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Article

Stefano Azzali and Tatiana Mazza

The purpose of this paper is to analyze the effects of financial restatements (FRs) on the likelihood of the top management team (TMT) dismissal. It investigates the…

Abstract

Purpose

The purpose of this paper is to analyze the effects of financial restatements (FRs) on the likelihood of the top management team (TMT) dismissal. It investigates the effects of types of FRs [corrective note and reissuance of financial statement (RFS)], of FR severity and of FR related to international financial reporting standards (IFRSs) easy or difficult-to-estimate.

Design/methodology/approach

The authors hand-collect: data about 96 FRs from the Italian public oversight board documents; chief executive officer (CEO) name, chairman name, year of the financial statement under investigation, total assets and operating income, from their financial statement. The authors use multivariate regression to test the effects of FRs on the probability of TMT dismissal.

Findings

The authors find that the RFS leads to a higher likelihood of chairman dismissal. A greater magnitude of misrepresentation on income statements, and FRs, which decrease net income, increase the likelihood of CEO dismissal. Difficult-to-estimate IFRSs increases the likelihood of CEO dismissal.

Originality/value

FRs are significant determinants of the CEO/chairman dismissal. The authors show that FRs directly involving shareholders (RFS) have negative consequences on the chairman of the board of directors, while the CEO is more affected by FRs that involve technical factors (FR severity or financial statement associated with difficult-to-estimate IFRSs).

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

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Article

Alice Medioli, Stefano Azzali and Tatiana Mazza

Although tax-motivated income shifting has been widely explored, no studies have as yet analyzed the association between ownership structure and management decisions about…

Abstract

Purpose

Although tax-motivated income shifting has been widely explored, no studies have as yet analyzed the association between ownership structure and management decisions about income shifting. The ownership structure of multinational groups is characterized by different levels of minority interests, and our aim is to establish whether income shifting is explained by the aim of expropriation of minorities, as well as taxation avoidance.

Design/methodology/approach

We collect data on a sample of European parent companies located in five countries and their foreign subsidiaries, and run a multivariate regression based on the Huizinga and Laeven (2008) model.

Findings

Our results support the idea of minority expropriation, finding evidence of ownership-motivated income shifting. We also find that the level of minority protection affects ownership-motivated income shifting, and that, when both are present, expropriation is statistically significant.

Research limitations/implications

Although the study looks at a wide range of subsidiaries, a limitation may be that it examines only firms having parent companies in five European countries. Further research would overcome this limitation and extend the literature and take into account other income-shifting contextual variables. Our results may lead regulators to pay more attention to the protection of minority interests.

Practical implications

This research offers insights to companies and investors, and should help them to make better-informed decisions and evaluate the best contexts for investments.

Originality/value

This study enriches the literature on income shifting by revealing that it can be caused by factors other than the desire to avoid taxation. It suggests that ownership structure is crucial.

Details

Management Decision, vol. 58 no. 12
Type: Research Article
ISSN: 0025-1747

Keywords

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Article

Tatiana Mazza, Stefano Azzali and Luca Fornaciari

This paper aims to test the positive relationship between audit quality (AQ) of outsourced information technology controls (ITC) and information technology audit quality…

Abstract

Purpose

This paper aims to test the positive relationship between audit quality (AQ) of outsourced information technology controls (ITC) and information technology audit quality (ITAQ).

Design/methodology/approach

Factor analysis, ordinary least squares (OLS) regressions and simulations.

Findings

Scoping and planning phases of the audit cycle account for about 69 per cent of ITAQ. The AQ of outsourced ITC is strongly and directly related to ITAQ. Improvement of AQ of outsourced ITC may be achieved through evaluation of control design and operating effectiveness by service auditor as well as direct evaluation by the client in service provider location.

Research limitations/implications

Sample size and input items in factor analysis.

Practical implications

Companies and auditors could improve ITAQ through a better organization of the scoping and planning activities; they could also improve the AQ of outsourced ITC using direct evaluation in the service provider location supplemented with service auditor reports. Regulators could refine or change laws and frameworks to take into account the factors of ITAQ and the methodology of evaluation of outsourced ITC.

Originality/value

Private data collected by questionnaire. The measures of ITAQ and the OLS model could be tested in future research, in countries with different frameworks and regulations related to AQ, different weight of outsourced information technology and other characteristics related to clients, service providers and service auditors.

Details

Managerial Auditing Journal, vol. 29 no. 9
Type: Research Article
ISSN: 0268-6902

Keywords

Content available
Article

Alan Kilgore

Abstract

Details

Managerial Auditing Journal, vol. 29 no. 9
Type: Research Article
ISSN: 0268-6902

Abstract

Details

Secrets of Working Across Five Continents: Thriving Through the Power of Cultural Diversity
Type: Book
ISBN: 978-1-80043-011-2

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