Scale Economies in Cross-Border Shopping and Commodity Taxation

A simple inventory theoretic model of cross-border shopping with transaction and storage costs is developed. Consumers incur fixed transaction and transportation costs to access the foreign market in which a perfect substitute of the domestic good is available. We show that the size of the optimal tax is inversely related to the size of domestic transactions. This result provides a simple example of a more general principle, that is, when there are increasing returns to scale in tax avoidance with respect to the quantities involved, then smaller transactions should be taxed more heavily than larger transactions. This revised version was published online in July 2006 with corrections to the Cover Date.     

Radius Restrictions on Retail Chains and the Similarity of Neighboring Shopping Centers

In Canada and the US, shopping center developers may impose ‘radius restrictions’ on tenants in their shopping centers, prohibiting tenants in a particular shopping center from opening another store within a certain radius. Whether a radius restriction is imposed on a chain will depend upon the relative bargaining positions of the chain and the developer. This paper presents an empirical analysis of regional shopping center composition in Canada, using variables that reflect the bargaining power of retail chains and shopping center developers. We find that large, well established, and growing chains are more likely to enter neighboring malls, consistent with the hypothesis that whether a chain enters neighboring malls depends upon its bargaining power. As well, we find that a chain is more likely to enter neighboring malls owned by large developers, consistent with large developers trying to keep retail chains out of the malls of small developers.     

The effect of non-audit services on client risk, acceptance and staffing decisions

The Sarbanes Oxley Act of 2002 prohibited auditing firms from providing certain non-audit services to audit clients and left open the possibility that other currently non-prohibited services could also be banned. This prohibition hinges, in part, on regulatory concerns that auditors were willing to accept prospective higher risk clients in order to obtain more profitable non-audit service engagements. Accounting firms rejected this claim. Given the prospect that more non-audit services could be prohibited, we revisit this debate by examining these competing claims in an experiment in which we manipulate risk and the potential to sell non-audit services and then observe the impact of these variables on auditors’ client acceptance and subsequent staffing decisions. Specifically, audit partners received client information and were asked to make an acceptance decision and propose a staffing plan for a potential engagement. We find that a higher (lower) level of risk decreased (increased) the likelihood of acceptance and this relation did not vary with the potential to provide non-audit services. These results do not support the regulators’ claims but are consistent with the firms’ claims. Further, we found that more experienced auditors were assigned to the prospective client whose management had lower integrity. This staffing plan is consistent with a risk adaptation strategy for the client with lower integrity. The prohibition of certain non-audit services has been justified on the grounds that auditors might engage in systematic opportunistic behavior. However, our results do not find such behavior which should inform the current PCAOB deliberation over whether additional services should be banned. Alternatively, different justification must be found for the prohibitions.     

Non-dictatorial extensive social choice

Summary. Different social planners may have different opinions on the well-being of individuals under different social options (Roberts, 1980). If utilities are translation- or ratio-scale measurable, or if the social ranking might be incomplete, or if interplanner comparability is allowed; then there exist non-dictatorial aggregation rules. We propose extensions, intersections, and mixtures of the Pareto, utilitarian, leximin, Kolm-Pollak, and iso-elastic rules.Received: 16 May 2001, Revised: 18 November 2003, JEL Classification Numbers: D63, D71. Correspondence to: Erwin OogheErwin Ooghe, Luc Lauwers: We are extremely grateful to the referee who was willing to review this paper many times. Her/his extensive and in-depth comments had a strong impact. Further thanks are due to Bart Capéau, Marc Fleurbaey, Maurice Salles, Erik Schokkaert, and Alain Trannoy. The first author gratefully acknowledges the financial support by the TMR network Living Standards, Inequality and Taxation (ERBFMRXCT 980248) of the European Communities.     

Auditor Reputation,Auditor Independence,and the Stock‐Market Impact of Andersen's Indictment on Its Client Firms*

In this paper, we study a broad sample of Arthur Andersen clients and investigate whether the decline in Andersen's reputation, due to its criminal indictment on March 14, 2002, adversely affected the stock market's perception of its audit quality. Because these reputa‐tional concerns are more of an issue if an auditor's independence is impaired, we investigate the relationship between the abnormal market returns for Andersen clients around the time of the indictment announcement and several fee‐based measures of auditor independence. Our results suggest that when news about Andersen's indictment was released, the market reacted negatively to Andersen clients. More importantly, we find that the indictment period abnormal return is significantly more negative when the market perceived the auditor's independence to be threatened. We also examine the abnormal returns when firms announced the dismissal of Andersen as an auditor. Consistent with the audit quality explanation, we document that when firms quickly dismissed Andersen, the announcement returns are significantly higher when firms switched to a Big 4 auditor than when they either switched to non‐Big 4 auditors or did not announce the identity of the replacement auditor. Our empirical results support the notion that auditor reputation and independence have a material impact on perceived audit quality and the credibility of audited financial statements, and that the market prices this.     

How individual auditor characteristics impact the likelihood of audit failure: Evidence from China

Audit failure imposes a severe loss on investors and damages market participants' confidence in financial reporting quality. This study investigates the impacts of individual auditor characteristics on the likelihood of audit failure. Chinese regulators mandate listed firms to disclose the engagement auditors' identity. Furthermore, the information regarding individual auditor characteristics in China is also publicly available. Utilizing this unique setting, we examine the relationship between individual auditor characteristics and the likelihood of audit failure in China during the period from 2000 to 2009. We document that individual auditors with more auditing experience are less likely associated with audit failure. We also find a weaker negative relationship between auditor education level and audit failure. Our study has important implications for both auditors and regulators by shedding lights on the determinants of audit failure and by providing guidance to the human resource management in audit firms.     

In-store music and aroma influences on shopper behavior and satisfaction

Retail markets are increasingly competitive and retailers continuously look to differentiate their retail offering. One way to differentiate is by providing a pleasant and exciting shopping ambience. This paper experimentally tests the effects of music (volume high or low) and aroma (vanilla scent present/absent) on young fashion shoppers in a real retail setting. Results show that volume of music and the presence of a vanilla aroma both have a significant impact on shoppers' emotions and satisfaction levels. Additional analysis reveals that the arousal induced by music and aroma results in increased pleasure levels, which in turn positively influences shopper behaviors, including time and money spend, approach behavior, and satisfaction with the shopping experience. Direct effects of arousal on behaviors as well as an interaction effect between music and aroma on pleasure and time spent in the store are also present. The paper contributes to the better understanding of shoppers' emotions and shopper behaviors in response to in-store atmospherics and offers retailers practical insights into how to create competitive advantage by customizing the atmosphere in their stores.     

Equity ownership and control of international joint ventures in the retail sector

Abstract

This study examines the relationships that exist between consumers' perceptions of a retail environment and their emotions, satisfaction and behavioural intentions with respect to that shopping setting. A model of these relationships is developed and then tested in two distinct retail settings—shopping centres and traditional retailing areas. The results show that, in general, positive perceptions of a retail environment have a positive influence on positive emotions, on repatronage intentions, and on the desire to remain longer in the shopping area in both retail settings. However, some interesting differences emerge between shopping centres and traditional retailing areas: (i) the internal environment has a stronger effect on emotions in shopping centres than in traditional retailing areas; and (ii) the internal environment has a negative effect in shopping centres on the disposition to pay more.     

Negative emotions,value and relationships: Differences between women and men

Service experiences are characterized by emotions that help shape the value in use received by the customer. Negative emotion plays an important role in all of consumer psychology and all too often consumers experience some degree of negative emotion during a consumption experience. This research sheds light on how these negative shopping emotions experienced by men and women in a typical shopping environment affect value and relationships in the form of shopper behavior, commitment and share of wallet. A theoretical process is explained and modeled with a sample of mall shoppers. Results overall suggest that negative emotions affect the shopping experience more for women than for men in terms of perceived value and loyalty. In contrast, the behavior–commitment relationship is stronger for men.     

Explaining auditors’ propensity to issue going‐concern opinions in Australia after the global financial crisis

We document an increase in auditors issuing going‐concern opinions in Australia over a prolonged period since the Global Financial Crisis that is not fully explained by changes in client risk. Overall, our evidence is consistent with auditors reporting more conservatively with the increased level of scrutiny from Australian Securities and Investments Commission inspections and other increased regulation, and in particular, the negative attention following the 2011–2012 inspections. As a result, auditor reports with reference to going‐concern issues have become less informative regarding future corporate failure.