What Do We Know About Audit Oversight

in Dutzi, Andreas; Gros, Marius; Nowak, Karsten (Eds.) et al Corporate Governance, Rechenschaft und Abschlussprüfung: Festschrift für Hans-Joachim Böcking zum 65. Geburtstag (2021)

The effect of risk disclosure on analyst following

in European Journal of Finance (2020), 26(14), 1355-1376

Prior research shows that financial analysts play an important information intermediary role in France. This study extends earlier research to examine the effect of risk disclosure on the number of ... [more ▼]

Prior research shows that financial analysts play an important information intermediary role in France. This study extends earlier research to examine the effect of risk disclosure on the number of analysts following listed firms. Using a unique dataset of French firms on the 120 SBF index over 2007−2015, the results show a positive and significant relation between risk disclosure and analyst following, suggesting that firms having greater risk disclosure attract more financial analysts. These findings provide empirical support to the argument that analysts incur lower costs of information gathering in firms with greater risk disclosure. The demand for analyst services is also more valuable in these firms, given their potentially high exposure to risks, implying greater analyst following. Overall, our results are in line with prior literature highlighting that analysts’ activities complement annual report disclosures and, generally, corporate disclosures. [less ▲]

At the boundaries of institutional theorizing: Individual entrepreneurship in episodes of regulatory change

in Accounting, Organizations and Society (2020), 83

We analyse the institutional dynamics surrounding the establishment of independent audit oversight in Germany from 1997 to 2016. Complementing prior works, which have focused on countries where the global ... [more ▼]

We analyse the institutional dynamics surrounding the establishment of independent audit oversight in Germany from 1997 to 2016. Complementing prior works, which have focused on countries where the global demand for independent regulation coincides with the domestic erosion of public trust in professional self-regulation, we investigate regulatory change in a context featuring strong trust in the accounting profession. To analyse the accounting establishment’s response to expanding global standards of accounting regulation and the escalating resistance of small accounting firms, as orchestrated by one individual, we mobilize a Bourdieusian field perspective and the literature on institutional entrepreneurship. By demonstrating how intra-professional conflict has increasingly eroded the establishment’s capital to reproduce its hegemonic field position and keep the regulator at distance, our case provides a counterpoint to prior research, which suggests that oversight is mainly the product of negotiations between a unified profession and the regulatory authority. Examining a rare instance of individual entrepreneurship also enables us to engage in a theory-testing process on the explanatory power of institutional ambiguitiesdthe subjectively perceived ruptures and contradictions within established social arrangementsdfor agency. Our findings suggest that ongoing encounters with institutional ambiguities result in varying disposition to activism. In this way, while acknowledging agency as a cause of field reproduction and change, our analysis shifts attention towards the relational, temporal, and transformational institutional dynamics that constitute distinct modes of agency. By identifying empirical residuals that seem to escape theorization, we also reveal the limits of institutional theorizing. [less ▲]

Information Content of Systematic and Idiosyncratic Risk Disclosure

Scientific Conference (2019, October 24)

Voluntary disclosure, ownership structure, and corporate debt maturity: A study of French listed firms

in International Review of Financial Analysis (2019)

This study examines the effect of voluntary disclosure on corporate debt maturity and explores the role that ownership structure plays in this effect. Using a sample of 440 French listed firms over the ... [more ▼]

This study examines the effect of voluntary disclosure on corporate debt maturity and explores the role that ownership structure plays in this effect. Using a sample of 440 French listed firms over the period 2007-2013, the empirical results indicate that firms with higher voluntary disclosure have more long-term debt, suggesting that companies benefit from extensive disclosure by having greater access to long maturity debt. This is consistent with the evidence that voluntary disclosure provides an efficient monitoring mechanism in firms where long-term debt may insulate firms from lenders’ scrutiny for a long time. Results also show that the positive association between voluntary disclosure and long-term debt is relevant only when control rights of the controlling shareholders are significantly in excess of cash flow rights. This supports the findings of recent work that better disclosure policies are viewed more positively by the market in environments where the risk of wealth expropriation by dominant shareholders is higher. [less ▲]

Information Content of Systematic Risk Disclosure

Scientific Conference (2018, September)

We analyse the relation between systematic risk disclosure, which is the description of a company’s exposure to systematic risk factors and its influence on investors’ risk perception for a sample of UK ... [more ▼]

We analyse the relation between systematic risk disclosure, which is the description of a company’s exposure to systematic risk factors and its influence on investors’ risk perception for a sample of UK listed firms from 2017 to 2015. Our results show that investors react to the systematic component of risk exposure description in the annual report; the information is incorporate into the capital market. For annual reports of financial years ending in 2013 or after, the relation between systematic risk disclosure and investors’ risk perception is negative compared to a positive relation for the annual reports ending before 2013. The mandatory strategic report introduced in 2013, in which firms are required to describe their risk exposure, seems to foster more timely description of risks and uncertainties. Therefore, firms tend to solely update the risk information in their annual reports in subsequent years and thus they resolve known risk factors rather than introducing new ones. [less ▲]

Zur Zufriedenheit von Mitgliedern des Verwaltungsrats und der Geschäftsleitung Schweizer Aktiengesellschaften mit dem "umfassenden Bericht" der Revisionsstelle : Ergebnisse einer explorativen Studie

in Funk, Wilfried (Ed.) Internationale Rechnungslegung und Internationales Controlling : Herausforderungen - Handlungsfelder - Erfolgspotenziale (2017)

In der Schweiz sind zum 1. Januar 2008 die geänderten Artikel des Obligationenrechts (OR) zur Abschlussprüfung (sog. ordentliche Revision) in Kraft getreten. Ein Ziel der Reform ist es gewesen, die ... [more ▼]

In der Schweiz sind zum 1. Januar 2008 die geänderten Artikel des Obligationenrechts (OR) zur Abschlussprüfung (sog. ordentliche Revision) in Kraft getreten. Ein Ziel der Reform ist es gewesen, die Qualität der ordentlichen Revision zu erhöhen. Ansatzpunkte waren insbesondere die Verbesserung der Kommunikation der Revisionsstelle mit dem Verwaltungsrat (VR) durch die Einführung des sog. umfassenden Berichts und die Erweiterung des Prüfungsumfangs um die Prüfung der Existenz des Internen Kontrollsystems (IKS). Der vorliegende Beitrag adressiert die Unsicherheiten der Revisionsstellen beim umfassenden Bericht. Ziel ist es, erstmalig und in einer breitangelegten Befragung von VR- und GL-Mitgliedern ihre Zufriedenheit mit dem umfassenden Bericht zu erheben. Die Ergebnisse der explorativen Studie sollen den Wirtschaftsprüfungsgesellschaften Verbesserungspotenziale hinsichtlich ihrer Berichterstattung aufzeigen und Ansatzpunkte für eine „passgenaue” Berichterstattung liefern. [less ▲]

MAINTAINING AND DISRUPTING INSTITUTIONS: (UN)INTENDED CONSEQUENCES OF PARALLEL INSTITUTIONAL WORKS IN A LOCAL REGULATORY CONTEXT

Scientific Conference (2017, May 12)

Führt die EU-Bilanzrichtlinie zu inkonsistenten und unsystematischen Rechnungslegungsnormen? Eine kritische Würdigung am Beispiel von Aufwandsrückstellungen

in ACE Comptabilité, fiscalité, audit, droit des affaires au Luxembourg (2016)

The European accounting directive does not specify the users of financial statements, nor weights the single objectives of financial accounting. Thus deducting EU accounting standards consistently and ... [more ▼]

The European accounting directive does not specify the users of financial statements, nor weights the single objectives of financial accounting. Thus deducting EU accounting standards consistently and systematically from predefined objectives is nearly impossible. As an example, accounting for ‘provisions for future charges’ can be justified neither by financial statements’ informational and stewardship function nor by the objective of measuring distributable profits for tax dividend payment purposes, or by capital maintenance requirements. Accounting for ‘provisions for future charges’ simply allows preparers of financial statements to shift ex post profit distribution decisions to ex ante profit determination, for a specific ‘apparent’ purpose i.e. the maintenance of assets or repairs thereof. Accordingly the ‘true and fair’ profit actually realized by the entity is not disclosed to external users. Thus accounting for ‘provisions for future charges’ is in contradiction with the informational and stewardship function of the annual accounts, as well as with the determination of a fair measurement of distributable profits. More specifically, shareholders find themselves deprived of part of the profits actually realized by the entity and dispose of fewer financial resources to cover for their own expenses. Besides, by shifting the profit distribution decisions to the level of profit determination, a circular reference is introduced in the question of determining the distributable profit, residing in the fact that in the function of the distributable profit is included a variable that needs to be determined by the financial statements, i.e. the variable ‘profit to be distributed’. The usefulness of the balance sheet as a basis for the profit determination is taken ad absurdum, if management’s profit distribution decisions are already reflected at the level of profit determination. In this case, determination of distributable profit is based on the question of how much profit the entity’s governing body intend to distribute and not based on the ‘true and fair’ profit actually realized. Accounting for ‘provision for future charges’ is neither the expression of protection of creditors. In substance, accounting for provisions is required by the prudence principle but this is only true for provisions accounted for future expected losses (future charges not compensated by future revenues). Provisions for charges cover expenses not linked to ‘expected’ future losses. Thus, provisions for charges reflect compensated future charges. Accordingly accounting for ‘provisions for future charges’ distorts the financial position and performance of an entity, misinterprets the prudence principle and violates the accrual principle of accounting. [less ▲]

Change to Remain the Same: Institutional Work after a Regulatory Intervention – The Case of the Establishment of the German Audit Oversight System

Scientific Conference (2015, September 12)