Pub Date : 2021-11-19DOI: 10.1080/16081625.2021.2003211
Yanzhi Xie, Chong Wang, Feng Wu
ABSTRACT Previous studies document that firms in countries speaking languages with strong future time reference (FTR), which more sharply dissociates the future from the present, engage in less future-oriented corporate behaviors relating to their default and information risks. We find that strong FTR influences creditors’ pricing of bank loan contracts: banks design more unfavorable loan terms to strong-FTR borrowers, including larger loan spread, higher likelihood of collateral requirement, and more covenants. This effect can be mitigated by a country’s strong governance. We confirm that strong FTR is associated with higher default and information risks of borrowing firms. Overall, our findings suggest that language represents a distinctive risk to banks which is priced in the loan market.
{"title":"Is language priced? evidence from bank loan contracting","authors":"Yanzhi Xie, Chong Wang, Feng Wu","doi":"10.1080/16081625.2021.2003211","DOIUrl":"https://doi.org/10.1080/16081625.2021.2003211","url":null,"abstract":"ABSTRACT Previous studies document that firms in countries speaking languages with strong future time reference (FTR), which more sharply dissociates the future from the present, engage in less future-oriented corporate behaviors relating to their default and information risks. We find that strong FTR influences creditors’ pricing of bank loan contracts: banks design more unfavorable loan terms to strong-FTR borrowers, including larger loan spread, higher likelihood of collateral requirement, and more covenants. This effect can be mitigated by a country’s strong governance. We confirm that strong FTR is associated with higher default and information risks of borrowing firms. Overall, our findings suggest that language represents a distinctive risk to banks which is priced in the loan market.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"3 1","pages":"745 - 768"},"PeriodicalIF":1.1,"publicationDate":"2021-11-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76867633","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-11-18DOI: 10.1080/16081625.2021.2003713
Xiaoqing Feng, W. Wen, Yun Ke, Ying He
ABSTRACT This paper examines the impact of stock pledges by controlling shareholders on critical audit matters (CAMs) disclosure. We show that there is a positive association between stock pledges by controlling shareholders and the disclosure of CAMs. We also find that the positive effect is more pronounced when auditors are Big Four audit firms. Further analysis reveals that increases in accrual earnings management and controlling shareholders’ entrenchment are possible channels through which stock pledges by controlling shareholders affect the disclosure of CAMs. Auditors disclose more CAMs associated with asset impairment and related-party transactions for firms with controlling shareholders pledging their stocks.
{"title":"Stock pledges by controlling shareholders and the disclosure of critical audit matters: evidence from China","authors":"Xiaoqing Feng, W. Wen, Yun Ke, Ying He","doi":"10.1080/16081625.2021.2003713","DOIUrl":"https://doi.org/10.1080/16081625.2021.2003713","url":null,"abstract":"ABSTRACT This paper examines the impact of stock pledges by controlling shareholders on critical audit matters (CAMs) disclosure. We show that there is a positive association between stock pledges by controlling shareholders and the disclosure of CAMs. We also find that the positive effect is more pronounced when auditors are Big Four audit firms. Further analysis reveals that increases in accrual earnings management and controlling shareholders’ entrenchment are possible channels through which stock pledges by controlling shareholders affect the disclosure of CAMs. Auditors disclose more CAMs associated with asset impairment and related-party transactions for firms with controlling shareholders pledging their stocks.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"7 1","pages":"726 - 744"},"PeriodicalIF":1.1,"publicationDate":"2021-11-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84945256","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-24DOI: 10.1080/16081625.2021.1995887
Zhao Ke, Lihong Wang, Y. Yin
ABSTRACT This study examines the impact of Sino-US trade conflict on the corporate cash holdings of China’s listed foreign-trade companies with sanctioned US business. Employing a DID method, we utilize a sample of 207 foreign-trade companies with sanctioned US business and 832 foreign-trade companies without US business from 2016 to 2019. Our results show that Sino-US trade conflict has stimulated cash holdings in foreign-trade enterprises with sanctioned US business. A large amount of cash holdings exerts a positive effect on corporate performance, especially in poorly performing firms. This relationship is especially pronounced in enterprises with financing constraints and non-state-owned foreign-trade firms.
{"title":"Corporate cash holdings under Sino-US trade conflict: evidence from China","authors":"Zhao Ke, Lihong Wang, Y. Yin","doi":"10.1080/16081625.2021.1995887","DOIUrl":"https://doi.org/10.1080/16081625.2021.1995887","url":null,"abstract":"ABSTRACT This study examines the impact of Sino-US trade conflict on the corporate cash holdings of China’s listed foreign-trade companies with sanctioned US business. Employing a DID method, we utilize a sample of 207 foreign-trade companies with sanctioned US business and 832 foreign-trade companies without US business from 2016 to 2019. Our results show that Sino-US trade conflict has stimulated cash holdings in foreign-trade enterprises with sanctioned US business. A large amount of cash holdings exerts a positive effect on corporate performance, especially in poorly performing firms. This relationship is especially pronounced in enterprises with financing constraints and non-state-owned foreign-trade firms.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"12 1","pages":"448 - 469"},"PeriodicalIF":1.1,"publicationDate":"2021-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84570287","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-23DOI: 10.1080/16081625.2021.1993073
Feng Cao, Xueyan Zhang, Jin Liu
ABSTRACT This paper investigates whether comment letter (CL) regulation affects stock price synchronicity. We find solid evidence that stock exchanges’ CL process can significantly reduce synchronicity, and this effect is attenuated by political connection and state ownership. Further study shows that the negative correlation is more pronounced when CLs address major accounting issues, target firms take longer time to prepare responses, and the responses are accompanied with verifications from related third parties. Our results confirm the positive role of the CL regulation in enhancing firm-specific information disclosure and have implications for the improvement of market efficiency in emerging nations.
{"title":"Comment letter regulation and stock price synchronicity: evidence from China","authors":"Feng Cao, Xueyan Zhang, Jin Liu","doi":"10.1080/16081625.2021.1993073","DOIUrl":"https://doi.org/10.1080/16081625.2021.1993073","url":null,"abstract":"ABSTRACT This paper investigates whether comment letter (CL) regulation affects stock price synchronicity. We find solid evidence that stock exchanges’ CL process can significantly reduce synchronicity, and this effect is attenuated by political connection and state ownership. Further study shows that the negative correlation is more pronounced when CLs address major accounting issues, target firms take longer time to prepare responses, and the responses are accompanied with verifications from related third parties. Our results confirm the positive role of the CL regulation in enhancing firm-specific information disclosure and have implications for the improvement of market efficiency in emerging nations.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"51 1","pages":"569 - 593"},"PeriodicalIF":1.1,"publicationDate":"2021-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87026324","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-23DOI: 10.1080/16081625.2021.1995888
J. Xue
ABSTRACT This study investigates the effect of mandatory Corporate Social Responsibility (CSR) disclosure on corporate cash holdings in China. We use the enactment of a policy mandating a group of firms to disclose their CSR activities as a quasi-natural experiment and find that mandatory CSR disclosure can significantly reduce corporate cash holdings. We identify three channels and their corresponding mechanisms through which mandatory CSR disclosure may affect corporate cash holdings. Mandatory CSR disclosure decreases corporate cash holdings by alleviating financing constraints, improving corporate governance and increasing risk-taking capacity. Further analysis indicates that the reduction in cash holdings due to mandatory CSR disclosure improves firm value.
{"title":"The effect of mandatory corporate social responsibility on firm’s cash holdings","authors":"J. Xue","doi":"10.1080/16081625.2021.1995888","DOIUrl":"https://doi.org/10.1080/16081625.2021.1995888","url":null,"abstract":"ABSTRACT This study investigates the effect of mandatory Corporate Social Responsibility (CSR) disclosure on corporate cash holdings in China. We use the enactment of a policy mandating a group of firms to disclose their CSR activities as a quasi-natural experiment and find that mandatory CSR disclosure can significantly reduce corporate cash holdings. We identify three channels and their corresponding mechanisms through which mandatory CSR disclosure may affect corporate cash holdings. Mandatory CSR disclosure decreases corporate cash holdings by alleviating financing constraints, improving corporate governance and increasing risk-taking capacity. Further analysis indicates that the reduction in cash holdings due to mandatory CSR disclosure improves firm value.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"72 1","pages":"470 - 489"},"PeriodicalIF":1.1,"publicationDate":"2021-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80058350","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-09-24DOI: 10.1080/16081625.2021.1930942
Taichi Kimura, Takahiro Morimitsu
ABSTRACT The effective and efficient implementation of government procurement improves social welfare, however, governments and policymakers struggle to refine contract arrangements. To investigate the optimal contract scheme, we analyze a hybrid model of moral hazard and adverse selection. We show that the contract price is higher when the firm’s cost–reducing capacity is unobservable than when it is observable. Moreover, the effect of the unobservability of the firm’s cost–reducing capacity becomes more severe as the information asymmetry between the government and the firm increases. We contribute to the literature by clarifying how information asymmetry leads to higher contract prices.
{"title":"Cost-based pricing in government procurements with unobservable cost-reducing actions and productivity","authors":"Taichi Kimura, Takahiro Morimitsu","doi":"10.1080/16081625.2021.1930942","DOIUrl":"https://doi.org/10.1080/16081625.2021.1930942","url":null,"abstract":"ABSTRACT The effective and efficient implementation of government procurement improves social welfare, however, governments and policymakers struggle to refine contract arrangements. To investigate the optimal contract scheme, we analyze a hybrid model of moral hazard and adverse selection. We show that the contract price is higher when the firm’s cost–reducing capacity is unobservable than when it is observable. Moreover, the effect of the unobservability of the firm’s cost–reducing capacity becomes more severe as the information asymmetry between the government and the firm increases. We contribute to the literature by clarifying how information asymmetry leads to higher contract prices.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"25 1","pages":"373 - 390"},"PeriodicalIF":1.1,"publicationDate":"2021-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89527361","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-09-14DOI: 10.1080/16081625.2021.1977663
Hyungjin Cho, Ga-Young Choi
ABSTRACT We investigate the association between managerial ability and revenue-expense matching. We find that firms having more capable managers exhibit a better contemporaneous revenue-expense matching, partly attributable to their ability at accrual estimation. We also find that the association between current revenue and past expense is weaker for firms having more talented managers due to cash flow effects. These findings are robust to a battery of control variables and to alternative proxies of managerial ability. Our study indicates that the relation between managerial ability and earnings attribute could be a function of accrual estimation process as well as real business decision. JEL codes: G32.
{"title":"Managerial ability and revenue-expense matching: accrual estimation versus real business decision","authors":"Hyungjin Cho, Ga-Young Choi","doi":"10.1080/16081625.2021.1977663","DOIUrl":"https://doi.org/10.1080/16081625.2021.1977663","url":null,"abstract":"ABSTRACT We investigate the association between managerial ability and revenue-expense matching. We find that firms having more capable managers exhibit a better contemporaneous revenue-expense matching, partly attributable to their ability at accrual estimation. We also find that the association between current revenue and past expense is weaker for firms having more talented managers due to cash flow effects. These findings are robust to a battery of control variables and to alternative proxies of managerial ability. Our study indicates that the relation between managerial ability and earnings attribute could be a function of accrual estimation process as well as real business decision. JEL codes: G32.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"76 3 1","pages":"1120 - 1135"},"PeriodicalIF":1.1,"publicationDate":"2021-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74368617","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-09-13DOI: 10.1080/16081625.2021.1976229
Li-li Jiu, Shiyang Hu, Yuanyuan Liu
ABSTRACT In this paper, we empirically examine whether financial statement comparability mitigates corporate fraud in China. Using the FSC measure proposed by De Franco, Kothari and Verdi (2011), we find that firms with greater comparability are less likely to commit frauds, either accounting – or non-accounting-related frauds. Further tests confirm that regulators can more quickly detect the fraudulent activities of accused firms if their financial statements are more comparable with those of their same-industry peers. Cross-sectional analyses show that the negative relationship between FSC and fraud incidence is more pronounced for firms with lower institutional ownership, and for those operating in regions with more developed markets. Overall, our study provides evidence for the benefits of peer comparisons in the fraud context, and has implications for investors, regulators, and standard setters.
{"title":"Does financial statement comparability mitigate corporate frauds in an emerging market? Evidence from China","authors":"Li-li Jiu, Shiyang Hu, Yuanyuan Liu","doi":"10.1080/16081625.2021.1976229","DOIUrl":"https://doi.org/10.1080/16081625.2021.1976229","url":null,"abstract":"ABSTRACT In this paper, we empirically examine whether financial statement comparability mitigates corporate fraud in China. Using the FSC measure proposed by De Franco, Kothari and Verdi (2011), we find that firms with greater comparability are less likely to commit frauds, either accounting – or non-accounting-related frauds. Further tests confirm that regulators can more quickly detect the fraudulent activities of accused firms if their financial statements are more comparable with those of their same-industry peers. Cross-sectional analyses show that the negative relationship between FSC and fraud incidence is more pronounced for firms with lower institutional ownership, and for those operating in regions with more developed markets. Overall, our study provides evidence for the benefits of peer comparisons in the fraud context, and has implications for investors, regulators, and standard setters.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"28 1","pages":"391 - 408"},"PeriodicalIF":1.1,"publicationDate":"2021-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82425937","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-09-12DOI: 10.1080/16081625.2021.1976228
J. Hao, Fei Kang, C. Lee
ABSTRACT In this study, we examine the association between corporate social responsibility (CSR) and the purchase of non-audit service (NAS). Due to the information asymmetry between stakeholders and managers, stakeholders are generally concerned about auditor’s independence and the firms’ reporting quality. We argue that firms engaging in CSR are more concerned about meeting stakeholder expectations and protecting their reputation of being socially responsible; therefore, they tend to purchase less NAS due to the concern of impaired audit quality. Consistent with our argument, we find that firms with higher CSR ratings incur lower NAS fees. We also document that the negative association of CSR-NAS fees is stronger for firms facing greater stakeholder demand, those with more reputation concerns, and those subject to higher litigation risk.
{"title":"Corporate social responsibility and non-audit service fees","authors":"J. Hao, Fei Kang, C. Lee","doi":"10.1080/16081625.2021.1976228","DOIUrl":"https://doi.org/10.1080/16081625.2021.1976228","url":null,"abstract":"ABSTRACT In this study, we examine the association between corporate social responsibility (CSR) and the purchase of non-audit service (NAS). Due to the information asymmetry between stakeholders and managers, stakeholders are generally concerned about auditor’s independence and the firms’ reporting quality. We argue that firms engaging in CSR are more concerned about meeting stakeholder expectations and protecting their reputation of being socially responsible; therefore, they tend to purchase less NAS due to the concern of impaired audit quality. Consistent with our argument, we find that firms with higher CSR ratings incur lower NAS fees. We also document that the negative association of CSR-NAS fees is stronger for firms facing greater stakeholder demand, those with more reputation concerns, and those subject to higher litigation risk.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"93 1","pages":"1327 - 1349"},"PeriodicalIF":1.1,"publicationDate":"2021-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84150868","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-09-12DOI: 10.1080/16081625.2021.1976226
Yun Wang, Xiaoguang Yang
ABSTRACT Using a unique dataset from 17 major banks in China, we investigate whether related firms serve as an alternative information channel. We find that compared with new clients with no related firms, new clients with related firms are less likely to default. And the difference in default rates becomes more pronounced when new clients have multiple related firms or the related firms have intense relationships with the bank. Moreover, this difference increases with new clients’ degree of information asymmetry. Our results suggest that the existing bank-firm relationships from related firms play an important role in the screening process.
{"title":"The information advantage from existing bank-firm relationships -evidence from new clients’ screening","authors":"Yun Wang, Xiaoguang Yang","doi":"10.1080/16081625.2021.1976226","DOIUrl":"https://doi.org/10.1080/16081625.2021.1976226","url":null,"abstract":"ABSTRACT Using a unique dataset from 17 major banks in China, we investigate whether related firms serve as an alternative information channel. We find that compared with new clients with no related firms, new clients with related firms are less likely to default. And the difference in default rates becomes more pronounced when new clients have multiple related firms or the related firms have intense relationships with the bank. Moreover, this difference increases with new clients’ degree of information asymmetry. Our results suggest that the existing bank-firm relationships from related firms play an important role in the screening process.","PeriodicalId":45890,"journal":{"name":"Asia-Pacific Journal of Accounting & Economics","volume":"16 1","pages":"409 - 428"},"PeriodicalIF":1.1,"publicationDate":"2021-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87448148","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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