Mehmet E. Akbulut, Emily Jian Huang, Qingzhong Ma, Athena Wei Zhang
In acquisitions of private firms, new blockholders (NewBs) are expected to form when substantial stocks are paid. Investors react strongly to a NewB signal, given the perceived monitoring and certification benefits. However, they largely ignore value‐relevant but less salient signals, such as the true quality of the acquisition. Investors' limited attention allows financially weak firms to adopt the NewB strategy and take speculative deals. Our results support this inattention hypothesis: NewB acquirers are financially weaker and earn higher announcement‐period returns, but lower long‐run returns; moreover, acquirers' financial weakness negatively predicts long‐run performance.
{"title":"New blockholder and investor limited attention: Evidence from private acquisitions","authors":"Mehmet E. Akbulut, Emily Jian Huang, Qingzhong Ma, Athena Wei Zhang","doi":"10.1111/acfi.13310","DOIUrl":"https://doi.org/10.1111/acfi.13310","url":null,"abstract":"In acquisitions of private firms, new blockholders (NewBs) are expected to form when substantial stocks are paid. Investors react strongly to a NewB signal, given the perceived monitoring and certification benefits. However, they largely ignore value‐relevant but less salient signals, such as the true quality of the acquisition. Investors' limited attention allows financially weak firms to adopt the NewB strategy and take speculative deals. Our results support this inattention hypothesis: NewB acquirers are financially weaker and earn higher announcement‐period returns, but lower long‐run returns; moreover, acquirers' financial weakness negatively predicts long‐run performance.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141744261","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 impact of an initial public offering (IPO) examination disclosure on accountants' IPO market share, using accounting firms undertaking A‐share approval system IPO audit projects from 2011 to 2021. We find that the IPO market share of accounting firms with Issuance Examination Committee Connections (IECC) decreases after the implementation of the issuance examination disclosure policy and that the market share decrease is more pronounced for low‐reputation accounting firms with IECC. This study reveals the impact of issuance review disclosures on the appointment of accountants by IPO firms. This study extends the research related to accountants' market share from the perspective of the impact of IPO examination disclosure on the IPO market share of IECC accountants.
{"title":"Examination disclosure, issuance examination committee connections and accountants' IPO market share","authors":"Zhaoya Zhang, Jenny Jing Wang, Biao Zhou","doi":"10.1111/acfi.13308","DOIUrl":"https://doi.org/10.1111/acfi.13308","url":null,"abstract":"This study examines the impact of an initial public offering (IPO) examination disclosure on accountants' IPO market share, using accounting firms undertaking A‐share approval system IPO audit projects from 2011 to 2021. We find that the IPO market share of accounting firms with Issuance Examination Committee Connections (IECC) decreases after the implementation of the issuance examination disclosure policy and that the market share decrease is more pronounced for low‐reputation accounting firms with IECC. This study reveals the impact of issuance review disclosures on the appointment of accountants by IPO firms. This study extends the research related to accountants' market share from the perspective of the impact of IPO examination disclosure on the IPO market share of IECC accountants.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141744260","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}
David Hay, Noel Harding, Nives Botica Redmayne, Jahanzeb Khan, Harjinder Singh, Nigar Sultana, Jean You
We commend the International Ethics Standards Board for Accountants for the initiative in releasing the two related Exposure Drafts regarding sustainability assurance and the use of external experts. There is a need for assurance over sustainability information, and for that assurance to be provided by professional people who have the appropriate guidance on ethical issues. There is an increasing need to draw on the work of experts and an increasing possibility that inappropriate reliance on that work by professional accountants and sustainability assurance practitioners may threaten compliance with the fundamental principles of the code of ethics.
{"title":"Comments on recent International Ethics Standards Board for Accountants Exposure Drafts regarding sustainability assurance and the use of external experts","authors":"David Hay, Noel Harding, Nives Botica Redmayne, Jahanzeb Khan, Harjinder Singh, Nigar Sultana, Jean You","doi":"10.1111/acfi.13302","DOIUrl":"https://doi.org/10.1111/acfi.13302","url":null,"abstract":"We commend the International Ethics Standards Board for Accountants for the initiative in releasing the two related Exposure Drafts regarding sustainability assurance and the use of external experts. There is a need for assurance over sustainability information, and for that assurance to be provided by professional people who have the appropriate guidance on ethical issues. There is an increasing need to draw on the work of experts and an increasing possibility that inappropriate reliance on that work by professional accountants and sustainability assurance practitioners may threaten compliance with the fundamental principles of the code of ethics.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141614814","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 British Petroleum's (BP) strategic framing and deployment of politically connected governance (PCG) practices amidst geopolitical disruptions from 2010 to 2017. Through thematic analysis, the study identifies three PCG practices developed by BP during reputational disruption, regulatory challenges and political upheavals. Each practice, supported by clusters of political and (non‐)executive actors, shares joint expertise and is deployed defensively or proactively amidst geopolitical disruptions. BP's framing strategies, which include responsiveness, compliance and collaboration, aim to alter stakeholders' perceptions. These understandings affect governance code setters, policymakers and related academic literature.
{"title":"Unfolding BP's reframe through reform strategies for politically connected governance practice and geopolitical disruptions","authors":"Sameh Ammar, Nader Elsayed","doi":"10.1111/acfi.13304","DOIUrl":"https://doi.org/10.1111/acfi.13304","url":null,"abstract":"This study examines British Petroleum's (BP) strategic framing and deployment of politically connected governance (PCG) practices amidst geopolitical disruptions from 2010 to 2017. Through thematic analysis, the study identifies three PCG practices developed by BP during reputational disruption, regulatory challenges and political upheavals. Each practice, supported by clusters of political and (non‐)executive actors, shares joint expertise and is deployed defensively or proactively amidst geopolitical disruptions. BP's framing strategies, which include responsiveness, compliance and collaboration, aim to alter stakeholders' perceptions. These understandings affect governance code setters, policymakers and related academic literature.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141614011","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}
Using a large sample of US firms over the period of 1991–2015, we examine the economic benefits of paying dividends. We find that dividend payments mitigate stock price crash risk. We show that dividend payments reduce bad news hoarding (overinvestments) while bad news hoarding (overinvestments) is (are) positively associated with stock price crash risk, suggesting that curbing bad news hoarding and curtailing overinvestments are two channels through which dividends mitigate crash risk. Finally, our main results are robust to a battery of sensitivity checks including controls for potential endogeneity concerns.
{"title":"Do dividends mitigate bad news hoarding, overinvestments, and stock price crash risk?","authors":"Jeong‐Bon Kim, Le Luo, Hong Xie","doi":"10.1111/acfi.13297","DOIUrl":"https://doi.org/10.1111/acfi.13297","url":null,"abstract":"Using a large sample of US firms over the period of 1991–2015, we examine the economic benefits of paying dividends. We find that dividend payments mitigate stock price crash risk. We show that dividend payments reduce bad news hoarding (overinvestments) while bad news hoarding (overinvestments) is (are) positively associated with stock price crash risk, suggesting that curbing bad news hoarding and curtailing overinvestments are two channels through which dividends mitigate crash risk. Finally, our main results are robust to a battery of sensitivity checks including controls for potential endogeneity concerns.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141546878","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}
Zhukun Lou, Mingran Li, Yuan George Shan, Ailin Ye
We investigate the association between corporate digitalisation and firms' real earnings management (REM). Using an archival data set of 11,806 firm‐year observations from the Shanghai and Shenzhen stock exchanges between 2011 and 2020, our results show a negative association between the degree of corporate digitalisation and the level of REM. Furthermore, we find that the association between corporate governance mechanisms – including power balance, board independence and audit quality – and REM is more pronounced in firms with a high degree of digitalisation. We also note that the reduction of REM resulting from corporate digitalisation has a positive effect on firms' operating efficiency.
我们研究了企业数字化与企业实际收益管理（REM）之间的关联。通过使用 2011 年至 2020 年期间沪深证券交易所 11806 个公司年度观测值的档案数据集，我们的研究结果表明，企业数字化程度与实际收益管理水平之间存在负相关关系。此外，我们还发现，在数字化程度较高的企业中，公司治理机制（包括权力平衡、董事会独立性和审计质量）与 REM 之间的关联更为明显。我们还注意到，企业数字化带来的 REM 减少对企业的运营效率有积极影响。
{"title":"Does corporate digitalisation moderate real earnings management?","authors":"Zhukun Lou, Mingran Li, Yuan George Shan, Ailin Ye","doi":"10.1111/acfi.13301","DOIUrl":"https://doi.org/10.1111/acfi.13301","url":null,"abstract":"We investigate the association between corporate digitalisation and firms' real earnings management (REM). Using an archival data set of 11,806 firm‐year observations from the Shanghai and Shenzhen stock exchanges between 2011 and 2020, our results show a negative association between the degree of corporate digitalisation and the level of REM. Furthermore, we find that the association between corporate governance mechanisms – including power balance, board independence and audit quality – and REM is more pronounced in firms with a high degree of digitalisation. We also note that the reduction of REM resulting from corporate digitalisation has a positive effect on firms' operating efficiency.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141546879","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}
Based on the literature on cross‐cultural psychology, this study examines the effect of executive individualism on the tone of the management discussion and analysis (MD&A) sections of firms' annual reports within one country. By employing an executive's place of origin in northern (southern) China to measure executive individualism (collectivism), we find that executive individualism increases the positive tone of the MD&A sections of firms' annual reports. Further analyses show that the positive relationship between executive individualism and MD&A tone is more pronounced when the executive has a longer tenure or is a local (vs. a non‐local). Finally, we find that executive individualism reduces the informativeness of MD&A in predicting firms' future accounting performance. In sum, the findings of this study suggest that executives' personal traits have important implications for the tone and informativeness of corporate non‐financial reporting.
{"title":"Executive individualism and the tone of firms' annual reports","authors":"Wei Jiang, Chuyue Shi, Yu Li, Sujuan Xie","doi":"10.1111/acfi.13284","DOIUrl":"https://doi.org/10.1111/acfi.13284","url":null,"abstract":"Based on the literature on cross‐cultural psychology, this study examines the effect of executive individualism on the tone of the management discussion and analysis (MD&A) sections of firms' annual reports within one country. By employing an executive's place of origin in northern (southern) China to measure executive individualism (collectivism), we find that executive individualism increases the positive tone of the MD&A sections of firms' annual reports. Further analyses show that the positive relationship between executive individualism and MD&A tone is more pronounced when the executive has a longer tenure or is a local (vs. a non‐local). Finally, we find that executive individualism reduces the informativeness of MD&A in predicting firms' future accounting performance. In sum, the findings of this study suggest that executives' personal traits have important implications for the tone and informativeness of corporate non‐financial reporting.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141546880","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}
Qianru Zhuo, Libin Qin, Wei Liu, Ying Liu, Jiaxing You
This study empirically examines the impact of supply chain risks on the corporate strategy of the geographical distribution of suppliers, by employing text analysis to procure firm‐level supply chain risk data. The findings indicate that, as supply chain risks intensify, firms are inclined to opt for geographically closer suppliers. Heterogeneity studies suggest that the effect of supply chain risks on the selection of geographically proximate suppliers is more pronounced within firms characterised by intense competition, low supplier concentration, low switching costs and in non‐state‐owned enterprises. Further analysis identifies that the supply chain risks, which drive strategies for firms to utilise a geographically proximate supplier distribution, stem from various sources. Each of these sources varies in its impact on a firm's strategies. Tests of economic consequences reveal that, in scenarios of heightened supply chain risks, firms' strategic geographic adjustments in supplier selection can favourably impact their supply chain management efficiency and operational risk.
{"title":"Supply chain risks and geographical supplier distribution strategy","authors":"Qianru Zhuo, Libin Qin, Wei Liu, Ying Liu, Jiaxing You","doi":"10.1111/acfi.13285","DOIUrl":"https://doi.org/10.1111/acfi.13285","url":null,"abstract":"This study empirically examines the impact of supply chain risks on the corporate strategy of the geographical distribution of suppliers, by employing text analysis to procure firm‐level supply chain risk data. The findings indicate that, as supply chain risks intensify, firms are inclined to opt for geographically closer suppliers. Heterogeneity studies suggest that the effect of supply chain risks on the selection of geographically proximate suppliers is more pronounced within firms characterised by intense competition, low supplier concentration, low switching costs and in non‐state‐owned enterprises. Further analysis identifies that the supply chain risks, which drive strategies for firms to utilise a geographically proximate supplier distribution, stem from various sources. Each of these sources varies in its impact on a firm's strategies. Tests of economic consequences reveal that, in scenarios of heightened supply chain risks, firms' strategic geographic adjustments in supplier selection can favourably impact their supply chain management efficiency and operational risk.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141510426","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 investigates whether and how federal judge ideology affects firm‐specific stock price crash risk. Using a comprehensive sample of US firms, we find a decline in the likelihood of future stock price crashes for firms headquartered in more liberal circuits. In identifying potential mechanisms, we show that liberal judge ideology reduces information opacity, risk‐taking behaviours and overinvestment, and thus curbs stock price crash risk. Furthermore, the curbing effect is more salient for firms with poor monitoring quality and those in low social capital areas. Overall, this study elucidates how federal judge ideology affects capital markets.
{"title":"Federal judge ideology, securities class action litigation, and stock price crash risk","authors":"Xiaoyu Cui, Jianlei Han, Jeong Bon Kim, Baolei Qi","doi":"10.1111/acfi.13299","DOIUrl":"https://doi.org/10.1111/acfi.13299","url":null,"abstract":"This study investigates whether and how federal judge ideology affects firm‐specific stock price crash risk. Using a comprehensive sample of US firms, we find a decline in the likelihood of future stock price crashes for firms headquartered in more liberal circuits. In identifying potential mechanisms, we show that liberal judge ideology reduces information opacity, risk‐taking behaviours and overinvestment, and thus curbs stock price crash risk. Furthermore, the curbing effect is more salient for firms with poor monitoring quality and those in low social capital areas. Overall, this study elucidates how federal judge ideology affects capital markets.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141514389","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 study the effects of employee health on corporate innovation by exploiting staggered medical cannabis legalisation across states from 1995 to 2020. Medical cannabis legalisation increases medical access, thereby significantly influences employee health. Using a difference‐in‐differences empirical design, we find that firms became more innovative after their states legalised medical cannabis use. In particular, we show that firms produced more patents, generated more patents with significant impacts, and attained higher patent value following the passage of bills to legalise medical cannabis. We identify a possible mechanism through which employee health spurs innovation: lower worker turnover. Lower worker turnover encourages firm‐specific human capital investments and facilitates inter‐generational knowledge transfer. Taken together, our findings support the hypotheses that medical cannabis legalisation improves employee health, overall well‐being and their innovative capacities.
{"title":"Employee health and corporate innovation: Evidence from medical cannabis legalisation","authors":"Linh Thompson","doi":"10.1111/acfi.13287","DOIUrl":"https://doi.org/10.1111/acfi.13287","url":null,"abstract":"We study the effects of employee health on corporate innovation by exploiting staggered medical cannabis legalisation across states from 1995 to 2020. Medical cannabis legalisation increases medical access, thereby significantly influences employee health. Using a difference‐in‐differences empirical design, we find that firms became more innovative after their states legalised medical cannabis use. In particular, we show that firms produced more patents, generated more patents with significant impacts, and attained higher patent value following the passage of bills to legalise medical cannabis. We identify a possible mechanism through which employee health spurs innovation: lower worker turnover. Lower worker turnover encourages firm‐specific human capital investments and facilitates inter‐generational knowledge transfer. Taken together, our findings support the hypotheses that medical cannabis legalisation improves employee health, overall well‐being and their innovative capacities.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141510428","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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