The Settlement Norm in Audit Legal Disputes: Insights from Prominent Attorneys

Prior research indicates that most audit legal disputes settle. There is, however, little evidence of the factors that drive the settlement norm and its exceptions in audit legal disputes. To better understand these factors, we rely on theory related to how professionals manage risks and, as a result, how professions defend jurisdictional claims. We use this theoretical lens to help motivate four research questions that we probe by interviewing 27 prominent attorneys experienced in audit litigation. Consistent with our lens, our interview data indicate that attorneys manage their risks, including the risk of reputational loss, by settling based on their expectations of trial verdicts. Unlike trials, settlements simultaneously enable attorneys on both sides to limit costs and avoid catastrophic jury verdicts and, by doing so, claim “wins” for their clients. Attorneys also stress that they settle many audit disputes without any legal filings. Thus, a large subset of disputes is invisible to the public and researchers. Attorneys characterize trials as exceptions to the settlement norm that emerge due to abnormal conditions sometimes present in disputes. However, trial verdicts in these abnormal conditions help attorneys justify the use of settlements to clients, as attorneys stress that by settling they can avoid the dreaded possibility of extreme unfavorable verdicts. We conclude that as individual attorneys manage their risks, especially the risk of reputational loss, their profession maintains its public image and thereby defends its jurisdictional claims. Among the many questions we pose for future research is whether the settlement norm reduces society's ability to monitor the audit profession and, more generally, whether this norm's benefits outweigh its drawbacks.     

Do credit unions have distinct objectives? Evidence from executive compensation structures

Credit unions compete directly with commercial banks in markets for consumer financial services yet receive an exemption from federal corporate income tax. Commercial banks claim that credit unions are no different than banks and that the credit union tax exemption represents an unfair competitive advantage. Credit unions counter that while they offer similar products and services, they differ from commercial banks in terms of structure and mission, given their not-for-profit, cooperative status. In this paper, we test for substantive differences in the objective functions of commercial banks and nonprofit credit unions by comparing CEO compensation structures. Drawing on the relevant principal–agent literature, we provide several arguments to support the hypotheses that credit union boards of directors establish lower-powered incentive contracts with their CEOs relative to similarly sized commercial banks, and offer lower total compensation. We find that credit union CEOs receive approximately 250% less performance-based compensation relative to CEOs of similarly sized community banks. Bank CEOs also earn approximately 15% to 20% more total compensation on average. The results are generally robust to controlling for CEO- and board-level characteristics, local economic conditions, and institution-level indicators of size, growth, complexity, liquidity and risk. The findings suggest important differences in incentive structures and objectives between banks and credit unions.     

Between Markets and Hierarchies: Towards a Better Taxonomy of Hybrid Organizational Forms?

In this paper, the authors attempt to better classify and characterize hybrid organizational forms. They proceed by briefly discussing some general principles of taxonomy and then they critically evaluate extant taxonomic schemas of hybrid forms that typically use as their reference point the dichotomous ideal types of market and hierarchy. The problem of classifying hybrids in relation to these ideal types is demonstrated, and it is pointed out that these ideals have contested meanings and governance modes are treated as 'natural givens'. The paper concludes with the observation that if we sharpen our definition of what constitutes firms and markets, the task in accounting for what lies in between is made much easier. Specifically, and following Hodgson, it is concluded that by returning to a conceptualization of firms as legal entities, much analytical confusion can be averted. In addition, it is suggested that theorizing needs to be accompanied by empirical work that focuses on the actual practices that are used to control and coordinate exchange relationships.     

Exchange rate and foreign price effects on UK inflation

The issue of incomplete pass-through from exchange rate changes to domestic inflation has received considerable attention. Most models try to account for this by using a variety of assumptions about the costs of changing prices. These suggest complete pass-through, but only after the possible elapse of a considerable delay. In contrast, in this article Graeme Chamberlin and Brian Henry provide evidence that exchange rate effects on inflation may be non-linear and, more specifically, subject to thresholds. Their tentative results suggest this may be important in describing price-setting behaviour in the UK.     

Does Financial Development 'Lead' Economic Growth?

We use the Toda & Yamamoto (1995) causality testing procedure to investigate the relationship, if any, between financial development and economic growth.We use quarterly data from 19 OECD countries and China, and use total credit and interest spread as indicators of financial development. We also consider the impact of financial development on investment and productivity. We find meagre evidence that financial development 'leads' economic growth, either directly or indirectly. This casts further doubt on claims that financial development is a necessary and perhaps sufficient precursor to economic growth.     

The Significance of Enterprise Anthropology in Asia

Abstract

Anthropology is known for its qualitative methods and its body of theory which is based on 150 years of study of human origins and cultures. This vast body of knowledge provides a base for the continuing study of humans in all contexts and twenty-first-century anthropology includes an array of subfields specializing in human behavior in diverse contexts. Enterprise anthropology is one of these subfields and this volume captures some of the valuable work being conducted in this field in Asia. It is a welcome addition to the literature on business anthropology not only for the quality of the research but also because it demonstrates the growth of the field in Asia. In this chapter, I first discuss enterprise anthropology and its relation to the field of business anthropology. Then I provide a brief history of the field’s development to put the importance of this current volume in context.     

Reconstructing consumer participation in evidence‐based health care: a polemic

Consumer participation in the evidence‐based health‐care movement is largely seen as important by those who promote evidence‐based health care but is surrounded by a range of competing discourses that variously critique medicine, nursing or health‐care systems; situate consumers as powerless players within systems characterized by controlling health professionals; or politicize the role of the consumer as activist and defender of patient rights. This paper explores these competing discourses and develops an argument that asserts that the social construction of the evidence‐based movement has rendered previously accepted terminology regarding the user or receiver of health services relatively meaningless. The result has been the ‘politicisation’ and ‘professionalisation’ of consumer participation and the time has come to reconstruct consumer participation in evidence‐based health care – from the generation of evidence to guideline development.     

Financial Development and Economic Growth: An Egg‐and‐Chicken Problem?

This study uses a Granger causality procedure to investigate the relationship between financial development and economic growth. The authors estimate a vector autoregression (VAR) model for nine OECD countries and China. They argue that a time-series approach is superior to a cross-sectional one and that the VAR framework avoids technical problems common in other time-series models. Evidence is presented of bidirectional causality between financial development and growth in half of the countries and reverse causality in three others. There is little support for the hypothesis that finance "leads" growth, and caution must be exercised in making general conclusions about this relationship.     

A test of bear market mergerstat control premiums

This paper examines all 340 of the 2001 “bear market” acquisition announcements of U.S. target firms reported by Mergerstat/Shannon Pratt’s Control Premium Study^TM. This paper compares the “Control Premium” reported by Mergerstat/Shannon Pratt’s Control Premium Study^TM to a comparable “Cumulative Abnormal Return”(CAR) calculated using event study methodology. While the average total “Control Premium” reported by Mergerstat differed by only −3.45% from the event study CAR, significant differences presented themselves when the event period was broken down between the day −63 to −1 “runup” period and the day 0 to end “markup” period.