Price-matching guarantees as signals of low store prices: survey and experimental evidence

Many retailers offer a price-matching guarantee that promises to pay consumers the difference if they find a lower price elsewhere. This article proposes that the effectiveness of a price-matching guarantee as a signal of low store prices depends on individuals’ beliefs about the degree to which other consumers in the market engage in price search, enforce price-matching guarantees, or both. Consistent with signaling theory, results of a survey and two experimental studies demonstrate that market level factors affect consumer beliefs about the extent to which others engage in price search and thereby the effectiveness of price-matching guarantees in lowering perceptions of store prices. The implications of the findings for retail strategy are discussed along with directions for future research.     

An Expert System Approach to Audit Planning and Evaluation in the Belief-Function Framework

The main purpose of this article is to discuss an expert system approach for audit planning and evaluation using belief functions. First, we show how to use belief functions to represent strengths of various types of evidence such as positive, negative, or mixed items of evidence in an audit. The situation where one item of evidence relates to more than one audit objective or account is of special interest here, particularly the evidence that provides different levels of support to different audit objectives or accounts. Second, we illustrate the use of Auditor's Assistant, an expert system shell, for planning and evaluation of an audit. For this illustration, we use an actual audit program of one of the Big Six accounting firms for the accounts receivable account of a health care unit. Third, two types of sensitivity analyses are performed on the evidential network (audit program) created above. The first one determines the effects of the location of evidence in the network and the second one deals with the effects of variations in the auditor's judgment of the strength of evidence on the overall belief on each variable in the network. Finally, practical implications of the findings of the sensitivity analyses are discussed in the article.     

For brand alliance social or cause related marketing which one is better? A study in emerging markets

The purpose of this study is to investigate the relationships and the effectiveness of cause‐ related or social marketing on consumer perceptions, perceived brand motivations, and the direct and indirect effects that these factors have on brand alliance, attitude, and purchase intentions. A total of 425 participated who are users of soap and oil in the fast‐moving consumer goods (FMCG) sector. Advertisements of three per brands are taken up for study. Dove soap, Parachute hair oil, and Dettol Soap (social marketing) and Fiama Di Wells beauty soap, Vatika hair oil, and Nihar hair oil (cause marketing) are selected for study. Both social and cause‐related marketing motivate the consumer to purchase products from the same company and likewise recommend to others. The present study findings clearly suggest that compared with social cause‐related marketing, social marketing is more preferred. People like watching advertisements incorporating social marketing more compared with cause‐related marketing. Both social and cause‐related marketing motivate the consumer to purchase products from the same company and also recommend to others. The takeaway from this study is how social and cause‐related marketing differ on brand alliance and subsequent effect on brand image, brand recommendation, brand loyalty, consumer perceptions, and purchase behaviour.     

Improving the measures of real earnings management

Firms often change their operating policy to meet a short-term financial reporting target. Accounting researchers call this opportunistic action real earnings management (REM). They measure REM by the difference between a firm’s costs and those reported by its industry peers. Firms that pursue distinct competitive strategies also display different cost patterns than peers. However, the models that measure REM do not control for differences in competitive strategy. Hence a researcher can misinterpret a cost difference that stems from a firm’s competitive strategy as REM. The researcher would also find a spurious correlation between earnings management and a firm characteristic that varies with competitive strategy. A cause or effect relationship with earnings management could be wrongfully inferred. I suggest improvements in measurement models to avoid misspecification.

     

Fee competition among Big 4 auditors and audit quality

Review of Quantitative Finance and Accounting - Both the GAO (Public accounting firms: mandated study on consolidation and competition. GAO, Washington, 2003; Audits of public companies: continued...     

PCAOB Inspections and the Differential Audit Quality Effect for Big 4 and Non–Big 4 US Auditors*

In this study, we investigate whether the increase in regulatory scrutiny epitomized by the initial PCAOB inspection impacted audit quality differentially for Big 4 and non–Big 4 auditors to better understand the consequences of PCAOB inspections for different audit firm types. Because of competing views on the effect of PCAOB inspections, the relation between PCAOB inspections and the audit quality differential between Big 4 and other auditors is an empirical issue. Empirically, we take the endogenous choice of auditor as a given and utilize a difference‐in‐differences specification that takes into account the staggered timing of the initial PCAOB inspection for different‐sized auditors in the United States. Our results suggest that the initial PCAOB inspection improved audit quality more for Big 4 auditors than for other annually inspected or triennially inspected non–Big 4 auditors. We also examine annually and triennially inspected non–Big 4 auditors separately, and find that the pre‐post Big 4/non–Big 4 differential audit quality effect is more pronounced for the triennially inspected non–Big 4 firms. In the larger context of the highly concentrated US audit market, our findings that PCAOB inspections accentuate the Big 4/non–Big 4 audit quality differential are of potential interest to public company audit clients contemplating an auditor change, investors interested in learning about the consequences of PCAOB inspections, regulators concerned about the Big 4 dominance of the US audit market, and academics investigating audit quality differences.     

Changes in Big N auditors’ client selection and retention strategies over time

Review of Quantitative Finance and Accounting - We examine changes over time in Big N auditors’ client selection and retention strategies, from 1970 to 2015, by client size and risk segments....     

Cross-listing and subsequent delisting in foreign markets

Employing a sample of stocks cross-listed and subsequently delisted from foreign markets, we examine the consequences of delisting to investors in terms of price, risk, and liquidity. We also provide a direct comparison between the firm's performance after a foreign cross-listing and after its subsequent delisting. We find a positive cross-listing and negative delisting effect on stock price, both of which dissipate in the long run. No significant changes in the market risk are found for either event. Foreign cross-listing and delisting are associated with increasing and decreasing long term trading volume respectively. Further analysis reveals that firms delist in response to low host market return and low firm trading volume in the host market. The changes in liquidity and market risk from delisting relate those from cross-listing. Finally, our results show that the bonding hypothesis fails to explain the listing premium and the delisting loss.