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Author: Surjit Tinaikar
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
This study examines whether outside directors factor in litigation costs for the firm while monitoring optimal disclosure policy. It investigates the association of management earnings forecast disclosure and the proportion of outside directors across two regimes with unequal litigation costs - U.S. and Canada. I find that the positive association between forecast frequency/precision and the proportion of outside directors is stronger in Canada. It suggests that outside directors are more likely to encourage disclosure in less litigious Canada. I also find that firm-level governance mechanisms such as outside directors and country-level litigation environment act as governance substitutes in determining unbiased forecasts. Specifically, the negative association between forecast bias and the proportion of outside directors is stronger in Canada. I also revisit the effect of legal regime on forecast disclosure in a non-U.S. context. Recent legislation has increased the likelihood of class-action lawsuits in Canada. The passage of these laws has decreased the precision in forecasts by Canadian firms.
Author: Surjit Tinaikar
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
This study examines whether outside directors factor in litigation costs for the firm while monitoring optimal disclosure policy. It investigates the association of management earnings forecast disclosure and the proportion of outside directors across two regimes with unequal litigation costs - U.S. and Canada. I find that the positive association between forecast frequency/precision and the proportion of outside directors is stronger in Canada. It suggests that outside directors are more likely to encourage disclosure in less litigious Canada. I also find that firm-level governance mechanisms such as outside directors and country-level litigation environment act as governance substitutes in determining unbiased forecasts. Specifically, the negative association between forecast bias and the proportion of outside directors is stronger in Canada. I also revisit the effect of legal regime on forecast disclosure in a non-U.S. context. Recent legislation has increased the likelihood of class-action lawsuits in Canada. The passage of these laws has decreased the precision in forecasts by Canadian firms.
Author: Zhiyan Cao
Publisher:
ISBN:
Category :
Languages : en
Pages : 58
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Book Description
We examine the effect of litigation risk on management's decision to issue earnings forecasts. We use a new ex ante measure of litigation risk, namely, the Directors and Officers liability insurance premium. This measure bypasses significant problems associated with the estimation of ex ante litigation risk in prior studies. By using this measure of litigation risk, our results are more intuitive. We find that, when faced with ex ante litigation risk, managers with bad news are more likely to issue an earnings warning. For good news firms, we do not see this effect. We also examine three forecast characteristics: forecast horizon, extent of news revealed, and forecast precision. Firms with higher litigation risk tend to issue earnings forecasts earlier if they have bad news, but this is not so when they have good news. They also reveal less news in the forecasts if they have good news. As litigation risk increases, bad news earnings forecasts tend to become more precise while good news earnings forecasts tend to become less precise. This differential effect of litigation risk on management earnings forecasts, based on the direction of the news, has not been documented by previous studies.
Author: Keitha L. Dunstan
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This study seeks to examine the impact of the continuous disclosure regulatory reform on the likelihood, frequency and qualitative characteristics of management earnings forecasts in New Zealand where a low private litigation environment prevails. This provides a unique opportunity to study the impact of a public regulatory reform in the absence of any viable private enforcement alternative. Using a sample of 720 management earnings forecasts issued by 94 firms listed on the New Zealand Stock Exchange during the financial reporting periods ending from 31 January 1999 to 31 December 2005, we provide strong evidence of significant changes in management earnings forecast behaviour in the post-regulatory reform period. Specifically, firms were more likely to issue an earnings forecast to pre-empt their earnings announcements and forecasting firms provided a greater number of earnings forecasts which were also more precise and accurate. These findings add to the concurrent evidence that the enhancement of public enforcement in New Zealand has had positive impact on corporate behaviour and capital market characteristics in an environment where there is a very low threat of private enforcement. This may indicate that public regulatory reforms are able to have a greater benefit where low private litigation environment prevails. This study provides insight into the impact of a public regulatory reform on corporate disclosure behaviour which may contribute to the debate regarding the value of further public regulatory reform of corporate requirements internationally.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Hyung Tae Kim
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
This study examines how the equity compensation of chief executive officers (CEO) and that of outside directors affect management earnings forecasts (MFs) and the relationship between these two positions in terms of compensation. Our evidence reveals that CEO (director) equity compensation is positively associated with MF likelihood, frequency, and accuracy when director (CEO) equity compensation is not high. However, an increase in director (CEO) equity compensation is not effective in improving disclosure quality when the level of CEO (director) equity compensation is already high. These results suggest that the two incentive mechanisms act as substitutes when both are intensively used in the context of MF disclosure.
Author:
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 736
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Book Description
Author: H. Chan
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
We examine the relationship between corporate governance and management earnings forecasts. We extend the prior literature by examining the impact of independent director reputation on characteristics of management forecasts, by refining the previously used proxy for director independence and by distinguishing between routine and non-routine forecasts. We find a significant positive relationship between the likelihood and frequency of firms issuing management earnings forecasts and our measures of audit committee independence and independent director reputation but not board independence. However, there is some evidence that director independence is related to more specific forecasts. We also find that these results are driven by the routine earnings forecasts over which management have greater discretion.
Author: Eliezer M. Fich
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
We examine the characteristics of firms that adopt stock-option plans for outside directors using a sample of 2,088 firm-year observations of Fortune 1000 firms from 1997-1999. Using fixed-effects models that account for self-selectivity bias, we find that firms with outside director option plans have significantly higher market to book ratios and profitability metrics. Adoptions of these option plans are also associated with significantly positive cumulative abnormal stock returns (CARs) as well as with favorable revisions in analysts' earnings forecasts. In addition, announcements of outside director appointments are related with CARs close to zero for firms with option plans, but with significantly negative CARs for firms without option plans. We conclude that stock option plans for outside directors help align the incentives of outside directors and shareholders, thereby improving firm value.
Author: Carol Liu
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
This study investigates whether effective audit committees influence the association between management earnings forecasts and the properties of analysts" forecasts. We posit that this influence on the part of an audit committee would likely result from increased responsibility for monitoring voluntary disclosure. Using the four attributes that the Blue Ribbon Committee (1999) and prior research suggest as being indicative of audit committee effectiveness, we find that analysts" forecasts exhibit higher accuracy and lower dispersion with the issuance of management forecasts for those firms employing audit committees that are composed exclusively of independent directors, include an accounting expert, and act with due diligence. We also find that effective audit committees strengthen the association between management and analyst forecast accuracy. Our evidence, therefore, supports the notion that effective corporate governance influences the reliability of voluntary disclosure, and thereby benefits the users of financial information.
Author: Shahzad Uddin
Publisher: Emerald Group Publishing
ISBN: 0857244523
Category : Business & Economics
Languages : en
Pages : 310
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Book Description
Includes research papers that examines various issues including the adoption of International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSASs), management accounting change in the context of public sector reforms, corporate reporting disclosures, auditing, etcetera.
