The Emergence of Second‐Tier Auditors in the US: Evidence from Investor Perceptions of Financial Reporting Credibility

We examine changes in the association between auditor type (Big 4, Second‐Tier, and Other non‐Big 4) and perceived financial reporting credibility in the wake of events (e.g., Andersen's failure, the implementation of SOX, creation of the PCAOB, etc.) which led to significant growth in Second‐Tier client portfolios and increased scrutiny of Second‐Tier audit practices. Our results reveal that financial reporting credibility of Second‐Tier clients was lower than that of Big 4 clients and was indistinguishable from that of Other non‐Big 4 clients pre‐Andersen. However, post‐Andersen, we find that financial reporting credibility of Second‐Tier clients is higher than that of Other non‐Big 4 clients and is indistinguishable from that of Big 4 clients. We expect that our results will be of interest to regulators, both in the United States and in the European Union, who have expressed concerns about the current state of competition in the audit market, management and boards of directors that are contemplating switching to a Second‐Tier audit firm, and academics investigating quality differences among audit firm types.     

THE INEQUALITY OF EMPLOYMENT AND SELF-EMPLOYMENT INCOMES: A DECOMPOSITION ANALYSIS FOR THE U.K.

U.K. employment and self-employment income inequality are analysed over 1979–94/95. Robust inequality decompositions reveal occupation to be a relatively important and hitherto neglected determinant of earnings inequality. In contrast, self-employment income inequality is harder to explain, although occupation is also the most important single factor in the mid-1990s. The paper also provides a novel implementation of a decomposition of changes in Kolm's inequality index.     

International harmony measures of accounting policy: comparative statistical properties

Van der Tas's (1988) I index and the between-country C index introduced by Archer et al. (1995) are competing measures of international harmony. We present comparative statistical properties of these indices, via a simulation study covering three accounting methods in 10 countries, with uniform, bimodal and unimodal distributions of companies across accounting methods. The indices are also adjusted for non-disclosures using techniques developed by Archer and McLeay (1995) and Archer et al. (1995). The I index and the between-country C index are mathematically equivalent in the two-country case even in the presence of non-disclosures. As more countries are compared, the two indices diverge. The means and standard deviations of the I index, with a correction proposed by Archer and McLeay (1995), decrease and there is little skewness or kurtosis. In contrast, as more countries are compared, the between-country C index exhibits more stability in means, lower standard deviations, higher skewness and kurtosis. The between-country C index may be superior to the corrected I index because (i) between-country C index means approximate their ‘expected values’ (where all observations equal expected values) more closely than do corrected I index means: and (ii) between-country C index means are more stable than corrected I index means where the data come from stable distributions.     

Antecedents of Budget Participation: Leadership Style,Information Asymmetry,and Evaluative Use of Budget

This study explores the causes or antecedents of budget participation to understand more fully the role of participation in the workplace. The study focuses on the reasons why superiors encourage the budget participation of their subordinates and draws upon several theoretical perspectives including leadership theory, agency theory and organizational justice. To examine the issues, a survey was administered to managers and supervisors in several companies. Results of path analysis suggest that superiors encourage subordinate participation when the superior's leadership style is considerate. This implies that budget participation may mediate the relation between leadership style and work outcomes. Results also suggest that superiors encourage participation when budget goals are used in the performance evaluation of subordinates, in which case, the study argues, the superiors encourage participation because of concerns about organizational justice. This finding implies that budget participation may mediate the relation between the evaluative use of budget and those work outcomes that prior research has linked to organizational justice. The proposed relation between information asymmetry and budget participation is not supported.     

Economic Regulation: a review of issues

This article surveys a range of issues relating to economic regulation. It begins by examining market and state failures which provide the basis for arguments in support of regulation. Concentrating on natural monopolies, the article outlines the main forms of economic regulation, namely rate–of–return or cost–of–service regulation, price–cap regulation, and sliding scale regulation, a hybrid between price–cap and rate–of–return approaches. Reference is made to the broad phases that need to be considered in the evolution of natural monopoly regulation. These are concerned with regulating the incumbent monopoly, promoting and policing the development of competition, and maintaining competition once it has been introduced. The last phase may be better served through the use of effective national competition laws rather than dedicated sector regulation. The article also examines the range of factors that are likely to affect the economic efficiency and effectiveness of regulation. These involve a mixture of economic, political and governance conditions.     

Boardroom Strategizing in Professional Associations: Processual and Institutional Perspectives*

abstract This study examines strategic decision‐making at the boardroom level of two non‐profit professional associations, penetrating directors' strategic orientations, discourse and decisions in their holistic context. In comparison with the predominantly survey and interview based literature on board level strategy behaviour, this study employs a longitudinal complete member researcher, participant observer methodology. Its findings are analysed from an institutional theory perspective and reveal selective championing of strategies by directors, the evaluation of strategic proposals and progress in predominantly financial resource/outcome terms, and directors' attention to navigating strategic initiatives through organizational politics. Also revealed are private sector philosophies imported into the non‐profit boardroom, the predominantly ceremonial role of formal strategic plans, and an informally enacted strategic discourse. This study offers a unique insider view of strategizing at the highest organizational level.     

A nurse-run business to improve health care for nursing home residents

The costs of health care for the rapidly growing segment of our population over age 75 are staggering. EverCare is a nurse-run business that seeks to improve cost-effectiveness and quality of health care for nursing home residents enrolled in a health maintenance organization.