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Article
Publication date: 1 March 2016

Kevin T. Rich and Jean X. Zhang

We investigate whether municipal financial manager turnover is associated with accounting restatements. This analysis is motivated by the notion that suspect financial

Abstract

We investigate whether municipal financial manager turnover is associated with accounting restatements. This analysis is motivated by the notion that suspect financial reporting could limit the ability of stakeholders to assess the use of public resources (GASB, 2006). The evidence suggests that municipalities disclosing accounting restatements are more likely to see changes in the top financial manager position than a control sample of non-restatement municipalities. Overall, our findings are consistent with associations between financial reporting quality and the labor market for municipal financial managers, and imply that governments should consider adding the prevalence of accounting failures as an input in the evaluation of top financial managers.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 28 no. 2
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 5 March 2018

Yuedong Li, Xianbing Liu and Qing Yan

The purpose of this paper is to discuss whether top management will assume their liabilities especially when financial restatement occurs, and,based on the “effective…

Abstract

Purpose

The purpose of this paper is to discuss whether top management will assume their liabilities especially when financial restatement occurs, and,based on the “effective supervision theory” and “strategic cooperation theory,” to examine whether an institutional investor is a supervisor or a cooperator considering the management turnover caused by financial restatement in the companies.

Design/methodology/approach

Using a sample of the A-share-listed companies from year 2010 to year 2014 and dividing financial restatement into fraudulent financial restatement and other financial restatement, the authors examine the relationship between financial restatement and abnormal management turnover, which usually is related to the management integrity or capacity. By using group test methods, the authors test the influence of the institutional investors’ shareholding on the relation between financial restatements and management turnover.

Findings

This paper finds that financial restatement can result in abnormal management turnover, especially the fraudulent financial restatement. The institutional investors usually are supervisors but when the shareholding of institutional investor is too high and the management turnover results from fraudulent financial restatement, the institutional investors may become cooperators with management in the companies. Besides, the institutional investors play the supervisory function more significantly in non-state-owned enterprises.

Originality/value

This paper expands literature of the institutional investors in the corporate governance area and provides a basis for future research in the area of the institutional investors’ governance effect. It divides financial restatements into fraudulent financial restatement and other financial restatement and examines the relationship between financial restatement and abnormal management turnover so as to provide evidence about whether the management will assume their responsibilities when there is financial restatement in the company. It also tests whether the institutional investors will play supervisor’s or cooperator’s function in state-owned and non-state-owned enterprises.

Details

Nankai Business Review International, vol. 9 no. 1
Type: Research Article
ISSN: 2040-8749

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Book part
Publication date: 29 March 2016

James W. Hesford, Mary A. Malina and Mina Pizzini

We investigate outcomes associated with the turnover of unskilled workers, isolating its effects on revenue, cost, and profit. Little attention from researchers has been…

Abstract

Purpose

We investigate outcomes associated with the turnover of unskilled workers, isolating its effects on revenue, cost, and profit. Little attention from researchers has been given to unskilled workers, a significant portion of the workforce.

Methodology/approach

This study investigates the relation between turnover among unskilled workers and financial performance using data from 527 hotels owned by the same lodging chain. The workers in our sample are full-time housekeepers and front desk attendants.

Findings

We find that the relation between turnover and performance differs by turnover type (voluntary vs. involuntary) and category of unskilled worker, reiterating the need to differentiate between turnover type and the importance of context in studying turnover. We challenge the assumption that voluntary turnover is categorically harmful and our results for front desk attendants support the view that organizations choose turnover levels that maximize performance. We also provide new evidence on the effects of involuntary turnover. Contrary to the established notion that dismissing less able employees should improve performance, we find that involuntary turnover has negative consequences.

Research limitations/implications

Our results demonstrate the importance of distinguishing voluntary turnover from involuntary turnover and the need to include both in models predicting turnover’s performance effects.

Details

Advances in Management Accounting
Type: Book
ISBN: 978-1-78441-652-2

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Article
Publication date: 6 June 2016

Yang Xu and Lijuan Zhao

The purpose of this paper is to examine chief financial officer (CFO) qualification improvement associated with restatements and restatement characteristics (restatement…

Abstract

Purpose

The purpose of this paper is to examine chief financial officer (CFO) qualification improvement associated with restatements and restatement characteristics (restatement materiality). The study is motivated by recent high-profile financial scandals and increasing instances of restatements which focus public attention on the role of CFOs in maintaining the integrity and quality of corporate financial reporting.

Design/methodology/approach

The study employs data composed of 80 restating firms matched with 80 non-restating firms with hand-collected CFO turnover information in the periods of 2003-2010. The research questions are tested in the logistic regression models.

Findings

The results provide some support that restating firms are more likely to hire new CFOs with greater accounting knowledge and overall CFO qualification (both accounting knowledge and CFO work experience) than non-restating firms. Furthermore, the authors also find that the number of restating years has a positive effect on CFO qualification improvement.

Research limitations/implications

Although the authors fail to find strong evidence for the hypotheses (perhaps due to the small sample size) the authors provide the first evidence on the relation between CFO qualification improvement and restatement. Further research can examine the relation in the pre-SOX period, and investigate whether any of the firms experiencing CFO turnover have experienced any financial statement restatements in subsequent years.

Originality/value

The results extend the understanding of companies’ strategies for regaining reporting credibility in the wake of restatements. Restatements of erroneous accounting numbers (primarily earnings) have led to significant losses for investors, contributed to a series of corporate governance reforms and legislative changes including SOX 2002, and prompted efforts to identify the remedies restating firms take to improve reporting quality and restore credibility.

Details

American Journal of Business, vol. 31 no. 2
Type: Research Article
ISSN: 1935-5181

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Article
Publication date: 31 October 2008

Emad Mohammad and Siva Nathan

The purpose of this paper is to examine the factors leading to turnover among sell‐side financial analysts and the consequences of turnover.

Abstract

Purpose

The purpose of this paper is to examine the factors leading to turnover among sell‐side financial analysts and the consequences of turnover.

Design/methodology/approach

The paper identifies two types of turnover, voluntary and involuntary, and defines voluntary (involuntary) as when analysts leave their employment at one brokerage firm and find (do not find) employment at another brokerage firm. Logistic models are estimated relating the probability of turnover to factors that explain turnover for both voluntary and involuntary turnover.

Findings

The paper finds that job performance is positively (negatively) related to voluntary (involuntary) turnover. This finding is consistent with Jackofsky's theory predicting U‐shaped relationship between performance and turnover. For voluntary turnover, analysts' performance and job conditions at the new brokerage firm are examined and related to the factors leading to turnover. It was found that turnover analysts move to smaller brokerage firms and become more accurate. They have lighter workload and enjoy more prestige at the new brokerage firm as they follow larger firms and fewer firms and industries.

Originality/value

This is the first study to apply Jackofsky's theory to the financial analysts' profession. Also, it is the first study to document the consequences to voluntary analyst turnover.

Details

Review of Accounting and Finance, vol. 7 no. 4
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 23 November 2010

Judy K. Land

This paper aims to examine whether restatement firms with certain restatement characteristics are more likely to have chief executive officer (CEO) turnover within a year…

Abstract

Purpose

This paper aims to examine whether restatement firms with certain restatement characteristics are more likely to have chief executive officer (CEO) turnover within a year of the restatement announcement, and whether these same firms are later subject to regulatory action by the US Securities and Exchange Commission.

Design/methodology/approach

The empirical analysis uses a logistic regression to test a sample of firms that restated earnings during the years 1996‐1999.

Findings

The results show significant associations between measures of the severity of earnings restatement and the probability of CEO turnover. Also, restatement firms with CEO turnover are more likely to be issued an SEC Accounting and Auditing Enforcement Release in the years after the restatement, indicating that financial fraud has occurred.

Research limitations/implications

The results may not generalize to a more recent time period because the sample of firms is from the 1996‐1999 time period.

Originality/value

This study provides a link between CEO turnover and restatement characteristics within a sample of restatement firms.

Details

Pacific Accounting Review, vol. 22 no. 3
Type: Research Article
ISSN: 0114-0582

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Article
Publication date: 1 June 2002

Robert Hamilton, Barry Howcroft, Zhonghua Liu and Keith Pond

Outlines the UK law on insovency and asks whether the financial ratios banks use to assess credit worthiness can discriminate between the companies placed in…

Abstract

Outlines the UK law on insovency and asks whether the financial ratios banks use to assess credit worthiness can discriminate between the companies placed in administrative receivership (AR) by their lending banks which can or cannot be rescued. Applies both linear discriminant analysis and logistic regression to samples of UK companies placed into AR in 1998, explains the methodology and shows broadly similar results from the two methods; and a predictive accuracy of 85‐90 per cent for the rescued companies and 55‐60 per cent for the failures. Analyses the key ratios for survival in more detail, looking at debtor turnover, the gearing ratio and the current ratio. Recogises the limitations of the study but sees it as a promising approach to predicting survivability.

Details

Managerial Finance, vol. 28 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 June 2002

Susan Parker, Gary F. Peters and Howard F. Turetsky

This study investigates the association of various corporate governance attributes and financial characteristics with the survival likelihood of distressed firms. To…

Abstract

This study investigates the association of various corporate governance attributes and financial characteristics with the survival likelihood of distressed firms. To address the manner in which firms evolve over time, we employ survival analysis techniques by incorporating Cox Proportional Hazards regressions. We longitudinally track an ex ante sample of 176 financially distressed firms. The results suggest that firms that replaced their CEO with an outsider, were more than twice as likely to experience bankruptcy. Furthermore, larger levels of blockholder and insider ownership over the sample period are positively associated with the likelihood of firm survival.

Details

Corporate Governance: The international journal of business in society, vol. 2 no. 2
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 6 March 2017

Bishnu Kumar Adhikary

The purpose of this paper is to investigate the macroeconomic determinants of foreign direct investment (FDI) for the top five South Asian economies, namely, Bangladesh…

Abstract

Purpose

The purpose of this paper is to investigate the macroeconomic determinants of foreign direct investment (FDI) for the top five South Asian economies, namely, Bangladesh, India, Pakistan, Sri Lanka, and Nepal, and to examine whether these factors are the same for each.

Design/methodology/approach

This study employs fully modified ordinary least squares and two-stage least squares estimation methods.

Findings

This study shows that South Asian economies have a number of FDI determinants in common. For example, market size and human capital are the two most common factors attracting FDI in each country (except for Nepal, which revealed a negative correlation between FDI and market size). Other factors, such as infrastructure, domestic investment, lending rates, exchange rates, inflation, financial stability/crisis, and stock turnover entered into regression with both positive and negative signs, thereby indicating that the underlying theories on FDI do not provide a clear prediction of the direction of the effect of a particular variable on FDI.

Research limitations/implications

This paper studied the effects of demand-side factors on FDI. A comparative study of the supply-side factors may add further knowledge.

Practical implications

This paper provides evidence to show that the determinants of FDI are indeed country-specific. Thus, to design a suitable FDI policy, it would not be wise to solely rely on other economies’ FDI experiences.

Originality/value

This paper provides updated evidence on factors that are essential to promoting or deterring FDI in South Asian economies.

Details

South Asian Journal of Business Studies, vol. 6 no. 1
Type: Research Article
ISSN: 2398-628X

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Book part
Publication date: 6 November 2015

Enrico Guarini, Anna De Toni and Cinzia Vallone

This study attempts to analyze the role of governance mechanisms in municipal bankruptcy, which appears to be a neglected area of research. The analysis considers both the…

Abstract

Purpose

This study attempts to analyze the role of governance mechanisms in municipal bankruptcy, which appears to be a neglected area of research. The analysis considers both the organizational level (micro) and the regulatory system (macro).

Methodology/approach

We use a relevant case of municipal bankruptcy in Italy to discuss the influence of governance characteristics, such as the political and management structure, interaction, and behaviors. The issues related to the accounting system and external audits are also considered. The data for this study are obtained from secondary sources such as audited budgetary reports, public documents, and reports from the Supreme Audit Institution.

Findings

The study indicates that the spoils system can favor the politicians’ exercise of power over public managers and undermine the capacity to prevent and manage financial distress. Poor accounting and weak control systems may facilitate this process. The high turnover of top management throughout a mayor’s term in office may reflect political pressure to force accounting rules and achieve flexibility to obtain the expected results or to correct poor financial performance.

Practical implications

To avert municipal bankruptcies, regulations should consider enforcing ex ante control by external oversight bodies, forbidding risky operations and limiting the spoils system for financial management positions and internal auditors.

Originality/value

Municipal defaults around the world have indicated that regulations and audits are ineffective to prevent local governments from failing. A full understanding of complex mutual interactions between the mechanisms of governance and the behaviors of politicians and managers can provide valuable insights to prevent local governments from failing.

Details

Contingency, Behavioural and Evolutionary Perspectives on Public and Nonprofit Governance
Type: Book
ISBN: 978-1-78560-429-4

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