Empirical evidence on the impact of external monitoring on book–tax differences

This study investigates whether institutional ownership levels are associated with levels of and time-series variability in book–tax differences (BTDs). Firm and year fixed-effects regression results suggest that institutional ownership is negatively associated with total, permanent, and temporary BTDs. This effect is driven primarily by permanent BTDs in the pre-SOX era but is consistently present for both permanent and temporary BTDs post-SOX. Further, this negative association is present regardless of firms' classification as “tax planners” and/or “earnings managers.” Finally, the results provide some evidence that stronger monitoring by the board and audit committee (i.e., a smaller and more independent board and a larger audit committee) is associated with lower permanent BTDs but is not consistently related with total or temporary BTDs. Overall, these findings are consistent with higher levels of institutional ownership equating to more effective monitoring of management, resulting in lower BTDs (in terms of both levels and time-series variability).     

Ten Classic Rules on Life of Bill Gates

Life is not fair get used to it.The world won’t care about your self-esteem. The world will expect you to accomplish something before you feel good about yourself. You will not make 40 thousand dollars a year right out of high school. You won’t be a vice president with a car     

Lift limits on people''''s use of foreign exchange

Mr. Guo Shuqing, Director General of the State Administrative of Foreign Exchange recently disclosed two important messages on the foreign exchange policies for this year: limits on foreign exchange purchasing will be     

Effect of Internationalization on the Cost Efficiency of Taiwan’s Banks

Abstract:

We focus on the effect of internationalization on the cost efficiency of banks by studying Taiwan as a sample for developing countries. We find that (1) increasing overseas businesses and foreign exchange deposits increases cost efficiency; (2) expanding offshore banking units increases bank efficiency; and (3) the profitability of a bank’s overseas branch is not a critical factor behind the differences in cost efficiency across both financial holding company (FHC) banks and non-financial holding company (non-FHC) banks. Finally, our metafrontier empirical results illustrate that FHC banks in Taiwan show better technical performance in cost control than non-FHC banks.     

The effect of ownership on the prudential behavior of banks – The case of China

Although the relationship between bank ownership and performance is the current focus of much research, this paper investigates the relationship between ownership and the prudential behavior of banks. Using Chinese data, I show that lending by state-owned banks has been less prudent than lending by joint-equity banks, but has improved over time. This is consistent with the hypothesis that accountability to shareholders and depositors gives joint-equity banks a better incentive than state-owned banks to engage in prudent lending, and with the hypothesis that the reform of the banking system has improved the incentive for state-owned banks to behave more prudently in their lending.     

The effect of pseudo‐immediacy on intertemporal choices

An interesting phenomenon, which we dub the ‘pseudo‐immediacy effect’, was detected in intertemporal choices. The majority of our participants preferred the smaller but sooner (SS) outcome to the larger but later (LL) outcome when a pseudo‐immediacy reward was framed, but a higher proportion of participants preferred the LL outcome to the SS outcome when the pseudo‐immediate format was removed. Such a shift violated the invariance principle which requires that the preference order between options does not depend on the manner in which they are described. With reference to the pseudo‐certainty effect reported by Kahneman and Tversky in 1984 Kahneman, D. and Tversky, A. 1984. Choice, values, and frames. American Psychologist, 39: 341–50. [Crossref], [Web of Science ®] , [Google Scholar], our findings typically support the notion that risk and delay are psychologically equivalent and that the same psychological process underlies risk and intertemporal choice.     

The impact of accruals and lines of business on analysts’ earnings forecast superiority

In this paper, we examine the linkage between analyst advantage (AA) (compared to the seasonal random walk model) in the prediction of quarterly earnings-per-share (EPS) and a broad set of economic determinants. Specifically, we employ a pooled cross-sectional time-series regression model where AA is linked to a set of firm-specific economic determinants that have been employed in extant work (e.g., Brown et al. in J Account Res 22:49?C67, 1987; Kross et al. in Account Rev 65:461?C476, 1990). We refine this set of independent variables by including a new variable (RATIODEV) based upon Sloan (Account Rev 71(3):289?C315, 1996) who documents that differential levels of accruals impact future earnings performance. This variable is particularly salient in explaining AA since analysts may be in a position to identify the permanent component of accruals via fundamental financial analysis. Additionally, we refine the measurement of lines of business??consistent with the reporting requirements of SFAS No. 131 relative to extant work that operationalized proxies for this variable based upon SFAS No. 14. Parameters for these aforementioned variables are significantly positively related to AA, consistent with theory.     

A note on the behaviour of the “tail” of the mixture-poisson distribution

Abstract

A mixture-Poisson distribution is defined by where U(x) is a distribution function concentrated on (0, ∞). This distribution has been applied as a model of the number of claims occurring in an insurance business during a certain period of time.     

Effects of audit partners on clients’ business risk disclosure

We empirically investigate audit engagement partners’ involvement in business risk disclosure. Specifically, we examine whether the quality of business risk disclosure is influenced by engagement partner tenure and knowledge. We also examine whether the effects of partner tenure and knowledge are similar for Big 4 audit firms and non-Big 4 firms. Since fiscal year 2003, listed companies in Japan have been required to disclose business risk information. Although the business risk information is not audited, auditors concerned about their audit quality may seek to influence clients’ business risk disclosure practices. Giving advice to management on the narrative business risk disclosure can contribute to improving the perceived value of the auditor’s services which can be a competitive advantage. Using a sample of Japanese listed companies from 2003 to 2010, we find that if the engagement partners’ tenure is shorter, a company discloses more business risk information and the disclosure is more detailed. Furthermore, companies with audit partners who have a larger number of client engagements disclose larger amounts of business risk information in more detail. However, the engagement partner effects are mitigated if they belong to a Big 4 firm.     

The effect of exchange rate fluctuations on multinationals’ returns

This paper examines if the type of exchange rate used or size of the movement in the exchange rate matters in estimating exchange-rate exposure of U.S. manufacturing firms. We find that switching from a broad trade-weighted exchange rate to a 2-digit SIC industry exchange rate increases slightly the number of significantly exposed firms. We also find that firms’ stock returns may be affected differently in periods of crisis and non-crisis; some firms have significant exposure only in crisis periods while others have significant exposure only during normal fluctuations in exchange rates.     

Some Evidence on Executives’ views of Corporate Social Responsibility

This paper draws upon the concepts of organizational legitimacy, political economy of accounting and agency theory, and subsequently combines these with stakeholder analysis, in an attempt to analyse the attitudes towards their perceived social responsibility on the part of the executives of a small sample of large, UK companies.In the conceptual model developed, organizational legitimacy is perceived as a way of examining corporate behaviour, whereby a business is visualized as operating under a mandate from society, withdrawable were the organization be seen not to be doing the things society expects of it. There is, however, an alternative political economy of accounting view, suggesting corporate behaviour might be perceived as more proactive, with company directors attempting to ‘set the agenda’, such as to manipulate societal opinion towards a favourable view of corporate activity.Agency theory is then utilized in an attempt to establish the connection between organizations and the various interest groups with whom they interact, whilst, finally,stakeholder analysis is resorted to as a way of establishing the relevant societal interest groups to which businesses might either be considered ‘accountable’, or alternatively whose views they might wish to ‘manipulate’ favourably regarding their (i.e. corporate) actions.The underpinning theory, as delineated, is then examined for validity via interviews with executives representing eight prominent UK companies in four business sectors. The model outlined enables the nature of perceived accountability/influence by the company to be linked to perceived/manipulated stakeholder expectations of the company, with the tentative conclusion being reached that support can be found for both organizational legitimacy and political economy of accounting perspectives, although which predominates is impossible to determine.     

The impact of auditor rotation on auditor–client negotiation

This paper reports the results of an experiment designed to investigate how mandatory audit firm rotation affects auditor–client negotiations. Drawing upon process theories of negotiation, we examine the strategies used by auditors and clients as well as the outcomes of their negotiations in alternative settings in which mandatory rotation is imposed or is not imposed. We posit that mandatory rotation changes (1) the dynamics of the audit market by increasing the number of clients who are in the market for a new auditor, and (2) the political costs to a client who switches auditors. These changes, in turn, alter the willingness of the auditor and the client to cooperate during negotiation. The results suggest that with mandatory rotation auditors adopt less cooperative negotiation strategies, producing asset values that are more in line with the auditor’s preferences than with the client’s preferences and more negotiation impasses.     

Discussion of “on the relation between expected returns and implied cost of capital”

This paper discusses the paper “On the relationship between expected returns and implied cost of capital” by Hughes, Liu, and Liu. The discussion focuses on developing the intuition behind the mathematical results and on extensions of the analysis that future research could address.     

The influence of international status and operating segments on firms’ choice of bonus plans

This paper investigates why firms select different accounting measures of performance when determining executive bonus compensation. Specifically, we investigate whether firms with a greater multinational presence and with more operating segments are more likely to use after-tax bonus plans. Newman (1989) investigated the relation between multinational status and bonus plan choice for the mid-1970s and did not find strong results. However, given the increased global implications of business decisions over the last two decades, it should be beneficial to investigate this issue for a more recent time period. We obtained financial information from 266 firms, 70 with after-tax compensation plans, 186 with before-tax compensation plans, and 10 with hybrid compensation plans. Logistic regression analysis suggests that large firms reporting a large number of operating segments and having a high level of multinational operations are more likely to select after-tax rather than before-tax compensation plans.     

The comparative viewpoints of groups of accountants: More on the entity — Proprietary debate

The predominant conceptual viewpoint of accountants is critical in the process by which accounting standards are debated, promulgated and applied in practice. While the intellectual debate on this issue is dichotomized, little empirical evidence exists as to the strengths of competing advocacy. This paper reports the results of a study which show that most accountants subscribe to what has been called “middle positions” and then seeks to explain, at two levels of analysis, the nature of the change process relative to these viewpoints.     

Coping with risk: analysis on the importance of integrating social perceptions on flood risk into management mechanisms – the case of the municipality of Águeda,Portugal

The paper reflects on how populations prone to flood risk perceive such hazards and the way this perception has or has not been incorporated into the measures and mechanisms of flood risk management. The frequent occurrence of flooding, as well as the population's vulnerability and exposure to this risk, shows that the municipality of Águeda is a paradigmatic case for analysis of these issues. Similar to the rest of the country, the municipality of Águeda has been neglecting the multidimensional nature of flood risk. The data collected present some disparity between the proposals and technical perspectives regarding the management and mitigation of flood risk and the perception of local populations. In addition, neither knowledge of social perception of flood risk nor of the local communities is being integrated in a substantial and pro‐active way, whether in the processes of policy‐making or in the implementation of these policies. Empirical evidence equally shows that there is a clear tendency towards acceptance and coping with flood risk by the population in the municipality of Águeda. This seems to be connected to the local populations' recognition that though it is impossible to eliminate risk, there are at the same time advantages to occupying the floodplains.     

The Impact of Enterprises’ Shadow Banking Activities on Business Performance: A Test Based on Mediator Effect of Investment Scale and Investment Efficiency

ABSTRACT

In recent years, China’s financial sector has gradually been alienated from the real sector, allowing financial innovation and regulatory arbitrage add their own value to finance. High interest rates in the financial industry have led to changes in the real sector, revealing a trend toward “financialization” and “quasi-financialization”; a typical example of this includes nonfinancial enterprises’ shadow banking activities. In this article, we use annual data from 2004 to 2015 of A share listed companies on the Shanghai and Shenzhen Stock Exchanges, to examine the influence of nonfinancial enterprises’ shadow banking activities on business performance. The results show that, overall, enterprises’ shadow banking activity improve operating performance. In addition, from the perspective of earning structure, nonfinancial enterprises’ shadow banking business increases financial benefits, but has a significantly negative effect on operating income. Further tests show that enterprises engaged in shadow banking activities will impact operating income through the two intermediary variables of investment scale and investment efficiency. However, the negative effect of investment in crowding out operating income is greater than that of the efficiency-improving effect on operating income. This article provides policy guidance in terms of recognizing diverse aspects of shadow banking system that divorce the real economy from the financial economy.     

Consequences of the Treasury Single Account Policy on the Wealth of Nigerian Commercial Banks’ Shareholders

We examine the impact of the Nigerian government’s Treasury Single Account (TSA) policy to withdraw the funds of Ministries, Departments and Agencies from commercial banks. Following the economic policy uncertainty theory, we use an event study methodology to measure the impact of the TSA policy on the shareholders’ wealth. Our results reveal that the announcements and subsequent final implementation of the TSA policy caused negative abnormal returns and losses on the wealth of the commercial banks’ shareholders. This article contributes to the literature on stock market reaction to policy announcements and the unintended consequences government policy can have in an emerging economy.