The International Journal of Accounting最新文献

Before the public disclosure of audit fees was mandated, it was unlikely for an audit client to have accurate information about how much other companies were charged by their auditors. Public fee disclosure decreases the cost of auditees' access to audit fee information for the auditor's portfolio of clients and is thus likely to increase the relative bargaining power of auditees over auditors when they negotiate audit fees. Using both proprietary and public audit fee data before and after public fee disclosure was mandated in China, we provide evidence consistent with the preceding conjecture. We find that public fee disclosure reinforces the magnitude of audit fee decreases for overcharged clients and weakens auditors' ability to raise audit fees for undercharged clients. These findings suggest the existence of unintended consequences of public fee disclosure regulation, the original rationale of which was a concern about audit pricing practices that could undermine auditor independence.

Focusing on segment disclosures under the management approach, we investigate managers' choices with respect to both segment reporting quantity and quality and the usefulness of these two characteristics for financial analysts. We measure quantity as the number of segment-level line items and quality as the cross-segment variation in profitability—arguing that more managerial discretion can be exercised over quality than over quantity. We find that managers solve proprietary concerns either by deviating from the suggested line-item disclosure in the standard, or, if following standard guidance, by decreasing segment reporting quality. Moreover, financial analysts do not always understand the quality of segment disclosures, suggesting that a business-model type of standard creates difficulties even for sophisticated users. Our results inform standard setters as they start working on a disclosure framework and as they consider the business model approach to financial reporting.

Management forecasts are an important source of information for the Japanese stock market. In this paper, we use management forecast error as a proxy for disclosure quality to investigate the relationship between disclosure quality and idiosyncratic risk. We find that management forecast error is positively related to idiosyncratic risk, suggesting that high-quality public information reduces idiosyncratic risk. Furthermore, we present evidence that management forecast error is less positively related to idiosyncratic risk in relatively good information environments.

This study examines whether the presence of ruling family members on boards of directors influences the extent and the quality of risk reporting. Based on a sample of publicly listed financial firms of the Gulf Cooperation Council countries between 2007 and 2011, our regression results show that ruling family board members reduce the quality and extent of risk disclosures. Firms with ruling family board members also disclose significantly less during periods of financial distress and when they are subject to higher levels of risk. We find that risk reporting is negatively associated with the existence of a ruling family director acting as the board chairperson, negatively associated with increasing proportions of ruling family directors on the board, and negatively associated with increasing numbers of board members who are connected to ruling family directors. Our results suggest that politically connected directors seize private benefits at the expense of their firms' shareholders. Our regression results hold after a series of robustness checks that control for endogeneity and for alternative measures of ruling family membership.

Andre, Filip, and Modovan (2016) explores the characteristics—quality and quantity—of segment disclosures under IFRS 8 and their usefulness to financial analysts in accurately estimating earnings per share (EPS). The authors measure quantity of disclosures as the number of segment-level line items disclosed in financial statements and quality as the cross-segment variation in profitability. The results provide evidence that managers solve the issue of proprietary costs by decreasing either the quantity of disclosure below the level of standards' guidance or the quality of disclosures on operating segments, thus reducing the overall information included in disclosures. Results also show that it is difficult even for a sophisticated group of financial statement users such as financial analysts to fully understand the quality of segment disclosures and that too much disclosure quantity might create a “foggy” environment, where even sophisticated investors can have troubles using disclosed information to forecast earnings.

Drawing on distinct German institutional characteristics related to cultural, legal, financial, and regulatory features, this paper investigates the extent to which environmental incentives influence German non-financial firms in revealing risk information in their annual report narratives. The paper also examines whether risk-related disclosure (aggregate risk reporting and the tone of news about risk) is useful by investigating its impact on market liquidity and investor-perceived risk. We find that the decision to provide or withhold such risk information is less likely to be significantly associated with environmental incentives. Among those incentives, we find that German firms are significantly influenced by their underlying risks rather than other factors including ownership structure, capital structure, external equity finance, and borrowing. The decision to disclose is likely to be influenced by the size of the firm and whether or not it produces lengthy annual reports. The results also suggest that the impact of aggregate risk reporting levels was not observable until a distinction was made between bad and good news about risk. Specifically, we find that the German market tends to positively (negatively) price good (bad) news about risk by either improving (worsening) market liquidity through removing (creating) information asymmetries, or reducing (increasing) investor-perceived risk.