Advances in Accounting最新文献

In recent years, Public Company Accounting Oversight Board (PCAOB) inspections have repeatedly reported audit deficiencies related to complex fair value measurements. Motivated by the PCAOB's concern, this paper investigates whether audit quality of fair value measurements has information value to investors. Using a sample of U.S. public banks during 2008–2019, I find a significantly positive (negative) association between stock prices (bid-ask spreads) and the perceived audit quality of fair value estimates. This finding is consistent with investors valuing audit quality as it enhances the reliability of—and reduces the uncertainty associated with—complex estimates. Furthermore, using the fair value hierarchy mandated by SFAS 157, Fair Value Measurement, I find the incremental valuation effect of the perceived audit quality is greater for the substantial estimation uncertainties and potential management bias inherent in Level 3 fair value assets. In addition, I find some evidence that an auditor's banking industry expertise plays a more significant role than Big 4 status in investors' perceptions of audit quality with respect to FVM. Additional cross-sectional results reveal that the documented effect is greater for banks with declining capital adequacy and for smaller banks. Collectively, my findings suggest that perceived audit quality is important to investors in assessing the informativeness of complex fair value measurements.

I re-examine the information content of earnings press releases (EPRs) by distinguishing textual fundamentals (TF), which captures information content in non-tone language, from tone, which captures optimism and pessimism and is the focus of prior research. I find after controlling for standard firm characteristics, TF positively predicts future operating performance, unlike tone, which negatively predicts future operating performance. I document a return continuation in TF, in contrast to the return reversal in tone documented in prior literature. My findings distinguish informative content in TF and misleading content in tone in EPRs.

Prior research indicates that males and females tend to respond differently in various decision settings. Two such behavioral characteristics, risk-taking attitudes and ethical leadership, are tied to corporate financial and investment decision-making. In this study, we examine the association between CFO gender and corporate investment efficiency, specifically, the extent of firm-level overinvestment. We find that the presence of a female CFO is significantly associated with a decreased level of corporate overinvestment. Robustness checks using alternative investment measures and controlling for CFO-, CEO-, and board-level factors provide consistent support to this main finding. Consistent with prior studies, we show that female executives are more cautious and risk-averse than their male counterparts when making various corporate decisions, and thus, may be more likely to act in shareholders' best interests. Our findings highlight that gender plays a role in corporate financial and investment decision-making.

Human capital plays a substantial role in the corporate tax planning process, and thus a firm's ability to attract, retain and motivate talented employees is a potential determinant of tax planning outcomes. Motivated by the premise that employee satisfaction is a key driver of productivity, I investigate the relationship between employee satisfaction ratings, collected from the website Glassdoor, and corporate tax planning outcomes. I find that firms with higher employee satisfaction ratings exhibit significantly greater tax avoidance as well as lower tax risk. A one-point increase in overall employee satisfaction ratings, on a five-point scale, is associated with a 2.6 percentage point decrease in cash effective tax rates (Cash ETRs) and a 0.20 standard deviation decrease in Cash ETR volatility. These results are stronger for firms with larger corporate tax departments, which rely more on employees to manage the tax planning process. I also find that employee satisfaction is negatively associated with UTB reserves, indicating that the increased tax avoidance is unlikely to arise from aggressive tax positions. Finally, through path analyses, I find that employee satisfaction can influence a firm's tax outcomes by reducing tax department turnover and improving the firm's internal information environment. Overall, my findings are consistent with the premise that employees play a substantial role in implementing tax avoidance strategies and mitigating tax risk, thus managers who adopt a strong work culture and employee-friendly policies can attain beneficial tax outcomes.

This study examines the indirect effects of regulatory change by studying the audit office effects of changes in client time pressure caused by the first acceleration of the 10-K filing deadline. The extant literature provides evidence that increased client time pressure adversely affects the timing and quality of individual engagements. We argue that because audit offices possess finite resources and production capacity in the short run, client-level pressure can have office-level effects. We document within-office differences related to changes in audit timeliness. In the same audit office, clients with no pressure (with pressure) experience an increase (a decrease) in audit report lag post-acceleration. This evidence suggests that auditors alter the timing of concurrent engagements in response to client pressure, and clients of the same office are affected differently by changes in time pressure. We also document across-office differences in audit/filing timeliness and audit quality. Clients of audit offices with more time pressure across the entire client portfolio experience a greater negative impact on audit timeliness, are more likely to file late, and experience lower audit quality. Taken as a whole, our results are consistent with client time pressure producing office effects as a result of the auditors' response to increased resource constraints. Further, we show that the time pressure documented during the first acceleration is transitory in nature. These results should be informative to regulators and practitioners because they suggest there are indirect costs associated with regulatory compliance, and such costs are not limited to directly affected clients.

Recent empirical research examines the credit relevance of non-GAAP net assets in low and high default risk settings and finds that the credit relevance of non-GAAP net assets increases when default risk is high (Eberhart, Maxwell, & Siddique 2008; Plumlee Xie, Yan, & Yu 2015). Using the implication of debt contracting theory (Kothari, Ramanna, & Skinner 2010), we extend this research to compare and contrast the credit relevance of GAAP and non-GAAP net assets in low and high default risk settings. We evaluate the change in reliance creditors place on GAAP net assets relative to that placed on non-GAAP net assets. Using data from the credit default swap (CDS) market, we find that the reliance creditors place on GAAP net assets, relative to the reliance placed on non-GAAP net assets, increases with increases in the probability of default. These results contribute to the growing literature examining the relevance of information beyond that provided on the balance sheet.

The purpose of this study is to shed light on the management choice between fair value and cost for investment property under IAS 40 in Europe. Using a multi-motivation approach, we explore what drives this choice across countries and across industries after ten years have passed from the first adoption of IAS 40. Following the theoretical framework developed by the accounting choice theory, we hypothesize that there are several classes of reasons possibly leading managers to commit to fair value: contractual efficiency motives, asset pricing incentives tied to information asymmetries, country institutional factors, and industry factors. In order to test these hypotheses, we select a sample of publicly-traded firms operating in the real estate, manufacturing and banking industries, and located in nine European countries where national pre-IFRS standards mandated either fair value or historical cost for investment property. We test our hypotheses running our model both on the full sample (real estate, manufacturing, and banking) and on a subsample that excludes real estate firms.

We find that all the proposed rationales included in our model play a role in explaining the choice between fair value and cost. Particularly, with regard to asset pricing incentives, the ratio of market to book value, as a proxy for information asymmetries, has a negative association with fair value. As for contractual motives, firm size, as a proxy for political costs is negatively related with the choice of fair value, although the firm's reliance on debt (measured by leverage) seems not to affect the choice. Firms with a higher ratio of investment property over total assets are much more likely to opt for fair value than firms for which IAS 40 assets are less significant. Finally, the comparison of choices made by firms in our sample at the first adoption of IFRS in 2005 with those made after ten years provides evidence of a learning process. The fair value choice however appears to be strongly related to country institutional factors, particularly the development of capital markets and legal origin, with firms operating in countries where markets are more developed being more likely to choose fair value.

This paper demonstrates the benefits to shareholders of offering severance packages to managers. We show that severance pay is not merely a way to coax underperforming managers to step aside. Rather, a manager's efforts can pave the way for the manager's successor, and thereby attract more talented potential replacements. We consider two settings that differ on whether or not the shareholder can fully commit to a replacement strategy. In both settings the shareholder makes replacement decisions based on output and the availability of a suitable replacement candidate at the end of the first period. When the shareholder can fully commit to the circumstances of replacement, severance pay serves solely to improve contract efficiency, because the probability of the replacement candidate emerging is influenced by the incumbent manager's effort. In the setting without full commitment, severance pay not only improves contract efficiency but also allows the shareholder to expand the set of credible output–contingent replacement strategies. Generally, severance pay motivates managers to build value in the firm despite the possibility that in doing so, they make their own services obsolete.

Accounting Standards Update (ASU) 2016–13 substantially changed the FASB's previous accounting guidance in SFAS 114 for credit loss estimation with the objective of making recognition more timely. We examine the effect of the initial adoption of ASU 2016–13 on January 1, 2020, on banks' loan loss allowances and its subsequent effect on banks' provision accruals over the first three quarters of 2020 during the COVID-19 pandemic when economic conditions changed rapidly. After controlling for bank size and other factors previously found to be associated with provisions, we find that banks adopting ASU 2016–13 made significantly larger provisions than SFAS 114 banks in Quarter 1 but not in Quarter 2. However, as economic conditions improved markedly in Quarter 3, we find a reversal in that the ASU 2016–13 banks reported significantly smaller mean provisions than the SFAS 114 banks. These results provide preliminary evidence that ASU 2016–13 has achieved its objective of making allowances more sensitive to changing economic conditions.

Is the corporate life cycle an important factor in management's decisions about real activities management (RAM)? In this study, we empirically investigate firms' RAM activities across the corporate life cycle, given the various costs and constraints associated with the alternative earnings management mechanisms across the life cycle stages. We examine both an aggregate RAM proxy and individual RAM proxies including operating and investing RAM such as sales, expenses, and production cost management, and sales of long-term assets. Employing the Dickinson (2011) proxy of corporate life cycle and Taiwanese data, we document that at the aggregate level, firms in the decline stage are more likely than mature firms to manage earnings upward with RAM. Using the individual RAM proxies, we find that firms in the early life cycle stages prefer sales management to the other RAM mechanisms, especially expenses management. Decline firms employ more sales and production cost management and investing RAM but a similar level of expenses management relative to mature firms. We further find that family firms in the introduction and decline stages engage in more RAM than mature family firms while nonfamily firms do not. Overall, our results indicate that firms prefer different RAM mechanisms across the life cycle stages, that these preferences differ between family and non-family firms, and that these preferences are stronger in family firms. The results are robust after using alternative proxies of operating RAM and additional control variables of corporate governance. Our findings are of interest to investors, auditors, regulators, and academics concerning financial reporting quality and financial statement analysis.