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This study examines whether language disclosed in the Management Discussion and Analysis (MD&A) of US Real Estate Investment Trusts (REITs) provides signals regarding future firm performance and thus generates a market response.

This research conducts textual analysis on a sample of approximately 6,500 MD&As of US REITs filed by the SEC between 2003 and 2018. Specifically, the Loughran and Mcdonald (2011) financial dictionary, and a custom dictionary for the real estate industry created by Ruscheinsky et al. (2018), are employed to determine the inherent sentiment, that is, the level of pessimistic or optimistic language for each filing. Thereafter, a panel fixed-effects regression enables investigating the relationship between sentiment and future firm performance, as well as the markets’ reaction.

The empirical results suggest that higher levels of pessimistic (optimistic) language in the MD&A predict lower (higher) future firm performance. Hereby, the use of a domain-specific real estate dictionary, namely that developed by Ruscheinsky et al. (2018) leads to superior results. Corresponding to the notion that the human psyche is affected more strongly by negative than positive news (Rozin and Royzman, 2001), the market responds solely to pessimistic language in the MD&A.

The results suggest that the market can benefit from textual analysis, as investigating the language in the MD&A reduces information asymmetries between US REIT managers and investors.

This is the first study to analyze exclusively US REITs, whether language in the MD&A is predictive of future firm performance and whether the market responds to textual sentiment.

Audit rotation (AR) is a key policy initiative implemented in global jurisdictions to deal with concerns about audit quality. Auditing financial reports involves communicating attested value-relevant company information to investors, and hence audit quality plays a role in the quality of financial reporting information. This paper aims to investigate whether AR affects the degree of information asymmetry (IS) between investors. It further aims to examine whether voluntary AR results in less asymmetric information compared to mandatory AR. Additionally, it examines whether political connections moderate the association between AR and IS.

The authors use data from publicly traded banks across the Gulf Cooperation Council (GCC) for the period 2010–2018. The authors include several variables to control for corporate governance and other firm-specific characteristics by using country-year fixed-effects regression model.

The authors find higher IS for banks that periodically rotate auditor, while banks voluntarily choose to rotate auditors obtain high-quality audits, which results in higher trading volume and lower stock return volatility, hence lower IS. The results suggest that when banks voluntarily choose to rotate auditors, investors perceive these banks as more committed to obtaining high-quality audits relative to mandatory AR. Providing higher quality audits enhances the credibility of reported information and thus reduce the level of IS. Moreover, IS following AR is higher for politically connected banks than for similar but politically unconnected banks. Finally, investors perceive voluntary AR as a disciplining tool, which mitigates IS. This mitigating role is not affected by bank political connectedness.

This study has limitations as the definition of AR could be interpreted as binary or too narrow, and hence it may not be appropriate to generalize findings to different contexts. Nonetheless, this study casts light on a new perspective to reconcile the existing mixed evidence on the influence of AR on IS and the moderating role of political connections. A further limitation is that because of data unavailability, the authors were unable to use other proxies (e.g. bid-ask spreads and analyst forecast dispersion) of IS.

The present findings provide insight to regulators, policymakers and standard setters on the potential adverse effect of political connections on the role of AR in mitigating IS. The results underscore the importance of voluntary AR, and suggest that regulators, policymakers and standard setters encourage firms to rotate their auditors periodically.

This study provides evidence in a setting that is unique at the economic, social and regulatory levels. Prior literature is lacking and has been centered on developed countries or focusing on single-country specifications. The data set of this study is unique and allows us to examine the interplay between political influence that arises through ownership and management roles of influential members of state.

Existing literature demonstrates the important role of information transparency in enterprise development and market surveillance. However, little empirical research has examined the information transparency effect in supply chain management. This study aims to fill this gap by exploring the significant role of information transparency on supply chain financing and its mechanism, taking trade credit as the starting point.

From the data set comprising 3,880 Chinese firms with A-shares listed on the Shenzhen and Shanghai Stock Exchanges from 2011 to 2020, we obtain the basic picture of information transparency and trade credit. Panel fixed effects regression is used to test the hypotheses concerning the antecedents to trade credit.

The empirical results show that: first, information transparency can significantly support corporate access to trade credit and is found to facilitate financing by mitigating perceived risk. Second, among companies with higher levels of financing constraints, weaker market power and more concentration of suppliers, information transparency promotes trade credit more markedly. Third, the outbreak of COVID-19 causes a substantial increase in uncertainty and risk in external circumstances and then the effect of information transparency is weakened. Fourth, the contribution to trade credit is likely to be stronger for disclosures containing management transparency elements compared to single financial transparency.

To the best of our knowledge, this study is one of the first to explore the positive role of information transparency to supply chain financing, which to a certain extent makes up for the lack of information transparency research in the supply chain. It provides new ideas for enterprises to obtain trade credit financing and promote the improvement of supervision departments’ disclosure policies.

Does the adoption of the Enterprise Risk Management (ERM) improve bank profitability? Does ERM also reduce bank risk? By analyzing a sample of banks located in European emerging markets between 2005 and 2013, the aim of this chapter is to empirically investigate the determinants of firm performance, both in terms of bank profitability and risk, with respect to the adoption of Enterprise Risk Management (ERM). In order to capture the effect of the ERM program adoption on banks’ performance, we both use market-based measures as well as accounting-based indexes. Following the seminal literature on the topic (Aebi, Sabato, & Schmid, 2012; Eckles et al., 2014; Ellul & Yerramilly, 2013; Hoyt & Liebenberg, 2003, 2011; Lin, Wen, & Yu, 2012; Pagach & Warr, 2010), we adopt a binary proxy variable, that is, the appointment of a Chief Risk Officer (CRO), to define whether the firm is currently undertaking an ERM program. Our results show that a post-ERM firm experiences an increase in the risk-adjusted profits and a reduction of the overall risk.

The purpose of this paper is to investigate the relationship between investors' divergence of opinions and the asset prices of foreign stocks and also examine the effect of home market country-level factors on the influence of divergency of opinions on stock price.

The authors employ panel data estimation with fixed effects to examine the host market response in divergent opinions to the earnings announcements. The paper uses the American Depositary Receipts (ADRs) of 42 countries from 1985 to 2011.

The authors find a negative relationship between differences of opinions and excess quarterly earnings announcement returns, and investors do process information asymmetrically based on good and bad earnings shocks. In addition, the authors find the negative relationship between divergent opinions and excess earnings announcement returns in ADRs is more pronounced in countries with short-sales restrictions, while other home-market country-level factors – the enforcement of insider trading law, legal origin, investor protection and rating on accounting standard – do not influence the relationship between investors' divergency of opinion and stock returns.

This paper is among the first to bring asymmetric effects on convergence in Miller framework and enhance the understanding of price convergence documented in Miller (1977). In addition, this study incorporates home-market country-level factors in explaining the relationship between investors' divergency of opinions and stock returns.

Building upon the framework of the tradeoff model of capital structure and motivated by the equity market timing theory, we examine whether equity misvaluation is a source of adjustment “costs” that will affect a firm’s leverage adjustment speed toward target. We also investigate whether the quality of a firm’s long-term growth options will influence the decisions of managers to exploit the mispriced equity to converge to the optimum. Using a sample of listed Taiwanese firms during 1992–2014 and employing the market-to-book decomposition as developed by Rhodes-Kropf, Robinson, and Viswanathan (2005), we find that overleveraged and overvalued firms demonstrate faster adjustment speed than overleveraged but undervalued firms. Furthermore, controlling for the misvaluation status, high-growth firms converge to target faster than their low-growth counterparts. The effect of growth options on the relation between equity mispricing and adjustment speed does not mirror the effect of financing deficits. With the detailed financial information of the local companies across a rather long time series, this study provides incremental inputs to the literature of capital structure from the determinants of target leverage, the estimation of leverage adjustment speeds, to the identification of the sources of adjustment costs in an emerging market where institutional environment is strikingly different from the US.

This study investigates the link between diversity in management and CEO positions and firm innovation. The purpose of this paper is to examine the effect that women and ethnic diversity in management and CEO positions have on the development of outstanding innovation in firms.

This paper conducts an empirical analysis to investigate these relationships over time using a large panel database of 1,345 publicly US traded firms.

Results revealed that gender and ethnic diversity at all levels of management exhibited a robust positive association with superior innovation competence. This finding remains robust when alternative proxies for innovation are employed. In contrast, the authors found that women and ethnic minorities at the CEO level had no significant influence.

Considering an output measure of innovation, the authors explore the effect of gender and ethnic minority groups in management positions as well as at the CEO level, rather than focusing only on top management teams or board of directors. The authors offer new practical insights regarding the manager selection process that are also useful to support public policy initiatives.

The purpose of this paper is to examine stock market reactions and liquidity effects following the first bank loan announcement of zero-leverage firms.

The authors use an event studies methodology in both a univariate and multivariate framework. The authors also use regression analysis.

Using a sample of 96 zero-leverage firms listed on the FTSE 350 index over the time period of 2000–2015, the authors find evidence of a significant and permanent stock price increase as a result of the initial debt announcement. The loan announcement results in a sustained increase in trading volume and liquidity. This improvement continues to persist once the authors control for stock price and trading volume effects in both the short and long run. Furthermore, the authors examine the spread decomposition around the same period, and discover the adverse selection of the bid–ask spread is significantly related to the initial bank loan announcement.

The results can be attributed to the information cost/liquidity hypothesis, suggesting that investors demand a lower premium for trading stocks with more available information.

This is the first paper to look at multiple industries, more than one loan and information asymmetry effects.

The purpose of this paper is to examine the relation between a company's bid‐ask spread, a proxy for information asymmetry, and auditor tenure and specialization.

The tests use clustered regression for a sample of 31,689 company‐years from 1992 to 2001 and control for factors known to impact bid‐ask spread in cross‐section.

The findings suggest that the market's perception of disclosure quality is higher and private information search opportunities are fewer for companies engaging industry specialist auditors. In addition, the paper finds that information asymmetry has a U‐shaped relation to auditor tenure. This U‐shaped relation holds for both specialists and non‐specialists; however, the bid‐ask spread for specialists tends to fall below that of non‐specialists at all tenure intervals.

The findings may directly result from auditor tenure and specialization or it may be that those auditor‐related characteristics are a subset of concurrent choices made by the company that impacts disclosure quality.

Companies have incentives to lower information asymmetry and the findings document that the choice of a specialist auditor and the length of the auditor relationship can potentially influence this objective.

The paper provides information to academics, regulators, companies, and auditors concerning the effect of auditor‐client relationships on the level of information asymmetry. In addition, it shows the importance of industry specialization and audit firm tenure on audit quality.

Education of the surgeon and development of surgical expertise have been debated for centuries. Today, research in surgical education applies terms and methods from other performance domains such as sport and music. However, there still seems to be a lack of consensus as to how talent may be brought into the discourse about surgical education. Especially, when it comes to identifying and developing trainees who in the future will perform better than the average surgeon.

This five-step scoping study aims to map existing literature about talent identification, talent development and development of expertise in the domains of surgery, sport and music in the period of 1985-2014.

A total of 242 studies, divided in the four domains of surgery (69 studies), sport (115 studies), music (34 studies) and cross-disciplinary studies (24 studies) published in the period 1985-2014 were included.

Informed by the performance domains of sports and music and their inclusion of a holistic, ecological approach to research, this study suggests that research in surgical education may benefit from broadening its view on talent by including psychosocial variables and environmental, demographic and structural influencers when considering how surgical talent may be identified and developed.