FAMILY BACKGROUND,EDUCATION AND EMPLOYMENT IN URBAN ETHIOPIA†

Most studies suggest that family background has a strong effect on earnings both directly and indirectly through the returns to own education. However, such effects might reflect the influence of family background on entry into work rather than a productive effect on earnings. The paper uses data from a survey of 16–29 year olds in urban Ethiopia to examine the impact of family background on selection into work and earnings. Family background strongly influences entry into the public sector; accounting for such selection removes its impact on earnings. This contrasts with the persistence of family background effects on private sector earnings.     

Audit committee financial expertise and properties of analyst earnings forecasts

An important role of financial accounting information is to aid financial statement users in forming expectations about the firm's future earnings. Prior research finds that accounting financial expertise of the audit committee is associated with higher financial reporting quality. We extend this literature by examining the association between audit committee financial expertise and analysts' ability to anticipate future earnings. We find a significant association between accounting financial expertise on the audit committee and analyst earnings forecasts that are more accurate and less dispersed. In contrast, we do not find a significant association between non-accounting financial expertise (i.e., supervisory expertise) and forecast accuracy or forecast dispersion. These findings contribute to our understanding of the benefits of accounting expertise in audit committees by demonstrating an association between accounting financial expertise and improvements in analyst earnings forecasts.     

Financial controller turnover: An early warning sign of deteriorating financial reporting quality

This study examines the relation between financial controller turnover and public firms’ financial reporting quality. Exploiting a special institutional setting in China, where financial controllers along with CEOs and CFOs are required to attest to the accuracy and completeness of firms’ annual reports, we find that: (a) financial controller turnover is negatively associated with financial reporting quality, (b) the negative relation between financial controller turnover and financial reporting quality is more pronounced in non-state-owned enterprises, in firms with weaker corporate governance, and in areas with higher regulatory enforcement intensity, and (c) financial controller turnover is not related to real earnings management. Further analyses show that financial controller turnover is associated with the incidence of subsequent financial report restatements and enforcement actions by the China Securities Regulatory Commission (CSRC). Financial controller turnover also precedes top executive turnover and can be viewed as an early warning sign of deteriorating financial reporting quality. Such information content is incremental to that of top executive turnover. Our analyses also show that firms with financial controller turnover have higher initial stock returns but underperform their counterparts in the long run.     

Professionalising gender and development expertise: innovations in capacity‐building and credentialing

Gender training does not adequately prepare gender and development professionals (GDPs) to undertake robust gender integration of development and humanitarian assistance (D&H) policies and programmes and limits their ability to impact gender equity and equality and development overall. In particular, GDPs lack sector‐specific and applied technical skills in gender analysis and integration. These limitations undermine GDPs’ own performance and their credibility with employers and colleagues who rely on them for professional guidance in gender integration. To address these shortcomings and advance the field of gender and D&H, this note describes a new model of gender capacity‐building that introduces three innovations: (1) sector‐specific, job‐related and outcome‐based gender analysis and integration competencies, (2) a professional development capacity‐building short course based on the competencies and applications to D&H policies and programmes and (3) a professional credential that recognizes possession of these critical competencies.     

Uncertainty and Compensation Design in Strategic Interfirm Contracts

In strategic outsourcing contracts, a substantial portion of implementation occurs at the client's premises and requires integration of effort between the vendor and the client. Compensation design in such contracts involves trade-offs between the higher (lower) incentive properties of fixed-price (cost-plus) contracts and their higher (lower) ex ante contracting and ex post adaptation costs. Uncertainty influences these trade-offs and affects compensation design. We explore the compensation implications of two types of uncertainty—volatility and ambiguity—which are reflected in the client's accounting measures. Volatility reflects the unpredictability of changes in the future environment, which makes it difficult to contractually specify future contingencies. Ambiguity reflects lack of consensus about the nature, drivers, and value effects of uncertainty, which makes it difficult to contractually specify responses to contingencies if and when they occur. Volatility increases the likelihood of ex post adaptation costs, while ambiguity increases ex ante contracting costs; therefore, volatility and ambiguity decrease the attractiveness of fixed-price contracts. We use accounting and market measures to calibrate volatility and ambiguity and examine their implications for compensation design and ex post renegotiation. Analysis of archival data for 455 strategic outsourcing contracts valued over $15 million indicates that volatility and ambiguity influence contract compensation design and renegotiation likelihood. These results hold even after controlling for asset specificity, task complexity, and relational factors. We conclude that accounting measures can provide signals of volatility and ambiguity and thereby influence compensation design in strategic interfirm contracts.