Internal audit function quality and financial reporting: results of a survey on German listed companies

Most prior studies on internal audit function (IAF) quality and financial reporting have focused on the US setting and have found a positive association between IAF quality proxies and both financial reporting quality and audit efficiency. In this study, we apply the German setting that is characterized by a two-tier board system of corporate governance and different prerequisites for the serving-two-masters problem. This might weaken the IAF’s ability to monitor financial reporting-related processes. To analyze this, we use survey data to measure IAF quality in the German setting and run multiple regressions to examine the association of several IAF quality characteristics and a self-developed IAF quality score with financial reporting quality and audit efficiency. The results show that also in a two-tier system, a high-quality IAF is able to contribute to both financial reporting quality and audit efficiency. Our findings support the notion that the IAF serves as an essential element of effective corporate governance and plays an important role in financial reporting. Moreover, as a practical implication of interest to regulators and managers, we identify that the external certification of the IAF and internal audit-related certifications of IAF employees may contribute to higher financial reporting quality and lower audit fees.     

Audit committee and internal audit and the quality of earnings: empirical evidence from Spanish companies

Corporate scandals and failures such as Enron, WorldCom, etc. were highly catastrophic and had a terrible effect on stakeholders. The pressure of globalisation and the intense competition have lead to organisations encouraging good corporate governance. Organisations have to promote transparency and accountability of financial information. As Gramling et al. (J Account Lit 23:194–244, 2004) argued there are four important mechanisms of corporate governance include boards of directors, audit committees (among others) and internal and external audit functions. However, this paper will focus on the relationship between two corporate governance mechanisms (audit committee and internal audit function). Thus, our purpose is to analyse the relation between characteristics of the audit committee and internal audit function and earnings management measured as abnormal accruals to test the quality of financial statements. We hypothesise that the association between the effectiveness of the audit committee and the presence of an internal audit function and its relationship with this committee would indicate less opportunity for management to manipulate earnings. Using a sample of 108 non-financial Spanish companies that traded on the Madrid Stock Exchange between 2003 and 2006 (432 observations), we have found that the size and number of meetings of the audit committee had a significant negative association with earnings manipulations. Also, our results suggest that a negative relation between having an internal audit function and earnings management.     

Effect of the board of directors and the audit committee on firm performance: a panel data analysis

This research examines the relationship between independent directors, the audit committee (AC), and firm performance, taking into account the impact of the chief executive officer’s powers and block shareholders. We use the maximum likelihood estimator, based on agency theory assumptions and cylindered panel data, to examine three models of firm performance. The results show that the independence of the board is reflected clearly by increased economic and equity performance of the firm. However, an AC that is fully independent or meets frequently is associated with lower firm performance. Unlike pension funds, institutional shareholders can be considered an effective control mechanism in the context of France. Our results development includes advanced explanations for market liquidity and shareholders’ portfolios. The study period ends before the European regulation on ACs came into effect in 2008. This allows for an appreciation of soft law in French corporate governance. It also lets us compare the data with the way firms operate their boards one decade later. The evidence provides useful guidelines on the supremacy of soft law in corporate governance and suggests that the composition and functioning of the board of directors should be moderated based on the firms’ context. The specificity of the cylindered panel data helps to better examine the impact of the board and AC’s independence and functioning in French corporate governance structure.     

An empirical study of the relationship between a self-service technology investment and firm financial performance

More and more enterprises are taking advantage of self-service technologies (SSTs) in their customer-related operating activities, especially service firms. Although research on SSTs is prevalent, few studies have examined the impact of SSTs on firm financial performance. Given the growing importance of SSTs in the service industries in general and in the banking industry in particular, we therefore empirically examined the impacts of ATMs, one of the most widely accepted SSTs, on bank financial performance. Contrary to the existing literature, our results show ATMs have a positive relationship with profitability. However, we find no association between ATMs and growth performance.     

质量成本各要素关系研究及模型建立

文章主要针对质量成本各组成部分间的关系以及质量成本与质量水平间的关系做深入分析研究。文章通过建立系统动力学仿真模型来研究不同质量水平下质量成本各组成部分间的关系;质量成本与质量水平的关系研究则利用灰色系统理论解决历史数据不足够多的情况下质量成本与质量水平间的关系,并通过灰色线性回归组合模型建立质量成本与质量水平间的关系模型。首先,文章分析讨论质量成本各组成部分间的三种关系模型;其次,为更进一步深入讨论不同质量水平下质量成本各组成部分间关系,文章建立质量成本各组成部分间的系统动力学模型;再次,文章采用灰色系统模型GM(1,1)与线性相关模型相组合的组合模型并结合新陈代谢处理方法建立一种更为优化的质量成本与质量水平间的关系模型;最后,文章通过案例研究证明质量成本灰色线性回归组合模型的准确性。     

Explaining the influence of time budget pressure on audit quality in Sweden

This paper is aimed at explaining how time budget pressure influences audit quality in the Swedish context. A hypothesis is deduced and tested through a survey sent to Swedish auditors. The Swedish context provides a special setting since audit firms and auditors have been facing new pressures due, for example, to the removal of statutory audits for a majority of the companies in Sweden. The findings show that time budget pressure lowers the quality of audits performed by Swedish auditors, but it is not the only explanation. Audit quality is also related to other factors such as gender, position, experience, number of clients, local office size and audit firm. Thus, the model is useful for explaining the factors influencing audit quality and could be used and expanded in future studies. The study also has practical implications showing that when trading-off between audit efforts and available resources and setting time budgets for each audit assignment, audit firms should also consider the personal characteristics of the auditors.     

The effects of coauthorship on the quality of financial research papers

This paper analyzes whether formal collaboration in terms of coauthorship enhances paper quality in financial research. Analyzing all papers presented at DGF annual meetings in the period from 1996 to 2005, we report the following major findings: First, we find superior paper quality of coauthored papers compared to single-authored papers. This holds true for two quality proxies, publication probability and publication quality (as measured by the original and the updated Jourqual rating). Second, the capability of scholars, measured by a citation measure derived from citations in Google Scholar, shows to be an additional important factor for explaining paper quality. Third, the employed methodology of a paper (e.g., empirical analysis, theoretical analysis) does not systematically affect paper quality. However, it is important to differentiate between empirical and theoretical papers. Whereas coauthorship shows to be a quality enhancing factor for empirical papers, this does not hold true for theoretical papers. Fourth, the origin of data is a crucial determinant of the publication success for empirical papers. In particular, papers which exclusively analyze data from Germany are published in less reputable journals.     

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.     

On the relationship between energy complexity and other boolean function measures

Journal of Combinatorial Optimization - We focus on energy complexity, a Boolean function measure related closely to Boolean circuit design. Given a circuit $$mathcal {C}$$ over the standard basis...     

Making sense of conflicting empirical findings: A meta-analytic review of the relationship between corporate environmental and financial performance

Despite the tremendous number of publications concerned with the relationship between corporate environmental performance (CEP) and corporate financial performance (CFP), inconsistent empirical findings persist and the overall picture remains vague. Drawing on a hybrid theoretical framework (combining the theoretical reasoning of the natural-resource-based view (NRBV) with instrumental stakeholder and slack resources arguments), we address the apparent lack of consensus by meta-analytically integrating the findings of 149 studies. We pay particular attention to two highly material issues: the direction of causality and the multidimensionality of the focal constructs. Meta-analytic results indicate that there is a positive and partially bidirectional relationship between CEP and CFP. In addition, our findings suggest that the relationship is stronger when the strategic approach underlying CEP is proactive rather than reactive. Furthermore, we reveal moderation effects of methodological artifacts, which may provide explanations for the inconsistency of the results of previous studies. Based on our findings, we discuss the implications and outline avenues for further research.     

The relationship between HRM practices and organizational commitment of knowledge workers. Facts obtained from Swiss SMEs

This paper explores the effects of human resource management (HRM) practices in Swiss small-to-medium enterprises (SMEs). More specifically, the main objective of this study is to assess the impacts of HRM practices developed in Swiss SMEs upon the commitment of knowledge workers. Using data from a survey of over 198 knowledge workers, this study shows the importance of looking closer at HRM practices and, furthermore, to really investigate the impacts of the different HRM practices on employees' commitment. Results show, for example, that organizational support, procedural justice and the reputation of the organization may clearly influence knowledge workers' commitment, whereas other HRM practices such as involvement in decision-making, skills management or even the degree of satisfaction with pay do not have any impact on knowledge workers' commitment.     

金融市场联动形态结构的非线性分析

从微观层面分析货币市场与资本市场的联结问题,通过构建支持向量机(SVM)和Copula函数的集成系统,研究金融市场联结途径与形态结构,深层次挖掘两个市场互动的规律.针对金融时间序列的非线性、非平稳特性,利用改进的样本加权支持向量机估计SHIBOR和股票市场价格指数收益率的边缘概率分布函数.然后,再采用优选的Copula函数进一步分析它们的联合概率分布及其在不同情形下的变化情况,获得了货币市场与资本市场联动的相依结构与非线性联结的动态特性.实证分析表明,1Y-SHIBOR和股票市场价格指数收益率的联合分布概率在两者不同变化方向和幅度上表现出不同的变化规律,并存在不对称性.压力测试分析也呈现出相似的结果.     

On the assessment of corporate productivity changes and their impact on financial performance

This paper explores desirable characteristics of a corporate productivity measure (CPM). Such a measure is defined and offered as an alternative to approaches presented in the literature. In addition, the accuracy of several productivity measures is explored and the CPM developed here is observed to be most precise. This finding is utilized to assess the dependency of profitability on productivity. For the sample firms a surprisingly low impact is observed, which demonstrates that productivity changes generally do not influence profitability to a high degree.     

On identifying codes in the Cartesian product of a path and a complete graph

Identifying codes in the Cartesian product of a complete graph and a path are considered. After proving a set of sufficient conditions for a set in such a graph to be an identifying code, we then construct minimum identifying codes when the complete graph is of order three or at least five, and when the path is of order at least three.     

Environmental practices and firm performance in emerging markets: the mediating role of product quality

Environmental practices have not received as much research attention in emerging market contexts as traditional topics like quality. However, the importance of environmental practices for a firm’s production strategy has been increasing at an unprecedented level across the globe. Our research objective is, therefore, to investigate the interplay between environmental practices and quality in the pursuit of firm performance. Relying on 492 responses from Turkish manufacturers to test our hypotheses, we show that environmental practices directly improve the quality of products over and above the effect of quality management practices in emerging markets. Product quality, in turn, is important for increasing firm performance, acting as a mediator for the positive effects of environmental practices on performance. Thus, we reveal that product quality functions as an instrumental conduit between environmental practices and firm performance in emerging markets like Turkey where stakeholder pressures are weak, and regulations are often not properly enforced.     

Modelling the impact of performance management practices on firm performance: interaction with human resource management practices

The paper draws on resource orchestration theory to investigate whether and how performance management (PM) practices interact with human resource management (HRM) practices in organisations as well as how this interaction affects firm performance. The proposed theoretical model was tested through a survey of 192 UK firms using Partial Least Squares approach for structural equations modelling. The findings show that the effect of PM practices on firm performance is better explained when the interaction between these practices and other organisational practices is considered. In particular, we examine the extent to which the interaction between PM practices and commitment-based HRM practices affects performance. We find that when HRM practices and PM practices are misaligned, their effect on performance can be negative. This is the first paper in the PM literature that establishes the relationship between PM and HRM practices in organisations and demonstrates the effect of this relationship on firm performance.