Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow intertemporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely. In the United States and the United Kingdom competitive markets dominate the financial landscape, whereas in France, Germany, and Japan banks have traditionally played the most important role. Why do different countries have such different financial systems? Is one system better than all the others? Do different systems merely represent alternative ways of satisfying similar needs? Is the current trend toward market-based systems desirable? Franklin Allen and Douglas Gale argue that the view that market-based systems are best is simplistic. A more nuanced approach is necessary. For example, financial markets may be bad for risk sharing; competition in banking may be inefficient; financial crises can be good as well as bad; and separation of ownership and control can be optimal. Financial institutions are not simply veils, disguising the allocation mechanism without affecting it, but are crucial to overcoming market imperfections. An optimal financial system relies on both financial markets and financial intermediaries.

比较金融系统 = Comparing financial systems

: This study investigates whether the tax-specific industry expertise of the external audit firm influences its clients' level of tax avoidance. Our results suggest that clients purchasing...

Tax Avoidance: Does Tax-Specific Industry Expertise Make a Difference?

We use textual-analysis software to quantify the language used in earnings press releases and the corresponding Management Discussion and Analysis (MD&A) for approximately 13,000 firm quarters between 1998 and 2003. Analyzing two narrative disclosures in which managers describe firm performance for the same quarter allows us to examine managers’ use of language across alternative communication outlets. Our general prediction, which relies on prior literature suggesting that there is a greater market response to information disclosed in an earnings announcement press release versus an SEC filing, is that managers disclose less pessimistic language and more optimistic language in earnings press releases relative to the corresponding MD&A disclosures. We first document that firms exhibit significantly lower levels of pessimistic language and higher levels of optimistic language in earnings press releases relative to the MD&A. We then construct a measure of the proportion of total pessimistic language reported in an earnings press release relative to the corresponding MD&A and find this proportional measure is negatively associated with the intensity of managers’ strategic reporting incentives. In additional analyses, we find a negative association between the level of pessimistic language in the MD&A and future firm performance, controlling for pessimistic language in the corresponding earnings press release. This evidence supports our assertion that managers disclose pessimistic language in the MD&A that provides information incremental to that in the corresponding earnings press release. Overall, our results are consistent with managers’ use of alternative communication outlets as part of a strategy to influence the market’s response to information disclosed.

Managers’ Use of Language Across Alternative Disclosure Outlets: Earnings Press Releases versus MD&A*

HCN cation channel mRNA expression was determined in the rabbit heart and neonatal and adult rat ventricle using RNase protection assays. In the rabbit SA node, the dominant HCN transcript is HCN4, representing >81% of the total HCN message. HCN1 is also expressed, representing >18% of the total HCN mRNA. Rabbit Purkinje fibers contained almost equal amounts of HCN1 and HCN4 transcripts with low levels of HCN2, whereas rabbit ventricle contained predominantly HCN2. The SA node contained 25 times the total HCN message of Purkinje fibers and 140 times the total HCN message of ventricle. No reports of hyperpolarization-activated current (If) exist in rabbit Purkinje fibers, and we could not record If in rabbit ventricular myocytes. To investigate the possible role of isoform switching in determining the voltage dependence of If, we determined the prevalence of HCN isoforms in neonatal and adult rat ventricle. We had previously determined the threshold for activation of If to be approximately -70 mV in neonatal rat ventricle and -113 mV in adult rat ventricle. In both neonatal and adult rat ventricle, only HCN2 and HCN4 transcripts are present. The ratio of HCN2 to HCN4 is approximately 5:1 in the neonate and 13:1 in the adult. Taken together, these results suggest that different cardiac regions express different isoforms of the HCN family. The HCN1 and HCN4 isoforms are most closely associated with a depolarized threshold for If activation, whereas the HCN2 isoform is associated with a more negative activation curve.

UltraRapid Communication Distribution and Prevalence of Hyperpolarization-Activated Cation Channel (HCN) mRNA Expression in Cardiac Tissues

This article presents a comprehensive review of academic research pertaining to auditor independence and audit quality. This literature review is conducted based on published articles during the period 1976-2013 in nine leading journals related to auditing. We organize our review around four main threats to auditor independence, namely, (a) client importance, (b) non-audit services, (c) auditor tenure, and (d) client affiliation with audit firms. For each of the threats, we discuss findings related to the incentives, perceptions, and behaviors of the auditor and the client, as well as the effects of each threat on the actual and perceived quality of audits and financial reports. We conclude that the mixed evidence, together with recent regulatory changes, provides opportunities for future research on auditor independence and audit quality.

/pdf/auditor-independence-and-audit-quality-a-literature-review-uh51ev1z6i.pdf

Auditor Independence and Audit Quality: A Literature Review

In this study we investigate the association between auditor-provided nonaudit tax services and financial reporting quality for public companies in a post Sarbanes-Oxley environment. We measure the quality of financial reporting by means of appropriately screened financial statement restatements. The Sarbanes-Oxley Act of 2002 restricts the scope of auditor-provided tax services and simultaneously bans other major nonaudit services by the auditor. We argue that the restriction limits the potential financial reporting quality benefits of nonaudit tax services while the ban simultaneously makes those services a relatively more important source of revenue to the auditor, exacerbating the potential for impairment of independence. Consequently, pre-Sarbanes-Oxley results may not hold in a post-Sarbanes-Oxley environment. Upon examination, we find no significant association between auditor-provided nonaudit tax services and general financial statement restatements. However, we find a significant negative association between such services and tax-related financial statement restatements. Thus, in a post-Sarbanes Oxley environment, the benefits of auditor-provided nonaudit tax services seem to manifest themselves in higher quality tax-related financial statement management assertions.

Tax-Related Financial Statements Restatements and Auditor-Provided Tax Services

Managerial overconfidence and audit fees

We investigate the association between managerial overconfidence and audit fees, as well as the effect of a strong audit committee on this relation Overconfident managers tend to overestimate their ability and the future payouts of projects but underestimate the likelihood and impact of adverse events Auditors may therefore charge a fee premium to compensate for the additional audit effort due to the increased audit risk Conversely, overconfident managers may demand less audit services due to either hubris in their companies’ financial reporting or a desire to reduce auditor scrutiny over aggressive accounting A strong audit committee can alleviate the audit risks associated with managerial overconfidence or prevent overconfident managers from reducing audit services thus mitigating the relation between audit fees and managerial overconfidence We find robust evidence of a negative relation between managerial overconfidence and audit fees for companies lacking a strong audit committee However, in the presence of a strong audit committee the negative relation is mitigated In additional analysis, we also find that companies with overconfident managers have a lower likelihood of using a city-industry specialist auditor

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2557494_code484765.pdf?abstractid=2557494&mirid=2

Managerial Overconfidence and Audit Fees

This study investigates whether MD&A disclosures have predictive ability for future firm performance in cases of disproportionate inventory increases. Using a sample of 568 manufacturing firms with disproportionate inventory increases, I find that the favorability of explanations for inventory changes in MD&A is positively associated with a firm’s profitability and sales growth in the subsequent three years. I also find that future profitability and sales growth of firms that do not explain disproportionate inventory increases in MD&A fall between those of firms with favorable explanations and firms with unfavorable explanations. These results suggest that the existence and the favorability of MD&A inventory disclosures help users interpret disproportionate inventory increases and predict future firm performance.

Do MD&A Disclosures Help Users Interpret Disproportionate Inventory Increases?

This study investigates whether MD&A disclosures have predictive ability for future firm performance in cases of disproportionate inventory increases. Using a sample of 568 manufacturing firms with disproportionate inventory increases, I find that the favorability of explanations for inventory changes in MD&A is positively associated with a firm’s profitability and sales growth in the subsequent three years. I also find that future profitability and sales growth of firms that do not explain disproportionate inventory increases in MD&A fall between those of firms with favorable explanations and firms with unfavorable explanations. These results suggest that the existence of and the favorability of MD&A inventory disclosures help users interpret disproportionate inventory increases and predict future firm performance.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1611404_code531403.pdf?abstractid=930471&mirid=5

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Tax-Related Financial Statements Restatements and Auditor-Provided Tax Services

Managerial overconfidence and audit fees

Managerial Overconfidence and Audit Fees

Do MD&A Disclosures Help Users Interpret Disproportionate Inventory Increases?

Do MD&A Disclosures Help Users Interpret Disproportionate Inventory Increases?