Journal ArticleDOI
The Audit Committee: Management Watchdog or Personal Friend of the CEO?
TLDR
This article found that firms whose audit committees have "friendship" ties to the CEO purchase fewer audit services and engage more in earnings management, and that auditors are also less likely to issue going-concern opinions or to report internal control weaknesses when friendship ties are present.Abstract:
To ensure that audit committees provide sufficient oversight over the auditing process and quality of financial reporting, legislators have imposed stricter requirements on the independence of audit committee members. Although many audit committees appear to be “fully” independent, anecdotal evidence suggests that CEOs often appoint directors from their social networks. Based on a 2004 to 2008 sample of U.S.-listed companies after the Sarbanes-Oxley Act we find that these social ties have a negative effect on variables that proxy for oversight quality. In particular, we find that firms whose audit committees have “friendship” ties to the CEO purchase fewer audit services and engage more in earnings management. Auditors are also less likely to issue going-concern opinions or to report internal control weaknesses when friendship ties are present. On the other hand, social ties formed through “advice networks” do not seem to hamper the quality of audit committee oversight.read more
Citations
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Journal ArticleDOI
Board Members With Style: The Effect of Audit Committee Members and Their Personal Styles on Financial Reporting Choices:
TL;DR: In this paper, the authors track 2,941 audit committee members and 683 chairpersons across firms over time, and test whether member (chairperson) specific factors explain firms' accounting choices.
Journal ArticleDOI
The consequences of audit committee quality
TL;DR: In this paper, the authors examine the consequences when audit committees have different economic incentives (i.e. incentive-based compensation) to switch auditors, and they find that when companies switch auditor, incentivebased compensation significantly affects the monitoring quality of audit committees.
Journal ArticleDOI
Individualist-collectivist culture, ownership concentration and earnings quality*
Chan Lyu,Desmond Yuen,Xu Zhang +2 more
TL;DR: The authors explored the effects of individualist-collectivist culture on the entrenchment incentives of large shareholders and found that the poor earnings quality that normally goes hand-in-hand with concentrated ownership, is improved when the firm's national culture is individualist.
Journal ArticleDOI
Conceptualizing the Moderating Role of CEO Power and Ownership Concentration in the Relationship between Audit Committee and Firm Performance: Empirical Evidence from Pakistan
TL;DR: In this article, the authors used the data of Pakistani manufacturing firms for the period 2008 to 2018 and applied the Ordinary Least Square (OLS) method, the Fixed Effect (FE) model, and the Generalized Method of Moments (GMM) model to check the robustness of the results.
Journal ArticleDOI
Whistleblowing Allegations, Audit Fees, and Internal Control Deficiencies
Yu Flora Kuang,Gladys Lee,Bo Qin +2 more
TL;DR: In this paper, the authors investigate whether audit fees and auditors opinions on internal controls are associated with whistleblowing allegations externally filed to regulatory agencies, and they find that firms subject to such allegations have significantly higher audit fees, regardless of the substance of these allegations.
References
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Book
Econometric Analysis of Cross Section and Panel Data
TL;DR: This is the essential companion to Jeffrey Wooldridge's widely-used graduate text Econometric Analysis of Cross Section and Panel Data (MIT Press, 2001).
Journal ArticleDOI
Birds of a Feather: Homophily in Social Networks
TL;DR: The homophily principle as mentioned in this paper states that similarity breeds connection, and that people's personal networks are homogeneous with regard to many sociodemographic, behavioral, and intrapersonal characteristics.
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The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors
TL;DR: In this article, the authors proposed a new measure of one aspect of the quality of accruals and earnings, which is the residual from firm-specific regressions of changes in working capital on past, present, and future operating cash flow realizations.
Posted Content
Regression standard errors in clustered samples
TL;DR: In this paper, the residuals are sorted and the observation is located in the residual corresponding to the quantile in question, taking into account weights if they are applied, and the square root of the sum of the weights is calculated.
Journal ArticleDOI
Methodological issues related to the estimation of financial distress prediction models
TL;DR: In this paper, the authors examined conceptually and empirically two estimation biases which can result when financial distress models are estimated on non-random samples and showed that these biases can result in biased parameter and probability estimates if appropriate estimation techniques are not used.