Do audit fees and audit hours influence credit ratings?: A comparative analysis of Big4 vs Non-Big4

We examine the relationship between credit ratings / changes and audit fees (hours) for Big4 and Non-Big4 firms. Audit fee (hours) may be considered as a default risk metric for credit ratings agencies. However, firms audited by Big4 are larger, better performing and operate with lower leverage compared to firms followed by Non-Big4. Therefore, the association between audit fee (hours) may be different for firms followed by Big4 and Non-Big4 audit firms. We find that there is a negative association between audit fees and credit ratings for firms followed by Big4 audit firms. However, we find an insignificant relation for firms followed by Non-Big4. We conjecture the different association due to the Big4 firms having more robust accounting procedures; Big4 firms must offer competitive audit fees because they are engaged in fierce competition with other Big4 firms. Moreover, Big4 and Non-Big4 firms have different relationships with their clients because Non-Big4 firms are more income dependent on their clients. Using a sample of 1,717 firm–year observations between 2002 and 2013, we establish a relation between audit fees in period t and credit ratings in period t+1, for firms followed by Big4 auditors. We do not find a significant relation for firms followed by Non-Nig4 firms, suggesting that credit ratings agencies perceive audit fee differently for Big4 and Non-Big4 firms. Client firms followed by Big4 auditors that experience a credit rating change in period t+1 pay lower audit fees in period t compared to firms that do not experience a credit rating change. Our additional analysis suggests a different association between firms audit fees and firm performance for firms that experience a credit rating increase and decrease. Firms that experience a credit ratings increase in period t+1 have strong performance and lower audit fees in period t. On the other hand, firms that experience a credit rating decrease have weak financial performance and negative audit fees compared to firms that do not experience a credit ratings change. Our results suggest that audit fees combined with financial performance influence a credit ratings agency' perception of default risk

Acute inhibition of bacterial growth in coastal seawater amended with crude oils with varied photoreactivities

The increased potential for contamination of seawater by crude oils requires studies of bacterial biodegradation potential, but little is known of the differential negative impacts of oils on bacterial growth. No two wells generate chemically identical oils; and importantly, solar exposure of crude oil may differentially affect the bacterial response. Elucidating the role that sunlight plays on the potential toxicity of spilled crude oils is imperative to understanding how oil spills might affect microbes in the tropical and subtropical waters of Florida. This study examined light exposure of six different crude oils, and subsequent microbial responses to altered oils. Marine bacterioplankton heterotrophic activities were measured via3H-leucine incorporation after the addition of oils’ water accommodated fractions (WAFs) that were created under varied solar conditions. Inhibition of production increased with higher concentrations of WAFs, but dose-response trends varied among the oils. Increased solar exposure during WAF preparation generally led to more inhibition, but trends varied among oils. WAFs were also prepared under different parts of the solar spectrum. Solar-irradiated WAFs resulted in significant but variable acute toxicity vs. dark counterparts. Solar-induced toxicity was primarily a result of visible and not ultraviolet light exposure. Results indicate responses to oil spills are highly dependent on the source of the oil and solar conditions at the time and location of the spill. The data presented here demonstrate the importance of photochemical changes and oil source in modulating microbial activity and bioremediation potential

Economic Growth and the Diffusion of Clean Technologies: Explaining Environmental Kuznets Curves

Production often causes pollution as a by-product. Once environmental degradation becomes too severe, regulation is introduced by which society forces the economy to make a transition to cleaner production processes. We model this transition as a change in general purpose technology" and investigate how it interferes with economic growth driven by quality-improvements. The model gives an explanation for the inverted U-shaped pollution-income relation found in empirical research for many pollutants (Environmental Kuznets Curve). We provide an analytical foundation for the claim that the rise and decline of pollution can be explained by policy-induced technology shifts and intrasectoral changes