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The purpose of this study is to provide further evidence on the ongoing debate on the costs and benefits of mandatory audit partner rotation (MPR). Specifically, this study examines how MPR simultaneously affects audit reporting lag (ARL) and audit fees (AFs).

A simultaneous approach was adopted to further shed light on the findings currently documented by this line of research.

Using Australian data, it was found that MPRs increase AFs but do not affect ARL simultaneously in the year of MPRs. It was also found that the departing audit partners do not charge higher fees or delay the completion of the audits in the final year before their departure and that neither AFs nor ARL changes significantly for the second round of MPRs.

To the best of the authors’ knowledge, no prior study on MPR has examined the issue using a simultaneous approach although failure to consider the simultaneous effect of interrelated variables may lead to estimation biases and problems of parameter identification. The results herein provide further evidence that the clients do not bear both costs of paying higher AFs and having the delayed audits and that the costs associated with MPRs do not occur earlier and the costs associated with MPRs may dissipate over time.

The purpose of this paper is to investigate the relationship between corporate governance mechanism and firm value of the listed companies in China. Does the better corporate governance lead to the higher firm value? Or does the higher firm value make it easy to choose a better governance mechanism? Or they affect each other? In other words, this paper tries to answer whether the corporate governance mechanism is only decided by institutional arrangement, or by market choice according to firm value or performance or by the interaction of institutional arrangement and market choice? It tries to answer whether institutional arrangement maximizes the firm value, or an invisible hand pushes them to arrive at its maximum.

This paper establishes an analytic framework of simultaneous equations based on causality, which includes five endogenous variables: ownership of larger shareholders, managerial ownership, director compensation, debt financing and firm value. It adopts 1,644 data samples from 274 Chinese listed companies in Shanghai and Shenzhen Stock Exchange during 2007- 2012 after the non-tradable shares reform. Ordinary least squares (OLS) estimation of single equation, 2SLS and 3SLS estimation of simultaneous equations are respectively done to show the differences of these three kinds of estimations.

The empirical results show that differences exist among OLS, 2SLS and 3SLS estimation. Finally, 3SLS estimation should be adopted because the OLS and 2SLS estimation are biased. There are endogenous relationships between corporate governance mechanism and firm value. Through the 3SLS estimation, it is found that first, ownership concentration and firm value affect each other positively. Second, managerial ownership and firm value affect each other positively; third, director compensation and firm value affect each other negatively, while director compensation and firm performance affect each other positively. Finally, debt financing level and firm value are negatively related to each other.

It means that ownership of large shareholders, managerial ownership, director compensation and debt financing in the Chinese listed companies are found to have a root in the interaction between institutional arrangement and market choice. It is also found that adverse selection occurs when creditors loan to the listed companies. Managerial compensation is positively related to accounting profit, but it is negatively related to firm value because managers increase profit due by earning management. This could only increase the accounting profits and obtain huge cash compensation, but not increase firm value and even harm the interests of shareholders.

This paper not only shows the difference between OLS and 2SLS estimation but also compares the estimation of 2SLS and 3SLS in terms of empirical methods. It gives answers to the following questions: whether the relationship is one-way causality or bilateral causality between ownership concentration, managerial ownership, director compensation and firm value; whether governance mechanism affects firm value by institutional arrangement, or market drives both of them to strike a balance by an invisible hand. In other words, does it make them arrive at equilibrium through the competitive selection process when shareholders, directors, managers and creditors attempt to maximize themselves of their interests?

The observation that different national stock markets are interrelated to different degrees is well established in the literature on global market integration. This literature documents that different national markets display more or less sensitivity to movements in other national equity markets, depending on various factors such as: their geographic proximity, their trade relationships, their relative importance to world economic activity, and the time period under scrutiny. While equity values in a few major markets, such as Japan, the UK and the US, tend to lead global price movements, the nature of these intermarket relationships appears to vary at different points in time. Roll (1989), for example, documents that October 1987 is the only month in recent experience during which all markets moved in the same direction. This result suggests that intermarket price relationships differ in periods of normal market activity from those in periods of extreme price moves, such as October 1987.

Veneer is one of the most important products in the wood‐based panel industry, therefore, to provide needed information for the development of this industry, it is necessary to provide better understanding of the forces driving the demand and supply of veneer. The purpose of this paper is to describe how supply and demand can be estimated by using a simultaneous equations model.

A theoretical framework is proposed based on a systematic approach of iterative 3‐stage least squares (I3SLS). The reason for using simultaneous equations is the existence of reciprocal relations between economic variables in this research.

Applying this theoretical framework is a useful tool to study the situation of veneer as one of the most important wood‐based panel products in Iran. For example, based on the results, it can be understood that veneer is a normal and essential commodity, and any increase in the price of veneer can lead to a considerable rise in total income for producers. To satisfy the excess demand, extensive investment is needed in establishing new plants.

There are many restrictions in applying other approaches, because of no access to research data. The present study provides a starting‐point for further research using other econometric models on different aspects of forest products marketing.

The framework (econometric models especially simultaneous equations) has proven to be useful in studying and improving forest products marketing. The use of such procedures was new and this research was done for the first time in Iran.

The purpose of this paper is to identify the accurate cause and effect relationships among strategic objectives and also to demonstrate how decision makers can be guided in the process of defining quantitative strategic target values in the framework of balanced scorecard (BSC) and performance measurement system.

Based on the proposed method in this research, after determining strategic objectives and developing an initial strategy map according to decision makers’ opinions, simultaneous equations system (SES) was used to determine the significance of the relationships among strategic objectives in higher perspectives of the BSC and corresponding strategic objectives in lower perspectives. Afterward, desirable values for performance measures were determined based on the equations and relationships obtained through SES and were optimized by goal programming method.

By applying the proposed method, a clearer picture of the associations among strategic objectives is obtained and the influence of strategic objectives on one another is determined. Afterward, optimal values for strategic objectives are determined to achieve the organization’s goals.

This paper proposes a framework for constructing a strategy map and setting quantitative targets in the framework of BSC. Indeed, this paper presents a case study to demonstrate the applicability and effectiveness of the proposed approach. However, SES technique requires a greater amount of data to generate more accurate results. Although the advent of the Information Age has forced organizations’ decision makers to provide sufficient information and data for business analysis, the data requirements are met.

The presented quantitative approach is a supporting approach for improving decision makers’ opinions and enabling them to reach a more accurate picture of the relationships, valuing strategic objectives and achieving strategic goals. This research also presents a case study to demonstrate the applicability of the proposed approach. The application and implication of the proposed method in banking services show that the contributions of the paper are not only theoretical, but also practical.

The proposed method provides a novel approach for determining the most appropriate targets and applies a comprehensive and scientific model together with decision makers’ opinions and experiences and has two main contributions: first, the associations among strategic objectives are investigated and obtained in an effective way by conducting the SES for the first time in the framework of BSC. Second, quantitative targets have been determined to help in achieving the long-term goals. This task has been accomplished through a combination of SES, the three-stage least squares regression analysis and optimization by using weighted goal programming method.

The purpose of this paper is to integrate the findings of articles appearing in European Journal of Marketing’s special section on covariance-based versus composite-based structural equations modeling (SEM).

This is an editorial which uses literature review to draw conclusions regarding areas of agreement, areas for further research, and changing the discussion around composite-based SEM methods.

There are now four new areas of agreement regarding composite-based SEM. Researchers should adopt a toolbox approach to their methods and know the strengths and weaknesses of the research tools in their toolbox. Partial least squares (PLS) SEM and covariance-based SEM are not substitutes, and it is inappropriate to use the language of confirmatory factor analysis (CFA) in reporting measurement estimates from PLS SEM. Measurement matters and researchers need to devote effort to using reliable and valid multi-item measures in their investigations.

This postscript article outlines recommendations for authors, reviewers and editors regarding the analysis of data and reporting of results using structural equations models.

This paper aims to test the relationship of the personality variable of cognitive hardiness to job satisfaction, performance and intention to turnover. These relationships are to be tested via two alternative models, with a sequential and simultaneous structure for appraisal and coping processes.

Employees (n=297) from a range of large New Zealand organisations completed a questionnaire on hardiness, appraisal, coping and affect.

Bivariate correlations revealed significant positive relationships between hardiness and job satisfaction, hardiness and performance, and a significant negative relationship with intention to turnover. Structural equation modelling revealed that the direct positive relationship between hardiness and job satisfaction was the strongest path. The simultaneous model provided best fit to the data, revealing a positive path from hardiness through challenge appraisals to positive affect, and a negative path through threat appraisal and emotion‐focused coping.

Higher levels of hardiness were associated with more positive appraisals and more effective coping responses. However, the cross sectional nature of this research and the use of a single measurement source pose potential limitations in terms of common method variance and study generalisability.

The paper investigates the relationship of hardiness to outcomes such as job satisfaction, self‐rated work performance and intentions to leave and explores the processes that underlie the relationships between hardiness and outcomes.

This paper aims to investigate whether audit fees and financial report readability are bi-directionally related.

The authors test their hypotheses with empirical data. Specifically, they adopt a two-stage simultaneous equation regression model to assess the bi-directional relationship between audit fees and financial report readability.

While poor readability increases the fees charged by the auditor, higher audit fees improve the readability of the financial reports.

This study is based on US data. Future research may extend this study to other countries.

Poor financial report readability encumbers stakeholders of the firms. Understanding the interaction between financial report readability and audit fees will help both auditors and firm managers.

Audit committees aggressively negotiating for lower audit fees should be aware of the link of low audit fees, potentially indicative of poor quality, to less readable reports. Investors and regulators too should be concerned about this relationship, especially in instances when auditors low-ball audit fees or when firms aggressively negotiate for lower audit fees.

To the best of authors’ knowledge, this study is the first to document the bi-directional relationship between financial report readability and audit fees and assess the positive impact of audit fees on financial report readability.

While there have been extensive empirical investigations of pay-performance sensitivity, the perspective of performance-pay has received less attention to date. While executive compensation is sensitive to firm performance, firm performance is also likely to be affected by executive compensation. Adopting multiple theoretical perspectives, the purpose of this paper is to examine whether executive compensation has a greater influence on firm performance or whether the latter has a greater influence on compensation.

Using data from a five-year period (2010-2014) for Financial Times and Stock Exchange 350 companies, the authors employ a set of simultaneous equation modelling to jointly investigate, after accounting for endogeneity problem, the mutual association of executive compensation and firm performance by employing four control variables (board size, non-executive directors, leverage and boardroom ownership).

The authors find strong evidence for the greater influence of executive compensation on firm performance than the pay-performance framework. This finding supports the tournament theory compared with the agency perspective.

Inevitably, there are limitations in a wide-ranging study of this nature that could be addressed in future research. As any empirical study utilising company data, there may be concerns to the effect of survivorship bias and the manner in which companies have reorganised, if there is any, themselves during the period under examination. There are also issues as to missing data, some measures relating to both executive compensation and corporate governance are not provided by the BoardEx database.

The study results provide evidence that using the tournament perspective by remuneration committees as a guide for determining executive compensation helps in achieving better performance. This helps in developing appropriate mechanisms for setting executive remuneration.

This paper combines an empirical investigation of the frameworks of pay-performance and performance-pay and develops a system of six simultaneous equations to examine the associations between executive compensation and firm performance.

The purpose of this paper is to examine the relationship between state ownership and firm profitability in developing countries by considering the endogenous nature of state ownership and firm profitability.

A simultaneous equation analysis is applied to study 232 Tunisian firms over the 2001-2013 period. This analysis is compared with OLS estimates to show its power in terms of an endogenous setting and its potential to improve estimation.

Unlike the OLS estimates that show a non-significant relationship between state ownership and firm profitability, the simultaneous equation analysis reveals a non-symmetrical concave relationship. Specifically, state ownership affects positively firm profitability when it is relatively small and negatively when state ownership dominates. Specification test indicates that both state ownership and firm profitability are endogenous. Furthermore, the simultaneous model’s explanatory power exceeds that of OLS estimates and proves to be a suitable estimation technique.

Taking into account public firms’ categorization, the authors implicitly examine the effect of privatization and corporatization on firm profitability. The findings imply that privatization is not the only solution to the operational problems of public firms, but an internal governance system restructuring can also be favorable for these firms.

In addition to focusing on a new database of developing countries, the case of Tunisian firms, the main empirical analysis is conducted by considering the endogeneity issue. Thus, the findings improve understanding of the role played by state ownership and suggest that a partial state control appears to be beneficial to firm profitability.