptions of financial planners

This study investigates the differences in adoption of and perceptions about financial planners among different age groups. Data from a survey of more than 300 people across generations were used to determine if decisions of hiring financial planners, or the types of services requested from financial planners, differed across different age cohorts. Although there are some similarities across generations about expectations of expertise, unselfishness, and trustworthiness of financial planners, there are differences in how financial planners are sought out, and the areas of advice desired by different generations. Millennials and Generation X have a higher preference for independent financial planners over affiliated planners, require more frequent communication with their planners, consider advice for risk management as important as retirement planning, and wish to remain more involved with their planners than the older cohorts.     

Free ad(vice): internet influencers and disclosure regulation

Consumers rely on intermediaries (“influencers”) such as social media recommendations to provide information about products. The advice may be mixed with endorsement in a way that is unobservable to the follower, creating a trade‐off for influencers between the best advice and the most revenue. This article models the dynamic relationship between an influencer and a follower. The relationship evolves between periods of less and more revenue. The model can provide insight into policies such as the Federal Trade Commission's mandatory disclosure rules. An opt‐in policy may be superior: it deregulates influencers who are reaping the rewards of past good advice.     

Stock-Price Effects of Internet Buy-Sell Recommendations: The Motley Fool Case

The Motley Fool has attracted significant notoriety for stock market buy‐sell advice on the Internet. Across five different investment portfolios, Motley Fool buy recommendations appear to generate an average 1.62% rise in stock prices on the announcement day (0), and 2.40% returns over the announcement period (?1, +1). Sell recommendations seem to cause a ?1.49% announcement day return, and a ?3.33% announcement period return. Small cap growth stock buy recommendations for The Motley Fool's flagship Rule Breaker Portfolio are associated with returns of 3.66% on the announcement day, and a 6.15% return over the announcement period. These findings suggest herd‐like behavior among Internet investors, and that such announcements are more newsworthy than second‐hand buy‐sell recommendations published in traditional print and electronic media.     

Bank credit constraints for women‐led SMEs: Self‐restraint or lender bias?

We test the existence of possible gender biases affecting firm behavior in demanding and obtaining bank credit using a cross‐country sample of European small‐ and medium‐sized enterprises (SMEs). We show consistent evidence that female‐led firms are more likely than their male counterparts to refrain from applying for loans. When they apply, female‐led enterprises do not seem to face gender discrimination from the lender. Interestingly, however, signs of gender bias appear to arise during the upside phase of the economy. Overall, our study provides support for policy actions aimed at reducing the frictions faced by women‐led SMEs when accessing credit markets.     

The effect of board gender diversity on cross-listing

This paper examines whether board gender diversity affects the decision to cross-list firms. The study is based on an extensive sample of 131,022 company-year observations consisting of 15,751 unique companies across 66 industries in 83 countries with different levels of institutional development from 1999 to 2018. Analysis reveals that cross-listing is not rare phenomena, but rather a very attractive strategy that is widely used by corporations seeking financial internationalization. The findings show that greater gender diversity on the board reduces the probability of cross-listing, and are robust to a battery of endogeneity tests including IV of gender grammatical marking, propensity score matching and reverse causality. In addition, we find that stronger institutional context will offset part of the negative effect that having women on the board has on cross-listing.     

Effects of Advice on Effectiveness and Efficiency of Tax Planning Tasks

Supervisory advice is generally given to tax professionals in public accounting firms before they commence tax planning tasks. The objectives of giving advice are to achieve effectiveness and efficiency in tax planning, as well as for training tax professionals. An experiment with 54 tax professionals, from accounting firms across Canada, was conducted to determine the effects of supervisory advice on effectiveness and efficiency in performing tax planning tasks of different complexity. Advice results in lower effectiveness in lower‐complexity tasks, as evidenced by more technically inadequate tax plans, signs of confusion and overdetermined solutions (i.e., unnecessary information in the tax plans). In higher‐complexity cases, the results suggest a limited improvement in effectiveness, as evidenced by more technically adequate plans, but at a cost of limiting insightful judgment. On the other hand, advice results in limited gains in efficiency for both the lower and higher‐complexity tasks. This study extends the advice and tax literatures by investigating the role of advice in the performance of tax planning tasks of different complexity, which has not been examined in other research. This study also contributes to tax practice, as public accounting firms should consider the limited gains in efficiency with the decrease in effectiveness for lower‐complexity tasks and the potential to limit insightful judgment for higher complexity tasks. The results of this study suggest that firms face trade‐offs in achieving efficiency, effectiveness and the training objective.     

Public Policy and Extended Families: Evidence from Pensions in South Africa

How are resources allocated within extended families in developingeconomies? This question is investigated using a unique socialexperiment: the South African pension program. Under that programthe elderly receive a cash transfer equal to roughly twice theper capita income of Africans in South Africa. The study examineshow this transfer affects the labor supply of prime-age individualsliving with these elderly in extended families. It finds a sharpdrop in the working hours of prime-age individuals in thesehouseholds when women turn 60 years old or men turn 65, theages at which they become eligible for pensions. It also findsthat the drop in labor supply is much larger when the pensioneris a woman, suggesting an imperfect pooling of resources. Theallocation of resources among prime-age individuals dependsstrongly on their absolute age and gender as well as on theirrelative age. The oldest son in the household reduces his workinghours more than any other prime-age household member.     

Gender implications of current social security reforms

This paper examines some current reforms to social security benefits / tax credits and changes to employment provisions from a gender perspective. It analyses tensions between the trend towards ‘individualisation’ and growing emphasis on the couple/household as a policy focus. New tax credits change the distribution of resources within many couples. Incentives to work for some second earners should improve; but extending in‐work subsidies to childless couples raises questions. Payment of child tax credit to the ‘main carer’ has been welcomed, though the implications of joint ownership of tax credits are unclear, and joint assessment will be extended. Many claimants' partners can now access employment services. However, this is aimed at reducing the number of workless households rather than expanding individuals' opportunities. Joint claims for jobseeker's allowance, and work‐focused interviews, involve increased responsibilities for partners but no right of access to individual income. A more consistent critical analysis of reform from a gender perspective is required.     

Do Women and Ethnic Minority Directors Influence Firm Value? Evidence from Post‐Apartheid South Africa

Previous studies on the value relevance of board gender and ethnic diversity have produced mixed results. This paper re‐examines this relationship using hand‐collected data of 245 South African listed firms over the period 2008–2013. We document a positive and significant effect of both board gender and ethnic diversity on firm value. We also find that the increase in firm value is greater when boards have three or more women directors. In contrast, ethnic minority directors contribute less to firm value when there are three or more on the board. Furthermore, we document that ethnicity has a concave relationship with firm value, but gender does not. We demonstrate that in better‐governed firms, ethnic diversity is more value relevant than gender diversity. Our results also suggest that financial crisis is associated with the propensity to restructure boards along gender and ethnicity. This paper sheds new light on the effect of board diversity in South African firms as the government increasingly pursues policies aimed at eradicating the effects of apartheid. Our results are robust after controlling for self‐selection and various forms of endogeneity.     

Making the Stability Pact More Flexible: Does It Lead to Pro‐Cyclical Fiscal Policies?*

One of the often‐discussed negative aspects of the Stability and Growth Pact is the rigidity of its deficit rule. Several reform proposals aim currently to alleviate the rule in order to allow the automatic stabilisers to operate freely. However, such a reform is likely to cause even further deterioration of fiscal balances in the EMU member countries. The empirical evidence presented in this paper shows that, in the past, increasing the structural deficit had a strong negative impact on the degree of anti‐cyclical fiscal stabilisation. This suggests that the reform of the Pact, through higher structural deficits, could decrease rather than increase the scope of anti‐cyclical fiscal actions in the EMU member countries.     

Endogenous cartel formation with heterogeneous firms

In the context of an infinitely repeated capacity‐constrained price game, we endogenize the composition of a cartel when firms are heterogeneous in their capacities. When firms are sufficiently patient, there exists a stable cartel involving the largest firms. A firm with sufficiently small capacity is not a member of any stable cartel. When a cartel is not all‐inclusive, colluding firms set a price that serves as an umbrella with non‐cartel members pricing below it and producing at capacity. Contrary to previous work, our results suggest that the most severe coordinated effects may come from mergers involving moderate‐sized firms, rather than the largest or smallest firms.     

Does the Quality of Financial Advice Affect Prices?

Using a large data sample of 58,562 new municipal issues covering the period from 1984 to 2002, we examine whether the quality of advice provided by a financial advisor affects new issue interest costs. We find that higher‐quality financial advisors are associated with statistically significant decreases in new issue yields. The effect of advisor quality on yields is more pronounced for revenue, negotiated, and opaque bond issues than for general obligation and competitively sold issues. However, issuers of revenue or negotiated bonds are more likely to choose a low‐quality advisor.     

Shareholder Activism through Proxy Proposals: The European Perspective

This paper is the first to investigate the corporate governance role of shareholder‐initiated proxy proposals in European firms. Proposal submissions in Europe remain infrequent compared to the USA, especially in Continental Europe. In the UK proposals typically relate to a proxy contest seeking board changes, while in Continental Europe they are more focused on specific governance issues. There is some evidence that proposal sponsors are valuable monitors, because the target firms tend to underperform and have low leverage. Sponsors also consider the ownership structure of the firm, because proposal probability increases in the target's ownership concentration and the equity stake of institutional investors. While proposals enjoy limited voting success across Europe, they are relatively more successful in the UK. The outcomes are strongest for proposals targeting the board but are also affected by the target characteristics including the CEO's pay‐performance sensitivity. Proposals are met with a significant negative abnormal return of ?1.23%, when they are voted upon at general meetings. The low voting support gathered by proposals and the strongly adverse market reaction suggest that shareholders of European companies use proposals as an emergency brake rather than a steering wheel.     

Predictors of unrealistic optimism: a study of Norwegian risk takers

In areas of voluntary risk behaviour, as with other kinds of risk, people tend to be overly optimistic regarding not being injured. A study of risk perception and causal explanations of injury assessments was conducted on 199 respondents from three different sub‐groups in Norway; skydivers (n?=?88), fire fighters (n?=?73) and soldiers (n?=?38). Unrealistic optimism was studied by means of four demographic variables: the background of the subject (sub‐sample), gender, age, and education. In addition, three predictors of unrealistic optimism were taken into account—safety attitudes, control, and anxiety. These predictors were included in an Analysis of Linear Structural Relationship (LISREL) analysis. The results showed that optimism differed between the sub‐groups, and that different factors influenced risk perception depending on the group and depending on whether the assessment was of oneself or of others. These findings offers additional information that will help explain the inconsistent findings in the current literature of unrealistic optimism. Of the predictors investigated, safety attitudes were found to be the most important, which may be because respondents preoccupied with safety are more aware of potential dangers and thereby less optimistic.     

Personality and domain‐specific risk taking

The concept of risk propensity has been the subject of both theoretical and empirical investigation, but with little consensus about its definition and measurement. To address this need, a new scale assessing overall risk propensity in terms of reported frequency of risk behaviours in six domains was developed and applied: recreation, health, career, finance, safety and social. The paper describes the properties of the scale and its correlates: demographic variables, biographical self‐reports, and the NEO PI‐R, a Five Factor personality inventory (N?=?2041). There are three main results. First, risk propensity has clear links with age and sex, and with objective measures of career‐related risk taking (changing jobs and setting up a business). Second, the data show risk propensity to be strongly rooted in personality. A clear Big Five pattern emerges for overall risk propensity, combining high extraversion and openness with low neuroticism, agreeableness, and conscientiousness. At the subscale level, sensation‐seeking surfaces as a key important component of risk propensity. Third, risk propensity differs markedly in its distribution across job types and business sectors. These findings are interpreted as indicating that risk takers are of three non‐exclusive types: stimulation seekers, goal achievers, and risk adapters. Only the first group is truly risk seeking, the others are more correctly viewed as risk bearers. The implications for risk research and management are discussed.