ABSTRACT
Using a sample of public firms listed in the Chinese market for the years 2000–2009, we find that audit partners with more public clients are associated with lower audit quality, consistent with the “busyness” effect that auditing multiple clients dissipates audit partner effort and, thus, reduces audit quality. However, the negative association is more pronounced for auditors with short audit partner-client tenure, supporting the idea that the lack of client-specific knowledge exacerbates the busyness effect. Collectively, these findings contribute to a better understanding of audit partner behavior in an emerging market.
Keywords: multiple audit clients, audit partner signature, client specific knowledge, and audit quality
Article Citation:
Ferdinand A. Gul, Shuai (Mark) Ma, and Karen Lai (2017) Busy Auditors, Partner-Client Tenure, and Audit Quality: Evidence from an Emerging Market. Journal of International Accounting Research: Spring, Vol. 16, No. 1, pp. 83-105.
ABSTRACT
Since the early 1990s, recoveries from recessions in the US have been plagued by weak employment growth. We investigate whether a similar problem afflicts other developed economies, and whether technology is a culprit. We study recoveries from 71 recessions in 28 industries and 17 countries from 1970-2011. We find that though GDP recovered more slowly after recent recessions, employment did not. Industries that used more routine tasks, and those more exposed to robotization, did not recently experience slower employment recoveries. Finally, middle-skill employment did not recover more slowly after recent recessions, and this pattern was no different in routine-intensive industries.
Article citation:
Graetz, Georg and Guy Michaels. 2017. "Is Modern Technology Responsible for Jobless Recoveries?." American Economic Review, 107(5):168-73.
ABSTRACT
We provide new evidence about how analysts incorporate and improve on management ETR forecasts. Quarterly ETR reporting under the integral method provides mandatory point-estimate forecasts by management, but firms must record certain “discrete” tax items fully in the quarter in which they occur, polluting these forecasts. We investigate management ETR accuracy, analysts' decisions to mimic management's estimate, analysts' accuracy relative to each other or to management, and dispersion. Our comprehensive analysis reveals that analysts deviate from management more and are more accurate relative to management as complexity increases, with real effects on EPS accuracy and dispersion. In contrast to prior research that analysts ignore or are confused by taxes, we provide evidence that analysts pay attention to taxes and improve on management estimates. Based on our evidence that management's quarterly ETRs have less predictive value in the presence of discrete items, we suggest standard-setters reexamine the discrete item exception to require more disclosure.
Keywords: analysts, discrete items, forecasts, ETRs, integral method, taxes
Article citation:
Brian Bratten, Cristi A. Gleason, Stephannie A. Larocque, and Lillian F. Mills (2017) Forecasting Taxes: New Evidence from Analysts. The Accounting Review: May 2017, Vol. 92, No. 3, pp. 1-29.
ABSTRACT
Banks produce short-term debt for transactions and storing value. The value of this debt must not vary over time so agents can easily trade it at par like money. To produce money-like safe liquidity, banks keep detailed information about their loans secret, reducing liquidity if needed to prevent agents from producing costly private information about the banks' loans. Capital markets involve information revelation, so they produce risky liquidity. The trade-off between less safe liquidity and more risky liquidity determines which firms choose to fund projects through banks and which ones through capital markets.
Article citation:
Dang, Tri Vi, Gary Gorton, Bengt Holmström and Guillermo Ordoñez. 2017. "Banks as Secret Keepers." American Economic Review, 107(4):1005-29.
ABSTRACT
We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation in the US economy at the zero lower bound. We first estimate a Markov-switching VAR to highlight that a zero-lower-bound regime captures most of the comovements during the Great Recession: a deep recession, no deflation, and large fiscal imbalances. We then show that a microfounded model that features policy uncertainty accounts for these stylized facts. Finally, we highlight that policy uncertainty arises at the zero lower bound because of a trade-off between mitigating the recession and preserving long-run macroeconomic stability.
Articel citation:
Bianchi, Francesco and Leonardo Melosi. 2017. "Escaping the Great Recession." American Economic Review, 107(4):1030-58.
