He Xiao, Jianqun Xi and Hanjie Meng
This study aims to investigate the impact of mandatory audit partner rotation (MAPR) on Chinese listed firms’ insider trading, as well as the moderating effects of firm…
Abstract
Purpose
This study aims to investigate the impact of mandatory audit partner rotation (MAPR) on Chinese listed firms’ insider trading, as well as the moderating effects of firm characteristics on this impact. The economic mechanism behind this impact is also explored.
Design/methodology/approach
This study conducts a regression analysis on firms associated with mandatory and voluntary audit partner rotation based on 2009–2019 firm data and examines whether corporate insiders of these two types of firms increase their share sales within 12 months before their financial statements are submitted to a new rotated auditor.
Findings
Client firms’ corporate insiders increase their share sales within 12 months before their financial statements are submitted to a new mandatory rotated auditor. In addition, such an association is less pronounced for client firms that changed from Big 4 auditors to those with higher financial constraints. This is more pronounced for client firms with higher information asymmetry. The economic mechanism of the finding is that is the MAPR implementation reduces earnings management activities from client firms. Moreover, client firms’ buy-and-hold stock returns decline in the first year after MAPR.
Research limitations/implications
This study should assist investors, corporate shareholders and Chinese policymakers. Investors can be well protected through the adoption of MAPR because upcoming auditors enhance the audit quality of clients by restraining managers’ manipulation of reported earnings and declining firms’ insider trading afterwards. Investors, Chinese policymakers and corporate shareholders should pay more attention to firms’ financial report quality, auditor selection, financial situation, corporate governance and the information environment. Explicitly, firms with less transparent financial report quality, non-big 4 auditors and fewer financial constraints are more likely to be involved in insider trading.
Originality/value
To the best of the authors’ knowledge, none of the extant studies have examined the impact of MAPR on insider sales. This study extends the research on the effect of the audit process on firm market performance by investigating the impact of audit partner rotation policy on insider trading behaviors.
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Jianqun Xi and He Xiao
This paper aims to examine the relationship among corporate environmental disclosure (CED), earnings management (EM) practices and accounting conservatism in Chinese listed firms…
Abstract
Purpose
This paper aims to examine the relationship among corporate environmental disclosure (CED), earnings management (EM) practices and accounting conservatism in Chinese listed firms and determine how internal corporate governance (CG) mechanisms moderate these relationships.
Design/methodology/approach
This study uses two different EM practices, accrual-based EM (AEM) and real EM (REM), to analyze the relationship between CED and EM practices, as well as accounting conservatism. The final sample consisted of 1,619 observations, documented between 2015 and 2019. The panel data method was applied to estimate the relationship among CED, AEM and REM, as well as the moderating effect of CG on this relationship.
Findings
This study finds a negative relationship between CED and EM (both AEM and REM) and a positive relationship between CED and accounting conservatism. Further, CG, measured as the independent director ratio, institutional ownership and state-owned entities, was found to moderate these relationships.
Practical implications
Chinese policymakers should reinforce CED because it reduces corporate EM practices and improves accounting conservatism. Further, CED, as a mandatory requirement, may be expanded to all industries, that is, beyond the highly polluting industries listed on China’s stock exchanges.
Originality/value
This study is among the first to examine the relationship between CED and EM practices from both the AEM and REM perspectives and the one between CED and accounting conservatism. It also extends extant analyses by investigating the moderating effect of CG on these relationships in China.
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Le Wang, Yu Gao, Jie Yan and Jianqun Qin
The purpose of this paper is to facilitate understanding of how to convert free players to paid consumers in free-to-play games.
Abstract
Purpose
The purpose of this paper is to facilitate understanding of how to convert free players to paid consumers in free-to-play games.
Design/methodology/approach
Drawing on the consumption value framework and affordance theory, the present study argues that in-game purchase behaviors are determined by multiple consumption values of in-game items. The perceptions of consumption values were influenced by game affordances. The model was tested, using data from an empirical survey with 2,006 free-to-play game players.
Findings
Monetary, enjoyment and social values of in-game items positively predict purchase behaviors in free-to-play games. Game fairness and balance of challenges and skills significantly influence perceived enjoyment value.
Research limitations/implications
The findings of this study provide operable implications to facilitate in-game consumption. The model was tested within the context of free-to-play multiplayer online battle arena (MOBA) games; however, caution is advisable when generalizing the findings to other subgenre of games.
Originality/value
This study extended and thus validated the consumption value framework in the context of free-to-play MOBA games. This study explored the antecedents of consumption values from the perspective of game affordance.