顶刊推送《Contemporary Accounting Research》2022-39-1

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Contemporary Accounting Research

Volume 39, Issue 1

（Spring 2022）

Contemporary Accounting Research (TOP 6 ), the premiere research journal of the Canadian Academic Accounting Association, publishes leading- edge research that contributes to our collective understanding of accounting's role within organizations, markets or society. Canadian based, and global in scope, CAR seeks to reflect the worldwide intellectual diversity in accounting research. Therefore, CAR welcomes interesting and intellectually rigorous work in all topics of accounting, using any appropriate method, and based in any discipline or research tradition that can contribute to accounting knowledge.

catalog

[1]. Managerial Career Concerns and Corporate Tax Avoidance: Evidence from the Inevitable Disclosure Doctrine

Ningzhong Li, Terry Shevlin, Weining Zhang

[2]. Language and Management Forecasts Around the World

Yuyan Guan, Zheng Wang, M. H. Franco Wong, Xiangang Xin

[3]. Does Susceptibility to the Numerosity Heuristic Impact Juror Assessments of Auditors' Liability?

Jennifer R. Joe, Benjamin L. Luippold, Kerri-Ann Sanderson

[4]. Restating Internal Control Reports Following Financial Statement Restatements: Determinants and Consequences

Mei Feng, Chan Li, K. Raghunandan, Lili Sun

[5]. The Role of Timing and Management's Remediation Actions in Preventing Failed Remediation of Material Weaknesses in Internal Controls

Andrew J. Imdieke

[6]. Across the Pond: How US Firms' Boards of Directors Adapted to the Passage of the General Data Protection Regulation

April Klein, Raffaele Manini, Yanting (Crystal) Shi

[7]. A Matter of Appearances: How Does Auditing Expertise Benefit Audit Committees When Selecting Auditors?

Matthew Baugh, Nicholas J. Hallman, Steven J. Kachelmeier

[8]. Accounting as a Normalizing Tool for Transitional Dirtiness: The Case of the US Adult-Use Cannabis Industry

Andrea M. Romi, Heather Carrasco, Casey A. Camors, John J. Masselli

[9]. Assessing the Influence of Different Interest Groups on International Tax Policy: Evidence from the BEPS Project

Christina Elschner, Inga Hardeck

[10]. Motivated Perspective Taking: Why Prompting Auditors to Take an Investor's Perspective Makes Them Treat Identified Audit Differences as Less Material

Elizabeth C. Altiero, Yoon Ju Kang, Mark E. Peecher

[11]. Do Alma Mater Ties Between the Auditor and Audit Committee Affect Audit Quality?

Divesh S. Sharma, Madhukar K. Singh, Arvind Patel

[12]. Organized Labor Effects on SG&A Cost Behavior

Hsihui Chang, Xin Dai, Eric Lohwasser, Yue Qiu

[13]. Corporate Integrity Culture and Compliance: A Study of the Pharmaceutical Industry

Jennifer L. M. Altamuro, John V. Gray, Haiwen (Helen) Zhang

[14]. What Determines Effective Tax Rates? The Relative Influence of Tax and Other Factors

Casey M. Schwab, Bridget Stomberg, Junwei Xia

[15]. A Tale of Two Supervisors: Compliance with Risk Disclosure Regulation in the Banking Sector

Jannis Bischof, Holger Daske, Ferdinand Elfers, Luzi Hail

[16]. Corporate Governance Reforms and Cross-Listings: International Evidence

Chih-Hsien Liao, Albert Tsang, Kun Tracy Wang, Nathan Zhenghang Zhu

[17]. Auditing Non-GAAP Measures: Signaling More Than Intended

Spencer B. Anderson, Jessen L. Hobson, Ryan D. Sommerfeldt

[18]. Relative Performance Evaluation and Earnings Management

Jakob Infuehr

[19]. How Changes in Expectations of Earnings Affect the Associations of Earnings Overstatements and Audit Effort with Audit Risk and Market Price

Evelyn R. Patterson, J. Reed Smith, Samuel L. Tiras

[20]. The Effect of SEC Reviewers on Comment Letters

Matthew Baugh, Kyonghee Kim, Kwang J. Lee

[21]. A Framework for Using Robotic Process Automation for Audit Tasks

Marc Eulerich, Justin Pawlowski, Nathan J. Waddoups, David A. Wood

[22]. Is R&D Really That Special? A Fixed-Cost Explanation for the Empirical Patterns of R&D Firms

Robert J. Resutek

 Abstract

1.Managerial Career Concerns and Corporate Tax Avoidance: Evidence from the Inevitable Disclosure Doctrine

Ningzhong Li

University of Texas at Dallas

Terry Shevlin

University of California-Irvine; University of California-Irvine

Weining Zhang

Cheung Kong Graduate School of Business

Abstract：This study examines the effect of managers’ career concerns on tax avoidance using the staggered recognition by state courts of the Inevitable Disclosure Doctrine (IDD), a trade secret protection doctrine which places greater restrictions on managers from joining or forming a rival company. We argue that the IDD recognition increases the cost of job loss for managers whose current jobs are in jeopardy thereby increasing their incentives to avoid taxes, improve performance, and favorably influence the current employer’s assessment of their ability. The IDD recognition also reduces opportunities for managers who have better outside jobs, and thereby reduces their incentives to save taxes, improve performance, and favorably influence the external employers’ assessment of their ability. Using a difference-in-differences design, we provide evidence consistent with these predictions. We further show these effects are stronger for CEOs in their early years of service, when the market is more uncertain about their ability.

Keywords: Managers’ outside employment opportunities, Career concerns, Inevitable Disclosure Doctrine, Tax avoidance

2.Language and Management Forecasts around the World

Yuyan Guan

Nanyang Business School, Nanyang Technological University

Zheng Wang

City University of Hong Kong

M. H. Franco Wong

University of Toronto - Rotman School of Management

Xiangang Xin

City University of Hong Kong

Abstract：Speakers of weak future-time reference (FTR) languages perceive the future as closer and more imminent. In this study, we examine the important question of whether the FTR properties of languages spoken by investors affect their demand for forward-looking information, thereby influencing corporate management forecast practices in different countries. We predict that investors who speak weak-FTR languages are more concerned about the future prospects of their investments and the ability of company management to respond to future changes, leading to a greater demand for management forecasts from these companies. We find that firms in weak-FTR language countries exhibit a greater propensity for and frequency of issuing management forecasts and that they also issue more long-horizon forecasts, compared to those in strong-FTR language countries. Our results hold after controlling for other country-level cultural factors. Within the same countries, firms with more foreign institutional ownership from weak-FTR countries issue more (long-horizon) management forecasts than their counterparts. Finally, firms from strong-FTR countries significantly increase their issuance of (long-horizon) management forecasts, after cross-listing their stocks in Germany, a weak-FTR country. This is the first study to examine language FTR as an antecedent to voluntary disclosures. We document a linguistic trait as a novel investor environment factor that shapes corporate voluntary disclosures and explains the cross-country variations in management forecast practices.

Keywords: Language, linguistic relativity principle, future time reference, management earnings forecasts, foreign institutional ownership, cross-listing

3.Does Susceptibility to the Numerosity Heuristic Impact Juror Assessments of Auditors’ Liability?

Jennifer R. Joe

University of Delaware - Accounting & MIS

Benjamin L. Luippold

Babson College

Kerri-Ann Sanderson

Bentley University

Abstract：We provide evidence that regulatory guidance aimed at improving audit efficiency and effectiveness—allowing auditor reliance on a multi-location client’s competent and objective internal audit function (IAF)—can unintentionally increase auditors’ litigation risk. Our research is important in demonstrating how client characteristics and juror cognitive processing, such as the number of client locations and jurors’ susceptibility to the numerosity heuristic, factors beyond auditors’ control, can exacerbate their litigation exposure. Consistent with theoretical predictions, we find that susceptibility to the numerosity heuristic contributes to jurors’ assessing an increased likelihood of misstatement on multi-location compared to single location audits. Further, these assessments of higher misstatement risk on multi-location audits lead jurors to perceive that auditor reliance on the client’s IAF in multi-location audits is less appropriate (i.e., not normal). Accordingly, jurors judge that auditors are more negligent when they rely on the IAF during multi-location audits than when they do not, but IAF reliance does not impact auditor negligence on single location audits. Our results suggest auditor reluctance to use a qualified IAF, despite client pressure and regulatory allowance, can provide potential benefits to firms in terms of reduced litigation exposure. Thus, we demonstrate the legal regime can undermine the objectives of regulators’ guidance to enhance audit efficiency and corporate governance.

Keywords: auditor liability, numerosity heuristic, internal audit, multi-location audits, work of others, audit effectiveness versus efficiency

4.Restating Internal Control Reports Following Financial Statement Restatements: Determinants and Consequences

Mei Feng

University of Pittsburgh - Katz Graduate School of Business

Chan Li

University of Kansas

K. Raghunandan

Florida International University (FIU)

Lili Sun

University of North Texas - Department of Accounting

Abstract：After restating their financial statements, companies may voluntarily restate their previously issued internal control (IC) reports for the financial statement (FS) misstatement periods, changing them from “effective” to “ineffective.” This paper examines the determinants and consequences of IC restatements, which have been of concern to financial statement users. When announcing these IC restatements, companies often provide a detailed explanation of the IC problems and a discussion of their plans to remediate these problems. We find that companies with less severe IC problems which can be remediated more quickly are more likely to restate their IC reports. Moreover, these results are driven by companies with a higher need for external financing, suggesting that IC restaters voluntarily restate their IC reports in order to inform investors about their less severe IC material weaknesses and their plans to improve IC quality. Finally, we find that, relative to other FS restatement companies, IC restaters have a lower likelihood of CFO turnover and auditor resignation following the FS restatement. Taken together, our results suggest that voluntary IC restatements are used by IC restaters as a means to separate themselves from other FS restatement companies with more severe control problems and slower remediation plans. Our findings also indicate that studies investigating IC quality and related disclosures need to distinguish between IC restaters and other FS restatement companies because of the different characteristics and consequences between the two groups.

Keywords: restatement of internal control reports, financial statement restatements, CFO turnover, auditor resignation

5.The Role of Timing and Management's Remediation Actions in Preventing Failed Remediation of Material Weaknesses in Internal Controls

Andrew J. Imdieke

University of Notre Dame - Mendoza College of Business

Abstract：Prior research finds that signals of remediation of internal control weaknesses do not guarantee that all weaknesses are fully resolved. However, why certain remediation strategies fail is unclear. This study examines how remediation timing and actions affect the likelihood of a failed remediation. I predict and find that the likelihood of a failed remediation is decreasing in both the time a company takes to remediate and in the extent of remediation actions employed. Importantly, this study documents that disclosures of material changes in internal control provide information useful in assessing the likelihood of a failed remediation, as well as evidence that prompt remediation does not necessarily result in a successful remediation. Moreover, I find that there are consequences to remediation failures in the form of a higher likelihood of management and board turnover. Finally, I find evidence that economic benefits of remediation found in prior research may be understated. This study can provide stakeholders with insights into how the nature, extent, and timing of a remediation strategy can reduce the likelihood of a failed remediation.

Keywords: remediation, financial restatements, financial reporting quality, internal control

6.Across the Pond: How US Firms' Boards of Directors Adapted to the Passage of the General Data Protection Regulation

April Klein

New York University (NYU) - Department of Accounting

Raffaele Manini

Universitat Pompeu Fabra

Yanting (Crystal) Shi

New York University (NYU), Leonard N. Stern School of Business, Department of Accounting, Students

Abstract：One of the prime responsibilities of the board of directors is to understand and oversee its firm’s risk profile. We exploit a recent European Union (EU) regulation, the General Data Protection Regulation (GDPR), as a quasi-exogenous shock to the cyber risk landscape to assess whether boards of US firms changed their focus and governance structures to deal with this new challenge. The GDPR encompasses a sweeping set of regulations aimed at protecting EU citizens from unwanted uses of their personal Internet data. Although an EU regulation, the GDPR applies to all US public firms with at least one EU user. Adopting a difference-in-differences methodology, we use firms that already fell under a US data privacy regulation as a control group, and find that boards of treated US firms, on average, increase their focus on cyber risk, add more directors with cyber/IT expertise, and more frequently assign cyber risk oversight to the board or to a board committee. In cross-sectional tests, we show that these changes are positively associated with a firm’s ex ante cyber risk, but are unrelated to whether a firm had a large EU presence, suggesting a more global reaction to the GDPR. In addition, we examine some of the consequences of these board changes. We find boards that promptly responded by changing their board focus, expertise, and monitoring assignment of cyber risk around the passage of GDPR had fewer future cyberattacks/data breaches and less related media attention. Our findings suggest that, on average, American corporate boards promptly responded to changes in the cyber risk environment in ways that reduced their firms’ overall future cyber risk. Our results have implications for the efficacy and flexibility of US corporate boards to respond to unexpected changes in risk.

Keywords: corporate governance, board of directors, cyber risk, GDPR, regulation

7.A Matter of Appearances: How Does Auditing Expertise Benefit Audit Committees When Selecting Auditors?

Matthew Baugh

Arizona State University (ASU) - School of Accountancy

Nicholas J. Hallman

University of Texas at Austin

Steven J. Kachelmeier

University of Texas at Austin

Abstract：We hypothesize that audit committees whose members have no Big-Four auditing experience are likely to struggle when interviewing prospective Big-Four partners, leading such committees to draw on superficial, heuristic cues in lieu of conducting more substantive evaluations. To test this prediction, we obtain independent ratings of the facial attractiveness of audit partners identified from PCAOB Form AP filings. Our primary finding is that audit committees with no Big-Four-experienced members are more likely to favor partners whose photographs raters view to be highly attractive. We characterize attractiveness as a superficial attribute for auditor selection because we detect no relation between attractiveness and accruals- or restatement-based measures of financial reporting quality for audit committees with one or more Big-Four-experienced members, whereas we find an inverse association between attractiveness and financial reporting quality for committees without this experience, likely reflecting the statistical implication of a selection bias. We conclude that auditing expertise mitigates the influence of superficial considerations in auditor selection.

Keywords: Audit committees, expertise, attractiveness, dual-processing theory, elaboration likelihood model, auditor selection, audit fees

8.Accounting as a Normalizing Tool for Transitional Dirtiness: The Case of the US Adult-Use Cannabis Industry

Andrea M. Romi

Texas Tech University - Area of Accounting

Heather Carrasco

Texas Tech University

Casey A. Camors

Mississippi State University

John J. Masselli

Texas Tech University - Rawls College of Business

Abstract：While prior accounting research documents normalizing strategies within the accounting profession and in instances of accounting adoption, the potential of accounting itself as a strategic tool toward normalizing that which is considered socially abnormal (i.e., dirty) remains an important and unexamined area of inquiry. In this study, we conduct in-depth interviews to examine the role accounting plays in the development of the US cannabis industry (CI) as it transitions from the illicit market in which formal accounting was systematically avoided to a state-legal market in which participants are subject to conventional business processes. Facing impediments to traditional operating practices and pressures to increase normative conformity for industry survival, cannabis operators (COs) incorporated the use of accounting in three normalizing strategies (creative concession, collaborative facilitation, and experimentation), seemingly influenced by the incongruencies between prior illicit-market culture and experiences and the state-legal operating environment. In response to what operators perceived to be coercive regulation, they employed creative concession strategies, including influencing, bargaining, challenging, escaping, and cessation tactics. However, in response to pressures to adopt more commonly accepted forms of accounting, COs instead deployed two different strategies, one focused on acquiescence to normalizing pressures when doing so facilitated essential relationship building (i.e., collaborative facilitation strategies), and one deployed as strategic experimentation, working to normalize industry activities in areas of perceived threats to industry acceptance and continuity. Given CO accounting naiveté, its usefulness was often introduced by peripheral industry parties attempting to normalize their own participation with the CI. Notably, we also find that normalizing pressures occasionally resulted in unintended consequences, including reversion to the illicit market and forgoing normalizing strategies in favor of retaining some level of dirtiness to fend off pending competition, both of which threaten to reemphasize the industry's dirtiness. Our study, therefore, points to accounting itself as a central mechanism in the complex, multidirectional strategy to normalize transitional dirtiness.

Keywords: cannabis, accounting, marijuana, transitional industry, normalization of dirtiness, normalizing strategy

9.Assessing the Influence of Different Interest Groups on International Tax Policy: Evidence from the BEPS Project

Christina Elschner

European University Viadrina Frankfurt (Oder); ZEW – Leibniz Centre for European Economic Research

Inga Hardeck

University of Regensburg

Abstract：This study investigates the influence of three interest groups—businesses, the tax profession, and civil society—on tax rules in the context of the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project. Our study is important as prior research has not examined the direct influence of various interest groups on the content of tax rules by means of comment letters. Using content analysis, we seek to explain the lobbying success of the different interest groups by examining the relevance of the kind of information transmitted and the alliance strategies used. Results indicate that lobbying success is mainly explained by the vested interests of the three groups, with businesses less successful than the other two interest groups as long as all interest groups are equally able to provide information. We also find that the lobbying success of businesses increases when proposals require specific expertise. However, bias is still relevant for lobbying success as we find that proposals from tax professionals with practical experience, likely to reflect less bias, are relatively more successful than proposals from businesses. Further, our results suggest that mobilizing commenters who have a shared interest in the form of alliances is a promising lobbying strategy. Overall, our findings highlight the importance of expertise and collective actions for lobbying success.

Keywords: aggressive tax planning, BEPS, comment letter, interest groups, tax lobbying, tax policy

10.Motivated Perspective Taking: Why Prompting Auditors to Take an Investor's Perspective Makes Them Treat Identified Audit Differences as Less Material

Elizabeth C. Altiero

University of Central Florida - Kenneth G. Dixon School of Accounting

Yoon Ju Kang

University of Massachusetts Amherst

Mark E. Peecher

University of Illinois at Urbana-Champaign; University of Illinois College of Law

Abstract：Audit regulators and commentators propose prompting auditors to more fully take an investor’s perspective as a remedy to their concern that auditors underreact to material misstatements. By contrast, we predict that prompting auditors in this manner will backfire, making them less (more) heavily weight indicia that misstatements are (not) material. We further predict auditors will apply this asymmetric weighting instrumentally—to a greater degree as needed—to justify management-preferred conclusions. We test these predictions in two experiments in which in-charge audit seniors judge the likelihood that identified audit differences are material and choose required adjustment amounts. Between-participants, we manipulate whether or not auditors are prompted to take an investor’s perspective and, within-participants, whether these audit differences would or would not violate a qualitative criterion—by breaking or not breaking a favorable profitability trend. Study 1 uses a context in which a relatively low degree of motivated perspective taking is needed, as the audit difference is just below tolerable misstatement. Investor-prompted auditors assess audit differences as less likely to be material than do unprompted auditors, but only when the qualitative criterion is not violated. Study 2 adds a between-participant manipulation of misstatement tolerability—that is, whether the audit difference is just below or well above tolerable misstatement. Consistent with an instrumental increase in motivated perspective taking, investor-prompted auditors assess audit differences that simultaneously are less tolerable and violate a qualitative criterion as significantly less likely to be material. Overall, our theory and experimental evidence suggest prompting auditors to take the investor perspective may have unintended consequences.

Keywords: materiality, material, audit differences, perspective taking, motivated reasoning, instrumental bias

11.Do Alma Mater Ties Between the Auditor and Audit Committee Affect Audit Quality?

Divesh S. Sharma

Villanova University - Accountancy

Madhukar K. Singh

The Ohio State University - Fisher College of Business

Arvind Patel

University of Minnesota

Abstract：We examine whether audit firm alma mater ties between the auditor and the audit committee (AC) are associated with significantly greater nonaudit services (NAS) provided by the auditor. We further examine whether greater NAS in the presence of such alma mater ties are associated with audit quality. Since the AC is responsible for approving and monitoring the services provided by the auditor, the presence of AC and auditor alma mater ties underscores the controversies surrounding such ties’ undermining audit quality. Predicating our hypotheses on social ties theory, we find a positive association between the presence of an audit firm alumnus on the AC and NAS acquired from the alma mater auditor. We further find that this association becomes stronger as the tenure of the alumnus increases. Next, using multiple measures of audit quality, we find that, when the alumnus on the AC is associated with significantly more NAS provided by the alma mater audit firm, the quality of the audit suffers. Collectively, our results suggest that audit firm alma mater ties between the AC and auditor engender economic ties that adversely affect audit quality. Our study provides new evidence on the channels through which the quality of the audit is affected and raises important implications for the composition of the AC, auditor-provided NAS, and client assignment to engagement partners.

Keywords: alumnus, audit committees, audit quality, nonaudit services, partners, social ties

12.Organized Labor Effects on SG&A Cost Behavior*

Hsihui Chang

Drexel University

Xin Dai

Drexel University

Eric Lohwasser

Colorado State University

Yue Qiu

Temple University

Abstract：This study examines how organized labor affects selling, general, and administrative (SG&A) cost behavior. We find that labor cost stickiness is higher for firms facing stronger unions, but the stickiness of SG&A costs is lower. This is consistent with an argument that managers’ discretionary decisions to retain SG&A resources are negatively affected by high labor adjustment costs that increase retention of slack labor resources during periods of decreased demand. We conduct an event analysis of labor union elections and find that SG&A cost stickiness decreases after firms experience new union certification. Cross-sectional tests show that the effect of labor union strength on SG&A cost stickiness is more pronounced for firms that are in better financial condition, have higher analyst coverage, and have higher net operating assets. We find a similar effect of union strength on discretionary spending when examining research and development costs.

Keywords: Organized Labor; Labor Unions; SG&A Cost Behavior; Sticky Costs

13.Corporate Integrity Culture and Compliance: A Study of the Pharmaceutical Industry

Jennifer L. M. Altamuro

Villanova University - Accountancy

John V. Gray

The Ohio State University - Fisher College of Business

Haiwen (Helen) Zhang

University of Minnesota

Abstract：This study examines corporate integrity culture—that is, a firm’s shared values and behaviors related to compliance, trustworthiness, and ethics. Different from prior research that associates culture measures with general firm-level outcomes, we evaluate the pervasiveness of the integrity culture within an organization across two disparate business functions: operations and financial reporting. We first develop a measure of corporate integrity culture based on firms’ internal control environments and show that, as predicted, weak integrity culture contributes to both operational and financial non-compliance. We next document the predicted positive contemporaneous association between operational and financial non-compliance, controlling for the integrity culture reflected in the internal control environment. Given the organizational and physical distances and lack of day-to-day interactions between the two business functions, we infer that management’s “tone at the top” likely affects non-compliance in both functions. Finally, for firms with existing operational non-compliance, we find more negative market reactions to accounting restatements and higher CEO turnover propensities following restatements. These results indicate that top management must consistently reinforce a culture of compliance and integrity, lest it decay throughout the organization. Our results also imply that regulators evaluating compliance in specific functions could benefit from reviewing compliance in other functions within the firm.

Keywords: culture, financial accounting, regulation, compliance, restatements

14.What Determines Effective Tax Rates? The Relative Influence of Tax and Other Factors

Casey M. Schwab

University of North Texas

Bridget Stomberg

Indiana University - Kelley School of Business

Junwei Xia

Texas A&M University - Department of Accounting

Abstract：Many studies use GAAP effective tax rates (ETRs) as a proxy for tax avoidance and assume that very low (high) ETRs represent the greatest (least) tax avoidance. Using income tax footnote disclosures from 2008 through 2016, we investigate how well ETRs capture cross-sectional differences in tax avoidance versus other factors. We document that ETRs below 5% and above 40% are significantly influenced by items largely unrelated to tax avoidance such as valuation allowances and goodwill impairments. Truncating ETRs at zero and one, controlling for standard determinants of tax avoidance, and using industry-size-adjusted ETRs or multi-year GAAP ETRs do not eliminate the clustering of factors largely unrelated to tax avoidance in the tails of the distribution. Cash ETRs attenuate but do not eliminate this clustering. Researchers can use ETR rate reconciliation data to construct an adjusted ETR that removes the influence of factors largely unrelated to tax avoidance. Our findings inform researchers about factors largely unrelated to tax avoidance that drive significant deviations in ETRs from the statutory tax rate. This is of increasing importance as the number of studies examining the consequences of very high and very low ETRs grows.

Keywords: Tax avoidance, effective tax rate, valuation allowance, goodwill impairments, FIN 48

15.A Tale of Two Supervisors: Compliance with Risk Disclosure Regulation in the Banking Sector

Jannis Bischof

University of Mannheim - Accounting and Taxation

Holger Daske

University of Mannheim - Accounting and Taxation

Ferdinand Elfers

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Luzi Hail

University of Pennsylvania - The Wharton School; European Corporate Governance Institute (ECGI)

Abstract：We examine how the presence of multiple supervisory agencies affects firm-level compliance in form and substance with disclosure regulations. We exploit that banks are subject to equivalent risk disclosure rules under securities laws (IFRS 7) and banking regulation (Pillar 3 of the Basel II accord), but that different regulators start enforcing the rules at different points in time. We find that banks substantially increase their formal risk disclosures upon the adoption of Pillar 3 even if they already had to comply with the same requirements under IFRS 7. The effects are stronger if the central bank is responsible for bank supervision and bank regulators are equipped with more supervisory resources but are less pronounced if the securities market regulator is an independent entity. In turn, banks facing more market pressures are more compliant with the rules. We further find persistent liquidity benefits of the increased risk disclosures but only after Pillar 3 became effective and its compliance was enforced by the banking regulator. Our results suggest that formal and material compliance with risk disclosure regulation are a function of both the resources of the supervisory agency and its incentive alignment with the regulated firms. In our setting, the banking regulator seems more effective in fulfilling this role.

Keywords: Disclosure regulation, Risk disclosures, Liquidity, Financial institutions, Market supervision, IFRS, Basel II, International accounting

16.Corporate Governance Reforms and Cross-Listings: International Evidence

Chih-Hsien Liao

National Taiwan University

Albert Tsang

Hong Kong Polytechnic University

Kun Tracy Wang

Australian National University - Research School of Accounting

Nathan Zhenghang Zhu

Australian National University (ANU)

Abstract：In this study, we examine whether a country’s implementation of major corporate governance reforms affects firms’ cross-listing activities. Cross-listing is important in overcoming international investment barriers and thus it is worth investigating whether enhanced corporate governance at the country level contributes to the integration of international capital markets. Using a difference-in-differences (DiD) research design, we predict and find that following the implementation of corporate governance reforms in their home countries, firms are more likely to engage in cross-listing activities and tend to cross-list in host countries with stronger investor protection and more developed markets than those in countries with no reforms in the same period. The results from country-level cross-sectional tests indicate that this effect is greater for firms in home countries with weaker investor protection and less developed stock markets in the prereform period. The reforms also have a stronger effect on firms subject to less analyst following and greater external finance dependence. Finally, we find a stronger association between cross-listing activities and institutional ownership after the reforms. Taken together, this study increases understanding of the trade-off between cross-border capital supply and demand. Our finding suggests that country-level corporate governance plays an important role in facilitating the supply of cross-border capital, which in turn incentivizes firms to cross-list. Our study also offers policy implications for national stock exchanges and securities regulators by suggesting that countries without well-developed capital markets should strengthen their corporate governance to improve firms’ ability to raise external financing and attract cross-border capital flows.

Keywords: corporate governance reform, cross-listing, firm value, legal environment, institutional ownership, investor protection

17.Auditing Non-GAAP Measures: Signaling More Than Intended

Spencer B. Anderson

University of Illinois at Urbana-Champaign - Department of Accountancy

Jessen L. Hobson

University of Illinois at Urbana-Champaign

Ryan D. Sommerfeldt

Washington State University

Abstract：Many companies regularly disclose non-GAAP performance measures to communicate firm-specific information that does not fit within the mold of GAAP reporting. However, these non-GAAP measures may have low information content or even be misleading to investors. Thus, the question arises of whether auditors should play a larger role in the reporting of non-GAAP measures, which currently are not audited. We run an experiment to provide ex ante evidence on the effect of auditing non-GAAP measures. Specifically, we present investor participants with a non-GAAP measure that is either more informative (should be used when making investment judgments) or less informative (should not be used when making investment judgments) and is either audited or is not audited. We find that, when participants view a non-GAAP measure that is more informative, they appropriately use the non-GAAP measure in their investment-related judgments, regardless of whether the measure is audited. However, we find that, while participants appropriately do not use a less informative non-GAAP measure when it is not audited, participants inappropriately do use the less informative non-GAAP measure in their investment-related judgments when it is audited. Mediation results provide evidence consistent with audits affecting investors’ reliance on non-GAAP measures. Specifically, our results are consistent with audits of non-GAAP measures signaling more than is intended, evidenced by investors perceiving an audited non-GAAP measure as being useful in their investment decisions when the measure is less informative to them. We also discuss implications for regulators and researchers regarding the role of auditors in non-GAAP reporting.

Keywords: Non-GAAP, Audit, Attribute substitution

18.Relative Performance Evaluation and Earnings Management

Jakob Infuehr

University of Southern Denmark

Abstract：Conventional agency theory suggests that firms should benchmark CEO compensation to absorb systemic risk and to more efficiently incentivize executives to work hard. Yet, empirical research has found only a modest use of benchmarking in CEO compensation contracts. In this paper, I highlight one weakness of relative performance evaluation (RPE). When earnings management is possible, benchmarking creates stronger incentives for misreporting performance measures compared to benchmark-independent pay. The optimal contract will depend less on a correlated benchmark (e.g. a stock market index) if it is easier for the manager to misreport performance. Thus, the model predicts that firms with weak internal controls and bad auditors are less likely to use RPE, offering a theoretical explanation for the empirically observed lack of RPE use.

Keywords: relative performance evaluation, earnings management, CEO compensation

19.How Changes in Expectations of Earnings Affect the Associations of Earnings Overstatements and Audit Effort with Audit Risk and Market Price

Evelyn R. Patterson

Indiana University-Kelley School of Business

J. Reed Smith

Kelley School of Business

Samuel L. Tiras

 Indiana University - Kelley School of Business

Abstract：In this study, we provide theoretical guidance for both analytical and empirical research by considering how changing expectations of earnings affect a dishonest manager’s strategy to overstate earnings and an auditor’s strategy to exert effort in a two-period setting. We expect our study’s insights on changing economic conditions to help shape future research. We model the manager type as either honest or dishonest, which allows us to differentiate audit risk from audit effort. The key takeaways for future research are the insights on how changes in payoffs and expected earnings affect the associations that involve earnings overstatements and audit effort with audit risk and market price. For instance, researchers typically assume audit effort and audit risk are negatively associated, but we find the association can be positive when, for example, the auditor chooses a period two strategy based on the changes in period one game parameters. The results of our study provide two additional key insights on the design of future empirical tests. First, by dichotomizing, we show the importance of estimating the intercept in the market pricing equation when studying earnings quality, because market price also adjusts for expected bias through changes in the intercept. Second, our multiperiod setting demonstrates that the effects from a change in the manager’s or auditor’s incentives in period one may reverse in period two. Empirical studies typically examine the contemporaneous effects of these changes on market price and/or audit risk but fail to identify the cross-temporal effects we document in our study.

Keywords: earnings expectations, changes in economic conditions, strategic outcomes, risk of material misstatement, cross-period strategic effects

20.The Effect of SEC Reviewers on Comment Letters

Matthew Baugh

Arizona State University (ASU) - School of Accountancy

Kyonghee Kim

Michigan State University

Kwang J. Lee

 Korea Advanced Institute of Science and Technology (KAIST)

Abstract：We examine whether the idiosyncrasy of individual employees of U.S. financial regulators contributes to inconsistent regulatory outcomes. Using a sample of SEC comment letters, we show that SEC reviewers’ idiosyncratic style plays an economically and statistically significant role in explaining the cross-sectional variation in filing review outcomes, even after holding firm and disclosure attributes constant. We also show that the reviewer style is persistent across firms and time. Finally, we find that reviewers with a stricter style are associated with improved financial reporting quality. These findings suggest that individual SEC reviewers have significant influence on the SEC filing review process.

Keywords: SEC Reviewers, Reviewer Style, Comment Letters, Financial Reporting Quality

21.A Framework for Using Robotic Process Automation for Audit Tasks

Marc Eulerich

University of Duisburg-Essen, Mercator School of Management

Justin Pawlowski

Independent

Nathan J. Waddoups

University of Denver

David A. Wood

Brigham Young University - School of Accountancy

Abstract：The ability to automate tasks and processes using robotic process automation (RPA)—or the development of bots—is receiving significant attention in accounting. Auditors often struggle to know what tasks to automate and how to prioritize bot development. Drawing upon socio-technical systems theory and using a design science methodology, we develop and validate a three-step evaluation framework to assist auditors as they decide what activities to automate. We validate this framework using interviews, surveys of experienced internal and external auditors, and two case studies. By developing and validating our framework through the lens of socio-technical systems theory, we also provide several insights that help explain the mixed findings in prior research regarding the effectiveness and adoption of emerging technologies in audit. The implications of our study yield many opportunities for future research in the areas of RPA and emerging technologies in audit.

Keywords: Robotic process automation, RPA, bots, design science, bot-evaluation framework, automation, digital labor, digital auditing

22.Is R&D Really That Special? A Fixed-Cost Explanation for the Empirical Patterns of R&D Firms 

Robert J. Resutek

University of Georgia - J.M. Tull School of Accounting

Abstract：I propose an explanation for the positive relation between R&D, future earnings, and future stock returns based on the fixed-cost qualities of R&D. If R&D is relatively fixed over short horizons, demand shocks realized by some R&D firms will push these firms into R&D intensity levels that are suboptimal as common scale proxies—market equity, assets, and sales—respond more quickly to demand shocks than R&D. In response, R&D firms realizing negative demand shocks reduce future expenses and capital expenditures, producing higher future profitability on lower sales growth. Consistent with the fixed-cost hypothesis, I find the higher future profits of high R&D firms are explained by cost cutting, not revenue growth. Collectively, the restructuring of cost and capital structures of the subset of high R&D firms realizing demand shocks explains the future profit and investment patterns of R&D firms, while the fixed-cost qualities of R&D seem to explain patterns in future stock returns. My results have implications for literatures that examine how decisions on R&D investment levels affect future firm performance, growth, and stock returns.

Keywords: R&D, earnings predictability, operating leverage, real earnings management

END

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收集：章鸣灿 长春财经学院 硕士

审核：董菲凡 上海对外经贸大学 硕士

编辑：石庚岩 信阳师范学院 硕士

编辑团队成员名单

李欣颖 青海民族大学 会计

张澳 湖南大学 大四 会计学

石庚岩 信阳师范学院 研二 会计学

吴伟 浙江工商大学 会计学 研三

王萃芳 东北财经大学 企业管理 博二

王俊苏 重庆理工大学 会计 研一

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