The influence of organizational justice on accountant whistleblowing

In this research study, we apply the theory of organizational justice to the design of whistleblowing policies and procedures. As a pro-social behavior, we posit that employee whistleblowing is likely to increase when organizational whistleblowing procedures, outcomes, and related exchanges with superiors are perceived as fair. We test our hypotheses with an experiment involving 447 internal auditors and management accountants. Our results indicate that whistleblowing policies and mechanisms incorporating higher levels of procedural justice, distributive justice, and interactional justice were perceived to increase the likelihood that an organizational accountant would internally report financial statement fraud.     

BANK EXPOSURE TO INTEREST RATE RISK: A GLOBAL PERSPECTIVE

In 1993, the Basle Committee on Banking Supervision considered whether to incorporate interest rate risk in risk-based capital requirements for international banks. At issue was whether a bank's interest rate risk varies with the country of concern. While the effects of interest rate movements on U.S. banks are well documented, the effects on banks from other countries are not. We find that bank interest rate risk varies among countries, which supports the need to capture interest rate risk differentials in the risk-based capital requirements. We also find that non-U.S. bank values are sensitive not only to domestic interest rates, but to international interest rates as well.     

GLOBAL MARKETS,FARMERS AND THE STATE: SUSTAINING PROFITS IN THE INDONESIAN COCOA SECTOR

The rapid expansion of cocoa farming among Sulawesi smallholders since 1980 has transformed the island into a hub within the global cocoa industry. It hosts a number of multinational trading firms and has an expanding grinding sector. In recent years, however, the cocoa sector has been struck by severe pest, disease and quality problems, which are undermining the long-term sustainability of one of Eastern Indonesia's most important rural industries. Some form of intervention is needed if the cocoa industry is to avoid steady decline. This paper examines the role of informal institutions, cocoa multinationals and government in attempts to maintain farm profits in Sulawesi.     

Litigation reform,accounting discretion,and the cost of equity

In this paper, we isolate a context – the 1995 Public Securities Litigation Reform Act – where information risk (accruals quality) is likely to change, and investigate whether the increase in accounting discretion associated with litigation reform is viewed by investors as basically opportunistic (i.e., as distorting reported earnings) or as improving the ability of reported earnings to reflect economic value. We measure accounting discretion using both positive (i.e., income-increasing) as well as absolute performance-adjusted abnormal accruals. Our analysis focuses on a constant sample of firms over a 10-year (1992–2001) period, and is structured in two stages. In the first-stage, we utilize an instrumental variable technique that isolates the increase in accounting discretion associated with the 1995 Act. In the second-stage, we relate the predicted increase in accounting discretion associated with litigation reform – obtained from the first-stage regression – to the ex ante equity risk premium for Big N audit clients. Our results suggest that the increase in accounting discretion associated with the 1995 Act was viewed by investors as basically opportunistic. Further, the exogenous nature of the 1995 Act suggests that the observed increase (and pricing) of accounting discretion is related to litigation reform rather than some omitted firm-specific operating characteristic. Overall, our findings suggest that litigation reform affects firm value through managers’ exercise of accounting discretion and cost of equity capital channels.     

Impact of Visibility and Investment Advisor Credibility on the Valuation Effects of High-Tech Cross-Border Acquisitions

Since foreign high-tech firms exhibit a high level of asymmetric information, there is much investor skepticism surrounding the potential benefits to US firms that acquire them. However, the investor perception may be more favorable when the acquisitions involve more visible targets and advice from investment banks with a strong reputation. Based on a sample of 503 high-tech cross-border acquisitions, bidding-firm shareholders experience positive but statistically insignificant valuation effects overall. However, bidder firms experience positive and significant valuation effects when the foreign high-tech target receives a high level of media attention and when the acquisition is endorsed by a top-tier investment bank. Visibility and credibility enhance the perceived benefits of acquiring foreign targets that have substantial intangible assets and a high level of asymmetric information.