Brian M. Burnett, D. Hart, B. Jorgensen, Gregory W. Martin
Canada delegates securities regulation to the provincial securities regulators where each Canadian firm is headquartered. Legal origin theories predict weaker enforcement due to less emphasis on accounting in civil law jurisdictions, like Quebec. Consistent with these theories, we find fewer restatements for non-U.S. cross-listed firms headquartered in Quebec relative to the rest of Canada (ROC), which has a common law legal origin. When subject to two securities regulators—a Canadian provincial securities regulator and the Securities and Exchange Commission—Quebec firms cross-listed in the U.S. restate at a rate similar to the ROC. Finally, we document that Canadian firms restate less frequently after adopting IFRS, consistent with more principles-based standards being more difficult to enforce ex post than more rules-based standards.
{"title":"Multiple Regulators and Accounting Restatements: Evidence from Canada","authors":"Brian M. Burnett, D. Hart, B. Jorgensen, Gregory W. Martin","doi":"10.2308/JIAR-52494","DOIUrl":"https://doi.org/10.2308/JIAR-52494","url":null,"abstract":"\u0000 Canada delegates securities regulation to the provincial securities regulators where each Canadian firm is headquartered. Legal origin theories predict weaker enforcement due to less emphasis on accounting in civil law jurisdictions, like Quebec. Consistent with these theories, we find fewer restatements for non-U.S. cross-listed firms headquartered in Quebec relative to the rest of Canada (ROC), which has a common law legal origin. When subject to two securities regulators—a Canadian provincial securities regulator and the Securities and Exchange Commission—Quebec firms cross-listed in the U.S. restate at a rate similar to the ROC. Finally, we document that Canadian firms restate less frequently after adopting IFRS, consistent with more principles-based standards being more difficult to enforce ex post than more rules-based standards.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46718464","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Editorial","authors":"Joanna L. Y. Ho","doi":"10.2308/jiar-10693","DOIUrl":"https://doi.org/10.2308/jiar-10693","url":null,"abstract":"","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48617612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze the relationship between financial transparency and carbon transparency based on the ethical and opportunistic perspectives. Our sample comprises 10,341 firm-year observations from firms in 55 countries or regions in the CDP (previously the Carbon Disclosure Project) during the period 2003–2015. We measure carbon transparency based on both managerial propensity to publicly disclose carbon information and the level and comprehensiveness of the voluntary carbon disclosure. We operationalize financial transparency based on firms' earnings management (EM). We find that our carbon transparency proxies are negatively associated with EM. These results are consistent with the ethical perspective, which suggests that carbon transparency complements financial transparency rather than substitutes for it. Furthermore, we find that the complementary relationship between carbon transparency and financial transparency is dependent on a country's stakeholder orientation, collectivism in the national culture, the presence of an emissions trading scheme, and regulatory governance.
{"title":"Voluntary Carbon Transparency: A Substitute for or Complement to Financial Transparency?","authors":"L. Luo, Hongjun Wu","doi":"10.2308/JIAR-52421","DOIUrl":"https://doi.org/10.2308/JIAR-52421","url":null,"abstract":"\u0000 We analyze the relationship between financial transparency and carbon transparency based on the ethical and opportunistic perspectives. Our sample comprises 10,341 firm-year observations from firms in 55 countries or regions in the CDP (previously the Carbon Disclosure Project) during the period 2003–2015. We measure carbon transparency based on both managerial propensity to publicly disclose carbon information and the level and comprehensiveness of the voluntary carbon disclosure. We operationalize financial transparency based on firms' earnings management (EM). We find that our carbon transparency proxies are negatively associated with EM. These results are consistent with the ethical perspective, which suggests that carbon transparency complements financial transparency rather than substitutes for it. Furthermore, we find that the complementary relationship between carbon transparency and financial transparency is dependent on a country's stakeholder orientation, collectivism in the national culture, the presence of an emissions trading scheme, and regulatory governance.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48596969","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Sophistication of Chinese Mutual Funds and the Mispricing of Accruals","authors":"T. Hansen","doi":"10.2308/jiar-10635","DOIUrl":"https://doi.org/10.2308/jiar-10635","url":null,"abstract":"","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44041791","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Olena V. Watanabe, Michael J Imhof, Semih Tartaroglu
We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information. JEL Classifications: F30; G15; G30; M4. Data Availability: Data are available from the sources cited in the text.
{"title":"Transparency Regulation and Stock Price Informativeness: Evidence from the European Union's Transparency Directive","authors":"Olena V. Watanabe, Michael J Imhof, Semih Tartaroglu","doi":"10.2308/JIAR-52383","DOIUrl":"https://doi.org/10.2308/JIAR-52383","url":null,"abstract":"\u0000 We examine changes in stock price informativeness following the European Union's Transparency Directive (TPD). The TPD, implemented by country between 2007 and 2009, enhanced corporate transparency through mandating regular firm financial disclosures and facilitating the dissemination of financial reports. Using stock return synchronicity as a proxy for stock price informativeness, we find that price informativeness improved following implementation of the TPD. This improvement was more pronounced in countries with strong regulatory environments than those with weak regulatory environments. We additionally examine a later amendment to the TPD that eliminated the requirement of quarterly financial disclosures and document an increase in stock return synchronicity following the amendment. Our findings support prior research suggesting that transparency regulations improve financial information.\u0000 JEL Classifications: F30; G15; G30; M4.\u0000 Data Availability: Data are available from the sources cited in the text.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47735930","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I examine CEOs' and CFOs' forced resignations after violations of the Foreign Corruption Practices Act (FCPA). My findings show that firms that adhere to the FCPA (FCPA firms) discipline CEOs and CFOs after violations of the act. Further, CEOs and CFOs are likely to resign after the SEC identifies them as perpetrators in these violations, and the SEC bars more CEOs and CFOs of firms that commit accounting fraud (FRAUD firms) than those of FCPA firms. Also, fewer CEOs than CFOs find a new position within five years after their resignation. Further, the market reacts significantly to the FCPA firms' announcements of bribery violations but does not react to the 8-K resignations of their CEOs or CFOs. In comparison, the magnitudes of the reactions to FRAUD firms' announcements of accounting fraud and the CEOs' or CFOs' 8-K resignations are higher than those of FCPA firms. JEL Classifications: M41; M48; G34; G14. Data Availability: Data are available from the sources indicated in the text.
{"title":"CEO/CFO Resignations and the Market's Reaction to Violations of the Foreign Corruption Practices Act","authors":"Jui-Chin Chang","doi":"10.2308/JIAR-52363","DOIUrl":"https://doi.org/10.2308/JIAR-52363","url":null,"abstract":"I examine CEOs' and CFOs' forced resignations after violations of the Foreign Corruption Practices Act (FCPA). My findings show that firms that adhere to the FCPA (FCPA firms) discipline CEOs and CFOs after violations of the act. Further, CEOs and CFOs are likely to resign after the SEC identifies them as perpetrators in these violations, and the SEC bars more CEOs and CFOs of firms that commit accounting fraud (FRAUD firms) than those of FCPA firms. Also, fewer CEOs than CFOs find a new position within five years after their resignation. Further, the market reacts significantly to the FCPA firms' announcements of bribery violations but does not react to the 8-K resignations of their CEOs or CFOs. In comparison, the magnitudes of the reactions to FRAUD firms' announcements of accounting fraud and the CEOs' or CFOs' 8-K resignations are higher than those of FCPA firms. JEL Classifications: M41; M48; G34; G14. Data Availability: Data are available from the sources indicated in the text.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":"1 1","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68992926","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
W. Chi, Ling Lei Lisic, Linda A. Myers, Mikhail Pevzner, Timothy A. Seidel
Using data from Taiwan, where a long history of engagement partner performance is available, we examine the reputational consequences that engagement partners suffer for having a recent history of past audit failures. We find that when an engagement partner's recent history of poor audit quality is observable to audit clients, they are more likely to lose clients and are less likely to be reassigned to serve other clients of the audit firm over the next five years. We also find that these engagement partners are more likely to stop serving as engagement partners in the next five years, and those who remain in client service experience a reallocation of assignments. Additionally, the clients that these partners continue to serve exhibit increased risk. Overall, our findings suggest that an engagement partner's prior audit quality influences clients' and audit firms' engagement partner selection.
{"title":"The Consequences of Providing Lower-Quality Audits at the Engagement Partner Level","authors":"W. Chi, Ling Lei Lisic, Linda A. Myers, Mikhail Pevzner, Timothy A. Seidel","doi":"10.2308/JIAR-52352","DOIUrl":"https://doi.org/10.2308/JIAR-52352","url":null,"abstract":"Using data from Taiwan, where a long history of engagement partner performance is available, we examine the reputational consequences that engagement partners suffer for having a recent history of past audit failures. We find that when an engagement partner's recent history of poor audit quality is observable to audit clients, they are more likely to lose clients and are less likely to be reassigned to serve other clients of the audit firm over the next five years. We also find that these engagement partners are more likely to stop serving as engagement partners in the next five years, and those who remain in client service experience a reallocation of assignments. Additionally, the clients that these partners continue to serve exhibit increased risk. Overall, our findings suggest that an engagement partner's prior audit quality influences clients' and audit firms' engagement partner selection.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":"1 1","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"68992906","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Lucy Huajing Chen, Saiying Deng, Parveen P. Gupta, Heibatollah Sami
In 2007, the U.S. Securities and Exchange Commission voted to eliminate the 20-F reconciliation requirement for foreign issuers listing their stocks or bonds in the U.S. capital markets and preparing their financial statements under International Financial Reporting Standards (IFRS). Distinct from prior research focusing on the equity market, we investigate the impact of eliminating the 20-F reconciliation on the cost of debt in the U.S. listed foreign bond market. Employing a difference-in-differences approach, we document that bond yield spread increases for foreign IFRS bond issuers after the elimination of 20-F reconciliation. The results suggest that bondholders, on average, view the elimination of 20-F reconciliation as an information loss. Cross-sectional analyses reveal that the positive association between the elimination of 20-F reconciliation and bond yield spread is more pronounced for firms with greater stock return volatility, lower institutional ownership, weaker reporting incentives, and higher country-level investor protection. JEL Classifications: M41; G15; G18.
{"title":"The Impact of Eliminating the 20-F Reconciliation on the Cost of Debt: An Exploratory Study","authors":"Lucy Huajing Chen, Saiying Deng, Parveen P. Gupta, Heibatollah Sami","doi":"10.2308/JIAR-52358","DOIUrl":"https://doi.org/10.2308/JIAR-52358","url":null,"abstract":"\u0000 In 2007, the U.S. Securities and Exchange Commission voted to eliminate the 20-F reconciliation requirement for foreign issuers listing their stocks or bonds in the U.S. capital markets and preparing their financial statements under International Financial Reporting Standards (IFRS). Distinct from prior research focusing on the equity market, we investigate the impact of eliminating the 20-F reconciliation on the cost of debt in the U.S. listed foreign bond market. Employing a difference-in-differences approach, we document that bond yield spread increases for foreign IFRS bond issuers after the elimination of 20-F reconciliation. The results suggest that bondholders, on average, view the elimination of 20-F reconciliation as an information loss. Cross-sectional analyses reveal that the positive association between the elimination of 20-F reconciliation and bond yield spread is more pronounced for firms with greater stock return volatility, lower institutional ownership, weaker reporting incentives, and higher country-level investor protection.\u0000 JEL Classifications: M41; G15; G18.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49038430","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Following the trend toward a globalized accounting standard, many non-English-speaking countries have adopted the International Financial Reporting Standards (IFRS). Translation of the IFRS from English to other languages is inevitable; thus, it is crucial to ensure that the original meanings of the standard requirements are not affected by translation. Using accounting students from a university in Taiwan as participants, we found that nearly half of probability expressions from the IFRS were differently interpreted before and after translation. And the effects of translation were moderated by the participants' accounting knowledge and English proficiency. Our results show that improving participants' accounting knowledge or English fluency would reduce variations in interpretations of probability expressions before and after the translation. Finally, we found that translation has more impact on participants' interpretations of negative expressions than positive expressions.
{"title":"Effects of Translation on Probability Judgments: Evidence from the IFRS in Taiwan","authors":"Hsiao-Lun Lin, Shu-ling Yeh, Ai-Ru Yen","doi":"10.2308/JIAR-52289","DOIUrl":"https://doi.org/10.2308/JIAR-52289","url":null,"abstract":"\u0000 Following the trend toward a globalized accounting standard, many non-English-speaking countries have adopted the International Financial Reporting Standards (IFRS). Translation of the IFRS from English to other languages is inevitable; thus, it is crucial to ensure that the original meanings of the standard requirements are not affected by translation. Using accounting students from a university in Taiwan as participants, we found that nearly half of probability expressions from the IFRS were differently interpreted before and after translation. And the effects of translation were moderated by the participants' accounting knowledge and English proficiency. Our results show that improving participants' accounting knowledge or English fluency would reduce variations in interpretations of probability expressions before and after the translation. Finally, we found that translation has more impact on participants' interpretations of negative expressions than positive expressions.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2018-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44915050","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines the role of mutual funds in the pricing of accruals in China's stock market to evaluate the sophistication of Chinese mutual funds. Using a sample of A-share stocks in China from 2003 to 2011, I find that the mispricing of accruals is concentrated in firms with large mutual fund holdings. This result differs from a number of U.S. studies documenting a positive relation between institutional holdings and stock price efficiency. In an effort to explain this result, I provide evidence that mutual funds in China fixate on earnings and fail to understand the one-year-ahead earnings implication of accruals. Specifically, I find that the persistence of accruals is overpriced in stocks with a high level of mutual fund ownership. The mispricing of accruals in these stocks is largely driven by discretionary accruals and is related to their high stock price responsiveness to earnings. JEL Classifications: M41; G12.
{"title":"Sophistication of Chinese Mutual Funds and the Mispricing of Accruals","authors":"Jiajia Fu","doi":"10.2308/JIAR-52257","DOIUrl":"https://doi.org/10.2308/JIAR-52257","url":null,"abstract":"\u0000 This study examines the role of mutual funds in the pricing of accruals in China's stock market to evaluate the sophistication of Chinese mutual funds. Using a sample of A-share stocks in China from 2003 to 2011, I find that the mispricing of accruals is concentrated in firms with large mutual fund holdings. This result differs from a number of U.S. studies documenting a positive relation between institutional holdings and stock price efficiency. In an effort to explain this result, I provide evidence that mutual funds in China fixate on earnings and fail to understand the one-year-ahead earnings implication of accruals. Specifically, I find that the persistence of accruals is overpriced in stocks with a high level of mutual fund ownership. The mispricing of accruals in these stocks is largely driven by discretionary accruals and is related to their high stock price responsiveness to earnings.\u0000 JEL Classifications: M41; G12.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49355692","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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