The Impact Of Audit Committees Personal Characteristics On Earnings Management: Evidence From China

This study investigates the influence of audit committees personal characteristics on the firms earnings management behavior using Chinas publicly traded firms during 2004-2010. Overall, our findings suggest that audit committees several personal characteristics, such as age, gender, education level, and working experience, are associated with earnings management, which in turn may affect the quality of financial reporting. The results are robust after controlling the size, independence, meeting frequency of audit committee, and other firm specific characteristics. The results are consistent with the predictions based on the Upper Echelons Theory. The contributions to the earnings management literature and implications for regulators and investors are also discussed

What Do We Know About The Variance Of Audit Quality? An Empirical Study From The Perspective Of Individual Auditor

In this paper, we analyze the variance in audit quality among a broad cross-section of listed firms in Chinese stock market from 1999 to 2012. The purpose of the analysis is to identify the importance of audit firm, audit client, and engagement auditor effects on the variance in audit quality. Using discretionary accruals and financial restatement to surrogate audit quality and based on simultaneous ANOVA method, we find that engagement auditor can add about 19% of incremental explanatory power to the variance in audit quality. As expected, audit firm effects and audit client effects also have significant influence on audit quality, which can add about 2% and 16% of incremental explanatory power to the variance in audit quality. In addition, we find that, relative to engagement auditors with short audit experience, engagement auditors with longer audit experience have no significant incremental power in explaining variance in audit quality. The analysis enriches previous studies by investigating audit client’s role and engagement auditor’s role in determining audit quality. Our study highlights the importance of understanding audit quality from the perspective of individual auditor

Bank Risk Literature (1978–2022): A Bibliometric Analysis and Research Front Mapping

This study maps the conceptual structure of the body of knowledge concerning bank risk to understand this research strand better. A bibliometric analysis including 671 publications from January 1978 to October 2022 was conducted to achieve the aim of the study. The analysis of descriptive indicators identifies the main traits of scholars debating bank risk in terms of the annual production of publications; most productive authors, countries, affiliations, and journals; and most cited articles in the dataset. This study performs a co-word analysis by adopting social network analysis tools to analyze the conceptual structure of the dataset. The results highlight growing academic interest in bank risk research topics, especially following the global financial crisis. The bibliometric analysis reveals three main topics concerning the consideration of bank risk: (1) the adoption of risk management and bank risk, (2) the use of bank risk during the financial crisis, and (3) the interrelations between corporate governance and bank risk

Innovation and High-Quality Development of Enterprises—Also on the Effect of Innovation Driving the Transformation of China’s Economic Development Model

Taking the A-share listed companies in Shanghai and Shenzhen from 2013 to 2020 as the research object, this paper discusses the impact of innovation on high-quality development at the enterprise level and evaluates the effectiveness of the current transformation of innovation driving China’s economic development mode. It is found that innovation inhibits the improvement of total factor productivity of enterprises overall and hinders the high-quality development of enterprises. This result also shows that China’s innovation driven economic development mode transformation has not achieved actual effect. The reason is that China is still in the dilemma that low-quality innovation occupies the dominant position of enterprise innovation. The inhibitory effect of low-quality innovation masks the promoting effect of high-quality innovation, which makes the net effect of innovation on enterprise productivity being inhibitory, and this inhibition is characterized by a loss of efficiency, which is caused by a mismatch of resources. Heterogeneity analysis shows that the inhibition effect of innovation is stronger in eastern enterprises, non-state-owned enterprises and the early implementation of innovation driven strategy. It is also found that the promotion effect of high-quality innovation on executive compensation is stronger than that of low-quality innovation, which indicates that carrying out low-quality innovation is an irrational and short-sighted behavior. The study provides important insights for China to optimize and improve innovation policies and to promote the shift of the overall innovation structure to high-quality innovation

Long term trends in Auditor Choice

The division of the market for audit services across the Big-4 (KPMG, PWC, D&T, and E&Y) and non-Big-4 (NB-4) auditors reflects both demand side effects (perceptions of higher Big-4 quality) and supply side effects (the difference in fees across these two auditor types). Using empirical evidence from long-term changes in Big-4 market shares over the period 2001-2015, we demonstrate a counter-intuitive result that a larger increase of audit fees by Big-4 auditors relative to NB-4 auditors results in a lower likelihood of switching to an NB-4 auditor. By analyzing switching behavior across different industries and client firm’s asset quintiles, and by separating switches into resignations (auditor initiated or supply-side effects) as opposed to dismissal (client initiated or demand-side effects) we provide insights into the effects of different economic causes on the choice of a Big-4 auditor by client firms

Does internal control over financial reporting really alleviate agency conflicts?

This study investigates whether internal control over financial reporting (ICFR) alleviates the managerial expropriation of corporate resources. We do this by examining the potential effects of material weaknesses in internal control on the values of corporate cash holdings and capital expenditures. Our findings suggest that ICFR facilitates the scrutiny and discipline of capital markets and thus alleviates the agency problems. Our results support the premise that high financial reporting quality impairs managers' abilities to use corporate resources in a self-serving manner

Does sharing the same network auditor in group affiliated firms affect audit quality?

We contribute to the literature on audit quality by examining whether sharing the same network auditor among group affiliated firms is related to lower or higher audit quality in China. We find that choosing the same network audit firm among group affiliated firms is associated with more sanctions by regulators regarding fraudulent financial reporting, higher abnormal accruals, larger standard deviation of abnormal accruals, higher likelihood of a downward restatement in earnings, and lower likelihood of receiving a going concern modified opinion. We further identify contexts that moderate audit quality. Higher audit quality is associated with the use of a specialist auditor and firms that operate in more homogeneous industries. Lower audit quality is associated with longer auditor tenure (more than five years), greater geographic distance between a parent company and its subsidiaries, and greater control by a parent company over its subsidiaries

R&D investment, corporate social responsibility disclosure and firm's green innovation performance:evidence from China

Given the contesting empirical literature on the relationship between Research and Development (R&amp;D) investment and firms' green innovation performance (GIP), the current research is a unique study to look at the moderating effects of corporate social responsibility disclosure (CSRD) on this relationship. We used dataset of 3248 firm-year observations of A-share listed firms in China from (2012-2020). The CSRD issued by Chinese Stock Exchange and the Accounting Research Database (CSMAR) is used to measure CSR information. The Corporate GIP of a firm is considered and measured by examining the total number of green patents. Finally, multiple regression and fixed effects models were used. The results reveal that CSRD has anaffirmative and significant impact on the relationship between corporate GIP and R&amp;D investment which implies the compensatory and supportive role of CSR strategies in shape of green signals in the green outcomes. This research could support managers and policymakers of underdeveloped nations inestablishing environmental innovation strategies for corporate sustainability.</p

The impact of top management team characteristics on the choice of earnings management strategies: Evidence from China.

Using a sample of Chinese A-share listed firms from 2000 to 2015, we investigate the association between a firm’s use of earnings management strategies and the characteristics of its top management team. Our findings suggest that several demographic characteristics (i.e., age, gender, educational level, and financial work experience) of the entire team, as well as of the CEO/CFO and other team members separately, are significantly associated with both accrual-based and real-activities-based earnings management; these, in turn, may affect the quality of the firm’s financial reporting. Our results are consistent with the predictions of the upper echelons theory and have implications for various stakeholders in corporate financial reporting, as well as providing insights to those responsible for selecting and developing upper-level executives