Compliance with International Financial Reporting Standards and auditor choice: New evidence on the importance of the statutory audit

We examine the impact of auditor choice on IFRS compliance under the assumption of strict exogeneity of auditor choice. Our results reveal that compliance is positively related to auditor choice after controlling for firm size, profitability, leverage, degree of international diversification, and whether a firm has a U.S. listing or was audited according to International Standards of Auditing. We also find that auditor choice is positively related to firm compliance when controlling for unmeasured, firm-specific effects. The results of our study reinforce the importance of developing institutional mechanisms (e.g., enforcement, auditing, or corporate governance structures) to encourage compliance with IFRS.     

Is corporate environmental disclosure associated with firm value? A multicountry study of Gulf Cooperation Council firms

Several studies have found a relationship between corporate social and environmental disclosure and firm value (FV) or accounting profitability. Where environmental disclosure has been the focus, though, only single-country studies have been published, and most of the previous research concerns the developed world. This study examines the association between corporate environmental disclosure (CED) and FV in the Gulf Cooperation Council (GCC) countries, where CED has been increasing from its previous low base. Findings from a multicountry sample of 500 firm-year observations using a 55-item unweighted environmental disclosure index suggest that CED is significantly and positively related to FV as measured by Tobin's Q (TBQ). The relationship is robust to using a weighted version of the disclosure index, individual countries and environmental disclosure subindices. Some evidence of a positive relationship between CED and return on assets is also found, but even where statistically significant, the relationship is much weaker than in the case of TBQ. For empirical and theoretical reasons, we recommend that future studies pay greater attention to market-based proxies, if possible, when investigating the value relevance of CED in both developed and developing countries. Our results suggest that both managers and policymakers in GCC countries should take a positive view of expanded CED.     

Bounding the benefits of stochastic auditing: The case of risk-neutral agents

Summary. In the context of a costly-state-verification model with a risk-neutral agent having limited liability, it has been postulated that allowing stochastic auditing reduces the asymmetric information problem to a trivial one: i.e., the first best can be approached arbitrarily closely with feasible contracts. This paper proves the postulate to be false: the surplus from feasible contracts is bounded strictly below the first-best surplus level. The bound is straightforward to compute in examples. The paper thus removes a justification for the restriction to deterministic auditing commonly made in the literature. Received: July 18, 1997; revised version: February 23, 1998     

Preference-directed regulation when ethical environmental policy choices are formed with limited information

Preference-directed regulation (PDR) can supplement traditional environmental policies through frequent regulatory revision (Livermore, Va Environ Law J 25:311–386, 2007). Using original survey data, PDR is operationalized via counterfactual simulations within a limited information discrete choice model. Augmenting individual opinions about one of the three policies at driving environmental outcomes, stakeholders can induce preference switching in favor of or in detriment to a specific policy. The three policies are summarized as: (1) ban; (2) tax; and (3) label. The resulting substitution patterns demonstrate that the extent of preference switching between policies depends on the relative change in individual opinions about a policy. Furthermore, different forms of PDR may be more effective at inducing preference switching in favor of or in detriment to a specific policy.     

Four scenarios for nanotechnologies in the UK, 2011–2020

The future social value of nanoscale science and technology (NST) has been repeatedly represented as revolutionary. However, government and industry support for the commercialisation of NST has to confront four key areas of uncertainty: concerning potential hazards associated with applications, commercial viability, public acceptance and evolving regulation. Academic and policy responses have to date largely emphasised the need for adaptive and anticipatory regulation, yet research which evaluates the prospects of success in implementing such measures has so far been lacking. This paper contributes to remedying this lack by examining difficulties and opportunities which may arise around this regulatory agenda in the UK, with the aid of a ‘policy Delphi’ exercise undertaken with a multi-stakeholder panel. It summarises four scenarios to aid policy-makers and technology strategists in the UK and internationally in thinking through how the future of NST innovation may be affected by factors associated with the aforementioned areas of uncertainty.