Asia-Pacific Journal of Accounting & Economics, 2004
ABSTRACT This study examines the value of audit quality in the capital markets setting. We argue ... more ABSTRACT This study examines the value of audit quality in the capital markets setting. We argue that higher quality auditors are associated with lower post-earnings announcement drift (PEAD). Results show that clients of brand name auditors exhibit lower PEAD than small auditors, but only weak auditor industry specialist effects are identified. PEAD also differs for clients of individual Big 6/5 auditors, with clients of the smaller Arthur Andersen and Deloittes exhibiting greater PEAD, consistent with the DeAngelo (1981) size hypothesis. Finally, PWC exhibits higher PEAD in 1998, suggesting market uncertainty about quality implications of audit market structural change.
Http Dx Doi Org 10 1080 09638180701507155, Sep 1, 2007
... However, board structure has no bearing on the voluntary disclosure of non-financial and hist... more ... However, board structure has no bearing on the voluntary disclosure of non-financial and historical financial information. ... where: VD ź percentage total voluntary disclosure out of all items, or per-centage of forward looking quantitative, strategic, non-financial or historical items. ...
Journal of Contemporary Accounting & Economics, 2015
ABSTRACT This paper examines the association between sell-side analysts' short and long-t... more ABSTRACT This paper examines the association between sell-side analysts' short and long-term EPS forecasts, growth rates, and forecast errors, and measures of technological conditions in the firm's industry investment environment. Our contention is analysts' industry knowledge includes an understanding of the technological conditions to which the firms' investments are exposed and how these technological conditions within industries map into future earnings. We predict and find as the horizon lengthens that interactions between technological conditions and current EPS are significantly associated with analysts' EPS and growth forecasts. The long horizon EPS growth results align with Jung, Shane and Yang (2012) who suggest analysts' growth forecasts reflect efforts to evaluate the firms' long-run prospects. We also present results for analysts' forecast errors that suggest analysts' technological knowledge is associated with optimistically biased long-term forecasts. Our evidence suggests analysts' industry knowledge includes the implications of technological conditions within industries for firms' future earnings.
Recent regulatory changes and recommendations implicitly assume that corporate governance reduces... more Recent regulatory changes and recommendations implicitly assume that corporate governance reduces the agency risk associated with the separation of ownership and control and therefore plays a key role in reducing the firm's equity risk. However, with the speed of legislative changes (e.g., the United States Sarbanes Oxley (SOX) legislation in 2002 and the United Kingdom Combined Code on Corporate Governance
This paper builds on and contributes to the currently emerging literature on CFO’s compensation a... more This paper builds on and contributes to the currently emerging literature on CFO’s compensation and turnover. Specifically, we focus on the economic consequences of accounting errors as opposed to accounting restatements on the CFO’s compensation and turnover. We identify the setting of IFRS adoption in Australia, where all firms had to adopt IFRS at the same time without the opportunity of early or late adoption. We hand-collect eighteen different sources of accounting errors for a sample of 274 Australian companies. These are then used to calculate IFRS errors. We find (i) a negative association between IFRS errors and the CFO’s compensation ex ante in the transition year, (ii) a negative association between the CFO’s bonus and IFRS errors in the subsequent years (adoption year) and (iii) a positive association between IFRS errors and the CFO turnover in the subsequent year. These results are robust with respect to alternative econometric specifications and variable descriptions.
We examine whether firms that capitalise a higher proportion of their firm’s underlying intangibl... more We examine whether firms that capitalise a higher proportion of their firm’s underlying intangible assets have higher analyst following, lower dispersion of analysts’ earnings forecasts and more accurate earnings forecasts relative to firms that capitalise a lower proportion. Under Australian GAAP, capitalisation of intangible assets has become increasingly ‘routine’ since the late 1980s. It is predicted that this experience leads Australian analysts to expect firms with relatively more certain intangible investments to signal this fact by capitalising intangible assets. Our results are consistent with this. We find capitalisation of intangible assets is associated with higher analyst following and lower absolute earnings forecast error for firms with a stock of underlying intangible assets. Our tests suggest a weaker association between capitalisation and lower earnings forecast dispersion. We conclude that there are benefits for analysts, for management to have the option to capit...
ABSTRACT This paper investigates the management control systems used by multinational corporation... more ABSTRACT This paper investigates the management control systems used by multinational corporation headquarters to control wholly-owned foreign subsidiaries. Our theory development is based on transaction cost economics. First, we conduct a series of exploratory interviews, providing an insight into the context, and second, we provide empirical evidence based on cross-sectional survey data. Our results indicate that activity traits (uncertainty, asset specificity and post hoc information impactedness) have significant implications on control choices, in particular the control archetype combinations chosen by headquarters, although not all results are consistent with theory predictions. Our findings are supported by extensive alternative testing.
ABSTRACT This study operationalises a theoretical model of political costs specific to the establ... more ABSTRACT This study operationalises a theoretical model of political costs specific to the establishment of the Prices Justification Tribunal in Australia and its implications for firms targeted in this political action. The aim is to identify and define a rigorous linkage between political actions likely to transfer wealth away from targeted firms, and firms' earnings manipulation. Both cross-sectional and longitudinal approaches are employed to examine the incentives for managers of target firms to manipulate earnings in a way which would be conducive to alleviating their exposure to wealth transfer. The cross-sectional approach examines the hypothesis that firms exposed to high levels of political costs would more likely manage their earnings downwards, as compared to other firms within the same period. The longitudinal approach examines the hypothesis that firms would more likely effect earnings-reducing accruals in periods of intense political costs, as compared to other periods of lesser political exposure. The empirical evidence presented suggests that firms are more likely to effect negative accounting accruals during periods when they are subjected to intense political scrutiny as a means of reducing their exposure to political costs.
ABSTRACT This paper tests Speklé’s (2001, 2003) transaction cost economics based approach to mana... more ABSTRACT This paper tests Speklé’s (2001, 2003) transaction cost economics based approach to management control system choices in the hierarchal organisational context. To examine this particular context, we have chosen the setting of head office control of wholly owned foreign subsidiaries. The two testable implications which we provide evidence on are (1) that there are a number of distinct management control systems (archetypes) and (2) the choice of management control system is driven by the activity traits of a firm. A series of interviews based on five firms and our survey evidence based on 167 firms, confirms the existence of different management control system archetypes, but we only find limited support for the association between management control system choices and activity traits as predicted by transaction cost economics. Our results are robust based on further testing conducted. The results in this paper are informative concerning the relevance of transaction cost economics theory in management accounting research and provide a platform for future research.
Recent regulatory changes and recommendations implicitly assume that corporate governance reduces... more Recent regulatory changes and recommendations implicitly assume that corporate governance reduces the agency risk associated with the separation of ownership and control and therefore plays a key role in reducing the firm's equity risk. However, with the speed of legislative changes (e.g., the United States Sarbanes Oxley (SOX) legislation in 2002 and the United Kingdom Combined Code on Corporate Governance
ABSTRACT This study examines the economic and director-specific determinants of non-executive dir... more ABSTRACT This study examines the economic and director-specific determinants of non-executive director (NED) compensation in the Australian setting. We find that NED compensation is associated with firm size, complexity, growth, risk and liquidity. It is also associated with director reputation, experience, connectedness and the directors' involvement with the firm. The additional compensation paid to the chairperson is positively associated with their prior experience and negatively associated with NED reputation and involvement. We find inconclusive evidence on the association between changes in NED compensation and firm performance.
ABSTRACT Responding to the social recognition of the importance of corporate gender-diversity, th... more ABSTRACT Responding to the social recognition of the importance of corporate gender-diversity, the topic has evoked significant interest in academic literature. This paper contributes to the discussion by focusing on the economic consequences of board-gender diversity in M&A setting. Using sample of 649 acquisitions by U.S. publicly listed companies between 2001 and 2009, we find that that board gender-diversity has no effect on either the size of the bid premium or the strength of the market reaction to M&A announcements, however, it has a positive impact on the long-term performance of the acquirers. This finding is consistent with the literature that suggests that board gender-diversity leads to positive economic outcomes such as more ‘optimal’ compensation structures, higher informativeness of stock prices and enhanced earnings quality.
Asia-Pacific Journal of Accounting & Economics, 2004
ABSTRACT This study examines the value of audit quality in the capital markets setting. We argue ... more ABSTRACT This study examines the value of audit quality in the capital markets setting. We argue that higher quality auditors are associated with lower post-earnings announcement drift (PEAD). Results show that clients of brand name auditors exhibit lower PEAD than small auditors, but only weak auditor industry specialist effects are identified. PEAD also differs for clients of individual Big 6/5 auditors, with clients of the smaller Arthur Andersen and Deloittes exhibiting greater PEAD, consistent with the DeAngelo (1981) size hypothesis. Finally, PWC exhibits higher PEAD in 1998, suggesting market uncertainty about quality implications of audit market structural change.
Http Dx Doi Org 10 1080 09638180701507155, Sep 1, 2007
... However, board structure has no bearing on the voluntary disclosure of non-financial and hist... more ... However, board structure has no bearing on the voluntary disclosure of non-financial and historical financial information. ... where: VD ź percentage total voluntary disclosure out of all items, or per-centage of forward looking quantitative, strategic, non-financial or historical items. ...
Journal of Contemporary Accounting & Economics, 2015
ABSTRACT This paper examines the association between sell-side analysts' short and long-t... more ABSTRACT This paper examines the association between sell-side analysts' short and long-term EPS forecasts, growth rates, and forecast errors, and measures of technological conditions in the firm's industry investment environment. Our contention is analysts' industry knowledge includes an understanding of the technological conditions to which the firms' investments are exposed and how these technological conditions within industries map into future earnings. We predict and find as the horizon lengthens that interactions between technological conditions and current EPS are significantly associated with analysts' EPS and growth forecasts. The long horizon EPS growth results align with Jung, Shane and Yang (2012) who suggest analysts' growth forecasts reflect efforts to evaluate the firms' long-run prospects. We also present results for analysts' forecast errors that suggest analysts' technological knowledge is associated with optimistically biased long-term forecasts. Our evidence suggests analysts' industry knowledge includes the implications of technological conditions within industries for firms' future earnings.
Recent regulatory changes and recommendations implicitly assume that corporate governance reduces... more Recent regulatory changes and recommendations implicitly assume that corporate governance reduces the agency risk associated with the separation of ownership and control and therefore plays a key role in reducing the firm's equity risk. However, with the speed of legislative changes (e.g., the United States Sarbanes Oxley (SOX) legislation in 2002 and the United Kingdom Combined Code on Corporate Governance
This paper builds on and contributes to the currently emerging literature on CFO’s compensation a... more This paper builds on and contributes to the currently emerging literature on CFO’s compensation and turnover. Specifically, we focus on the economic consequences of accounting errors as opposed to accounting restatements on the CFO’s compensation and turnover. We identify the setting of IFRS adoption in Australia, where all firms had to adopt IFRS at the same time without the opportunity of early or late adoption. We hand-collect eighteen different sources of accounting errors for a sample of 274 Australian companies. These are then used to calculate IFRS errors. We find (i) a negative association between IFRS errors and the CFO’s compensation ex ante in the transition year, (ii) a negative association between the CFO’s bonus and IFRS errors in the subsequent years (adoption year) and (iii) a positive association between IFRS errors and the CFO turnover in the subsequent year. These results are robust with respect to alternative econometric specifications and variable descriptions.
We examine whether firms that capitalise a higher proportion of their firm’s underlying intangibl... more We examine whether firms that capitalise a higher proportion of their firm’s underlying intangible assets have higher analyst following, lower dispersion of analysts’ earnings forecasts and more accurate earnings forecasts relative to firms that capitalise a lower proportion. Under Australian GAAP, capitalisation of intangible assets has become increasingly ‘routine’ since the late 1980s. It is predicted that this experience leads Australian analysts to expect firms with relatively more certain intangible investments to signal this fact by capitalising intangible assets. Our results are consistent with this. We find capitalisation of intangible assets is associated with higher analyst following and lower absolute earnings forecast error for firms with a stock of underlying intangible assets. Our tests suggest a weaker association between capitalisation and lower earnings forecast dispersion. We conclude that there are benefits for analysts, for management to have the option to capit...
ABSTRACT This paper investigates the management control systems used by multinational corporation... more ABSTRACT This paper investigates the management control systems used by multinational corporation headquarters to control wholly-owned foreign subsidiaries. Our theory development is based on transaction cost economics. First, we conduct a series of exploratory interviews, providing an insight into the context, and second, we provide empirical evidence based on cross-sectional survey data. Our results indicate that activity traits (uncertainty, asset specificity and post hoc information impactedness) have significant implications on control choices, in particular the control archetype combinations chosen by headquarters, although not all results are consistent with theory predictions. Our findings are supported by extensive alternative testing.
ABSTRACT This study operationalises a theoretical model of political costs specific to the establ... more ABSTRACT This study operationalises a theoretical model of political costs specific to the establishment of the Prices Justification Tribunal in Australia and its implications for firms targeted in this political action. The aim is to identify and define a rigorous linkage between political actions likely to transfer wealth away from targeted firms, and firms' earnings manipulation. Both cross-sectional and longitudinal approaches are employed to examine the incentives for managers of target firms to manipulate earnings in a way which would be conducive to alleviating their exposure to wealth transfer. The cross-sectional approach examines the hypothesis that firms exposed to high levels of political costs would more likely manage their earnings downwards, as compared to other firms within the same period. The longitudinal approach examines the hypothesis that firms would more likely effect earnings-reducing accruals in periods of intense political costs, as compared to other periods of lesser political exposure. The empirical evidence presented suggests that firms are more likely to effect negative accounting accruals during periods when they are subjected to intense political scrutiny as a means of reducing their exposure to political costs.
ABSTRACT This paper tests Speklé’s (2001, 2003) transaction cost economics based approach to mana... more ABSTRACT This paper tests Speklé’s (2001, 2003) transaction cost economics based approach to management control system choices in the hierarchal organisational context. To examine this particular context, we have chosen the setting of head office control of wholly owned foreign subsidiaries. The two testable implications which we provide evidence on are (1) that there are a number of distinct management control systems (archetypes) and (2) the choice of management control system is driven by the activity traits of a firm. A series of interviews based on five firms and our survey evidence based on 167 firms, confirms the existence of different management control system archetypes, but we only find limited support for the association between management control system choices and activity traits as predicted by transaction cost economics. Our results are robust based on further testing conducted. The results in this paper are informative concerning the relevance of transaction cost economics theory in management accounting research and provide a platform for future research.
Recent regulatory changes and recommendations implicitly assume that corporate governance reduces... more Recent regulatory changes and recommendations implicitly assume that corporate governance reduces the agency risk associated with the separation of ownership and control and therefore plays a key role in reducing the firm's equity risk. However, with the speed of legislative changes (e.g., the United States Sarbanes Oxley (SOX) legislation in 2002 and the United Kingdom Combined Code on Corporate Governance
ABSTRACT This study examines the economic and director-specific determinants of non-executive dir... more ABSTRACT This study examines the economic and director-specific determinants of non-executive director (NED) compensation in the Australian setting. We find that NED compensation is associated with firm size, complexity, growth, risk and liquidity. It is also associated with director reputation, experience, connectedness and the directors' involvement with the firm. The additional compensation paid to the chairperson is positively associated with their prior experience and negatively associated with NED reputation and involvement. We find inconclusive evidence on the association between changes in NED compensation and firm performance.
ABSTRACT Responding to the social recognition of the importance of corporate gender-diversity, th... more ABSTRACT Responding to the social recognition of the importance of corporate gender-diversity, the topic has evoked significant interest in academic literature. This paper contributes to the discussion by focusing on the economic consequences of board-gender diversity in M&A setting. Using sample of 649 acquisitions by U.S. publicly listed companies between 2001 and 2009, we find that that board gender-diversity has no effect on either the size of the bid premium or the strength of the market reaction to M&A announcements, however, it has a positive impact on the long-term performance of the acquirers. This finding is consistent with the literature that suggests that board gender-diversity leads to positive economic outcomes such as more ‘optimal’ compensation structures, higher informativeness of stock prices and enhanced earnings quality.
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Papers by Zoltan Matolcsy