Suzanne H. Lowensohn and Jacqueline L. Reck
Coverage of governmental accounting is typically light within both accounting and public administration programs, and instructors generally do not have access to the same number…
Abstract
Coverage of governmental accounting is typically light within both accounting and public administration programs, and instructors generally do not have access to the same number of resources that they may find for courses which have been ingrained in their curricula for decades. Hence, it can be difficult for instructors to create or maintain student interest in governmental accounting without such resources. The purpose of this paper is to examine how instructors can emphasize relevance to increase the interest level of students in governmental accounting and to discuss how current resources and various pedagogical tools may be used as facilitators.
El‐Hussein E. El‐Masry and Jacqueline L. Reck
The purpose of this paper is to examine investors' perceptions of the usefulness of continuous online auditing (COA) prior to and after the Sarbanes‐Oxley (SOX) Act and assesses…
Abstract
Purpose
The purpose of this paper is to examine investors' perceptions of the usefulness of continuous online auditing (COA) prior to and after the Sarbanes‐Oxley (SOX) Act and assesses the current value relevance of continuous auditing. The paper examines two research questions: first, whether continuous online audits significantly impact investors' perceptions of firm risk and, consequently, the value of a firm and second, whether continuous online audits have a greater impact on investor assessment of a firm's risk subsequent to SOX.
Design/methodology/approach
A 2 × 2×2 × 2 between participants laboratory experiment was conducted. Technology risk was manipulated at (e‐commerce risks versus no e‐commerce risks), traditional financial risk was manipulated at (high financial leverage versus low financial leverage), COA was manipulated at (traditional annual audit versus continuous online audits), and pre‐ and post‐SOX was tested (2002 sample versus 2005 sample). The primary dependent variables used were investors' assessment of firm risk and investors' assessment of earnings per share estimates. Additionally, investors' confidence in their investing decision was captured.
Findings
Results indicate a demand for COA as reflected in investors' reduced firm risk estimates, and increased confidence in estimates. Comparative results from the 2005 sample and the 2002 sample indicate that the value relevance of COA has increased after the introduction of SOX in July 2002. We attribute this shift to investors' perception that COA is a factor that helps mitigate firm risk and relatedly boosts investor confidence in their investing decisions.
Research limitations/implications
Only a single proxy for traditional business risk (financial leverage) is examined. Future studies need to examine the ability of continuous online audits to mitigate other types of traditional business risks.
Originality/value
The study establishes the current economic feasibility of continuous online audits. Additionally, the most insightful finding of the study is that the value relevance of COA has increased after the introduction of SOX. This shift is due to investors' perceptions of COA as a factor that mitigates firm risk and helps boost confidence in their investing decisions. Implications for the profession, the classroom and public policy are discussed.
Details
Keywords
Ehsan H. Feroz, Jarrod Johnston, Jacqueline L. Reck and Earl R. Wilson
The purpose of this paper is to describe a study which examined the effects of underwriter reputation market segments on the value relevance of firm specific risk measures in the…
Abstract
Purpose
The purpose of this paper is to describe a study which examined the effects of underwriter reputation market segments on the value relevance of firm specific risk measures in the pricing of initial public offerings (IPOs).
Design/methodology/approach
The study abandons the notion of a homogenous market for IPOs and focuses instead on the differential demand for information across identifiable segments of the IPO market in the pre‐market offering period leading to the first day trading closing prices. Ordinary least square (OLS) regressions were used to test the two hypotheses developed in the paper.
Findings
It was found that firm‐specific risk measures are associated with the initial trading day returns of IPOs managed by low reputation underwriters, but not those by high reputation underwriters. However, as expected, these risk measures are impounded in initial trading day returns only for a sub‐sample of high‐risk junk IPOs that were marked down in price by the underwriter prior to the offering in order to make them more attractive to investors.
Research limitations
As with all empirical studies the tests are joint tests of the hypotheses stipulated and econometric assumptions underlying OLS. The findings of the study may not be generalized to an unrelated domain.
Practical implications
The findings suggest that ex ante risk measures are useful in picking among junk IPOs those with the best chances of survival, and thus earning an initial trading return on those IPOs.
Originality/value
This is the first study to look at junk IPOs in a systematic manner using a quasi‐experimental design.
Details
Keywords
Susan M. Albring, María T. Cabán‐García and Jacqueline L. Reck
The study is driven by concerns raised by standard setters and others about the usefulness of performance reporting under generally accepted accounting principles (GAAP). Of…
Abstract
Purpose
The study is driven by concerns raised by standard setters and others about the usefulness of performance reporting under generally accepted accounting principles (GAAP). Of primary interest is whether explicitly defining what information should be included in earnings results in an earnings measure that is more relevant than operating earnings computed according to current GAAP. The purpose of this paper is to explore whether reducing management discretion in the reporting of performance adds to the value relevance of the performance measures reported to capital markets.
Design/methodology/approach
The value relevance of this non‐GAAP earnings measure is examined by estimating market valuation and returns models for 518 US firms included in the Standard & Poor's 500 Index over the time period 2002‐2007.
Findings
Results show that the explicitly defined non‐GAAP measure used is significantly associated with equity market values and returns and is significantly more value‐relevant than the GAAP measure.
Originality/value
The paper contributes to accounting literature assessing the relevance of earnings in setting equity market value. More specifically, it provides evidence consistent with prior results that non‐GAAP performance measures are more useful in valuation than GAAP earnings. However, in contrast with prior studies, the more explicit performance measure the paper examines removes some of the classificatory discretion pervasive in other non‐GAAP earnings metrics.