Category Archives: RESEARCH ARTICLE

The influence of partners’ known preferences on auditors’ sceptical judgements: The moderating role of perceived social influence pressure

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Abstract

We examine the moderating effect of auditors' perceived social influence pressure on the influence of partners' known preferences on auditors' sceptical judgements in China. We invoke social influence theory to provide complementary insights into the driving forces behind auditors' judgements, over and above the pressure arising from accountability. We hypothesise that the influence of partners' known preferences on auditors' sceptical judgements is stronger for auditors who perceive higher social influence pressure than those who perceive lower pressure. Our results support the hypothesis and establish the value of understanding auditors' perceived social influence pressure in managing partners' communication with audit teams.

Impact of the interactive and diagnostic uses of performance measurement systems on procedural fairness perception, cooperation and performance in supply alliances

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Abstract

We examine the effects of interactive and diagnostic uses of performance measurement systems (PMSs) on two behavioural factors (procedural fairness perception and cooperation) in inter-firm alliances. We further investigate whether the two behavioural factors mediate the relationship between PMS uses and alliance performance. We find that both interactive and diagnostic uses of PMS are significantly related to procedural fairness perception but only the interactive use is significantly related to cooperation. The relationships between the two uses of PMS and alliance performance are serially mediated by procedural fairness perception and cooperation. These findings contribute to management accounting studies in inter-firm alliances.

What firm risk factors drive bank loan pricing and other terms? Evidence from China

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Abstract

This study investigates how firm risk factors affect bank loan pricing. Although firm-specific stock price crash risk affects bank loan costs directly, it also prompts other risks, including financial restatement and litigation, which in turn trigger higher bank loan costs. Strong internal and external governance mechanisms help reduce agency problems and improve information transparency, alleviating the adverse effect of stock price crash risk on loan costs. Our results confirm that bankers take good corporate governance into account in their bank loan decisions. We also show that bond investors price the adverse effect of stock price crash risk, prompting higher corporate bond costs. Futher evidence suggests that banks impose stricter non-price terms, such as smaller loan size, shorter loan maturity, and a higher likelihood of collateral requirement, on firms with higher crash risk.

How important are semi‐annual earnings announcements? An information event perspective

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Abstract

Using a method that avoids the need to specify earnings expectations, we demonstrate that the period surrounding the semi-annual announcement of Australian firms' earnings is, on average, an important source of information. Although there is substantial year-to-year variation, we observe no evidence of any significant time trend, and also conclude that a shift from Australian domestic generally accepted accounting principle to International Financial Reporting Standards did not impact the association between earnings announcement windows and stock returns. We also find no evidence that the informativeness of earnings announcements varies systematically with firm size, analyst following or economic news (i.e., positive vs. negative stock returns, profits vs. losses), although we do observe significant variation across industries. Our conclusion is further supported by contrasting the earnings release date with the days immediately prior to release, or high information days other than earnings announcement windows. Using a more precise event window relative to prior studies (i.e., 3 h vs. 3 days), we confirm that earnings announcements contain significant new information about fundamentals.

Messages in online stock forums and stock price synchronicity: Evidence from China

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Abstract

Online stock forums allow investors to share information and exchange opinions, which facilitates the incorporation of firm-specific information into prices and reduces stock price synchronicity. However, prior research presents mixed evidence as to the value of messages in online forums. Using the information of the Eastmoney Guba online forum in China, we find a causal and negative relation between Guba messages and stock price synchronicity. The finding is robust after accounting for media reports and firm fixed effects and using both an instrumental variable analysis and an experimental design that exploits exogenous changes in the authenticity of Guba messages. We find the impact of Guba information is attributed to its roles in both information dissemination and investor interaction and is more pronounced for messages with a negative narrative tone. Additional tests suggest Guba messages improve firm information disclosure quality, reduce stock price crash risk and decrease stock return volatility synchronicity.

Effective teaching, student engagement and student satisfaction during the Covid‐19 pandemic: Evidence from business students’ qualitative survey evaluations

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Abstract

We investigate the influence of unanticipated prolonged disruption on effective teaching, student engagement and student satisfaction during campus lockdown due to COVID-19. Qualitative comments provided by undergraduate business students in the university end-of-semester survey were analysed using a variety of methods, including sentiment analysis. Our findings indicate that effective teaching through the characteristics of the instructor, can lead to enhanced student engagement and higher levels of student satisfaction in an emergency remote teaching environment. Our findings highlight the critical role of the instructor in providing cognitive and affective support to students, along with clear communication, during times of substantial change.

Does corporate social responsibility protect shareholder value from the shock of COVID‐19? Evidence from China

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Abstract

Our study examines whether and how increased engagement in social responsibility activities by a firm affects movements in its stock prices during the COVID-19 public health crisis, which is regarded as an exogenous shock to economic ties between focal firms and their customers, employees, and suppliers. We find that corporate social responsibility has an inverted U-shaped relationship with shareholder value. The nonlinear relationship is more dominant at firms with higher cash-flow constraints and weaker cost-adjustment capabilities. Our research also generates meaningful implications for business practices.

Awe culture and corporate social responsibility: Evidence from China

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Abstract

By proxying ‘awe culture’ (i.e., reverence for life and ethical behaviour) with regional induced abortion rates, we examine the impact of awe culture on corporate social responsibility (CSR) in a sample of Chinese firms. We find that firms located in areas with higher induced abortion rates spend less funds on CSR activities and obtain lower CSR scores. The findings remain intact after an array of robustness tests. Further analysis shows that the effect of awe culture on CSR is more pronounced in areas with weaker law enforcement and where the local government emphasises economic growth targets. However, the effect becomes insignificant when firms are well-represented by top executives with overseas experience, foreign directors, and a high proportion of female board members. The significance of the effect also diminishes for non-state-owned firms, and firms with higher institutional ownership and higher cash holdings. Moreover, the lack of awe culture attenuates the positive impact of CSR on firm value. Overall, we document that awe culture, as an informal institution, shapes CSR behaviours.

Effects of audit committee chair characteristics on auditor choice, audit fee and audit quality

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Abstract

We investigate whether the characteristics of audit committee (AC) chairs are associated with decisions about auditor choice, audit fees and audit quality. Using hand-collected Australian data, firms with AC chairs who have longer tenure and multiple AC memberships across several boards are found to be more likely to choose Big 4 and/or industry specialist auditors, pay higher audit fees and have lower discretionary accruals. Those AC chairs with higher business qualifications are more likely to hire a Big 4 auditor, pay higher audit fees and have lower discretionary accruals, while AC chairs with professional qualifications are more likely to hire a Big 4 and/or industry specialist auditor. In contrast, firms with AC chairs who are executive directors are less likely to hire a Big 4 auditor and have higher discretionary accruals. Our findings contribute to the literature by documenting that various characteristics of AC chairs are important for enhancement of auditor selection and audit quality.

The rise of robots and the fall of cost stickiness: Evidence from Chinese manufacturers

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Abstract

Industrial robots are increasingly used to perform tasks traditionally assigned to humans. Using a sample of Chinese manufacturers, we examine the impact of robot adoption on firm cost stickiness. We find that robot adoption is associated with less sticky costs. The negative impact of robot adoption on cost stickiness is particularly meaningful for state-owned enterprises and firms with higher labour costs, and becomes significantly stronger after the enactment of China's Labour Contract Law, which significantly increases labour adjustment costs. These findings are consistent with the conjecture that the adoption of robots allows firms to reduce their overall labour adjustment costs.