Publication Search Results

Now showing 1 - 10 of 64

  • (2007) Bayley, Luke
    Accounting numbers are not only the products of peripheral economic events, but, by and large, can be consciously influenced from the effects of calculated business decisions and the selective applications of alternative reporting procedures. In academic parlance, the term accounting quality, or lack thereof, is often used to describe the extent to which these convoluting influences create a disparity between economic fundamentals and their numerical portrayal. This doctoral thesis speaks to three aspects of accounting quality; (i) Earnings Thresholds: A Re-Examination of the Role of Earnings Management, (ii) Earnings Manipulation and the Investigation of 'Red Flag' Accounting Ratios, and (iii) An Empirical Analysis of Standard and Poor's (S&Ps) Core Earnings metric. Each topic is outlined in a separate research paper.

  • (2007) Curtis, Asher
    I examine the extent to which accounting information is reflected in market prices at different points in time. The efficient market hypothesis implies that price always reflects (value-relevant) accounting information, based on the assumptions of rational investors and costless arbitrage. I examine the time-series relation between price and value in two studies which are motivated by potential shortcomings of these assumptions. First, there is significant debate regarding the rationality of equity investors during the late 1990s. I therefore contrast the historical time-series relation between price and value with that of the 1990s, and show that the historical tendency of price to converge towards value breaks down during this period. Second, I examine the impact of the lack of close substitutes - an arbitrage cost - on the time-series relation between price and value. I find some evidence of a positive association between this arbitrage cost and both the level and the duration of the disparity between price and value. My results provide empirical support for the hypothesis that price requires time to reflect (accounting) information and has implications for research that assumes that prices are measured without error.

  • (2019) Khoo, Eunice
    This thesis examines the role of reputation on a firm’s financial and non-financial outcomes through three studies. The first study examines whether the reputation incentives of busy audit committee members improve their effectiveness in monitoring the financial reporting process. I find that firms with a larger proportion of audit committee members where the membership is the most prominent are associated with higher financial reporting quality and more effective monitoring of internal control. Additional analyses reveal that my results are driven by audit committee members’ reputation incentives rather than independent non-audit committee members’ reputation incentives. I conclude that audit committee member reputation is a strong incentive for audit committee members, such that it influences their monitoring effectiveness over the financial reporting process. The second study explores whether the reputation incentive offered by a firm’s directorship has an impact on a firm’s CSR performance. I find that firms with a larger proportion of independent directors where the directorship is the most prominent are associated with better CSR performance. The positive effect of independent directors’ high reputation incentives on CSR performance is driven by better performance in CSR strengths rather than CSR concerns, and by better performance in both stakeholder CSR and third-party CSR. The effect is more pronounced in an environment where firms face less external pressure to perform CSR, and in firms with a less diverse board. Overall, my results suggest that independent directors have incentives to develop their reputation as a socially responsible director. The third study investigates the role of corporate reputation in enhancing the timeliness of external audits and earnings announcements. Changes in audit and financial reporting regulations have resulted in longer audit delay, leading to an increase in firms that announce earnings prior to audit completion, both of which have implications on the quality of financial information. I find that corporate reputation is negatively associated with audit report lag and the likelihood of firms announcing earnings after audit completion. I document important benefits in the form of timelier audits and earnings announcements derived from developing and maintaining a good corporate reputation.

  • (2019) Yang, Fan
    This thesis investigates issues regarding the application of fair value accounting to investment properties. The thesis documents two inter-related studies conducted in the context of accounting for investment properties around the adoption of IAS 40 Investment Property. The first study examines lobbying on exposure drafts regarding the application of fair value accounting to investment properties. I analyse comment letters received by both the IASC and the FASB in response to their exposure drafts, that is, E64 Investment Properties and Topic 973 Investment Property Entities, respectively. I first use a content analysis method to understand attitudes and concerns of interested parties with respect to accounting for investment properties at fair value. Results show that the reliability of fair values and the relevance of unrealised gains and losses are the primary concerns expressed by respondents. I then investigate underlying factors driving interested parties’ preferences. Results show that respondents’ preferences are highly associated with their functional roles in accounting practice, their industries, and their institutionalized accounting practices. Using a sample of European real estate firms, the second study utilises a number of different approaches to investigate the value relevance of historical cost and fair value accounting information for investment properties. Using both a balance sheet model and a returns model, I examine the value relevance of balance sheet and income statement information separately. Results consistently show that balance sheet amounts for investment properties measured at fair value are more value relevant than those measured at depreciated cost. However, results regarding the value relevance of income statement information are mixed. Although fair value-based earnings are relatively more value relevant than historical cost-based earnings, the incremental value relevance of earnings components differs significantly depending on the permissibility of asset revaluations of the sample firms’ domestic GAAP. In particular, realised earnings are incrementally value relevant only for firms whose domestic GAAP strictly require historical cost accounting, whereas unrealised earnings are incrementally value relevant only for firms whose domestic GAAP permit revaluations prior to IFRS. This finding reinforces the argument that economic, cultural, and social forces can impact the value relevance of fair value information at the country-level.

  • (2019) Xu, Yang
    This thesis examines how audit partners change over their life cycle and how those changes affect audit quality. Study 1 investigates whether human capital investment changes as audit partners become more experienced and whether an increase in the partners’ career horizon can motivate them to invest more in human capital. I find that, as audit partners gain experience, both Big N and non-Big N partners charge a small fee premium for their experience but allow more accruals to be reported by clients. However, Big N partners are more likely to issue going concern opinions as they gain experience, while non-Big N partners are less likely to do so. I also find weak evidence for the effect of postretirement work on partner performance. Study 2 investigates how the incentive to invest in industry specialisation differs from general human capital and its implications for audit quality over partners’ life cycle. The results show that audit partners demand a fee increase for another year’s experience when they are industry specialists working within their specialisation (3.2% - 5.5% per annum), which is higher than when they work outside their specialisation (1.9% - 2.3% per annum). In comparison, nonspecialists receive an annual fee increase of 2.3% - 3.6%. The results show that audit partners allow clients to report higher levels of absolute value of accruals as they are more experienced, regardless of whether they have a specialisation or not, which is sensitive to the control of the GFC and its aftermath. The results also show that specialist partners are more effective at restraining their clients from earnings management as they become more experienced, but only when they work within their specialisation and not when they work outside their specialisation. Findings from the thesis have implications for practitioners and regulators. Audit firms may consider 1) costs and benefits of their partner early retirement policies and 2) providing additional support for less experienced partners to ensure high audit quality. Regulators from quality review programs may target engagements audited by less experienced partners and/or those audited by industry specialists working outside their specialisation as warranting their attention.

  • (2017) Chua Bun Pho, Debbie
    My thesis examines earnings quality (EQ) of Asian financial firms during the Asian financial crisis (AFC) 1997-1999 and the global financial crisis (GFC), 2008-2010. For these firms, I investigate: (a) whether EQ is higher during the GFC than the AFC; (b) whether EQ in high enforcement countries exceeds that of low enforcement countries in both crises; (c) in low enforcement countries, if international agency interventions occurred, whether EQ is higher during the GFC than if no interventions occurred. My sample consists of firms with SIC codes between 6000-6499 from 10 Asian countries (China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand), comprising on average 880 and 1,124 firm-year observations for banks and other financial firms, respectively. Countries are pooled into high and low enforcement groups, consistent with legal institutions, both law and its enforcement, and financial development of a country affecting the quality of accounting numbers. I treat banks separately from other financial firms, and divide the latter into insurance companies and diversified financial services companies for some hypotheses, sample size permitting. Of the five EQ measures covered, I argue that, during times of financial crisis, conditional conservatism, cash flow predictability and accrual quality are superior EQ measures to earnings persistence and income smoothing. Collectively, the results suggest that banks and other financial firms (insurance and diversified financial services companies) do not learn from their AFC experience and that financial reforms instigated following the AFC are not effective in improving the earnings quality during the GFC, except for cash flow predictability by banks. Evidence further suggests that the financial sector in Asia puts more importance on earnings persistence rather than accounting conservatism during crisis periods, particularly in the regulated bank and insurance companies. However, a sensitivity analysis conducted on financial firms that survived the AFC to the GFC indicates that only financial firms belonging to the high enforcement group report conditionally conservative numbers during the GFC. Despite being rejected by accounting standard-setters as a desirable EQ attribute, conditional conservatism can be an indication of financial strength, especially during uncertain times.