The 2008 crash has left all the established economic doctrines - equilibrium models, real business cycles, disequilibria models - in disarray. Part of the problem is due to Smith’s "veil of ignorance": individuals unknowingly pursue society’s interest and, as a result, have no clue as to the macroeconomic effects of their actions: witness the Keynes and Leontief multipliers, the concept of value added, fiat money, Engel’s law and technical progress, to name but a few of the macrofoundations of microeconomics. A good viewpoint to take bearings anew lies in comparing the post-Great Depression institutions with those emerging from Thatcher and Reagan’s economic policies: deregulation, exogenous vs. endoge- nous money, shadow banking vs. Volcker’s Rule. Very simply, the banks, whose lending determined deposits after Roosevelt, and were a public service became private enterprises whose deposits determine lending. These underlay the great moderation preceding 2006, and the subsequent crash.

The Economic Institutions of Capitalism

Earnings Management and Investor Protection: An International Comparison

Testing Trade-Off and Pecking Order Predictions about Dividends and Debt

Lang, Raedy and Wilson (JAE 2006) compare the properties of U.S. GAAP accounting numbers across cross-listed and U.S. firms. Using a wide range of properties, LRW show that accounting data are not comparable, even though sample firms use the same accounting standards. I discuss how these findings advance the literature and what they imply for the effectiveness of cross listing as a bonding mechanism. My discussion highlights that documented differences cannot be solely attributed to weak U.S. legal enforcement. I emphasize that accounting standards provide discretion and that cross-listed and U.S. firms are likely to have differential incentives to use this discretion. To illustrate, I document that cross-listed and U.S. firms differ in ownership concentration and that these differences are associated with the level of earnings management. I also provide evidence that home-country institutions continue to influence cross-listed firms' reporting behavior.

Cross Listing, Bonding and Firms' Reporting Incentives: A Discussion

Purpose – The purpose of this paper is to examine the association between audit committee activity, external auditor’s size and internal control quality (ICQ) in the Egyptian setting. It also explores how external auditor’s size moderates the relationship between audit committee activity and ICQ. Design/methodology/approach – To obtain relevant information about ICQ in Egypt, the authors conducted a survey among external auditors using an internal control checklist. Findings – Results show that audit committee activity has a significant positive effect on ICQ. In addition, Big 4 auditors contribute significantly to the improvement of the ICQ in the Egyptian setting. Finally, the association between audit committee activity and ICQ is more pronounced when an organisation is audited by a Big 4 audit firm. Originality/value – The results this paper demonstrate that Big 4 auditors play a governance role in weak legal environment as exists in Egypt by strengthening the effectiveness of audit committee meetings...

Audit committee activity and internal control quality in Egypt: Does external auditor’s size matter?

SUMMARY: This paper investigates the effect of human resource investment in internal control over financial reporting on the disclosure of internal control weaknesses at both the firm and the individual department level. Using a unique reporting requirement for Korean-listed firms, this study uses the ratio of the number of employees involved with the implementation of internal controls (hereafter, IC personnel) to the total number of employees of the firm as a proxy for a firm's human resource investment in internal control. We find that the proportion of IC personnel and the change of the proportion within the firm and several key departments are negatively associated with the disclosure of internal control weaknesses. We also find that a change in IC personnel is positively associated with the likelihood of remediation of the internal control weaknesses. These findings provide valuable insights into the role of human resource investment in determining the strength of a firm's internal controls over fi...

The Effect of Human Resource Investment in Internal Control on the Disclosure of Internal Control Weaknesses

Using the unique reporting environment in Korea, this study investigates the determinants of human resource investment in internal controls for 1352 listed firms disclosing the number of personnel who are in charge of internal control-related tasks (IC personnel) from 2005 to 2008. We find that the number of IC personnel within a firm and several key departments increase with firm size, number of employees, complexity and for Chaebols, and decrease in rapidly growing firms. Additional analysis reveals that the factors influencing internal control systems have an accentuated effect on firms with relatively larger firm size.

pdf/determinants-of-human-resource-investment-in-internal-dno9vrue7d.pdf

Determinants of human resource investment in internal controls

The Association between Human Resource Investment in Internal Control and Audit Fees

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The Effect of Human Resource Investment in Internal Control on the Disclosure of Internal Control Weaknesses

Determinants of human resource investment in internal controls

The Association between Human Resource Investment in Internal Control and Audit Fees