Journal of Business Finance & Accounting最新文献

The Public Company Accounting Oversight Board's Rule 3211 mandates firms to disclose the types of component auditors employed and their contribution to the overall audit. Using a difference-in-differences approach, we examine the effect of the disclosure of component auditor usage on shareholder dissatisfaction. We find that multinational companies (MNCs) reporting higher use of large component auditors (LCAs), defined as component auditors contributing materially to the audit, experience a 17% decrease in shareholder votes against (or abstaining from) auditor ratification compared to MNCs with lower usage. This effect is more pronounced for firms with high institutional shareholding. We fail to find evidence of any effect on firms with the higher usage of small component auditors (SCAs). Our findings are robust to various definitions for treated and control firms. Our results support the view that, on average, LCAs offer higher “local” benefits and impose lower coordination costs compared to SCAs.

This paper investigates the value and corporate governance consequences of government awards for a sample of French CEOs appointed to the national Order of the Legion of Honor (Légion d'honneur). Short-term market reactions surrounding award announcements are significantly positive, whereas the valuation of firms with awarded CEOs is greater than that of (matched) firms with nonawarded CEOs. We explore the channels through which government awards create value and find evidence that they provide awarded CEOs and their firms with increased political access. We also observe that government awards are associated with better corporate governance in that awarded CEOs are more likely to be fired for poor performance. The negative effects that have been documented for media awards and are associated with CEOs’ superstar status do not seem to apply to state awards.

This study investigates whether the attribute of integrity culture (derived from target firms’ annual reports) influences merger and acquisition (M&A) performance. We find that a target firm's integrity culture, measured from its 10-K reports, has a positive and significant effect on market reaction to the bidder firm's M&A announcement. Our study's analysis is found to be robust to sample selection bias by utilising the entropy balancing technique and to endogeneity concerns by employing an instrumental variable approach. Our results are also robust to alternative measures of integrity culture and when controlling for a target firm's religiosity and corporate social responsibility, an acquirer firm's fixed effects, chief executive officer's fixed effects, governance for corporate control and advisor quality. We identify the retention of a target firm's directors and of its customers as channels that underlie our main findings. Furthermore, we find that acquisition synergies improve, with decreased time taken to complete the deal, for acquisitions of target firms with a higher integrity culture.

In a quasi-natural experimental setting in which Bond Connect allows foreign investors to trade in the Chinese interbank bond market, we predict and find that firms subject to the program increase their accounting conservatism. Further analyses suggest that the increase is concentrated among firms with higher litigation risk, more corporate site visits and greater media attention from overseas, suggesting that foreign bond investors affect firms through the channel of bondholder litigation and monitoring. Additionally, we document that improvement in conservatism is more pronounced when foreign investors participate more and for firms with looser issuance criteria. We also find that enhanced conservatism results in a lower cost of debt for bonds in the liberalized market and those of the same issuers in the nonliberalized market, as well as lower overinvestments and fewer dividends. In addition, firms show greater conservatism in other forms of public disclosure. Together, these findings suggest that firms enhance accounting conservatism to facilitate foreign bond investors’ assessment of credit risk.

Chinese stock exchanges have launched two investor interactive exchange platforms (IIEPs) to facilitate communication between retail investors and listed companies. Using retail investor posts on the IIEPs as a proxy for monitoring by minority shareholders, we show that minority shareholders can play an active monitoring role in corporate governance and improve earnings quality. We identify coordination among minority shareholders and increased regulatory scrutiny as key mechanisms through which IIEPs exert their influence. This form of monitoring proves critical, especially in the absence or ineffectiveness of traditional oversight bodies like institutional investors, auditors and government regulators. Our findings underscore the constructive role of minority shareholders in corporate governance, challenging the notion of them as passive free riders. Implementing IIEPs could be a valuable model for other nations looking to bolster minority shareholder rights.

We use earnings call transcripts to examine whether managers strategically change their disclosure behaviors before an actual share repurchase. Our findings suggest that managers use tone management to strategically portray a more negative outlook for the firm in the earnings call before an actual repurchase. In addition, we find that managers of repurchasing firms “cast” the call with more unfavorable analysts even when more favorable analysts are available. These disclosure strategies aim to influence the information flows to the market and allow repurchasing firms to repurchase their shares at a discounted price. We further show that insiders of repurchasing firms adjust their subsequent stock trading accordingly. Following more negative conference calls, insiders exhibit a tendency to increase share repurchases or reduce sales of company shares. Our findings underscore the increasingly sophisticated disclosure strategies employed by managers to wield influence over information dynamics in the market leading up to share repurchases.

This paper provides evidence on the role of multiple large shareholders (MLSs) in the determination of audit pricing from a new demand-side perspective, rather than the typical supply-side perspective. We find that for Chinese A-share listed firms, the presence of MLS is associated with significantly higher audit fees. The results are robust after we address endogeneity concerns and use auditor choice as an alternative proxy to capture demand for auditing. Further tests show that audit fees increase with the number and relative power of noncontrolling large shareholders. The positive impact of MLS on audit fees is more pronounced for state-owned enterprises (SOE) than in family-owned enterprises. Moreover, this positive impact of MLS is more pronounced for SOEs with foreign blockholders and non-SOEs with independent institutional blockholders. This positive impact is also more pronounced for firms with higher information asymmetry, severe agency problems and higher litigation risk. Overall, our results provide consistent evidence that firms with MLS are likely to demand high-quality auditing, leading to higher audit fees.

Using Regulation SHO as a controlled experiment, we examine the impact of short-selling threats on credit rating performance and credit rating usage in debt contracts. We find that when short-selling constraints are removed for pilot firms, rating accuracy increases, but rating stability decreases for these firms relative to non-pilot firms. This result suggests that short-selling threats push rating agencies to enhance rating accuracy at the cost of rating stability. We also find less rating usage in debt contracts for pilot firms than for non-pilot firms when short-selling constraints are removed for pilot firms, suggesting that in the presence of short-selling threats, debt contracting parties emphasize rating stability over rating accuracy. Overall, our study informs academics, practitioners and regulators about short sellers’ disciplining effect on rating agencies and provides novel evidence on the rating property trade-off and its implication for rating usage.

We examine implications from the expansion of private equity (PE) firms into the collateralized loan obligation (CLO) (i.e., leveraged lending) business. Due to similarities in the investment universes of CLO managers and PE firms, asset managers running both of them frequently hold debt and equity claims of the same company. Our results indicate lower credit costs for these companies through the mitigation of shareholder–creditor agency conflicts. The lower funding costs imply increased equity returns for the sponsoring PE firms. In addition, our findings suggest that PE-affiliated CLO managers benefit from informed trading in the secondary leveraged loan market.

We investigate whether generalist chief executive officers (CEOs), that is, CEOs who gain transferable skills across firms and industries, have less incentive to hoard bad news. To address endogeneity concerns stemming from firm–CEO matching, we deploy a difference-in-differences method utilizing exogenous CEO turnovers, propensity score matching and entropy balancing matching methods, and Oster's coefficient stability test. Supporting our conjecture, we find a negative relation between CEOs’ general ability index (GAI) and future stock price crash risk. The effect of CEOs’ GAI on crash risk is stronger when labor demand is stronger and when firms have more agency conflicts. Our analysis further suggests that generalist CEOs attenuate crash risk by increasing conditional accounting conservatism and reducing real earnings management. Taken together, our findings highlight the role of CEOs’ general human capital in increasing their tolerance for failure and mitigating the agency problem.