The Corporate Governance Effects of Audit Committees

Arguments associated with the promotion of audit committees in many countries are premised on their potential for alleviating weaknesses in corporate governance. This paper provides a synthesis and evaluation of empirical research on the governance effects associated with audit committees. Given recent policy recommendations in several countries aimed at strengthening these committees, it is important to establish what research evidence demonstrates about their existing governance contribution.A framework for analyzing the impact of audit committees is described, identifying potential perceived effects which may have led to their adoption and documented effects on aspects of the audit function, on financial reporting quality and on corporate performance. It is argued that there is only limited and mixed evidence of effects to support claims and perceptions about the value of audit committees for these elements of governance. It is also shown that most of the existing research has focused on factors associated with audit committee existence, characteristics and measures of activity and there is very little evidence on the processes associated with the operation of audit committees and the manner in which they influence organizational behaviour.It is clear that there is no automatic relationship between the adoption of audit committee structures or characteristics and the achievement of particular governance effects, and caution may be needed over expectations that greater codification around factors such as audit committee members' independence and expertise as the means of correcting past weaknesses in the arrangements for audit committees. The most fundamental question concerning what difference audit committees make in practice continues to be an important area for research development. For future research we suggest (i) greater consideration of the organizational and institutional contexts in which audit committees operate; (ii) explicit theorization of the processes associated with audit committee operation; (iii) complementing extant research methods with field studies; and (iv) investigation of unintended (behavioural) as well as expected consequences of audit committees.     

The value of audit quality in public and private companies: evidence from Spain

This paper compares the value of audit quality, proxied by the selection of a big N auditor, to the external claimholders of private and public companies. Although the combination of a lower ownership concentration of public companies, the greater demand for financial information quality about these companies and their higher litigation risk can result in the expectation that audit quality should be more valuable for public than for private companies, the greater information asymmetry between the managers and the external stakeholders and the unavailability of alternative mechanisms for monitoring the managers can make external audit more valuable for the external claimholders of private companies. In this paper, we test these two competing views by analysing if banks and lenders take into account auditor selection in the formation of the cost of debt. Our results support the second view: we find that only private companies obtain a lower cost of debt when they are audited by a high-quality auditor. These results are robust to both endogeneity and unobserved firm-specific heterogeneity.     

公司治理、控制权性质与审计定价

借鉴Simunic的审计定价模型,构建关于审计定价影响因素的多元线性回归方程,并以沪深两市上市公司2007年数据为研究对象,对股权结构、公司治理与审计定价之间的关系进行实证检验.研究结果表明,总体而言,公司治理因素对中国上市公司审计定价的解释力有限,说明中国会计师事务所在决定审计收费时对被审计单位的公司治理因素考虑较少.具体而言,终极控制人为政府的上市公司审计费用较低,股权集中度、管理层持股比例与审计定价之间大体上呈U型关系,即股权适度集中和管理层适度持股最有利于降低审计定价,进一步的研究发现,管理层持股比例与审计定价的U型关系仅存在于非国有控股公司样本中.研究还发现,中国会计师事务所在确定审计费用时会结合公司控制权的性质考虑风险因素时审计定价的影响.     

The impact of corporate governance on auditor choice: evidence from Germany

Statutory audits are only beneficial if the appropriate audit quality is both provided and perceived by the users of audited financial statements. On the one hand, Big 4 audit firms are commonly viewed as producing high quality audits. On the other hand, regulators complain about the high market share of Big 4 audit firms. In this context, it is of interest to examine the drivers of a Big 4 audit firm selection. Despite extensive prior research, there is still a lack of findings form Continental European countries and on the impact of corporate governance on auditor choice. This paper on hand is intended to fill the related research gap. Thus, our study identifies variables that determine the auditor choice of large German listed companies. Based on a sample of 432 firm-year observations for the period 2010–2014, our logistic regression analysis suggests that the corporate governance structure influences auditor choice significantly. Notably, the annual meeting frequency of the audit committee and the size of the supervisory board are positively associated with the engagement of a Big 4 audit firm. However, the meeting frequency of the supervisory board and the compliance to the German corporate governance code are negatively related to the choice of a Big 4 auditor. Additionally, the proportion of female supervisory board members does not exert a significant impact. The results remain stable when the DAX30 observations, for which statutory audits are exclusively performed by Big 4 audit firms, are excluded. The main contribution of our paper is, that it sheds light on the impact of corporate governance variables not analyzed by prior research, like supervisory board characteristics, deviations from a corporate governance code, or the female quota, in a Continental European setting, and that it mainly indicates a complementary relationship. Despite the peculiarities of the German setting, the two-tier corporate governance system and the low level of investor protection, the findings of our study are not only relevant for Germany, since many other Continental European countries are characterized by a similar environment. The study’s findings are of particular interest for regulators when addressing audit market structure problems.     

Demographic and Attitudinal Correlates of Employee Satisfaction with an ESOP

A firm's adoption of an employee stock ownership plan (ESOP) has been hypothesized to increase employee productivity. Resulting employee productivity is hypothesized to improve firm profitability and thus ultimately improve stock performance. Most studies to date have tested potential relationships between the mere presence of an ESOP and changes in employee productivity and firm profitability. Few studies have attempted to identify the variables that are associated with employee satisfaction with an ESOP. In order to maximize the productivity gains associated with the adoption of an ESOP, researchers must first identify the relationships and variables most likely to positively affect employee attitudes and subsequently their satisfaction toward an ESOP. The purpose of this paper is to identify the demographic and attitudinal correlates of employee satisfaction with an ESOP. This exploration will provide a more substantive foundation for future research efforts in the area. Correlation and regression results indicated that employees' perceived influence on decision-making, perceived pay equity and perceived influence on stock performance, when examined separately, were each significant correlates of ESOP satisfaction. When combined with the modelled employee demographics in a step-wise regression model, only employees' perceived influence on stock performance, perceived influence on decision-making and age explained a statistically significant amount of variance in ESOP satisfaction.     

The Effect of Perceived Novelty on the Adoption of Information Technology Innovations: A Risk/Reward Perspective

A fundamental characteristic of any innovation is its novelty, the newness or freshness of the innovation in the eyes of the adopter. Past research has often considered novelty to be inherent to an information technology (IT) innovation, yet it is also likely that perceptions of novelty differ widely across individuals. Nevertheless, the role that the novelty of an IT innovation plays in adoption is not well understood. The primary goal of this research effort is to frame the perceived novelty of an IT innovation as a salient affective belief in the nomological network related to adoption. Further, we examine how perceived novelty influences the way individuals reconcile their perceptions of risk versus reward when considering the adoption of an IT innovation. Two empirical studies with 424 and 138 participants, respectively, examine the effect of perceived novelty on IT innovations from a risk/reward perspective. Results indicate that perceived novelty is a salient affective belief that plays a significant role in the adoption of IT innovations. Implications for both theory and organizational decision making are examined.     

审计风险的博弈分析

由于在审计监督行为中,审计与被审计单位作为矛盾的两个方面存在着信息不对称现象,从而导致审计结果与实际不符,产生了审计风险。据此,本文拟采用博弈论这一分析工具,主要从注册会计师与管理当局和注册会计师与监管机构两个方面建立模型,进行博弈分析。     

PSS business model conceptualization and application*

The discussion about business models has gained considerable attention in the last decade. Business model frameworks have been developed in the literature as management methods helping companies to comprehend and analyse their current business logic and guide the deployment of new strategies. In response to calls for a deeper understanding of the application of a business model approach to product-service systems (PSS), this study develops a two-level hierarchical framework that (i) includes a set of components with pertinent, second-order variables to take into account when undergoing the shift from products to solutions; (ii) supports industrial companies, especially SMEs, in designing their future business model and in consistently planning the actions needed to implement it. The framework was applied and refined within real-life settings. The application to KINE – a robot solutions supplier – shows how key challenges faced by servitization firms may be thoroughly addressed through the adoption of a business model perspective.     

中国证券市场审计任期与盈余质量关系的实证检验

安然事件以来,审计任期与盈余(经审计的)质量的关系成为了研究热点.本文运用中国证券市场1998-2004年上市公司的公开数据,同时从事务所任期与合伙人任期两大层面实证检验了审计任期与盈余质量之间的关系.实证结果显示:随着会计师事务所审计任期的增加,盈余质量显著地表现出先逐渐上升后逐渐下降的倒U型趋势,且拐点稳定在6-8年之间;而随着签字注册会计师审计任期的增加,盈余质量虽然总体逐渐上升,但此趋势尚不足够显著.     

Measuring Organizational Performance: A Case for Subjective Measures

We review the organizational performance (OP) measurement literature highlighting the limitations of both objective and subjective measures of performance. We argue that, with careful planning, subjective measures can be successfully employed to assess OP. This is because often consistent, reliable and comparable compatible objective data on OP measures – particularly across countries and sectors – is difficult to come by. Considering that an inflated OP measure can be cross‐checked with the use of secondary data, managers have little incentive to report such figures. As a result, when quizzed over the stand‐alone performance measures of their organizations or vis‐à‐vis their rivals, managers accurately assess and respond to questions on the performance of their organizations. An in‐depth statistical exercise conducted on the subjective measures of OP as reported by managers of four sets of companies in four separate countries, show consistent results, thus lending support to this premise.     

On the evaluation of commonality strategy in product line design: The effect of valuation change and distribution channel structure

This paper investigates a manufacturer's optimal decisions in relation to the adoption of the commonality strategy in a decentralized channel as opposed to a centralized channel. Our model, through valuation premium and discount, captures the possible changes in the perceived quality made by customers as a result of the use of common design in the high-quality and low-quality products. We show that commonality always help reduce the extent of quality distortion encountered by the low-valuation segment, regardless of the channel structure. We also show that the adoption of commonality strategy in a decentralized channel is able to reduce channel efficiency loss, which may lead to improvements in the channel profits even when there is no cost saving associated with the use of common components. The valuation premium and discount are influential on several important measure including optimal quality levels, channel profits, and consumer surplus. Furthermore, we point out an important issue on the coordination between the manufacturer and the retailer that must be addressed if the commonality strategy is to be implemented in a decentralized channel.     

The Cadbury Committee recommendations on corporate governance – a review of compliance and performance impacts

In December 1992, the Cadbury Committee published their Code of Best Practice. The recommendations, which largely reflected perceived best practice at the time, included separating the roles of CEO and chairman, having a minimum of three non-executive directors on the board and the formulation of audit committees. The Code also advocated that a more active role be taken by institutional investors in the promotion of good practice in corporate governance. This paper discusses how agency problems may be (partially) resolved by corporate governance, reviews the evidence on compliance with the Cadbury Code and examines the relationship between board structure and firm performance, looking for evidence that the Code has enhanced board performance. While there is no empirical evidence of an association between board structure and firm value, there is some evidence that compliance with the Cadbury recommendations enhances board oversight with respect to the manipulation of accounting numbers and the discipline of the top executive.     

感知价值和个人特质对用户移动购物采纳意图的影响研究

从消费者感知价值和自我效能感的角度,以基于价值的采纳模型和技术接受模型为理论基础,通过调研问卷方法研究影响消费者移动购物意图的若干关键因素.结果表明,用户对于移动购物的感知有用性和自我效能感影响了感知价值,并与感知价值一起影响采纳意图.所提出的移动购物采纳模型解释度较高,对用户采纳意图给出了技术特性视角和个人特质视角的比较全面的解释,并结合研究结果对移动购物的发展提出了具体的建议.     

The antecedents of psychic distance

This study investigates the antecedents of psychic distance. Building on original data in 25 of the world's largest economies, we investigate potential drivers of perceived psychic distances to foreign countries. The results show these perceptions to be influenced by a range of cultural, geographic, political and economic factors. Among these, absolute geographic distance accounts for the largest share of the explained variance, suggesting that physical distance should be given a more prominent role when it comes to empirically investigating international business decisions for which psychic distance perceptions may be important. The findings also suggest that, used in isolation, ‘cultural distance’ – as measured by the so called Kogut and Singh index – is a poor predictor of such perceptions.     

Returnable transport packaging in developing countries: drivers,barriers and business performance

Abstract

This study, drawing on natural resource-based view, identifies drivers, barriers and the potential benefits of returnable transport packaging (RTP) – that is, the repeated use of packaging items – and conceptualises RTP as a technology and resource that supports organisational competitiveness. Specifically, it investigates the impact of RTP adoption on business performance, the effects of drivers, barriers and size of organisations. The data collection took place in Nigeria and South Africa. The findings suggest that RTP has a significant positive impact on business performance. Whilst prior studies seem to suggest that shrinkage and attrition are the major problems identified with the usage of RTP, our findings indicate that there are several other barriers affecting RTP adoption and the resultant performance advantage. The results also show that there is an increasing move towards adoption of RTP but some organisations are faced with financial constraints, especially the small and medium size enterprises. In addition, the results show that RTP is largely a ‘sustainability facing’ initiative with adopters motivated primarily by potential environmental, economic, social and operational benefits of adoption.     

External audit and bankruptcy prediction

In this paper, we investigate the relationship between external auditor characteristics and the likelihood of bankruptcy. We use a sample of US public companies to analyse whether auditor attributes are associated with default. We also test whether the inclusion of such attributes in bankruptcy prediction models improves their predictive ability. We find that firms audited by industry-expert auditors, large audit firms and long-tenured auditors are less likely to default. Firms with higher audit fees are more likely to default. Our results also show that the inclusion of auditor attributes significantly increases the predictive ability of bankruptcy prediction models. This paper contributes to the literature about auditing and bankruptcy prediction. Our results suggest that the auditor attributes can provide predictive signals concerning a default risk and that an external audit can play a relevant role in early warnings of financial distress. Our study also suggests that bankruptcy prediction models can become more effective if they are complemented with audit data. Our results are of interest to market participants, auditors, regulating authorities, banks and other financial institutions that are interested in credit risk assessment.     

Limiting Exposure to Collateral Liability Associated With ISO 14001 EMS Audits

The purpose of this article is to provide suggestions on how to limit the collateral liability associated with ISO 14001 environmental management system (EMS) auditing activities. Due to the detailed, invasive nature of EMS audits, companies performing such activities may expose themselves to collateral risks. Collateral risk is liability not directly associated with ISO 14001 activities, but borne through the unrelated process of EMS audit activities. Examples of collateral risks include issues of non-compliance, unintended discovery of evidence in civil tort claims and exposure to regulatory sanctions. Therefore, well-defined management of EMS audits represents an important aspect of limiting risk. This article identifies several strategies for managing and reducing these legal risks. These strategies include the rigorous management of compliance audits, concisely defining audit scopes, training auditors and auditees, understanding and using audit privileges as appropriate, exploring the use of self-declaration (for ISO 14001 conformance purposes), and using reliable document control methods. While completely eliminating liability represents a laudable but challenging goal, these methods should reduce collateral exposure to corporate and personal liability.     

The relationship between burnout and risk-taking in workplace decision-making and decision-making style

This study aimed to investigate what decision-making styles might be exhibited by employees who experience burnout. Using a Work Risk Inventory (WRI), developed for this study, which included generic workplace scenarios, it was also explored whether such employees take relatively more risky decisions. Risk was conceptualised as the adoption of decisions that threaten one’s reputation at work, job performance and job security. The mediating effect of the likelihood and seriousness of the consequences of the worst that could happen in each given scenario on the relationships between dimensions of burnout and risk-taking was also tested. A total of 262 employees in various occupations completed an online survey, including measures on burnout, decision-making styles and the WRI. As predicted, dimensions of burnout – exhaustion, cynicism and professional inefficacy – correlated significantly with avoidant decision-making and negatively with rational decision-making. The seriousness of the consequences of the worst-case scenario occurring mediated the relationship between professional inefficacy and risk-taking. In the context of identifying mechanisms by which burnout leads to risky decision-making, the findings suggest that employees’ sense of professional inefficacy determines their risky decision-making. The contribution to theory and implications for practice are discussed.     

Influence of Environmental Factors and Prior Changes on the Organizational Adoption of Changes in Products and in Technological and Administrative Processes

This research studies how organizational adoption of three different types of change – change in products, in technological processes and in administrative processes – is influenced by environmental factors such as industry regulation and market concentration and by the prior adoption of different types of change. We tested our hypotheses in the service sector, examining a sample of bank holding companies in the USA for the period 1975–1995. We found that (1) environmental factors influence rates of change in products, in technological processes and in administrative processes differently; (2) changes in products are followed by changes in both technological and administrative processes; and (3) the three types of change exhibit momentum, as firms are more likely to implement changes similar to those they have recently undertaken. We discuss the implications of our findings for the theory and management of change in organizations.