Does Board Independence Affect Audit Fees? Evidence from Recent Regulatory Reforms

To enhance board oversight, since 2002, US legislation has required listed companies to have a majority independent board. This paper uses this legislative change to examine the relation between board independence and audit fees. To provide a clean estimate of this relation, we adopt a difference-in-difference approach using a sample matched on client firm characteristics. We find that greater board independence is insignificantly associated with a change in audit fees when client firms operate in a weak information environment. When the information environment is strong, greater board independence is associated with an increase in audit fees. Our results are consistent with the nascent theory emphasizing information asymmetry and provide insight into the effectiveness of the mandated board independence in relation to audit quality.     

Audit Committee Attributes on Audit Fees： The Impact of Malaysian Code of Corporate Governance （MCCG） 2007

The evolution of corporate governance has created a competitive environment among the companies to catch the attention of investor＇s confidence. This paper aims to examine the relationship between the audit committee attributes and the audit fees. Specifically, this paper aims to examine the effects of audit committee expertise （number of financial-related director＇s trainings and experience） on audit fees. The data are obtained from annual reports of the population of Bursa Malaysia listed companies for both Main and Ace markets in year 2008. The results show that audit committee size is significant and has a positive association with audit fees. However, audit committee＇s financial related training is significant and has a negative association with audit fees. These results suggest that financial training of audit committee could have an impact on the lower audit fees. However, audit committee expertise is significant and has a positive association with audit fees. This suggests that financial-related training is needed in order to enhance the expertise of audit committee members.     

Blockholders’ Ownership and Audit Fees: The Impact of the Corporate Governance Model

This paper examines how two prominent corporate governance models, namely the shareholder and stakeholder models, have different effects on the relation between agency conflicts and the supply, and demand of audit services. Shareholder (stakeholder) countries rely heavily on public (private) information to reduce information asymmetry for outside investors in the context of high (low) litigation risk. We expect audit fees to reflect the level of agency conflicts in shareholder countries as well as the needs for information of the major blockholders in stakeholder countries. Using a sample of 7982 firm-year observations from 19 countries, we find a U-shaped relation between controlling shareholding and audit fees for shareholder countries and an inverted U-shaped relation between controlling shareholding and audit fees for stakeholder countries. These results are consistent across different firm-level governance arrangements.     

Are institutional investors colluding with manipulators?

This paper examines the trading behavior of institutional investors in Taiwan before, during, and after a manipulation event and determines whether institutional investors benefit from their trading behavior during the period from the year 2000 to 2020. We find that stocks with a low turnover and small market capitalization are the main targets of price manipulators. In addition, the stock price of manipulated firms increases from the start date of the manipulation event, peaks at the end of the event, then falls after the event. Foreign institutions collude with manipulators to exaggerate stock prices for self-benefit. In contrast, securities dealers counter the trading behavior of manipulators and act as market stabilizers, causing them to suffer losses. Moreover, foreign institutions earn higher returns on stocks of manipulated firms with a low turnover during and soon after manipulation; however, they earn a higher return on stocks of manipulated firms with a high turnover in the long run after manipulation.     

Which Corporate Sustainability Activities are Associated with Greater Financial Payoffs?

While many company managers and academic researchers have argued that businesses that develop a sustainability focus also may improve their financial performance, little information is known about whether firms' different types of sustainability activities are related to varying degrees of financial gain. This paper assesses the economic relationship between two types of sustainability activities – lower‐ and higher‐order – derived from the sustainability value framework of Hart and Milstein (2003). Our analysis reveals that both types of sustainability activities are similarly associated with firms' financial performance in terms of direction and trend. However, the average level of financial benefits related to firms' higher‐order sustainability activities (which develop new products and processes) is greater than the average level of financial benefits related to firms' lower‐order sustainability activities (which modify existing products and processes). These findings offer initial evidence that companies that reach further by developing higher‐order sustainability activities may reap greater financial benefits, while improving the natural environment to a greater degree. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

Are new work practices applied together with ICT and AMT?

The goal of this paper is to analyze the association between Information and Communication Technologies (ICT) and Advanced Manufacturing Technologies (AMT) and the adoption of a number of new work practices, such as job autonomy, teamwork, job breadth, suggestion systems and involvement groups. Special attention is paid to examining whether the strength of the association with new work practices is the same for the two technologies. The data used in the empirical part of the research come from a survey conducted in 281 Spanish manufacturing plants. The results show that ICT use among production workers is only positively related to higher coverage of involvement groups. On the other hand, AMT use is positively associated with the incidence of self-managed teams, job autonomy and suggestion systems. We have found differences between ICT and AMT in the strength of association with new work practices for self-managed teams and suggestion systems.     

Are firms with state ownership greener? An institutional complexity view

This study investigates the role of state ownership in green innovation from the institutional complexity viewpoint. We posit that state ownership can be characterised by two seemingly competing logics: institutional logic, which emphasises that firms with state ownership can acquire resources to promote innovation; and efficiency logic, which states that firms with state ownership have low resource utilisation effectiveness. On the basis of the integration of both views, we suggest a U‐shaped curvilinear relationship between state ownership and green innovation. Data from Chinese listed firms from 2003 to 2015 confirm our hypothesis. Moreover, we also find two macro‐level contingencies that moderate this relationship: regional innovation readiness and industrial competition. The U‐shaped relationship between state ownership and green innovation is more pronounced when regional innovation readiness and industrial competition are higher. This study advances previous research on environmental innovation by arguing that state ownership is characterised by institutional complexity rather than being a monolithic construct.     

Is Higher Education Making Students Dumb and Dumber?

This article examines what colleges and universities have to do if they wish to remain relevant. Many students graduating college today lack critical thinking skills. One reason for this is that academic faculty themselves lack some important skills, which include: 1) an appreciation of uncertainty; 2) respect for other disciplines; and 3) an understanding of what true diversity is all about. All of these require humility, which is not valued enough in academe.     

Are gilts ethical investments?

In the light of the rolling bandwagon of socially responsible investment (SRI), this paper attacks gilt-edged securities as highly unethical investments. With gilts not conforming to the rules laid down by the government for the private sector, the author invites the pension funds to shake off this anachronism in favour of expansion of the corporate bond market     

Are professional forecasters overconfident?

Do professional forecasters have an accurate sense of the uncertainties surrounding their own forecasts? This paper examines forecaster overconfidence by comparing ex ante, surveyed forecaster uncertainty with ex post, realised uncertainty based on the dispersion of an individual’s forecast errors. Unlike the literature that focuses on consensus forecasts, our focus is at the level of the individual forecaster. Using microdata from the three major surveys of professional forecasters (Euro Area, US and UK), we examine real GDP growth forecasts over the period 1999–2015. Our findings show that overconfidence dominates among individual forecasters, particularly for longer forecast horizons, and that individual forecasters appear to have little understanding of their own uncertainty.     

Are CEOs expected utility maximizers?

Are individuals expected utility maximizers? This question represents much more than academic curiosity. In a normative sense, at stake are the fundamental underpinnings of the bulk of the last half-century’s models of choice under uncertainty. From a positive perspective, the ubiquitous use of benefit-cost analysis across government agencies renders the expected utility maximization paradigm literally the only game in town. In this study, we advance the literature by exploring CEO’s preferences over small probability, high loss lotteries. Using undergraduate students as our experimental control group, we find that both our CEO and student subject pools exhibit frequent and large departures from expected utility theory. In addition, as the extreme payoffs become more likely CEOs exhibit greater aversion to risk. Our results suggest that use of the expected utility paradigm in decision making substantially underestimates society’s willingness to pay to reduce risk in small probability, high loss events.     

Are intellectual property rights unfair?

If redistribution is distortionary, and if the income of skilled workers is due to knowledge-intensive activities and depends positively on intellectual property, a social planner which cares about income distribution may in principle want to use a reduction in intellectual property rights (IPRs) rather than redistributive transfers. On the one hand, such a reduction reduces static inefficiency. On the other hand, standard redistribution also reduces the level of R and D because it distorts occupational choice. We study this possibility in the context of a model with horizontal innovation, where the government, in addition to taxes and transfers, controls the fraction of innovations that are granted patents. The model predicts that standard redistribution always dominates limitations to IPRs.     

Are compact cities environmentally friendly?

There is a wide consensus among international institutions and national governments in favor of compact (i.e. densely populated) cities as a way to improve the ecological performance of the transport system. Indeed, when both the intercity and intra-urban distributions of activities are given, a higher population density makes cities more environmentally friendly because the average commuting length is reduced. However, when we account for the possible relocation of activities within and between cities in response to a higher population density, the latter may cease to hold. Indeed, an increasing-density policy affects prices, wages and land rents, which in turn incentivizes firms and households to change place. This reshapes the urban system in a way that may generate a higher level of pollution. Thus, although an increase in compactness is environmentally desirable when locations are given, compactness may not be environmentally-friendly when one accounts for the general equilibrium effects generated by such a policy.