Mandatory audit partner rotation,audit market concentration,and audit quality: Evidence from China

This research examines the audit quality consequences of China's mandatory audit partner rotation (MPR) regulation, which became effective in 2004. The rule requires firms to rotate signing audit partners of audit reports every five years. We find that audit quality improves in the three years immediately following a client firm's MPR during the 2004–2011 period for a sample of 273 Chinese publicly listed firms. Specifically, we find that the improvement is most pronounced in those Chinese provinces with both low levels of audit market concentration and low levels of legal development. However, MPR does not improve audit quality in jurisdictions where legal conventions are more developed and/or where audit markets are highly concentrated with a handful of large audit firms dominating the market.     

ENDOGENOUS EXPORT SUBSIDIES AND WELFARE UNDER DOMESTIC COST HETEROGENEITY

We present a model of international market share rivalry where the domestic export subsidy is determined by lobbying. Greater domestic cost heterogeneity leads to a higher subsidy level and a larger domestic market share. However, the relationship between cost heterogeneity and welfare is ambiguous. Starting from a near-symmetric situation, an increase in heterogeneity reduces domestic welfare if the number of domestic firms exceeds some critical value. When starting farther from symmetry, the welfare effect is reversed. Our findings are in contrast with the results from the existing literature where lobbying is ignored.     

Does input sector liberalization promote quality innovation and exports?

This paper examines the relationship between input sector liberalization and product quality innovation and export orientation by a LDC firm given the complementarity between high input quality and high product quality. We show that input sector liberalization per se may not induce quality innovation and outward orientation. In fact, in some situations, ceteris paribus input sector liberalization may increase the odds in favour of low-quality production. We show that total output sector liberalization, or surprisingly, a suitable degree of output sector protection is needed to be combined with input sector liberalization so that quality innovation is induced.     

Multi-valued decision rules and coalitional non-manipulability: Two possibility theorems

In this paper we show that under the restriction that the individual's sincere preference orderings are linear (strict), there exists a fairly wide class of coalitionally non-manipulable democratic decision rules. These positive results are established without any restriction on the pairwise choice. It is also shown that the possibility of manipulation even by a single individual arises once he adopts a pessimistic approach in comparing two different sets of outcomes which reflect his attitude to risk.     

Response adaptive procedures with dual optimality

The paper proposes an optimal response-adaptive procedure for a general class of responses using a combination of two clinically relevant optimality criteria. We provide a thorough development for trials involving two treatments and sketch the possible extension for multiple treatments. Some related asymptotic results are worked out. We provide simulation studies to compare the performance of the proposed procedure with some of the existing competitors. We illustrate our methodology on data from a real clinical trial.     

International oligopoly,barriers to outsourcing and domestic employment

In this paper we analyze the impact of barriers to outsourcing on domestic employment in an oligopolistic context. We show that although an outsourcing tax makes domestic labour cheaper, its employment effect is ambiguous due to strategic considerations. Analyzing international policy interdependence, we also show that, although a unilateral tax (subsidy) by a country must raise its domestic employment, this may be counterproductive in a Nash policy equilibrium. Finally, both a credit crisis and increased product differentiation tend to worsen the employment effects of an outsourcing tax. Our central findings are robust to both Bertrand and Cournot modes of competition.     

Pareto optimality and the decisive power structure with expansion consistency conditions

This paper establishes the implication of Pareto optimality requirement in social choice. It is shown that a Paretian social choice function satisfying certain expansion-consistency conditions, which are based on the rationality of optimization, generates extremely asymmetric power structure, e.g., dictatorship or oligarchic.     

Ethical standards,attitudes toward risk,and intentional noncompliance: An experimental investigation

Prior research has investigated the influence of decision maker characteristics on decision choice. This research examines the effect two personality traits of taxpayers, attitude towards risk and ethical standards, on intentional noncompliance. A taxpayer who is more (less) ethical will have lower (greater) intentional noncompliance, while a taxpayer who is more (less) risk averse will have lower (greater) intentional noncompliance. However, this study also found significant correlation between risk attitudes and ethical standards. This is because tax evasion is not just a gamble which can be explained by merely considering the risk variable. To understand tax evasive behavior better requires incorporation of noneconomic factors in the analysis, such as ethical standards, although risk attitudes may be an important explanatory factor. The current research suggests that individuals with lower ethical standards will have more intentional noncompliance. However, since ethical standards are correlated with attitude toward risk, the Internal Revenue Service (IRS) can partially overcome the influence of ethics by making the tax audit environment more uncertain. Thus, the research results justify the decision of the IRS not to release all its audit parameters because it makes the audit environment less uncertain.Dipankar Ghosh's research interests are in judgment and decision making, transfer pricing, and negotiation. He has published inDecision Science, Journal of Conflict Management, International Journal of Accounting, andJournal of Management Accounting Research.Terry L. Crain's research interests are in tax policy, tax equity, and the effects of taxation on taxpayer decision. He has published inDecision Science, International Journal of Accounting, andJournal of the American Taxation Association.