Cohesion,COVID-19 and contemporary challenges to globalization

In the years preceding the COVID-19 pandemic, the decades-long, pan-continental globalization consensus was being questioned. In our view, the pandemic has accelerated the rate at which the globalization consensus is being defied. To better understand the implications of this defiance, we turn to research on people, organizations and international competition to see whether this defiance weakens the cohesion needed to keep globalization moving apace. People and organizations create cohesive forces that can link and constrain the differences that are encountered when people and organizations move across international borders. Meanwhile, the nature of international competition, particularly as connected to the level of active involvement by state actors, can lead to fractures that reduce cohesion across polities and societies.     

Informational Costs and Institutional Typologies: A Review Article

Books reviewed in this article:
Mark Casson, Information and Organisation. A New Perspective on the Theory of the Firm
Takao Shiba and Masahiro Shimotani (eds), Beyond the Firm. Business Groups in International Historical Perspective     

Industrial clusters, transactions costs and the institutional determinants of MNE location behaviour

This paper discusses the institutional and organizational assumptions underlying many of the currently popular notions of industrial clustering. By adopting a transactions costs perspective, we explain that there are three fundamentally different types of industrial cluster. We then discuss how the institutional differences between each of these clusters provide different possibilities for the location behaviour of the multiplant or multinational firm. Using two examples from the global semiconductor industry, we show that observations of industrial clusters must be interpreted very carefully when we are discussing multinational firms. The reason for this is that many simple clustering notions are predicated on assumptions which are often incompatible with multinational firms. The potential advantages of industrial clustering can only be understood when location strategies are considered with respect to the organizational and institutional logic of both the firm and the cluster.     

Common risk factors in returns in Asian emerging stock markets

This paper examines the application of the Fama and French's (1993) three-factor model in three Asian emerging markets (Hong Kong, Singapore and Taiwan). The empirical evidence is consistent with the US findings that the model can explain most of the variations in average returns. However, we find that the main contributing factor is the contemporaneous market excess returns. The impact of the size effect and book-to-market (BE/ME) factor is limited and in some cases insignificant. When the three-factor model is modified by using lagged market excess returns instead in order to check for the predictability of the market factor, the explanatory power of the model drops substantially but both the risk factors for size and BE/ME are now able to contribute significantly in explaining the cross-sectional variations of stock returns. Their explanatory powers are strongest for small-size with high BE/ME portfolios. The robustness of our results is also checked for the separation of up and down markets periods and January effect.     

The joint determination of audit fees, non-audit fees, and abnormal accruals

Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by modeling the confluence of audit fees, fees for non-audit services and abnormal accruals in a system of simultaneous equations. Our joint estimation provides a starting point to look simultaneously at several competing theories. Using audit and non-audit fee data from the UK for 1994–2000, we find evidence consistent with knowledge spillovers (or economies of scope) from auditing to non-audit services and from non-audit services to auditing. While knowledge spillovers from non-audit services to auditing have been found in prior research [e.g. see Simunic, 1984], the presence of knowledge spillovers from auditing to non-audit services is a new result. Contrary to recent results in Ferguson et al. (2000) and Frankel et al. (2002), we do not find support for the assertion that fees for non-audit services increase abnormal accruals. In fact, contrary to the results in Ashbaugh et al. (2003) and Chung and Kallapur (2003), we find that non-audit fees decrease abnormal accruals, which we attribute to the productive effects of non-audit services. We also find evidence that audit fees increase abnormal accruals, consistent with behavioral theories of unconscious influence or bias in the auditor-client relation. The findings are robust to tests with US data. JEL Classification C30 · M40 · M41 · M49     

Discretionary disclosure and the market reaction to restatements

This paper presents evidence that management’s disclosure choices related to a restatement are associated with the market reaction at the time the restatement is announced. The two aspects of pre-restatement disclosure choice we examine are the amount of disclosure, hypothesized to reduce information asymmetries, and the tone of disclosure, hypothesized to exacerbate the effect of subsequently-disconfirmed market expectations. Our results provide support for both hypothesized effects, controlling for characteristics that previous research has shown to affect market reaction to restatements—financial attributes of restatements, and concurrent disclosure choices such as prominence of the announcement. We also find that concurrent and prior disclosure characteristics have equivalent and complementary power in explaining market reaction to restatements, while interactive effects indicate that pre-restatement disclosure choices reduce the marginal market impact of concurrent disclosure characteristics.