Soo Yeon Park and Hyun-Young Park
Based on 1,798 firm-year observations from 2009 to 2013, using publicly available disclosure data for Korean listed firms, this study aims to examine whether statutory internal…
Abstract
Purpose
Based on 1,798 firm-year observations from 2009 to 2013, using publicly available disclosure data for Korean listed firms, this study aims to examine whether statutory internal auditors influence firm-level stock price crash risk.
Design/methodology/approach
Based on the bad news hoarding theory of crash risk, the authors investigate the association between the quality of statutory internal auditors and one-year-ahead stock price crash risk. The quality of statutory internal auditors is measured as the compensation of statutory internal auditors and the financial expertise of statutory internal auditors. Stock price crash risk is measured as an indicator variable whether a firm experiences one or more crash weeks during the fiscal year period.
Findings
The authors find that higher quality of statutory internal auditors – measured through greater compensation and greater financial expertise – is associated with lower possibilities of future stock price crash risk. These results indicate that high-quality statutory internal auditors mitigate bad news hoarding of managers because of their greater capability and stronger incentive to lower litigation risk and preserve their reputation. The results are mostly robust to different measures for stock price crash risk and the quality of statutory internal auditors.
Practical implications
The findings of this study regarding stock price crash risk are important for investors because such risk can significantly affect investor welfare. The results indicate that statutory internal auditors play an important role in controlling future stock price crash risk and maintaining stability in the equity market.
Originality/value
This study adds to the extant literature on the determinants of stock price crash risk and is the first to examine the impact of internal auditors on stock price crash risk. Moreover, this study also contributes to the existing literature on internal auditor quality by showing that high-quality statutory internal auditors reduce risks in financial markets.
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Jungsil Choi and Hyun Young Park
This study aims to investigate the moderating role of hedonic and utilitarian purchase motives for the presentation order effect. Although past research finds that presenting item…
Abstract
Purpose
This study aims to investigate the moderating role of hedonic and utilitarian purchase motives for the presentation order effect. Although past research finds that presenting item first and price later (e.g. 70 items for $29) increases consumers’ purchase intention more than presenting the information in the opposite order (e.g. $29 for 70 items), the effect was mostly examined in a hedonic consumption context. This study examines whether the effect is applicable for hedonic purchases but is less applicable for utilitarian purchases, and why.
Design/methodology/approach
Seven experiments tested the moderating effect of purchase motives for the presentation order effect. Two serial mediation analyses were conducted to examine the underlying mechanism.
Findings
The “item-price” (vs “price-item”) order increases hedonic purchases, but not utilitarian purchases. Because consumers feel guilty about hedonic purchases, they engage in motivated information processing to perceive greater value from their hedonic purchase when item (benefit) information is presented first and price (cost) information is presented later. Perceiving greater value reduces guilt, which consequently increases hedonic purchases. In contrast, the order effect is not observed for utilitarian purchases that do not elicit guilt. When a price discount is offered, the order effect is reversed because actual savings justify hedonic purchases better than perceived savings resulting from motivated information processing.
Practical implications
When promoting hedonic products, marketers are recommended to present item information before price information, unless a price discount is offered, in which case the price should be presented first.
Originality/value
This research introduces a novel moderator for the presentation order effect and a novel underlying mechanism, driven by the motivation to alleviate guilt associated with hedonic purchases.
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Hyun-Young Park, Ho-Young Lee and Jin Wook Kim
Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance…
Abstract
Purpose
Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance characteristics are associated with investment in internal auditing proxied by compensation and the number of statutory internal auditors.
Design/methodology/approach
The authors investigate the association between governance characteristics and investment in internal auditing proxied by compensation and the number of statutory internal auditors.
Findings
The authors find that firms with greater ownership of the largest shareholders and with a higher proportion of outside directors invest more in internal auditing. These results indicate that firms with higher incentive and demand for monitoring are more likely to invest more in internal auditing. The authors further find that the positive effect of the largest shareholder ownership (board independence) on investment in internal auditing is attenuated in firms with greater board independence (ownership of the largest shareholders) suggesting that the complementary effect of the two governance mechanisms associated with internal auditing weakens as they function simultaneously.
Research limitations/implications
The results provide regulators and investors with a clear picture of the governance characteristics of firms associated with investment in internal auditing. The results imply that both the largest shareholders and the outside board of directors play a significant role in resource allocation in internal auditing within a firm. The effect of allocation, however, can be attenuated contingent upon the combined characteristics of governance mechanisms.
Originality/value
Using large amounts of public archival data, this study adds to the extant literature on firm characteristics associated with investment in internal auditing. This study also contributes to the literature by expanding the scope of research on executive compensation to the locus of statutory internal auditors.
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Hyun Young Park and Sue Ryung Chang
This research investigates when and how brands influence attribute importance weights. Most past studies modelling consumer decision processes treated the brand of a product as an…
Abstract
Purpose
This research investigates when and how brands influence attribute importance weights. Most past studies modelling consumer decision processes treated the brand of a product as an attribute parallel to the price, color or size of a product, and as a result, those studies assigned an equal (i.e. non-contingent) importance weight across brands for each attribute. In contrast, this study introduces a brand-contingent attribute-weighting process, in which brand is a higher-order construct that influences attribute importance.
Design/methodology/approach
This study presents a multi-level choice model in which the importance weight of an attribute can vary across brands. This study then estimates the model using real purchase data and survey data from an airline industry.
Findings
This study finds that attribute importance weights are contingent upon two aspects of a brand – the perceived relative position of the brand and consumers’ brand usage experiences. Specifically, when consumers perceive a brand to be inferior to its competitors in a given attribute, they generally place greater weight on that attribute for that brand. In contrast, when consumers perceive a brand to be superior to its competitors in a given attribute, only consumers with extensive brand usage experiences place greater weight on that attribute for that brand.
Practical implications
The findings provide managerial insights on brand positioning and segmentation strategies using consumers’ brand usage experiences.
Originality/Value
This study advances the literature on consumer decision processes by modeling an attribute-weighting process that is contingent upon brands. The present study models this process based on consumer behavior theories and estimates the model using real market data.
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Ho-Young Lee and Hyun-Young Park
Using 5,055 sample firm-years in Korea between 2009 and 2013, this paper aims to examine the association between the characteristics of the internal audit and the number of…
Abstract
Purpose
Using 5,055 sample firm-years in Korea between 2009 and 2013, this paper aims to examine the association between the characteristics of the internal audit and the number of external audit hours as a proxy for audit efficiency.
Design/methodology/approach
This study is motivated by the International Standard on Auditing No. 610: “Using the work of internal auditors”. This auditing standard guides external auditors in using the work of internal auditors to obtain audit evidence and consult internal auditors for direct assistance. The authors expect that external audit efficiency will increase when the work of competent internal auditors is used.
Findings
The authors find that the number of internal auditors relative to the number of employees is associated with the number of external audit hours. This result suggests that the greater the availability of internal auditors, the greater their contribution will be to the financial statement audit and the more efficient the audit. The authors find evidence that external auditors use the work of internal auditors with accounting and legal expertise to improve audit efficiency. They also find some evidence that the work of internal auditors with greater availability is more effective during initial external audit engagements.
Originality/value
This study adds to the extant literature on the contributions of internal auditors to external audits by using archival data and by measuring audit effort using a large database of audit hours. In addition, our findings have practical implications for firms and external auditors who are evaluating the role and value of using the work of internal auditors. The authors also believe that the findings will be of interest to regulators or auditing standards boards.
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Moon-Kyung Cho, Ho-Young Lee and Hyun-Young Park
– The purpose of this paper is to examine the effect of the characteristics of statutory internal auditors on operating efficiency.
Abstract
Purpose
The purpose of this paper is to examine the effect of the characteristics of statutory internal auditors on operating efficiency.
Design/methodology/approach
This study investigates three characteristics pertaining to statutory internal auditors, namely, compensation, activity and expertise, based on 1,340 firm observations from 2009 to 2010 using publicly available disclosure data for Korean listed firms.
Findings
The authors find no evidence that statutory internal auditors’ compensation is positively associated with operating efficiency. This implies that compensation data on statutory internal auditors in Korea may not directly reflect their competence and ability to enhance operating efficiency. On the other hand, the authors find evidence for a positive association between full-time status for statutory internal auditors and operating efficiency and a positive association between the attendance at board meetings for statutory internal auditors and operating efficiency. The results also show a decrease in operating efficiency when statutory internal auditors are newly appointed. Finally, expertise of statutory internal auditors in financial or legal matters provides no advantage in terms of operating efficiency.
Practical implications
This study contributes to the extant literature on internal audit by examining the advisory role of statutory internal auditors and its effect on operating efficiency, which is one of the objectives established by the Committee of Sponsoring Organizations of the Treadway Commission.
Originality/value
While most prior research on internal audit depends on survey data from statutory internal auditors or experimental data based on a limited sample of firms, this study is based on a large sample of publicly available data of the Korean market.
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Jin Suk Lee and Hyun Young Cho
This study addresses the lack of exploration of whether posting luxury products purchased on social media contributes to a favorable impression of oneself. It uncovers the…
Abstract
Purpose
This study addresses the lack of exploration of whether posting luxury products purchased on social media contributes to a favorable impression of oneself. It uncovers the underlying mechanisms shaping observers’ attitudes toward account holders sharing luxury posts. By examining the motive attribution processes triggered by such posts, particularly intrinsic and extrinsic motives, this study clarifies the dynamics of luxury posts on social media, addressing inconsistencies in the literature regarding responses to luxury brand users.
Design/methodology/approach
To test the hypotheses, a one-factor between-subjects experimental design involving 400 South Korean participants with social media accounts was employed. Participants in each condition recalled their experiences of encountering either luxury or non-luxury posts on social media and completed several measures, including attitudes toward the account holder.
Findings
The results indicate that luxury posts on social media positively influence attitudes toward account holders through intrinsic motive attribution but have a negative impact through extrinsic motive attribution. The study revealed that observers with lower materialistic values were more prone to infer the motives behind posting luxury products.
Originality/value
This study introduces motive attribution as a crucial mechanism for understanding the impact of luxury consumption on social media. Exploring the intrinsic and extrinsic motives inferred from luxury posts provides nuanced insights into how these posts shape observers’ evaluations of account holders. This study’s identification of distinct routes offers valuable perspectives for fashion marketing researchers and marketers.
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Nishaal Prasad, David Hay and Li Chen
The purpose of this study is to examine which factors explain the use of an in-house internal audit function (IAF) in a voluntary setting.
Abstract
Purpose
The purpose of this study is to examine which factors explain the use of an in-house internal audit function (IAF) in a voluntary setting.
Design/methodology/approach
Based on the foundations of agency and resource-based theory, this study examines a unique data set from the New Zealand setting, which combines information obtained from The Institute of Internal Auditors of New Zealand with empirical firm data collected from publicly available sources. Multivariate analysis is performed to test the prediction that in-house IAF use is associated with factors such as strong corporate governance, firm size, risk, complexity and firm ownership structure.
Findings
There is strong evidence that larger organisations are more likely to use an in-house IAF. The authors also find that listed firms and organisations that use a Big Four auditor are less likely to use in-house-based IAF. The authors learn that the IAF investment decision is dominantly influenced by a firm’s ability to fund an in-house IAF as compared to the IAF being used as a resource to improve firm performance to achieve sustained competitive advantage. This implies that IAFs need to ensure cost efficiency and eliminate unnecessary overheads and demonstrate and make visible the benefits the function offers to the host organisation.
Originality/value
The unique New Zealand setting, where the establishment and use of an IAF are voluntary, provides an environment to study factors that promote demand for internal audit services. Research implications are applicable to most parts of the world, including the UK, EU nations and the Asia-Pacific region, where IAF use is voluntary.