Anticipation and Reaction to Going Concern Modified Audit Opinions by Sophisticated Investors

The purpose of this paper is to examine whether institutional investors (i) anticipate a distressed firm\u27s receipt of a first‐time going‐concern modified audit opinion, and (ii) react to a first‐time going‐concern modified opinion by engaging in abnormal net selling of firm shares. Using a proprietary database of US institutional investor trades, we find that institutional investors are net sellers of first‐time going‐concern opinion firms beginning 6 months before the release of the report and remain net sellers through the subsequent 3 months. We also find that the severity of the reasons auditors modify their opinions is associated with increased trading activity, but only after the opinion is publicly available. Our results support the position that an auditor\u27s going‐concern modified opinion is influential in the marketplace by documenting that institutional investors anticipate this price‐relevant information and react through increased selling. The finding of increased net selling of firms with more severe reasons for report modifications provides evidence of the incremental informational value of the wording in the modified opinion

Conditional Conservatism and Labor Investment Efficiency

Prior literature documents that asymmetric timely recognition of losses versus gains (also known as conditional conservatism) can induce management to make more efficient investment decisions by mitigating information asymmetry between management and investors and providing early signals about the profitability of projects undertaken. In this paper, we investigate the impact of conservatism on an important investment decision that has been overlooked, namely investment in labor. We find that conservatism is negatively associated with labor investment inefficiency; more specifically, conservatism reduces inefficiency investment practices on the labor market, including over-hiring, under-firing, under-hiring, and over-firing. Our results hold after controlling for managerial ability, corporate governance and other investments

Corporate Social Responsibility Strategies of Spanish Listed Firms and Controlling Shareholders’ Representatives

This article aims at analyzing how controlling shareholders’ representatives on boards affect corporate social responsibility (CSR) strategies (disclosing CSR matters) in Spain, a context characterized by high ownership concentration, one-tier boards, little board independence, weak legal protection for investors, and the presence of large shareholders, especially institutional shareholders. Furthermore, among controlling shareholders’ representatives, we can distinguish between those appointed by insurance companies and banks and those appointed by mutual funds, investment funds, and pension funds. The effect of these categories of directors on CSR strategies is, therefore, also analyzed. Our findings suggest that controlling shareholders’ representatives have a positive effect on CSR strategies, as do directors appointed by investment funds, pension funds, and mutual funds, while directors appointed by banks and insurance companies have no impact on CSR strategies. This analysis offers new insights into the role played by certain types of directors on CSR strategies

Stability Enhancement of DFIG Wind Farm Using SSSC With FOPID Controller

The wind power generation has become more important nowadays to meet the increase in power demand. DFIG based wind power generation is the recent and used in many countries due to its better power controllability. The controllers like Proportional Integral (PI) are used for the stabilization of the waveforms of the supply system. The change in controllers produces better oscillation damping in recent days. The effect of varying the wind input to generate power using the wind turbine resulting in instability in the power system because of the control is done on a grid supply. This paper aims to proposes an optimum FOPID controller for damping power system instability using a Static Synchronous Series Compensator (SSSC) system that takes into account the dynamics of wind energy conversion systems (WECS) connected to a infinite grid. The WECS model, which includes variations in wind supply to the wind turbine, has been developed to test the durability of the optimized controller that was developed to damping power system oscillations. The controller used to take the power system dynamics into account. A new controller is being designed to include a corrective measure for the damping the oscillations to adjust the instability caused by wind supply variations. The controller helps to tune the controller settings that lead to the achievement of the power oscillation damping objectives. These results are compared with conventional PMSM based wind turbine system

Hometown advantage: The effects of monitoring institution location on financial reporting discretion

We examine the impact of institutional ownership on financial reporting discretion, focusing on whether the impact varies with institutions' cost of acquiring monitoring information. Using geographic distance between the firm and the institutional investor as a proxy for the cost of acquiring monitoring information, we find that corporate managers are less likely to use financial reporting discretion in the presence of local monitoring institutions than distant monitoring institutions. We also find that the impact of monitoring institutions on financial reporting discretion varies with the costs and benefits of financial reporting discretion.Reporting discretion Institutional investors Geographic distance Corporate governance Earnings management