Derrald Stice, Han Stice and Roger White
This study aims to examine the effect of individual auditor quality (below the partner level) on overall audit quality.
Abstract
Purpose
This study aims to examine the effect of individual auditor quality (below the partner level) on overall audit quality.
Design/methodology/approach
We aggregate audit employee-level individual performance evaluations to create a measure of auditor quality at the office level.
Findings
We find that high-quality audit offices are associated with a lower likelihood of client restatement, fewer client abnormal accruals and a higher likelihood of a client receiving a going concern opinion. We partition employees into low, medium and high level, based on job title, to investigate which employee levels drive these results. We find that the restatement results are driven by high quality high-level employees (Senior Managers/Directors), whereas the going concern results are driven by high quality low-level employees (Seniors). Furthermore, we find evidence that high-quality audit teams are associated with all aspects of audit quality and the magnitude of these team effects are much larger than those of the effects for any individual employee type.
Originality/value
Our findings are consistent with higher-level auditors preventing the most serious financial statement deficiencies, low-level employees contributing to audit firm independence and overall team quality creating synergy which has the strongest effect on all aspects of audit quality. These insights based on individual auditor evaluations are new to the literature. Overall, our empirical results suggest that individual auditor quality is associated with higher quality audits and that employees at all levels affect audit outcomes.
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Viktoria Dalko and Michael H. Wang
The purpose of this paper is to uncover the essence of insider trading, explain why insider trading law is ineffective and provide implications of the effectiveness of the law.
Abstract
Purpose
The purpose of this paper is to uncover the essence of insider trading, explain why insider trading law is ineffective and provide implications of the effectiveness of the law.
Design/methodology/approach
This conceptual paper offers three propositions. The first two are based on a literature review of 62 articles in empirical research to develop an understanding of the essence of insider trading and identify the areas in which insider trading is ineffective. This analysis is used in the third proposition to provide a direction in suggesting effective measures to improve insider trading law.
Findings
The essence of insider trading is that corporate insiders exercise informational monopoly power over their trades. This understanding explains why insider trading law is ineffective because it has not taken away the monopoly power that corporate insiders possess and exercise. This understanding also leads to three antitrust suggestions aimed at improving insider trading law.
Practical implications
The findings may provide assistance to the lawmakers and regulators to make insider trading law more effective and enforcement more simplified.
Originality/value
This paper is of value to other researchers attempting to understand the essence of insider trading and to policymakers concerned about the existence of monopolistic behavior in the equity market and income inequality due to corporate insiders’ trading profit.
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This study examines whether corporate earnings announcements affect investors' beliefs about future earnings using a sample of companies in the People's Republic of China…
Abstract
This study examines whether corporate earnings announcements affect investors' beliefs about future earnings using a sample of companies in the People's Republic of China. Revisions in financial analysts' consensus forecasts are used as a proxy for the change in the aggregate belief of investors in the market. Changes in the analysts' forecasts dispersion are used to measure the degree of convergence or divergence of the market's belief after the earnings announcements. Results show that both forecast revisions and changes in forecast dispersion are significantly and positively associated with the unexpected element in the earnings announcements. The results indicate that accounting earnings of Chinese companies contain information useful to the market and that the information is reflected in the analysts' subsequent forecasts of the companies' future earnings. The findings are also consistent with results from recent analytical studies, such as Kim and Verrecchia (1994), Barry and Jennings (1992) and Morse, Stephan and Stice (1991), that information disclosure may increase (rather than reduce) the disagreement among investors.
Body weight has a long history of functioning as a symbol of one’s beauty, social status, morality, discipline, and health. It has also been a standard inflicted much more…
Abstract
Body weight has a long history of functioning as a symbol of one’s beauty, social status, morality, discipline, and health. It has also been a standard inflicted much more intensely on women than men. While US culture has long idealized thinness for women, even at risky extremes, there is growing evidence that weight standards are broadening. Larger bodies are becoming more visible and accepted, while desire for and approval of a thin ideal has diminished. However, the continued widespread prevalence of anti-fat attitudes and stigma leaves uncertainty about just how much weight standards are changing. This study used an online survey (n = 320) to directly compare evaluations of thin, fat, and average size women through measures of negative stereotypes, prejudicial attitudes, and perceptions about quality of life. Results indicated that, as hypothesized, thin women were perceived less favorably than average weight women. However, fat women were perceived less favorably than both average and thin women. Men were harsher than women in their evaluations of only fat women. Additionally, participants being underweight or overweight did not produce an ingroup bias in their evaluations of underweight and overweight targets, respectively. That is, participants did not rate their own group more favorably, with the exception of overweight participants having lower prejudice toward overweight targets. These findings add to the emerging evidence that women’s weight standards are in transition, marked by an increasingly negative perception of thin women, though not necessarily growing positivity toward fat women. This evidence further points toward the need for more extensive research on attitudes of people across the entire weight spectrum.
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Jianhua Tan, Kam C. Chan, Samuel Chang and Bin Wang
This paper aims to examine the effect of carbon emissions on audit fees. The authors hypothesize that firms in cities with higher carbon emission levels have lower reporting…
Abstract
Purpose
This paper aims to examine the effect of carbon emissions on audit fees. The authors hypothesize that firms in cities with higher carbon emission levels have lower reporting transparency, higher return volatility or are subject to higher reputation risk, causing them to be charged higher audit fees for auditing services.
Design/methodology/approach
The authors use panel data of 25,960 firm-year observations from a sample of Chinese firms. The carbon emission data for each Chinese city are obtained from the China Emission Accounts and Datasets for Emerging Economies. This paper adopts a multiple regression model to study the impact of carbon emissions on audit fees.
Findings
The authors find that firms located in cities with higher carbon emission levels and firms with more carbon emissions are charged, on average, a higher audit fee. This audit fee effect of carbon risk is transmitted by lessened information transparency and elevated financial risk within these firms. This paper shows that auditors consider carbon risk in their audit fee decisions and other factors that could influence audit risk and effort.
Originality/value
This study draws a connection between carbon emissions and audit fees. It is especially relevant due to the increasing importance of environmental factors in the audit risk assessment. In addition, the findings suggest that a firm implementing a proactive environmental strategy benefits the economy and decreases the costs to the firm for services such as auditing.
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This paper aims to in the modern world, possessing an attractive appearance is often considered a highly valued attribute. As such, the perceptions and satisfaction with one’s…
Abstract
Purpose
This paper aims to in the modern world, possessing an attractive appearance is often considered a highly valued attribute. As such, the perceptions and satisfaction with one’s body are shaped by dominant cultural norms. Adolescents, women in particular, who are heavily influenced by media representations, may tend to have a distorted body image (BI), including adopting extreme dieting methods. This study reviews the adverse effects of excessive weight loss associated with this.
Design/methodology/approach
The authors searched journals and the internet for relevant literature using the keywords “eating disorders”, “body image” and “weight stigma”. In the case study field, they added papers that considered “nutrition” to identify the link between dieting behaviour and nutrition. From these reviews, the authors ultimately selected 190 articles that appeared to meet their research objectives. The papers cover a range of studies published between 1995 and 2023.
Findings
Among adolescent girls and young women in their early 20s, there is a social media-driven culture of being extremely thin and petite. Weight stigma puts more pressure on them and makes strange behaviours like pro-ana syndrome a part of the culture. The authors have seen that modern BI standards leave young women vulnerable to eating disorders caused by excessive dieting.
Originality/value
Adolescence is a time of continuous growth, so balanced nutrition is essential. However, biased societal standards of beauty can push adolescent girls who are sensitive to external gaze into excessive dieting and make eating disorders a culture. This review provides a perspective on the behaviours that should be pursued for a healthy BI.
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Alice Labban, Yu Ma and Laurette Dube
This paper aims to elucidate some of the complexity around food consumption by drawing from neuroscience research of food as a motivated choice (i.e. a neurobehavioral process…
Abstract
Purpose
This paper aims to elucidate some of the complexity around food consumption by drawing from neuroscience research of food as a motivated choice (i.e. a neurobehavioral process sensitive to dopaminergic response to food and environmental cues such as marketing). The authors explore the single and compounded effect of the motivational salience of food’s intrinsic reinforcing value tied to its sugar content and that of two marketing food cues, price and in-store display, on actual consumer purchase behavior.
Design/methodology/approach
The authors test the above hypotheses in two perceived “healthy” product categories with a wide distribution of sugar content. The authors estimate a within-category model using three years of retail transaction data to test the effect on weekly sales.
Findings
The authors confirm the single effect of each of food’s and marketing cues’ motivational salience as well as their compounded effect with high-motivational-salience food being less price elastic and more susceptible to in-store display activities.
Research limitations/implications
This research highlights the need to complement current reliance on unhealthy/healthy perception with finer grained objective evidence linked to the formulation of the food itself and the marketing applied to them.
Practical implications
The present study findings may help marketing managers and policymakers develop better targeted pricing and display strategies for low- and high-motivational-salience food, attempting to strike a better balance between consumer welfare and commercial performance.
Originality/value
This paper is one of the few that links real-world market outcomes to predictions derived from a unique combination of consumer neuroscience and neurobiology of food, advancing data-driven decisions.
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Renu Devi, Mohammad Firoz and R. Saravanan
This study aims to investigate redundant information in mandatory non-financial reports (NFRs) demanded by regulators, focusing primarily on overlapping disclosures in a new…
Abstract
Purpose
This study aims to investigate redundant information in mandatory non-financial reports (NFRs) demanded by regulators, focusing primarily on overlapping disclosures in a new Indian sustainability reporting (SR) framework.
Design/methodology/approach
The study sample comprised NIFTY100 listed entities that published SR voluntarily during 2021–2022. The authors used content analysis and cosine similarity techniques to conceptually compare redundancy in SR disclosures with non-financial disclosures.
Findings
The findings reveal an information overlap in SR disclosure with other NFRs disclosures. The disclosures of Directors’ Report have higher cosine similarity scores at the firm level with SR, followed by the Management Discussion and Analysis report, Corporate Governance report and Corporate Social Responsibility report. The additional analysis reveals that qualitative disclosures and disclosures comprising governance factors overlap more in SR.
Practical implications
Policymakers should look to establish relevant disclosure guidelines in the SR system, and thereby, shed light on fundamental issues to enhance future SR framework reforms.
Social implications
The study highlight the need for integration and amendment in the disclosure guidelines of NFRs to improve the overall transparency of the reports.
Originality/value
Previous studies have examined the redundancy in annual reports and SRs from the point of view of overlapping information. To the best author’s knowledge, this is possibly among the first studies to offer insights into the repetition of disclosures required by regulators in statutory NFRs based on environmental, social, and governance factors through the lenses of the institutional theory.
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This study aims to examine how a firm’s strategic emphasis on value appropriation over value creation is associated with the readability of narrative disclosures in annual reports.
Abstract
Purpose
This study aims to examine how a firm’s strategic emphasis on value appropriation over value creation is associated with the readability of narrative disclosures in annual reports.
Design/methodology/approach
This study examines the effect of the strategic emphasis on annual report readability based on a total of 45,273 US firm-year (5,754 unique firms) observations for the period from 1994 to 2018. Strategic emphasis is measured as advertising expenses minus research and development expenses, scaled by sales and Bog index and various measures, such as the FOG, KINCAID and FLESCH index, are used to measure the annual report readability.
Findings
The authors find that the strategic emphasis on value appropriation over value creation is positively related to firms’ annual report readability. In addition, the positive effect of the strategic emphasis on value appropriation over value creation on annual report readability is more pronounced with high managerial ability.
Practical implications
With the continual effort of Securities and Exchange Commission regulation and IFRS updates to improve narrative disclosures, it is meaningful to provide evidence showing how managers shape narratives in annual reports by highlighting good news with easy-to-understand words, but also may establish a barrier to understanding by choosing to use long and complex words depending on their strategic emphasis.
Originality/value
The evidence suggests that a strategic emphasis between value appropriation and value creation and managerial ability is an important factor in shaping the readability of annual reports, which contributes to the management, accounting and finance literature that investigates the relationship between resource deployment (i.e. strategic emphasis) and textual properties of corporate financial disclosures (i.e. readability).