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.     

Homophobic Bullying and Cyberbullying: Study of a Silenced Problem

Bullying and cyberbullying have been studied extensively. In lesbian, gay, bisexual, and questioning (LGBQ) students, these phenomena seem to be overrepresented so that, although they share some common elements, homophobic bullying and cyberbullying could be considered as specific phenomena. This study analyzed homophobic bullying and cyberbullying, with the participation of 533 Spanish secondary school students aged from 12 to 20 (M = 14.9, SD = 1.7). The results showed that students identified as non-heterosexual experienced a higher level of being targeted with bullying and cyberbullying, almost one half of them declaring that they had been victimized and more than 20% cybervictimized. Many stated they had suffered both kinds of harassment. In addition, the prevalence of all kinds of bullying was higher among non-heterosexual students. Regression analyses showed that sexual orientation could be considered a risk factor for suffering these aggressions. We discuss results in relation to previous research and look at their practical implications.     

Improving Well-Being in Bhutan: A Pursuit of Happiness or Poverty Reduction?

Increasing happiness is a key priority for the Bhutanese government. This priority displaces more traditional (economic) objectives such as the pursuit of income growth and the reduction of income poverty. This paper examines the implications of this approach by examining whether there are common correlates of the four following measures of human well-being in Bhutan: income poverty; multidimensional poverty; perceived poverty; and happiness. Our findings suggest that whilst there is a degree of commonality, determinants of the different measures of well-being are distinct. Common factors include having a savings account, levels of literacy and household size. Further we show that higher levels of income poverty, multidimensional poverty and perceived poverty are found to be negatively associated with happiness. Importantly, our findings suggest that a focus on increasing happiness might come at the expense of improving other measures of wellbeing.     

Prevalence and Risk Factors Among Minors for Online Sexual Solicitations and Interactions With Adults

The research on online child sexual victimization has mainly focused on the sexual solicitation of minors (i.e., sexual requests by an adult), with scarce information available on sexual interactions (e.g., cybersex or meeting in person) in which a minor is exploited by an adult. In the present study, we analyzed the prevalence and risk factors associated with both sexual solicitations and interactions of minors with adults. The sample included 2,731 minors between 12 and 15 years old (50.6% female). The minors completed several self-report questionnaires about sexual solicitations and interactions with adults, including possible risk factors (e.g., sociodemographic variables, Internet use, and psychological adjustment). Of the participants, 15.6% of girls and 9.3% of boys reported sexual solicitations, and 8.2% of girls and 7.4% of boys reported sexualized interactions with adults. Among the variables studied, several appeared related to both sexual solicitations and interactions: older age, having been involved in sexting, being a victim of cyberbullying, having unknown people in friends list, using chat, time spent online on a weekday, and depression symptoms. Gender (being female), using video chat, and instant messaging by computer were significant variables for sexual solicitation but not for sexual interaction; participation in online games was significant only for sexual interactions. Finally, minors reporting sexual interactions presented a higher risk profile than those reporting only sexual solicitations. These findings highlight the relevance of distinguishing between sexual solicitations and sexual interactions and suggest important avenues for prevention programs.     

Comprehensive maternity support and shared care in Switzerland: Comparison of levels of satisfaction

Background

According to the woman-centred care model, continuous care by a midwife has a positive impact on satisfaction. Comprehensive support is a model of team midwifery care implemented in the large Geneva University Hospitals in Switzerland, which has organised shared care according to the biomedical model of practice. This model of care insures a follow up by a specific group of midwives, during perinatal period.

Quality splitting in waste incineration due to non-convex production possibilities

Using a real case study of waste incineration, we show a new form of non-convexity in the transformation process of the inputs into the outputs. Its consequence is quality splitting, i.e. the separate use of different input qualities, yielding a better result than a homogeneous mix. For waste incineration plants (WIP), this leads to surprising practical implications for strategies of waste collection and supply, as well as for the control of a WIP. The insights are based on the evaluation of a basic model of waste incineration developed for the case study. Thus, the paper also contributes to production research by modelling waste incineration as a central process for the “reduction” of waste from manufacturing and consumption.     

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.     

Integrating Household Risk Mitigation Behavior in Flood Risk Analysis: An Agent‐Based Model Approach

Recent studies showed that climate change and socioeconomic trends are expected to increase flood risks in many regions. However, in these studies, human behavior is commonly assumed to be constant, which neglects interaction and feedback loops between human and environmental systems. This neglect of human adaptation leads to a misrepresentation of flood risk. This article presents an agent‐based model that incorporates human decision making in flood risk analysis. In particular, household investments in loss‐reducing measures are examined under three economic decision models: (1) expected utility theory, which is the traditional economic model of rational agents; (2) prospect theory, which takes account of bounded rationality; and (3) a prospect theory model, which accounts for changing risk perceptions and social interactions through a process of Bayesian updating. We show that neglecting human behavior in flood risk assessment studies can result in a considerable misestimation of future flood risk, which is in our case study an overestimation of a factor two. Furthermore, we show how behavior models can support flood risk analysis under different behavioral assumptions, illustrating the need to include the dynamic adaptive human behavior of, for instance, households, insurers, and governments. The method presented here provides a solid basis for exploring human behavior and the resulting flood risk with respect to low‐probability/high‐impact risks.     

Tobacco use in the treatment trenches

As reported here (see “Dirty Words: Smoker, Vaper, Harm Reductionist?” ADAW, Oct. 14, 2019; https://onlinelibrary.wiley.com/doi/10.1002/adaw.32509 ), recently I have focused much of my time on raising alarms about the very high rates of smoking among addiction treatment and recovery populations. In addition to archival research, I have conducted a series of key informant interviews to better understand the roots of our field's ongoing reluctance to address this issue. These interviews with national leaders in the alcohol and drug field confirmed that when presented with statistics about the very high rates of cigarette smoking among treatment and recovery populations, there is widespread consternation about the resulting tobacco‐related mortality and morbidity. Paradoxically, however, this concern has not translated into strong remedial action.