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In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

We use Chen, Dong, Han, and Zhou’s (2013) internal control index on the effectiveness of internal control and Dickinson’s (2011) definition on firm life cycle. We use multivariate regression analysis.

We find that the internal control improves corporate performance. When dividing firm life cycle into five stages: introduction, growth, mature, shake-out and decline, we find that the impacts of internal control on firm performance vary with different stages. The positive impact of internal control on firm performance is more significant in maturity and shake-out stages than other stages.

Our findings would have implications for the regulators and policy makers with regards to the importance of internal control in corporate governance and the effectiveness of implementing standards and guidelines on internal control in public firms.

In addition, our findings on the various roles of internal control at different stages of firm life cycle would help managers and board of directors find more focus in risk management and board monitoring, respectively.

Although the prior literature have examined the link between internal control, information quality and cost of equity capital (Ashbaugh-Skaife, Collins, Kinney, & LaFond, 2009; Ogneva, Subramanyam, & Raghunandan, 2007), our study would be the first attempt to investigate the link between internal control and firm performance during different stages of firm life cycles.

This study investigates the impact of insider-ownership of publicly traded firms on their performance, cost of debt (COD) and cost of equity. We use a sample of 104 non-finance listed companies of Pakistan for the period from 2006 to 2016. Our study is conducted in Pakistan as a developing country in which insider-ownership is dominant, and a weak external corporate governance mechanism increases the payoffs from insider-ownership. We use feasible generalized least square (FGLS) regression methods to examine these hypotheses. Based on agency theory, we find that insider-ownership enhances firm performance. Furthermore, our results show that insider-ownership reduced the COD and equity. Higher ownership decreases the opportunistic behavior of insiders. It also reduces the creditor’s perception of the likelihood of default on loan payments and reduces agency issues among shareholders. The insider will invest in positive NPV projects which will help maximize shareholders’ wealth and minimize the COD. Similarly, the relationship between insider-ownership and cost of equity is significant but negative. Supporting the convergence of interest increase in ownership helps in aligning the goals of managers and stakeholders whereby the insider will focus on value creation by minimizing equity cost.

Prior research finds evidence that audit quality is positively associated with the joint purchase of tax nonaudit services (NAS) and concludes that jointly provided tax services result in audit-related knowledge spillovers that lead to improved audit quality. We extend this line of research. We examine the relation between auditor-provided tax services and restatements and determine whether this relation differs when the auditor is a small or large accounting firm. We also examine whether the Securities Exchange Commission’s restrictions on certain tax consulting practices (SEC, 2006) altered this relation. Specifically, we measure whether the probability of financial statement restatements varies with (1) variation in accounting firm size (measured as PCAOB annually inspected firms versus PCAOB triennially inspected firms), and (2) the joint provision of audit and tax services. We find a negative relation between auditor-provided tax services and restatements which is consistent with prior research. We also find that this relation is significantly more negative when the auditor is a small accounting firm. Finally, we find that the lower probability of a restatement associated with the joint provision of audit and tax services persists regardless of auditor size after the SEC-imposed restrictions on certain tax consulting services in 2006. Our study provides evidence that accounting firms, and particularly small accounting firms, benefit from knowledge spillovers when jointly providing audit and tax services and these benefits lead to improved audit quality. Prior research concludes that large auditors provide higher audit quality and that the provision of tax services improves audit quality. Our results provide evidence that audit quality improvements are greater for small auditors and their clients. This improvement narrows that audit quality gap between large and small auditors. We do not find evidence that the SEC’s restrictions on certain tax consulting services altered the relation between audit quality and tax services.

This study examines the relation between internal control material weakness (ICMW) under Section 404 of the Sarbanes-Oxley Act (SOX) and real earnings management. Our measures of real earnings management are abnormal cash flow from operations (ABCFOs), abnormal discretionary expenses (ABDISEXP), and abnormal production cost (ABPROD). We use a sample of 1,824 manufacturing firms over the period 2004–2011 to run regressions of ABCFO, ABDISEXP, and ABPROD on ICMW and other independent variables. We find that ICMW is negatively associated with ABCFOs. Another result that emerges from this study is a positive relation between ICMW and ABPROD. Our results imply that manufacturing firms with materially weak internal controls predominantly use overproduction and excessive price discounts to manage operational activities to achieve earnings targets. As SOX Section 404 is designed to reduce the instances of firms having ICMW, our finding that ICMW firms engage in real earnings management suggests that the use of real earnings management could be reduced as SOX Section 404 succeeds in reducing ICMW.

Purpose: The purpose of this study is to analyze whether information asymmetry (ASYM) plays a mediating role in the relationship between corporate disclosure and cost of equity capital (COEC) in emerging markets such as Indonesia.

Design/Methodology/Approach: This study is a quantitative study using secondary data obtained from listed manufacturing firms from 2015 to 2017. Purposive sampling was used to select 105 firms. The design of this study was causality research, and the analysis was performed through ordinary least squares (OLS) regression and path analysis.

Findings: The results show that the level of disclosure for corporate social responsibility (CSR), intellectual capital, and enterprise risk management (ERM) reduces the COEC by suppressing ASYM. This finding confirms the argument that managers can reduce their companies’ COEC by reducing ASYM through increased disclosure. These results are controlled by earnings quality (EQL) because that is most relevant to the COEC, as well as corporate size, leverage, and differences in institutional factors.

Originality/Value: This research is based on the central assumption that disclosure enhances the level of information while EQL remains the focus for investors. This research is also the first to study CSR disclosure, intellectual capital disclosure, and ERM disclosure together as a proxy for disclosure. The findings confirm that managers can reduce their companies’ agency conflict by increasing their level of disclosure. Managers can also reduce the COEC by reducing ASYM through increased disclosure. This also implies that increasing the level of disclosure will be effective in reducing the COEC for companies in emerging markets, such as Indonesia.

The information of pledging stocks for liquidity by controlling shareholders of publicly traded firms in Taiwan has been required to disclose since 1998. A common perception by market practitioners in Taiwan is that stock pledging by controlling shareholders is an indication of expropriation of firms. This study first examines the determinants of the tendency that controlling shareholders of firms in Taiwan pledge their stocks to financial institutions for liquidity and then evaluates how stock pledging by controlling shareholders affects their firms' accounting and financial performances. Determinants of firm attributes, market conditions, and corporate governance are identified. The tendency of stock pledging by controlling shareholders has a negative effect on accounting and financial performances. The negative effect on firm performance is reduced when the firm has a higher level of working capital. These findings indicate that stock pledging by controlling shareholders is an indication of weak corporate governance when the firm has lower liquidity. These findings may provide insights to the equity markets of the other countries in which public firms have more concentrated ownerships.

This study investigates the impacts of operational risks and corporate governance on bond yield spreads, examining their impacts on bond yield spreads during the COVID-19 pandemic. The results indicate that operational risks significantly raise yield spreads, especially for high-leverage firms. Moreover, a higher independent director percentage reduces debt costs. Furthermore, the results reveal more pronounced effects of operational risks on yield spreads during the COVID-19 pandemic, with these risks increasing the financing costs for large firms. When the effect of the independent director percentage on the yield spreads increases, this consequently raises the debt costs for large firms.

A social movement is sweeping the globe in the form of Internet delivered and open access sharing spaces. People are connecting in new ways while personalizing their daily experiences with shared websites called Web 2.0 technologies. This chapter looks into the implications of taking these technologies beyond social interactions into the learning experiences of students. With a literature review and case study analysis, the goal of this chapter is to gain a better understanding of what is needed to appropriate quality instructional strategies to the online university course room including social sites such as Facebook, Twitter, Second Life®, and wikis. Following a brief history and descriptions of the Web 2.0 sites and functions, the reader is introduced to the design expectations typical of instructional designers (IDs) with definitions and standards from the field's literature. Support is offered from the business and educational literature for incorporating leadership into design practice through vision, strategy, and theory-based decisions. Definitions, benchmarks, and examples of instructional strategies and activities for learner engagement complete the theoretical framework for the chapter. Given the added complexities of advanced technologies, this chapter suggests evaluating social learning through an ID leadership perspective for a more informed recommendation of Web 2.0 online affordances. Following a case analysis of Second Life®, a 3-D virtual world used for learning activities, implications for ID practice are discussed, along with the various benefits and barriers of adopting Web 2.0 technologies. In the conclusion, suggestions are given for future research on the potential for integration of Web 2.0 affordances into online learning designs for rich, engaging learning experiences.

This chapter examines corporate governance–related financial reporting issues in the context of globalization. Over the past few decades, the process of globalization has substantially altered the fields of corporate governance and accounting. More specifically, Anglo-American models of corporate governance and financial reporting have received increasing momentum in emerging economies, including China. However, a review of relevant studies suggests that there is limited research examining the implementation of Anglo-American concepts in various countries regardless of their growing acceptance. This monograph extends the existing literature by comprehensively investigating the adoption of internationally acceptable principles and standards in China, the largest transitional economy that has different institutional context from Anglo-American countries. In addition, the review has a number of implications for developing the theoretical framework, and determining the research methodology for the monograph.