This paper examines whether the ‘style’ of individual auditors influences financial reporting quality in Germany. Audit quality in Germany should be uniformly high, because of strong reputational needs, strict controls on operating procedures, and quality enforcement mechanisms. An audit partner's style should not affect this quality level. However, our results do not support this expectation. Exploiting

We propose a supplementary way to assess the information content of a financial statement disclosure based on the comovement of asset returns in different markets in response to information that has price implications for both. The influence of a signal that strongly influences at least two asset markets measures a dimension of information content less clearly reflected in single‐market responses.

Accounting has few heroes, but one that most acknowledge as worthy of that accolade is Luca Pacioli, the man who published the first printed exposition of double entry bookkeeping in 1494. This was the publication that led to the development of the accounting systems we use today. However, if we consider our literature on Pacioli, it is found to be not just confusing and contradictory, but undecided

This paper investigates the association between CEO’s relative position in the social network and the likelihood of being involved in corporate fraud. Tracing a large sample of US publicly listed firms, we find that CEO network centrality is inversely related to the likelihood of fraudulent financial reporting. We also document a significant spillover effect of financial reporting behaviour from the

The use of real activities manipulation (RAM) to mislead stakeholders has garnered the focus of earnings management research. A prominent feature of RAM research is its use of estimation models in conjunction with performance matching. The veracity of this research dependents on performance matching to mitigate estimation bias. This paper provides comprehensive tests of the RAM models and their performance‐matched

We study time variation in the profitabilities of medium‐term momentum and long‐term reversals trading strategies over the business cycle. We find reliable evidence that turning points in the business cycle are critically important in determining momentum and reversals profits. Specifically, momentum profits at business cycle peaks are higher than at business cycle troughs. The opposite pattern is

This study reveals themes and trends in accounting research over the past 20 years by utilizing natural language processing and text‐mining techniques. We generated a corpus consisting of over 40,000 articles through multiple searches in EBSCOhost Business Source Premier, Scopus, and ScienceDirect to gather data from 30 highly ranked (A* and A) journals that were listed and categorized by the Australian

This study examines how product market competition affects firms’ disclosures of their individual segment's performance. We explicitly account for different types of product market competition by distinguishing between competitors who are already active in a particular market and potential competitors who are considering entering the market. Arguably, firms that are subject to intensive existing competition

Using a large sample of US data, we examine the relationship between asset redeployability and corporate tax avoidance. We also examine the extent to which asset redeployability influences tax avoidance directly and indirectly (through financing constraints channel). We find a significant negative relationship between asset redeployability and tax avoidance, implying that firms with more redeployable

This paper investigates how damage apportionment between auditor and auditee affects the quality of the internal control system (ICS), the supplied audit quality, and social welfare. The analysis takes place in a setting where the audit is not only required to meet obligations towards the primary addressees of the audited report, but where the auditor assumes a public responsibility that also makes

We examine the value relevance of the corporate social responsibility (CSR) expenditure of Bangladeshi banks from 2007–2014 in response to a regulatory directive on banking firms’ engagement in CSR activities. We find a positive association between CSR expenditure and a firm's market value. Evidence of an inverse U‐shaped curvilinear association between CSR expenditure and market value suggests that

This paper develops a model showing how the environmental liability regime and the precision of the disclosed environmental performance indicator affect managers’ incentives (1) to reduce actual pollution and (2) to manipulate the reported pollution. I assume a company with a separation of ownership and control which can be held liable for environmental damages and distinguish between a negligence

The focus of this paper is on UK Code compliance and the contests and confusions that have surrounded its principle of ‘comply or explain’. In contrast to many agency theory‐informed studies, the paper suggests that visible compliance with the Code cannot itself be taken as a reliable proxy for board effectiveness. Instead, drawing upon Foucault's account of governance as subjection, we argue that

We investigate whether investor sentiment affects the relationships between accounting variables and contemporaneous stock returns. Using price‐relevant accounting variables identified by Chen and Zhang (2007) and the investor sentiment index constructed by Baker and Wurgler (2006), we find that the value relevance of accounting variables is collectively lower in high sentiment periods than in low

In the literature, the integration of the cash and risk effects of executive compensation into company valuation is discussed only marginally. This paper addresses the question of how these effects can be integrated into corporate valuation. Several methods for solving the problem are discussed and a method free of circular references, similar to the adjusted present value approach to company valuation

This paper traces the evolution of risk management practices in a global technology company between 2000 and 2015. We extend recent research that has highlighted the emotional aspects of riskwork. We detail how a passionate interest—‘we can do better at risk management’—emotionally ‘hooked’ the staff in the company's Sourcing Unit. Risk management, emotion, and management controls were intertwined

This study examines a computational framework for segregation of duties (SoD) in the design as well as implementation of accounting systems. The framework consists of a model of workflows in accounting systems based on workflow graphs, a partial order model of roles performed by the actors in the accounting system, and a specification of SoD rules. We develop a set of algorithms for four SoD rules

When the firm changes its operating leverage it becomes a different firm with a different payoff distribution from its operations. Its CAPM market value can therefore be higher or lower, as can its cost of capital. Its market value is not independent of its operating leverage in the way that its firm value is independent (under MM) of its debt to equity financing ratio. Changes in debt to equity do

The firm's operating leverage is its ratio of fixed to variable costs. It is widely understood that production settings with higher fixed costs and lower variable costs are high risk. Well‐rehearsed CAPM arguments show how the firm's beta and cost of capital is higher when its proportion of fixed costs is higher. Importantly, that generalization holds under CAPM if expected total costs are constant

We examine the issue of operating leverage and firm value. Johnstone (2020), in this issue, questions existing results which indicate that higher operating leverage results in lower firm value. We agree with Johnstone (2020) that this result is to be questioned and present a number of arguments which indicate that operating leverage is irrelevant to the valuation of the firm in the context of the CAPM

Using two decades of shareholder class action filings, we provide evidence of significant and consistent long‐run price underperformance in defendant firms. By partitioning our sample according to the merits of an action, we show that firms less likely to have been involved in earnings manipulation, but who may have benefited from corrective management improvements and better signalling, go on to experience

He et al. (2018) find achievement‐striving analysts exert more effort and exhibit better performance. In this study, we also employ the facial width‐to‐height ratio (fWHR) of analysts as a proxy for achievement drive to re‐examine the performance of achievement‐striving analysts. We argue that achievement‐striving analysts’ superior performance can be alternatively explained by their opportunistic

Focusing on closed‐end investment funds, this paper examines whether the value relevance attached to fair value estimates is influenced by the type of investment being held. Our premise is that the fair values of different investment types rely on different valuation models and imply different underlying risks. Using hand‐collected US closed‐end funds data from 2009 to 2011, our results show that the

This paper details discoveries relating to the accounting transactions that chronicle the circumstances of the Mobile and Ohio (M&O) Railroad's 1850s and 1860s asset ledgers. There were accounting differences between railroads overall because the northern lines used foreign construction workers, while the southern lines used slaves. ?Personal Property? was the title given to the account used by the

The volume of work published by accounting scholars on corporate social responsibility (CSR) reporting is impressive. As a community we have explored ongoing developments in the field, including the accuracy of the accounts and their economic impact for various actors. We have also asked broader questions about the effect of CSR reporting on corporate accountability and responsibility. However, as

We employ computer-based textual analysis to examine disclosure patterns for a sample of US corporate social responsibility (CSR) reports from the period 2002-2016. Starting from 466 features commonly used in computational linguistics, our results show that the linguistics or disclosure patterns in CSR reports can be used to accurately predict the actual CSR performance type of CSR reporters. Specifically

This study investigates whether goodwill impairments are perceived as timely and whether specific auditor characteristics affect the perceived timeliness. It therefore contributes to central questions in accounting research: is managerial discretion over accounting numbers (accounting choice) good or bad for stakeholders and does audit quality have an impact on this relationship? It is motivated by

Both the International Financial Reporting Standards (IFRS) and the codified accounting standards (ASC) for the US GAAP categorize hedging relationships as falling into several buckets. The two buckets of relevance in this paper are (i) hedging the volatility of fair values, and (ii) hedging the volatility of future cash flow. In this paper, I argue that at least three accounting treatments of derivatives

Essentially, this study asks: Does the business risk audit (BRA) approach increase audit production efficiency? To answer this question empirically, direct and indirect tests are employed using proprietary, working paper data from the larger clients of a major Australian public sector audit provider and an efficiency frontier analytic methodology, data envelopment analysis (DEA). Results based on this

It is well documented that accounting measures of investment, such as working capital and capital expenditures, negatively predict future stock returns. The earnings fixation hypothesis suggests that investors overestimate and overvalue the persistence of the accrual component of earnings. Another stream of the literature argues that since accruals capture growth, the accruals anomaly can be explained

In this paper, we focus on the question to what extent machine learning (ML) tools can be used to support systematic literature reviews. We apply a ML approach for topic detection to analyze emerging topics in the literature—our context is accounting and finance research in the Asia–Pacific region. To evaluate the robustness of the approach, we compare findings from the automated ML approach with the

This paper sets out the science behind global environmental change, defined by the US Global Change Research Act as ‘changes in the global environment (including alterations in climate, land productivity, oceans or other water resources, atmospheric chemistry, and ecological systems) that may alter the capacity of the Earth to sustain life’. We explain why there is still scepticism about the science