This study examines whether the relatively rule-based U.S. Generally Accepted Accounting Principl... more This study examines whether the relatively rule-based U.S. Generally Accepted Accounting Principles (GAAP) and the more principle-based International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) provide different opportunities for earnings management (EM). Management can use strategic management decisions to smooth income that may or may not maximize the firm‘s value under either the rule-based or principle-based accounting standard. Comparisons of accounting standards across different markets and countries are difficult because of the differences in institutional factors and corporate governance issues (Frost and Pownall, 1994; Leuz, 2003). This problem is controlled via the unique feature of dual listing in the current German Frankfurt Stock Exchange. Firms that choose to list their shares under the Prime Standard can report in accordance with either the U.S. GAAP or the IAS/IFRS. Findings suggest that EM through R&D expenditure and deferred tax expense is higher for the IAS/IFRS firms compared to the U.S. GAAP firms and that EM through discretionary accruals is higher for the US-GAAP firms compared to the IAS/IFRS firms. The results inform US regulators considering IAS/IFRS adoption.
International journal of internet and enterprise management, 2014
This paper aims to investigate whether the boards curb earnings management by revising the compen... more This paper aims to investigate whether the boards curb earnings management by revising the compensation contract with CEOs. Using a sample of CEO compensation from 1993 to 2009, we find that the boards decrease cash payment sensitivity to accruals in the presence of the horizon problem. However, in the mean time, the boards heighten equity payment sensitivity to accruals and keep the total pay for performance sensitivity unchanged. We argue this temporary equity rewards for discretionary accruals will disappear as the value of equity claims will be realised over time and any market overpricing will evaporate by then. Overall, our results suggest that the boards can curb earnings management by revising pay-for-performance sensitivity in the terminal year.
The review of business information systems, Oct 1, 2004
We conducted an exploratory study to enhance understanding on systems security and hacker hiring.... more We conducted an exploratory study to enhance understanding on systems security and hacker hiring. Increased understanding on these issues will assist firms in developing effective guidelines for mitigating problems associated with potential attacks and in designing recruitment procedures for hiring hackers. Specifically, we examine the impact of corporate security policies on perceived systems security; the impact of internal (external) systems security audits on perceived systems security; and the willingness of firms in hiring hackers.
The North American Journal of Economics and Finance, Dec 1, 2013
ABSTRACT This study examines whether the trading location affects equity returns of China-backed ... more ABSTRACT This study examines whether the trading location affects equity returns of China-backed American Depository Receipts (ADRs) traded in the US. If International Financial Markets are integrated, stock prices should be affected only by their fundamentals; otherwise, stock prices may also be affected by their trading locations/investor sentiment. We find that China ADRs’ returns are affected more by the US market fluctuations than by Chinese market returns. We interpret the results as suggesting that International Financial Markets are at least partially segmented and country-specific investor sentiment affects stock prices.
Journal of Computer Information Systems, Dec 11, 2015
EVA® has recently been touted by the business press, analysts and researchers as the best method ... more EVA® has recently been touted by the business press, analysts and researchers as the best method for assessing firm performance. EVA® focuses on maximization of incremental income above capital costs while adjusting for accounting items frequently used to manage earnings. In the current study, EVA® is used to assess differences in firm performance as related to IT investment in order to add clarity to conflicting results in the extant research. Our study focuses on manufacturing firms during 1998-2000 when there was widespread adoption of factory automation, enterprise resource planning and advanced production scheduling systems. Consistent with several earlier studies, results in the sample firms were inconsistent when applying traditional accounting measures (i.e. IT investment was not correlated with increases in ROI and ROA but was correlated with ROE and ROS). However, a significant relationship exists between IT investment and EVA®, indicating increased IT investment was associated with increased wealth creation.
Asia-Pacific journal of accounting & economics, Sep 1, 2013
This paper investigates the value relevance of accounting information in the presence of ineffect... more This paper investigates the value relevance of accounting information in the presence of ineffective internal control (IIC). Based on Ohlson’s valuation model, this paper first documents that IIC can directly affect a firm’s market value after control cost of capital, corporate governance, and other, value-relevant variables. Second, this paper finds that the value relevance of earnings and book value in determining a firm’s market value are significantly reduced. Collectively, the results of this paper indicate that the effectiveness of internal controls can directly affect a firm’s market value and the value relevance of accounting information.
Journal of Accounting, Auditing & Finance, Oct 3, 2012
This article investigates the relationship between a firm's visibility in blogspaces, termed blog... more This article investigates the relationship between a firm's visibility in blogspaces, termed blog exposure, and the cross-sectional stock returns. We show that blog exposure is fundamentally different from the traditional media coverage, and securities with low blog exposure earn higher returns than stocks with high blog exposure. We further illustrate that such an effect is more prominent for stocks with low institutional ownership. Contrary to traditional media coverage, the return premium associated with blog exposure cannot be explained by either the illiquidity hypothesis or the investor recognition hypothesis based on the rational-agent framework. Instead, our results suggest that blog effect can be attributed to the limited attention theory and cannot be arbitraged due to investors' selfattribution and short-sale constraints. Our research points out the importance of blogs in information dissemination, especially for the stocks with limited attention.
International Journal of Accounting and Information Management, Mar 2, 2015
Purpose – The purpose of this paper is to understand the impact of tenure on earnings management.... more Purpose – The purpose of this paper is to understand the impact of tenure on earnings management. Design/methodology/approach – Analytical model; multivariate regression analysis. Findings – The paper predicts that managers are conservative in managing earnings when they first start to take top managerial positions, and then become aggressive in the next few years. Once they reach the maximum level of earnings management, they will become conservative again and report earnings less aggressively. This inverted U-shaped relationship between tenure and earnings management is confirmed by the data from the Chinese stock market. Research limitations/implications – It is based on China stock market data. Generalization of the research results to other countries is limited. Practical implications – With the knowledge of when earnings management is more likely to occur, regulators can set up policies targeting firms and managers with certain characteristics, instead of requiring observances from all firms and managers. This limited scope can greatly reduce the costs of preventing and identifying earnings management, while effectively maintaining the quality of earnings in the meantime. Social implications – This paper examines the earnings management behavior related to CEO tenure. It is hoped that the research results can improve the overall understanding of earnings management, then social wealth spent on preventing and identifying it could be reduced. Originality/value – It is an original work.
This study investigates empirically the extent of corporate governance and voluntary disclosure b... more This study investigates empirically the extent of corporate governance and voluntary disclosure by listed firms in Malaysia. The governance factors examined are Board size, proportion of independent non-executive directors (INDs) on board, outside share ownership, family control, and percentage of audit committee members to total members on the board. Our results suggest a positive association between Board size and voluntary disclosures and between proportion of INDs and voluntary information. However, the extent of voluntary disclosure is negatively related to family control, and the ratio of audit committee members to total members on the board is not related to voluntary disclosures.
EVA® has recently been touted by the business press, analysts and researchers as the best method ... more EVA® has recently been touted by the business press, analysts and researchers as the best method for assessing firm performance. EVA® focuses on maximization of incremental income above capital costs while adjusting for accounting items frequently used to manage earnings. In the current study, EVA® is used to assess differences in firm performance as related to IT investment in order to add clarity to conflicting results in the extant research. Our study focuses on manufacturing firms during 1998-2000 when there was widespread adoption of factory automation, enterprise resource planning and advanced production scheduling systems. Consistent with several earlier studies, results in the sample firms were inconsistent when applying traditional accounting measures (i.e. IT investment was not correlated with increases in ROI and ROA but was correlated with ROE and ROS). However, a significant relationship exists between IT investment and EVA®, indicating increased IT investment was assoc...
International Journal of Accounting & Information Management, 2015
Purpose – The purpose of this paper is to understand the impact of tenure on earnings management.... more Purpose – The purpose of this paper is to understand the impact of tenure on earnings management. Design/methodology/approach – Analytical model; multivariate regression analysis. Findings – The paper predicts that managers are conservative in managing earnings when they first start to take top managerial positions, and then become aggressive in the next few years. Once they reach the maximum level of earnings management, they will become conservative again and report earnings less aggressively. This inverted U-shaped relationship between tenure and earnings management is confirmed by the data from the Chinese stock market. Research limitations/implications – It is based on China stock market data. Generalization of the research results to other countries is limited. Practical implications – With the knowledge of when earnings management is more likely to occur, regulators can set up policies targeting firms and managers with certain characteristics, instead of requiring observances...
Review of Business Information Systems (RBIS), 2011
We conducted an exploratory study to enhance understanding on systems security and hacker hiring.... more We conducted an exploratory study to enhance understanding on systems security and hacker hiring. Increased understanding on these issues will assist firms in developing effective guidelines for mitigating problems associated with potential attacks and in designing recruitment procedures for hiring hackers. Specifically, we examine the impact of corporate security policies on perceived systems security; the impact of internal (external) systems security audits on perceived systems security; and the willingness of firms in hiring hackers.
This study examines whether the relatively rule-based U.S. Generally Accepted Accounting Principl... more This study examines whether the relatively rule-based U.S. Generally Accepted Accounting Principles (GAAP) and the more principle-based International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) provide different opportunities for earnings management (EM). Management can use strategic management decisions to smooth income that may or may not maximize the firm‘s value under either the rule-based or principle-based accounting standard. Comparisons of accounting standards across different markets and countries are difficult because of the differences in institutional factors and corporate governance issues (Frost and Pownall, 1994; Leuz, 2003). This problem is controlled via the unique feature of dual listing in the current German Frankfurt Stock Exchange. Firms that choose to list their shares under the Prime Standard can report in accordance with either the U.S. GAAP or the IAS/IFRS. Findings suggest that EM through R&D expenditure and deferred tax expense is higher for the IAS/IFRS firms compared to the U.S. GAAP firms and that EM through discretionary accruals is higher for the US-GAAP firms compared to the IAS/IFRS firms. The results inform US regulators considering IAS/IFRS adoption.
International journal of internet and enterprise management, 2014
This paper aims to investigate whether the boards curb earnings management by revising the compen... more This paper aims to investigate whether the boards curb earnings management by revising the compensation contract with CEOs. Using a sample of CEO compensation from 1993 to 2009, we find that the boards decrease cash payment sensitivity to accruals in the presence of the horizon problem. However, in the mean time, the boards heighten equity payment sensitivity to accruals and keep the total pay for performance sensitivity unchanged. We argue this temporary equity rewards for discretionary accruals will disappear as the value of equity claims will be realised over time and any market overpricing will evaporate by then. Overall, our results suggest that the boards can curb earnings management by revising pay-for-performance sensitivity in the terminal year.
The review of business information systems, Oct 1, 2004
We conducted an exploratory study to enhance understanding on systems security and hacker hiring.... more We conducted an exploratory study to enhance understanding on systems security and hacker hiring. Increased understanding on these issues will assist firms in developing effective guidelines for mitigating problems associated with potential attacks and in designing recruitment procedures for hiring hackers. Specifically, we examine the impact of corporate security policies on perceived systems security; the impact of internal (external) systems security audits on perceived systems security; and the willingness of firms in hiring hackers.
The North American Journal of Economics and Finance, Dec 1, 2013
ABSTRACT This study examines whether the trading location affects equity returns of China-backed ... more ABSTRACT This study examines whether the trading location affects equity returns of China-backed American Depository Receipts (ADRs) traded in the US. If International Financial Markets are integrated, stock prices should be affected only by their fundamentals; otherwise, stock prices may also be affected by their trading locations/investor sentiment. We find that China ADRs’ returns are affected more by the US market fluctuations than by Chinese market returns. We interpret the results as suggesting that International Financial Markets are at least partially segmented and country-specific investor sentiment affects stock prices.
Journal of Computer Information Systems, Dec 11, 2015
EVA® has recently been touted by the business press, analysts and researchers as the best method ... more EVA® has recently been touted by the business press, analysts and researchers as the best method for assessing firm performance. EVA® focuses on maximization of incremental income above capital costs while adjusting for accounting items frequently used to manage earnings. In the current study, EVA® is used to assess differences in firm performance as related to IT investment in order to add clarity to conflicting results in the extant research. Our study focuses on manufacturing firms during 1998-2000 when there was widespread adoption of factory automation, enterprise resource planning and advanced production scheduling systems. Consistent with several earlier studies, results in the sample firms were inconsistent when applying traditional accounting measures (i.e. IT investment was not correlated with increases in ROI and ROA but was correlated with ROE and ROS). However, a significant relationship exists between IT investment and EVA®, indicating increased IT investment was associated with increased wealth creation.
Asia-Pacific journal of accounting & economics, Sep 1, 2013
This paper investigates the value relevance of accounting information in the presence of ineffect... more This paper investigates the value relevance of accounting information in the presence of ineffective internal control (IIC). Based on Ohlson’s valuation model, this paper first documents that IIC can directly affect a firm’s market value after control cost of capital, corporate governance, and other, value-relevant variables. Second, this paper finds that the value relevance of earnings and book value in determining a firm’s market value are significantly reduced. Collectively, the results of this paper indicate that the effectiveness of internal controls can directly affect a firm’s market value and the value relevance of accounting information.
Journal of Accounting, Auditing & Finance, Oct 3, 2012
This article investigates the relationship between a firm's visibility in blogspaces, termed blog... more This article investigates the relationship between a firm's visibility in blogspaces, termed blog exposure, and the cross-sectional stock returns. We show that blog exposure is fundamentally different from the traditional media coverage, and securities with low blog exposure earn higher returns than stocks with high blog exposure. We further illustrate that such an effect is more prominent for stocks with low institutional ownership. Contrary to traditional media coverage, the return premium associated with blog exposure cannot be explained by either the illiquidity hypothesis or the investor recognition hypothesis based on the rational-agent framework. Instead, our results suggest that blog effect can be attributed to the limited attention theory and cannot be arbitraged due to investors' selfattribution and short-sale constraints. Our research points out the importance of blogs in information dissemination, especially for the stocks with limited attention.
International Journal of Accounting and Information Management, Mar 2, 2015
Purpose – The purpose of this paper is to understand the impact of tenure on earnings management.... more Purpose – The purpose of this paper is to understand the impact of tenure on earnings management. Design/methodology/approach – Analytical model; multivariate regression analysis. Findings – The paper predicts that managers are conservative in managing earnings when they first start to take top managerial positions, and then become aggressive in the next few years. Once they reach the maximum level of earnings management, they will become conservative again and report earnings less aggressively. This inverted U-shaped relationship between tenure and earnings management is confirmed by the data from the Chinese stock market. Research limitations/implications – It is based on China stock market data. Generalization of the research results to other countries is limited. Practical implications – With the knowledge of when earnings management is more likely to occur, regulators can set up policies targeting firms and managers with certain characteristics, instead of requiring observances from all firms and managers. This limited scope can greatly reduce the costs of preventing and identifying earnings management, while effectively maintaining the quality of earnings in the meantime. Social implications – This paper examines the earnings management behavior related to CEO tenure. It is hoped that the research results can improve the overall understanding of earnings management, then social wealth spent on preventing and identifying it could be reduced. Originality/value – It is an original work.
This study investigates empirically the extent of corporate governance and voluntary disclosure b... more This study investigates empirically the extent of corporate governance and voluntary disclosure by listed firms in Malaysia. The governance factors examined are Board size, proportion of independent non-executive directors (INDs) on board, outside share ownership, family control, and percentage of audit committee members to total members on the board. Our results suggest a positive association between Board size and voluntary disclosures and between proportion of INDs and voluntary information. However, the extent of voluntary disclosure is negatively related to family control, and the ratio of audit committee members to total members on the board is not related to voluntary disclosures.
EVA® has recently been touted by the business press, analysts and researchers as the best method ... more EVA® has recently been touted by the business press, analysts and researchers as the best method for assessing firm performance. EVA® focuses on maximization of incremental income above capital costs while adjusting for accounting items frequently used to manage earnings. In the current study, EVA® is used to assess differences in firm performance as related to IT investment in order to add clarity to conflicting results in the extant research. Our study focuses on manufacturing firms during 1998-2000 when there was widespread adoption of factory automation, enterprise resource planning and advanced production scheduling systems. Consistent with several earlier studies, results in the sample firms were inconsistent when applying traditional accounting measures (i.e. IT investment was not correlated with increases in ROI and ROA but was correlated with ROE and ROS). However, a significant relationship exists between IT investment and EVA®, indicating increased IT investment was assoc...
International Journal of Accounting & Information Management, 2015
Purpose – The purpose of this paper is to understand the impact of tenure on earnings management.... more Purpose – The purpose of this paper is to understand the impact of tenure on earnings management. Design/methodology/approach – Analytical model; multivariate regression analysis. Findings – The paper predicts that managers are conservative in managing earnings when they first start to take top managerial positions, and then become aggressive in the next few years. Once they reach the maximum level of earnings management, they will become conservative again and report earnings less aggressively. This inverted U-shaped relationship between tenure and earnings management is confirmed by the data from the Chinese stock market. Research limitations/implications – It is based on China stock market data. Generalization of the research results to other countries is limited. Practical implications – With the knowledge of when earnings management is more likely to occur, regulators can set up policies targeting firms and managers with certain characteristics, instead of requiring observances...
Review of Business Information Systems (RBIS), 2011
We conducted an exploratory study to enhance understanding on systems security and hacker hiring.... more We conducted an exploratory study to enhance understanding on systems security and hacker hiring. Increased understanding on these issues will assist firms in developing effective guidelines for mitigating problems associated with potential attacks and in designing recruitment procedures for hiring hackers. Specifically, we examine the impact of corporate security policies on perceived systems security; the impact of internal (external) systems security audits on perceived systems security; and the willingness of firms in hiring hackers.
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Papers by Lee Jia Yao