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1 – 10 of 143Pamela Kent, Richard Anthony Kent, James Routledge and Jenny Stewart
The purpose of this paper is to examine the effectiveness of voluntary governance mechanisms in Australia.
Abstract
Purpose
The purpose of this paper is to examine the effectiveness of voluntary governance mechanisms in Australia.
Design/methodology/approach
This study identifies similar choices of corporate governance by Australian firms and tests the effectiveness of the choices made based on the earnings quality of reported firms. Cluster analysis is conducted using governance best practice variables, firm size and an earnings quality variable.
Findings
This paper’s results support the voluntary governance approach for smaller firms, but suggest that mandatory governance requirements could be beneficial for larger firms. Evidence suggests that a benefit accrues for larger firms with the adoption of governance best practice. Cluster analysis indicates that larger firms tend to exhibit higher levels of adoption of governance best practice than smaller firms.
Originality/value
This paper adds to the literature by providing important information regarding the suitability of adoption of voluntary governance mechanisms in Australia.
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John Goodwin, Pamela Fae Kent, Richard Kent and James Routledge
The purpose of this study is to examine if partner cross-contagion in audit offices is associated with client reporting quality. To this end, the authors test if the presence in…
Abstract
Purpose
The purpose of this study is to examine if partner cross-contagion in audit offices is associated with client reporting quality. To this end, the authors test if the presence in an audit office of a partner with a highly aggressive style is associated with the reporting quality of other partners’ clients. Partners with a highly aggressive style are identified by their tendency to approve favorable client reporting. The authors add to the existing literature that provides limited and equivocal evidence on audit office cross-contagion.
Design/methodology/approach
Partner style is determined in an estimation period from 2010 to 2014. Aggressive style is identified when partners tend to approve favorable client reporting, which is shown by a positive value for their clients’ median discretionary accruals. Partners are considered to exhibit a highly aggressive style if they have positive median client discretionary accruals within the 90th percentile. Cross-contagion analysis is then conducted in a test period from 2015 to 2019 by determining if the presence in an office of a partner with a highly aggressive style is associated with the reporting quality of other partners’ clients. Two measures of client reporting quality used. These are the accuracy of current-period accruals in predicting period-ahead cash flows and earnings management related to benchmark beating.
Findings
This study finds partner cross-contagion of highly aggressive style in Big 4 offices that is associated with lower client reporting quality for non-Metals and Mining industry clients. This cross-contagion only occurs when the contagious partner has a very high level of aggressive style. This study finds Big 4 partners are susceptible to aggressive style cross-contagion regardless of their own idiosyncratic style. The results of this study show more cross-contagion in small Big 4 offices and mitigation of cross-contagion for economically important clients. Cross-contagion in non-Big 4 offices is observed for Metals and Mining industry clients.
Originality/value
By determining style from partners’ past clients’ discretionary accruals, this study extends prior cross-contagion research that relies on restatements to identify style. This study examines several other cross-contagion issues not addressed in prior studies. These include differences in cross-contagion for Big 4 and non-Big 4 offices and for large and small Big 4 offices, partners’ susceptibility to cross-contagion and the influence of client importance.
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Grant Richardson, Ivan Obaydin and Pamela Fae Kent
Considering the importance of environmental lawsuits in the capital market specifically and society more generally, the authors examine whether environmental lawsuits are related…
Abstract
Purpose
Considering the importance of environmental lawsuits in the capital market specifically and society more generally, the authors examine whether environmental lawsuits are related to the cost of bank loans for the first time.
Design/methodology/approach
This study uses a US sample of 7,684 loans from 1,409 individual borrowing firms over the 1995–2015 period. The hypothesis is tested using lagged data from the year before the start of a bank loan, and firm fixed effects panel regression analysis is applied to control for correlated omitted variable bias. To further address endogeneity concerns, the authors use a difference in differences analysis that exploits the Deepwater Horizon oil spill on April 20, 2010, to establish causality. Finally, the authors use the entropy balancing method as an additional endogeneity check.
Findings
The authors find a positive relationship between environmental lawsuits and firms' bank loan costs. The results are economically significant. In particular, a one standard deviation increase in environmental lawsuits is related to a 2.07 basis point increase in bank loan costs. The results are robust to various endogeneity checks. Cross-sectional analyses indicate that a poor information environment, weak corporate governance, and low corporate social responsibility (CSR) levels strengthen the positive relationship between environmental lawsuits and bank loan costs. Finally, additional analyses show that environmental lawsuits are significantly negatively related to the loan amount and maturity contract provisions.
Originality/value
The authors provide new empirical evidence that increasing understanding of the economic consequences of environmental lawsuits on bank loan costs.
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Jagdish Agrawal, Pamela Grimm, Shyam Kamath and Thomas Foscht
This study seeks to examine differences in the signals of brand quality that consumers utilize in and across different countries. The approach is driven by the practical goal of…
Abstract
Purpose
This study seeks to examine differences in the signals of brand quality that consumers utilize in and across different countries. The approach is driven by the practical goal of helping international firms understand how they could tailor their marketing mix to target consumers based on the particular signals of brand quality that they use in different countries.
Design/methodology/approach
Survey data are collected from Austria, Belgium, Hong Kong, Indonesia, Russia, Singapore, Thailand and the USA and analyzed using factor analysis to identify the signals that are used as extrinsic and intrinsic cues of brand quality in different clusters of countries. Two major dimensions of signals of quality are identified and used to generate four clusters of countries representing different beliefs in signals of brand quality.
Findings
Two major dimensions of signals of quality are identified and used to generate four clusters of countries representing different beliefs in signals of brand quality. These dimensions broadly fall in to those that can be characterized as external signals (brand popularity, retailer's name and volume of advertising) and internal signals (brand name, price and country of origin) with the eight countries clustering in terms of these signals. Thus, Austria, Belgium, Hong Kong and the USA form one cluster with Thailand and Russia forming another cluster while Indonesia and Singapore show differences in their signal preferences.
Practical implications
Practical implications in terms of standardization versus differentiation of marketing mix strategies are discussed. The most important implication is that differentiation of marketing strategies would seem to be advantageous contrary to the commonly held view that international firms need to standardize their marketing strategies in the face of increasing globalization and alleged consumer convergence.
Originality/value
This study seeks to examine differences in the signals of brand quality that consumers utilize in and across different countries.
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Ben Lowe, Fanny Chan Fong Yee and Pamela Yeow
The purpose of this study is to resolve inconsistencies in the literature about how one-time price promotions affect reference prices. Specifically, this study suggests that the…
Abstract
Purpose
The purpose of this study is to resolve inconsistencies in the literature about how one-time price promotions affect reference prices. Specifically, this study suggests that the measure of reference price used within a study (e.g. expected price or fair price) can affect the outcomes of that study.
Design/methodology/approach
This research uses three separate experiments, replicating and extending existing work, to simulate purchasing decisions for products in the context of a price promotion. Experiments allow careful control of the confounds presumed to cause the inconsistencies between studies.
Findings
Study 1 shows that measurement of different reference prices within the same experiment leads to carryover effects, which inflate the correlation between measures. Expected price and fair price appear to be conceptually and empirically distinct and should be measured separately to reduce design artifacts. Study 2 shows that one-time price promotions affect fair price, but not expected price, and Study 3 shows expected price and fair price converge after multiple promotions.
Research limitations/implications
Independent measurement of reference price concepts allows robust claims about their distinctiveness. These findings have implications for how reference price should be measured in survey research and for pricing and promotional strategy.
Originality/value
This research contributes by showing how the measure of reference price used affects the outcomes of price promotion studies. It does this through the replication and extension of past research. Replication allows greater confidence in the findings of past research, and testing the same findings under different conditions allows for the boundaries of existing research to be delimited and generalizations to be made.
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Xin Liu, Michael Y. Hu and Pamela E. Grimm
The goal of the paper is to examine the affect transfer process of the brand extension by developing a conceptual framework that integrates two factors important to this process…
Abstract
Purpose
The goal of the paper is to examine the affect transfer process of the brand extension by developing a conceptual framework that integrates two factors important to this process: the expectancy and relevancy of brand extensions.
Design/methodology/approach
Two experimental studies with a sample of 250 respondents provide empirical support that both expectancy and relevancy positively influence the affect transfer process.
Findings
The study first tests both factors at the product level as well as at the product attribute level. The two factors enhance the affect transfer process in different manners. Expectancy facilitates the transfer from the parent product category to the extension, whereas relevancy enhances the transfer from the brand associations to the extension product. The greatest affect transfer occurs when both factors are present.
Originality/value
The study proposes a theoretical framework that for the first time integrates the two main streams of literature in brand extensions. The proposed framework explains the affect transfer process in brand extensions, and helps understand consumers' attitude towards brand extension products.
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The purpose of this study is to provide evidence on the category, quantity and quality of voluntary employee-related information Australian listed companies disclose in their…
Abstract
Purpose
The purpose of this study is to provide evidence on the category, quantity and quality of voluntary employee-related information Australian listed companies disclose in their annual report. An explanation is also sought to determine whether companies adopt employee-related disclosures to legitimise their relationship with society. Voluntary adoption of corporate governance best practice recommendations is used as a measure of companies' attempts to attain ex ante legitimacy. Media agenda setting theory is used as a measure of an attempt to gain legitimacy ex post following adverse publicity from the media.
Design/methodology/approach
The annual reports of all companies with at least one employee listed on the Australian Stock Exchange with a 30th June balance date of 2004 are examined to identify employee-related disclosures. This employee-related information is categorised and identified as positive, negative or a combination of positive and negative information by three independent coders. Ordinary least squares regression is used to explain the quantity of disclosure with a corporate governance score and number of adverse newspaper articles included as experimental variables.
Findings
Adopting voluntary corporate governance mechanisms is associated with the quantity of voluntary annual report employee-related disclosures. Higher levels of adverse publicity are also significantly associated with higher quantities of employee-related disclosures. The quality of these disclosures is questioned because 124 companies had adverse publicity relating to employees and only two of these companies reported any negative employee-related disclosures. Few companies from the whole sample reported any negative information relating to their employees in their annual report, with 98 per cent of companies reporting positive news or no news.
Originality/value
Most previous social responsibility research has focused on environmental disclosures. This study is original because it focuses on employee-related disclosures. Honest, transparent employee disclosures are an international corporate governance recommendation by the Organisation for Economic Co-operation and Development and studies have not previously tested the relation between reporting recommended corporate governance mechanisms and employee-related disclosures in annual reports.
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Puan Yatim, Pamela Kent and Peter Clarkson
The purpose of this study is to examine the association between external audit fees, and board and audit committee characteristics of 736 Malaysian listed firms. It is…
Abstract
Purpose
The purpose of this study is to examine the association between external audit fees, and board and audit committee characteristics of 736 Malaysian listed firms. It is hypothesised that good corporate governance practices reduce auditors' risk assessments, resulting in lower audit fees. Drawing on the existence of a clearly identifiable ethnic domination of board membership and ownership of Malaysian listed firms, the study also posits that Bumiputera‐controlled firms pay higher audit fees because of their weaker governance practices.
Design/methodology/approach
This study employs a cross‐sectional analysis of 736 firms listed on the Bursa Malaysia for the financial year ending in 2003. Multiple regression analysis is used to estimate the relationships proposed in the hypotheses.
Findings
Overall, the results of this study reveal that external audit fees are positively and significantly related to board independence, audit committee expertise, and the frequency of audit committee meetings. The study also finds a strong negative association between external audit fees and Bumiputera‐owned firms. An additional analysis into the internal governance structures of firms in the sample show that Bumiputera firms practice more favourable corporate governance practices compared to their non‐Bumiputera counterparts.
Originality/value
This study is a unique contribution in that it provides data on corporate governance practices in Malaysia for a large sample in the period after the corporate governance reforms taken by Malaysian capital market regulators and participants. Previous studies have shown that Bumiputera‐controlled firms pay higher audit fees than non‐Bumiputera‐controlled firms. These studies have not tested theoretical explanations for this fee differential. A theoretical explanation provided in the current study is that Bumiputera‐controlled firms pay higher audit fees than non‐Bumiputera‐controlled firms partially because of differences in corporate governance practices. The study finds conflicting results with previous research suggesting that corporate governance practices have changed in Malaysia since the amendments of Bursa Malaysia Listing Requirements, 2001.
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The purpose of this paper, using transaction cost economics as a theoretical framework, is to seek an understanding of a company's decision to purchase Management Advisory…
Abstract
Purpose
The purpose of this paper, using transaction cost economics as a theoretical framework, is to seek an understanding of a company's decision to purchase Management Advisory Services (MAS) from their external auditors and other consultants as opposed to assembling MAS internally within the company.
Design/methodology/approach
Data from annual reports for a pooled sample of 3,154 company years were collected for listed Australian companies to determine MAS from auditors. Data for a second sample were collected by undertaking a survey of listed companies to provide a figure for total management advisory services paid to auditors and other consultants. Ordinary least squares regression was used to analyse the data and predict companies' decision to outsource or internally generate MAS.
Findings
It is found that purchases of MAS from external auditors and other consultants are associated with, restructuring, number of controlled entities (subsidiaries), number of geographical segments, management change and frequency of contracting. Other company characteristics, including company's industry membership, short‐term growth, leverage, return on assets, use of a “big 5” auditor, type of audit report, and audit fees also explain the quantity of MAS purchased by a company from their external auditors and other consultants.
Originality/value
Transaction cost economics has not previously been applied to explain the decision to generate MAS internally by assembling knowledge within the company versus outsourcing from auditors and other consultants. The study makes use of unique data sets because it covers the period when regulations were not foreshowed restricting accounting firms supplying their audit clients with MAS.
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