Two Essays On Financial Reporting Quality
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Two Essays On Financial Reporting Quality
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Author : Yangxin Yu
language : en
Publisher:
Release Date : 2011
Two Essays On Financial Reporting Quality written by Yangxin Yu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Auditing categories.
Essays On Financial Reporting Quality
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Author : Yuequan Wang
language : en
Publisher:
Release Date : 2012
Essays On Financial Reporting Quality written by Yuequan Wang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with Corporation reports categories.
Because of the importance of financial reporting quality in capital market, I explore the determinants to financial reporting quality in my second essay, "Market power and accrual management". I examine whether a firm's competition status in product markets affects its financial reporting quality, measured as discretionary accrual. I argue that because firms with greater market power have a greater ability to set prices for their products, they have comparatively fewer incentives to manipulate earnings through accrual management. I use the Lerner index to measure product market power and asset-deflated absolute discretionary accruals to proxy the magnitude of accrual management. Using a large sample of firm-year observations from 1997 to 2007, I find that, as hypothesized, firms with greater market power tend to have lower levels of accrual management. The final essay, "Product market competition and audit fees", goes one-step further than the second. As noted in the second essay, product market competition affects a firm's financial reporting quality. However, financial reporting quality may not be the only factor auditors take into account when they decide what fees to charge a client. The last essay, therefore, empirically explores the inter- and intra- industry effect of product market competition on audit fees. Prior literature posits two contradictory predictions on the relation between product market competition and audit fees. On the one hand, firms in a competitive market are expected to face higher liquidity risk, distress risk, and liquidation risk, thus increasing auditors' assessments of a client's business risk. So, audit fees are expected to increase with industry competitiveness. On the other hand, it is often argued in prior literature that product market competition decreases information asymmetry and mitigates agency problems between shareholders and managers and increases the accuracy of financial reporting, thus decreasing auditors' assessments of a client's audit risk resulting in necessary audits. So auditors tend to charge lower fees on firms in a more competitive industry. The study, then, empirically tests the relation between product market competition and audit fees and finds that auditors charge higher fees on firms in a more competitive industry. It also finds that auditors charge lower fees on firms with greater market power within the same industry.
Three Essays On Audit Committees And Financial Reporting Quality
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Author : John Lewis Abernathy
language : en
Publisher:
Release Date : 2010
Three Essays On Audit Committees And Financial Reporting Quality written by John Lewis Abernathy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Electronic dissertations categories.
This dissertation investigates the relationship between audit committee characteristics and financial reporting quality. The dissertation is organized into three essays that examine this topic. The first two essays examine audit committee characteristics and their association with various measures of financial reporting quality. Essay Three summarizes relevant literature regarding conservatism, a measure of financial reporting quality. In Essay One, I examine whether adding board members with accounting financial expertise to the audit committee is associated with an increase in a firm's accounting conservatism. The results of this study provide evidence that the addition of accounting expertise is positively associated with higher conservatism as measured by the Penman and Zhang (2000) C-Score measure of conservatism, but only for firms with a strong governance structure. For firms with weak governance, the addition of accounting expertise to the audit committee is associated with higher levels of conservatism as measured by the Givoly and Hayn (2000) negative accruals measure of conservatism. However, the addition of accounting financial expertise is not associated with higher levels of conservatism as measured by the Beaver and Ryan (2000) book-to market measure. Sensitivity analysis suggests that the addition of accounting financial expertise is associated with higher conditional conservatism as measured by the Basu (1997) asymmetric loss recognition measure. In Essay Two, I investigate the association between analyst earnings forecast properties and the presence of accounting financial expertise on audit committees. The results indicate that the presence of accounting financial expertise is associated with significantly higher forecast accuracy and significantly lower forecast dispersion. Additionally, I find that the non-accounting financial expertise is significantly associated with higher analyst forecast accuracy and lower forecast dispersion, but nonfinacial expertise is not. Essay Three summarizes relevant literature regarding conservatism, a measure of financial reporting quality.
Essays On Institutional Economics And The Quality Of Financial Reporting
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Author : John A. Hepp
language : en
Publisher:
Release Date : 2004
Essays On Institutional Economics And The Quality Of Financial Reporting written by John A. Hepp and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with categories.
Essays On The Determinants And Effects Of Financial Reporting Quality
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Author : Ting Luo
language : en
Publisher:
Release Date : 2007
Essays On The Determinants And Effects Of Financial Reporting Quality written by Ting Luo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
Essays Examining The Association Between Going Concern Audit Opinions Subsequent Earnings Management And Engagement Office Audit And Reporting Quality
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Author : Marcus R. Brooks
language : en
Publisher:
Release Date : 2014
Essays Examining The Association Between Going Concern Audit Opinions Subsequent Earnings Management And Engagement Office Audit And Reporting Quality written by Marcus R. Brooks and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This dissertation consists of two essays that examine the association between going concern audit opinions, subsequent earnings management and engagement office audit and reporting quality. Essay I (Chapter 1) examines the earnings management behavior of financially distressed firms following the receipt of a going concern opinion. The results indicate that financially distressed firms, unable to improve their financial condition through the manipulation of accounting accruals, report large magnitudes of negative discretionary and working capital accruals. As a result, these firms turn their attention to the manipulation of real operational activities. By engaging in various forms of real activity manipulation, financially distressed firms are able to reduce reported expenses, conserve cash, and most importantly, avoid bankruptcy and/or the receipt of a subsequent going concern opinion, despite being in financial distress. Essay II (Chapter 2) investigates whether audit quality and reporting accuracy is associated with engagement office propensity to issue going concern opinions. The findings from this study show clients of engagement offices with a high propensity to issue going concern audit opinions are associated with large magnitudes of income decreasing discretionary accruals, suggesting that these engagement offices require their clients to report more conservatively. The findings also show that these engagement offices' financial statement conservatism carries over to their financial reporting decision-making. The conservative reporting posture of these engagement offices leads them to issue going concern audit opinions to subsequently viable clients, leading to higher type I error rates. Overall, this dissertation contributes to the accounting literature addressing going concern audit reporting by creating two new variables that help to explain the association between the receipt of a prior going concern audit opinion and subsequent earnings management, and the association between engagement office propensity to issue going concern audit opinions and audit and reporting quality. The variables created could open a new stream of literature aimed at addressing earnings management behavior and choices following the receipt of a going concern opinion and also demonstrate that more attention should be directed to the characteristics of individual engagement offices because they are the ultimate determining factor of an audit firm's overall audit and reporting quality. Together, the studies show how important it is to analyze the effects of going concern audit reports and how they are associated with seemingly unrelated topics in accounting literature.
Essays On Organizational Ambidexterity Financial Reporting Quality And Investment Efficiency
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Author : Emmanuel Mwaungulu
language : en
Publisher:
Release Date : 2021
Essays On Organizational Ambidexterity Financial Reporting Quality And Investment Efficiency written by Emmanuel Mwaungulu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with Financial statements categories.
Organizational ambidexterity is a corporate strategy where a firm simultaneously seeks to pursue exploration and exploitation (March, 1991). Despite being described as one of the most interesting subjects in strategy research (O’Reilly & Tushman, 2013), accounting and finance scholars have not yet extensively explored this topic. In accounting, studies on organizational strategy have looked at the effects of exploitation and exploration on financial reporting quality (Bentley, Omer, & Sharp, 2013; Hsieh, Ma, and Novoselov, 2019), audit quality (Bentley et al., 2013; Bentley-Goode, Newton, & Thompson, 2017), and tax accounting (Higgins, Omer, & Phillips, 2015). But none of the studies have analyzed the impact of ambidexterity on accounting outcomes. Similarly, on the finance end, studies have looked at how ambidexterity affects firm performance (Fu & Morris, 2014; Han & Celly, 2008; Hill & Birkinshaw, 2014; Lubatkin, Simsek, Ling, & Veiga, 2006; Stubner, Blarr, Brands, & Wulf, 2012; Uotila, Maula, Keil, & Zahra, 2009) but there has not been any work that explains how ambidexterity relates to better financial performance. Contributing to the aforementioned literature and filling the highlighted gaps, this dissertation seeks to answer two research questions. First, does organizational ambidexterity affect financial reporting quality? Second, does organizational ambidexterity affect investment efficiency? The dissertation consists of two papers, each answering one of the research questions. The first paper addresses the relationship between ambidexterity and financial reporting quality. The paper hypothesizes that ambidextrous firms reduce agency problems, have better performance, and are less risky, and thus will engage in less accounting manipulation and have higher financial reporting quality. The study used machine learning to measure ambidexterity (Bonsall, Mammadov, & Vakilzadeh, 2021; K. Li et al., 2020) and the discretionary accrual method to measure financial reporting quality (Kothari, Leone, & Wasley 2005). The study found a positive and significant relationship between ambidexterity and high financial reporting quality. The paper introduces March’s (1991) organizational strategy typology into accounting research and extends current accounting and strategy research by showing ambidexterity impacts accounting outcomes. The second paper addresses the relationship between ambidexterity and investment efficiency. Specifically, the paper highlights how ambidexterity relates to better performance by analyzing investment efficiency between ambidextrous and non-ambidextrous firms. The second study also used machine learning to measure ambidexterity (Bonsall et al., 2021; K. Li et al., 2020). Following Benlemlih and Bitar (2018), Biddle, Hilary, and Verdi (2009), and S. Chen, Sun, Tang, and Wu, (2011), the study measured investment efficiency using the deviation from the expected investment levels approach. The study found that ambidextrous firms show the least amount of deviation from ideal investment levels and thus have better investment efficiency. The findings contribute to the literature by showing how ambidexterity leads to better performance. In additional analyses, the study found that ambidexterity specifically leads to better investment efficiency by reducing overinvestment. The findings have implications for practice as they provide guidance on what managers and consultants should consider when deciding firm strategy.
Two Essays On Corporate Governance Asset Securitization And Accounting Misstatement In The Banking Industry
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Author : Jing Zhang
language : en
Publisher:
Release Date : 2015
Two Essays On Corporate Governance Asset Securitization And Accounting Misstatement In The Banking Industry written by Jing Zhang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
"This dissertation consists of two essays that address important questions related to corporate governance and financial reporting in the banking industry. The first essay investigates why and how bank-level shareholder rights affect the quality of loans originated for securitization. Poor loan securitization has been blamed for the financial crisis. But why so many risky loans were originated for securitization remains an unsettled question. In this study, I attempt to address this question from a corporate governance angle. Focusing on a sample of securitization activities that involve less risk transfer, I find that banks with strong shareholder rights originate poor quality loans to securitize and experience large nonperforming and charge-off in securitized loans. This association is more pronounced in banks that have large and non-management shareholders. In addition, the negative impact of shareholder rights on the quality of securitized loans is also found to be more strengthened in banks that have larger information asymmetry between managers and shareholders. Lastly, banks with the highest shareholder rights pre-crisis are found to suffer the largest losses in securitized loans during the financial crisis. Overall, the evidence supports the view that stronger shareholder rights that impose intense pressure on managers encourage the origination and securitization of riskier loans. Hence, the failure of securitization is likely due to a failure of banks' internal governance, and there could be a potential negative consequence of having powerful shareholders in banks. These findings should provide insights into the ongoing regulatory reform with regard to rebuilding corporate governance mechanisms for financial institutions.The second essay investigates the characteristics of banks that are likely to misstate their financial statements. There has been an extensive amount of research studying the determinants of financial misreporting in the non-financial industry. However, very little work has been done as to what causes financial institutions to manage their earnings, and how we can best detect accounting misstatements in banks. The objective of this paper is to analyze the characteristics of misstating banks and develop a model to predict misstatements in the banking industry. Using a sample of 247 banks that had accounting restatements, I find that banks with financial misstatements have larger abnormal loan loss provisions, abnormal securitization income, and are more likely to engage in securitization business. I also find that managers are more likely to conduct accounting manipulations when there is underperformance, a demand to raise external financing, or a high leverage ratio. Furthermore, banks involved in more complicated business are found to face a higher likelihood of having misstatements. Together, my evidence suggests that bank managers use the discretions in loan loss provisions and securitization accounting estimates to manage financial numbers, and the key motivating factors for accounting manipulations are deteriorating performance and capital market pressure. Finally, a scaled logistic probability (B-score) is derived from the prediction model, which can be used to help investors, auditors or regulators to identify accounting misstatements in the banking industry." --
Financial Reporting Quality And Voluntary Disclosure
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Author : William F. Floyd
language : en
Publisher:
Release Date : 2016
Financial Reporting Quality And Voluntary Disclosure written by William F. Floyd and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This thesis is comprised of two essays that explore how investors' uncertainty over financial reporting quality influences firms' voluntary disclosures. I consider two shocks that cause investors to assign a higher likelihood of restatement and examine how managers respond using voluntary disclosures. Managers inform stakeholders of the firm through mandatory disclosures (e.g. financial statements) and voluntary disclosures (e.g. earnings forecasts, conference calls, press releases). Financial reporting quality represents the extent to which financial statements faithfully reflect the underlying economics of the firm, and therefore, how much stakeholders can learn from these mandatory disclosures alone. The focus of this thesis is on how managers use voluntary channels to inform stakeholders following shocks to investors' expectations of financial reporting quality.
Two Essays On International Financial Reporting Standards
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Author : Kim M. Shima
language : en
Publisher:
Release Date : 2007
Two Essays On International Financial Reporting Standards written by Kim M. Shima and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Financial statements categories.