Although determinants of cross-border merger and acquisitions (M&As) have been given substantial attention in the literature, research examining the effect of tax system characteristics on cross-border M&As is more limited. Cross-border M&As have substantial tax implications for both the acquiring firm and the target firm. Because firms evaluate investments based on expected after-tax returns, I expect that managers consider potential tax savings or costs in making investment decisions across tax jurisdictions. In this study, I use hand-collected country-year-level tax system characteristics to examine tax determinants of the volume and direction of cross-border M&As. I find that tax system characteristics such as controlled foreign corporation provisions, thin capitalization provisions, and the presence of a worldwide versus territorial regime have a significant effect on cross-border M&A activity.
{"title":"The Effect of Tax System Characteristics on Cross-Border Mergers and Acquisitions","authors":"Jodi M Henley","doi":"10.2308/jiar-2021-061","DOIUrl":"https://doi.org/10.2308/jiar-2021-061","url":null,"abstract":"Although determinants of cross-border merger and acquisitions (M&As) have been given substantial attention in the literature, research examining the effect of tax system characteristics on cross-border M&As is more limited. Cross-border M&As have substantial tax implications for both the acquiring firm and the target firm. Because firms evaluate investments based on expected after-tax returns, I expect that managers consider potential tax savings or costs in making investment decisions across tax jurisdictions. In this study, I use hand-collected country-year-level tax system characteristics to examine tax determinants of the volume and direction of cross-border M&As. I find that tax system characteristics such as controlled foreign corporation provisions, thin capitalization provisions, and the presence of a worldwide versus territorial regime have a significant effect on cross-border M&A activity.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47908228","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 whether bank audit regulations impact bank reporting quality. Using a multi-country panel of publicly traded banks, we find that regulations targeting auditor qualifications and independence improve bank reporting quality. In contrast, regulations that impose greater supervisory oversight of external auditors have little or even an adverse effect on bank reporting quality. Cross-sectional analysis further shows that the effects of bank audit regulations are concentrated among banks where supervisory regime is less independent. Our results hold after controlling for bank regulations pertinent to financial reporting and disclosure, the adoption of international financial reporting standards and time-varying country-level institutional characteristics. Overall, our findings suggest that audit regulations matter and their impact on bank reporting quality is sensitive to the type of audit regulation.
{"title":"Bank Audit Regulations and Reporting Quality","authors":"Inder K. Khurana, R. Zhong","doi":"10.2308/jiar-2021-066","DOIUrl":"https://doi.org/10.2308/jiar-2021-066","url":null,"abstract":"This study examines whether bank audit regulations impact bank reporting quality. Using a multi-country panel of publicly traded banks, we find that regulations targeting auditor qualifications and independence improve bank reporting quality. In contrast, regulations that impose greater supervisory oversight of external auditors have little or even an adverse effect on bank reporting quality. Cross-sectional analysis further shows that the effects of bank audit regulations are concentrated among banks where supervisory regime is less independent. Our results hold after controlling for bank regulations pertinent to financial reporting and disclosure, the adoption of international financial reporting standards and time-varying country-level institutional characteristics. Overall, our findings suggest that audit regulations matter and their impact on bank reporting quality is sensitive to the type of audit regulation.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46115130","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}
In this study, we explore the inverted U-shaped association between internal control quality and firm operational efficiency. Although effective internal controls can facilitate and improve operational efficiency, excessive internal controls can negatively affect operational efficiency by (1) influencing management energy, attention, risk-taking, and innovation motivations; (2) hindering employees' creativity, enthusiasm, and trust. Our findings support the inverted U-shaped association. We further explore and prove the two channels through which internal controls affect firm operational efficiency: the "information channel" (the quality of internal management reports), and the "application channel" (the enforcement of internal controls). Additionally, we show that the inverted U-shaped association only exists in non-state-owned firms. We do not find significant association between internal control quality and operational efficiency in state-owned firms. Overall, this study suggests that firms should not only establish an optimal level of internal controls, but also enforce the internal controls effectively to achieve their intended goals.
{"title":"Going Too Far is as Bad as not Going Far enough: An Inverted U-shaped Relationship between Internal Control and Operational Efficiency","authors":"Hanwen Chen, Ting Li, Chuancai Zhang","doi":"10.2308/jiar-17-571","DOIUrl":"https://doi.org/10.2308/jiar-17-571","url":null,"abstract":"In this study, we explore the inverted U-shaped association between internal control quality and firm operational efficiency. Although effective internal controls can facilitate and improve operational efficiency, excessive internal controls can negatively affect operational efficiency by (1) influencing management energy, attention, risk-taking, and innovation motivations; (2) hindering employees' creativity, enthusiasm, and trust. Our findings support the inverted U-shaped association. We further explore and prove the two channels through which internal controls affect firm operational efficiency: the \"information channel\" (the quality of internal management reports), and the \"application channel\" (the enforcement of internal controls). Additionally, we show that the inverted U-shaped association only exists in non-state-owned firms. We do not find significant association between internal control quality and operational efficiency in state-owned firms. Overall, this study suggests that firms should not only establish an optimal level of internal controls, but also enforce the internal controls effectively to achieve their intended goals.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-06-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44934701","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}
S. Khan, Mark C. Anderson, Hussein A. Warsame, Michael Wright
We examine cross-sectional differences in changes in liquidity for Canadian firms between pre-IFRS and post-IFRS adoption based on their pre-IFRS disclosure quality. In a matched sample analysis, with U.S. firms acting as control firms, we find that liquidity improved after mandatory IFRS adoption for Canadian companies with high pre-IFRS disclosure quality but declined for Canadian companies with low pre-IFRS disclosure quality, in comparison to U.S. peers. We find similar results when we stratify the sample based on total assets - larger Canadian firms gained liquidity while smaller Canadian firms lost liquidity, relative to the U.S. control firms. Our results are sustained when we use firms listed in Canada that report under U.S. GAAP before and after IFRS adoption as control firms.
{"title":"Liquidity and IFRS Adoption in Canada","authors":"S. Khan, Mark C. Anderson, Hussein A. Warsame, Michael Wright","doi":"10.2308/jiar-17-546","DOIUrl":"https://doi.org/10.2308/jiar-17-546","url":null,"abstract":"We examine cross-sectional differences in changes in liquidity for Canadian firms between pre-IFRS and post-IFRS adoption based on their pre-IFRS disclosure quality. In a matched sample analysis, with U.S. firms acting as control firms, we find that liquidity improved after mandatory IFRS adoption for Canadian companies with high pre-IFRS disclosure quality but declined for Canadian companies with low pre-IFRS disclosure quality, in comparison to U.S. peers. We find similar results when we stratify the sample based on total assets - larger Canadian firms gained liquidity while smaller Canadian firms lost liquidity, relative to the U.S. control firms. Our results are sustained when we use firms listed in Canada that report under U.S. GAAP before and after IFRS adoption as control firms.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46272792","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 examine whether chief executive officer compensation aligned with stakeholders’ interests is associated with enhanced corporate carbon transparency. Using an international sample obtained from the CDP, we find that corporate carbon transparency—as measured by both the propensity to voluntarily disclose carbon information and the quality and comprehensiveness of the disclosure—is greater when managers’ compensation contracts are better aligned with stakeholder interests. Further analyses indicate that this positive relationship is stronger in countries or regions with a code law legal system, with an inefficient rule of law, that show strong social norms toward climate change, that feature collectivist societies, and that have a long-term orientation. These findings indicate that the stakeholder agency problem of voluntary carbon disclosure can be addressed through executive incentives that are aligned with stakeholders’ interests.
{"title":"CEO compensation, incentive alignment, and carbon transparency","authors":"L. Luo, Hongjun Wu, Chuyue Zhang","doi":"10.2308/JIAR-2020-032","DOIUrl":"https://doi.org/10.2308/JIAR-2020-032","url":null,"abstract":"We examine whether chief executive officer compensation aligned with stakeholders’ interests is associated with enhanced corporate carbon transparency. Using an international sample obtained from the CDP, we find that corporate carbon transparency—as measured by both the propensity to voluntarily disclose carbon information and the quality and comprehensiveness of the disclosure—is greater when managers’ compensation contracts are better aligned with stakeholder interests. Further analyses indicate that this positive relationship is stronger in countries or regions with a code law legal system, with an inefficient rule of law, that show strong social norms toward climate change, that feature collectivist societies, and that have a long-term orientation. These findings indicate that the stakeholder agency problem of voluntary carbon disclosure can be addressed through executive incentives that are aligned with stakeholders’ interests.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49520274","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":"Discussion of: The State Expropriation Risk and the Pricing of Foreign Earnings","authors":"Stefano Cascino","doi":"10.2308/jiar-10769","DOIUrl":"https://doi.org/10.2308/jiar-10769","url":null,"abstract":"","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47504427","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 whether the effectiveness of internal control over operations and compliance is associated with the likelihood of financial misstatements. Using a unique dataset from Taiwan, we find that the more deficiencies a company has in internal control over compliance, the greater the likelihood that the company's financial statements will be restated in the future; indeed, severe misstatements are more likely for firms with more internal control deficiencies in compliance. However, we do not find a similar impact involving internal control over operations. As the literature contains little about internal control over operations and compliance, our study contributes by shedding light on the importance of control activities in operations and compliance in regard to the quality of financial reporting.
{"title":"Misstatements and Internal Control Over Operations and Compliance","authors":"Yu-Tzu Chang, Han-Chung Chen, R. K. Cheng, W. Chi","doi":"10.2308/jiar-2020-016","DOIUrl":"https://doi.org/10.2308/jiar-2020-016","url":null,"abstract":"\u0000 This study examines whether the effectiveness of internal control over operations and compliance is associated with the likelihood of financial misstatements. Using a unique dataset from Taiwan, we find that the more deficiencies a company has in internal control over compliance, the greater the likelihood that the company's financial statements will be restated in the future; indeed, severe misstatements are more likely for firms with more internal control deficiencies in compliance. However, we do not find a similar impact involving internal control over operations. As the literature contains little about internal control over operations and compliance, our study contributes by shedding light on the importance of control activities in operations and compliance in regard to the quality of financial reporting.","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":"20 1","pages":"31-48"},"PeriodicalIF":1.2,"publicationDate":"2021-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48032384","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":"Book Reviews","authors":"M. Kimbro","doi":"10.2308/jiar-2020-067","DOIUrl":"https://doi.org/10.2308/jiar-2020-067","url":null,"abstract":"","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48713058","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}
Pub Date : 2020-12-01DOI: 10.2308/1542-6297.19.3.165
{"title":"Journal of International Accounting Research Editorial Policy","authors":"","doi":"10.2308/1542-6297.19.3.165","DOIUrl":"https://doi.org/10.2308/1542-6297.19.3.165","url":null,"abstract":"","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" ","pages":""},"PeriodicalIF":1.2,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44422383","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":"Senior Editor's Introduction","authors":"Joanna L. Y. Ho","doi":"10.2308/jiar-10752","DOIUrl":"https://doi.org/10.2308/jiar-10752","url":null,"abstract":"","PeriodicalId":45457,"journal":{"name":"Journal of International Accounting Research","volume":" 3","pages":"1-1"},"PeriodicalIF":1.2,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41312126","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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