Search

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

SUMMARY: This study examines whether the presence of high-quality auditors (Big 4 or industry specialist auditors [ISAs]) in an industry facilitates accounting information transfer among industry peers and enhances investment decisions of firms not audited by high-quality auditors (non-Big 4-ISA client firms). Consistent with the prediction of informational influence theories, we find that non-Big 4-ISA client firms that belong to an industry with a greater presence of high-quality auditors are associated with lower investment inefficiency. The effect is more pronounced for firms with less precise private information. Path analysis shows that the association between high-quality auditor presence and learning firms' investment inefficiency is explained via a direct path of source credibility and an indirect path mediated by peer firms' accounting information quality. Finally, we find that firms in industries with larger reductions in Big 4 presence following the Sarbanes-Oxley Act of 2002 incur more investment inefficiency. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M40; M41; M42. [ABSTRACT FROM AUTHOR]

Robust Risk Quantification via Shock Propagation in Financial Networks Despite the significance of risk contagion in financial networks, uncertainties arise in interbank network structures because of limited information. To address this, proposed is a robust optimization approach to estimate worst-case default probabilities and capital requirements for a specific group of banks (e.g., systemically important financial institutions). By applying this tool, we analyze the impact of different incomplete network information structures and gain regulatory insights into gathering actionable network information. Given limited network information, we consider robust risk quantification under the Eisenberg–Noe model for financial networks. To be more specific, motivated by the fact that the structure of the interbank network is not completely known in practice, we propose a robust optimization approach to obtain worst-case default probabilities and associated capital requirements for a specific group of banks (e.g., systemically important financial institutions) under network information uncertainty. Using this tool, we analyze the effects of various incomplete network information structures on these worst-case quantities and provide regulatory insights into the collection of actionable network information. All claims are numerically illustrated using data from the European banking system. Funding: The work of D. Ahn was supported by the Hong Kong Research Grants Council, University Grants Committee [Early Career Scheme Grant 24210420]. N. Chen acknowledges funding support from the Hong Kong Research Grants Council, University Grants Committee [General Research Fund Grant 14207918 and General Research Fund Grant 14208620]. The work by K.-K. Kim was supported by the National Research Foundation of Korea [Grant NRF-2019R1A2C1003144]. Supplemental Material: The e-companion is available at https://doi.org/10.1287/opre.2020.0722. [ABSTRACT FROM AUTHOR]

• The trend factor performs significantly better following high market volatility periods. • Results remain robust under different asset price models and after controlling for various macroeconomic state variables. • Stock market volatility serves as an important time-series determinant of trend factor performance. This paper investigates how stock market volatility predicts trend factor profits. We find that the trend factor performs significantly better following high market volatility periods. From 1931 to 2022, the average monthly risk adjusted return following high volatility periods is 2.47 %, significantly higher than that following low volatility periods. We hypothesize that fundamental signals are more likely to be imprecise when the stock market is more volatile, leading investors to rely more heavily on trend signals. Consequently, the trend factor could deliver higher profits. Collectively, our paper suggests that market volatility is an important time-series determinant of trend factor performance. [ABSTRACT FROM AUTHOR]

• There is a U-shaped relationship between the performance of carbon neutrality and firm value. • The U-shaped relationship is weaker in state-owned firms and firms operating in B2C industries. • The U-shaped relationship is stronger when information uncertainty is higher. Carbon neutrality is critical in addressing the climate crisis. Using the data of Chinese listed firms from 2018 to 2022, this paper shows a significant U-shaped association between the performance of carbon neutrality and firm value. Our key findings hold after a battery of robustness tests and endogeneity concerns. The U-shaped relationship is weaker in state-owned firms and those operating in B2C industries, and stronger when information uncertainty is higher. This paper has implications for the promotion of carbon-neutral practices in enterprises and the realization of sustainable development. [ABSTRACT FROM AUTHOR]

Background: Whether and how the uncertainty about a public health crisis should be communicated to the general public have been important and yet unanswered questions arising over the past few years. As the most threatening contemporary public health crisis, the COVID-19 pandemic has renewed interest in these unresolved issues by both academic scholars and public health practitioners., Objective: The aim of this study was to investigate the impact of communicating uncertainty about COVID-19-related threats and solutions on individuals' risk perceptions and misinformation vulnerability, as well as the sequential impact of these effects on health information processing and preventative behavioral intentions., Methods: A 2×2 (threat uncertainty [presence vs absence]×solution uncertainty [presence vs absence]) full-fractional between-subjects online experiment was conducted with 371 Chinese adults. Focusing on the discussion of whether the asymptomatic cases detected during the COVID-19 pandemic would further lead to an uncontrolled pandemic, news articles were manipulated in terms of whether the infectiousness of asymptomatic cases and the means to control the transmission are presented in terms of their certainty or uncertainty. Participants were randomly assigned to one of the four experimental conditions, being instructed to read one news article. After reading the news article assigned, participants were asked to respond to a series of questions to assess their cognitive and behavioral responses., Results: Individuals were more susceptible to believing false COVID-19-related information when a certain threat and uncertain solution were framed in the news article. Moreover, individuals' perceptions of crisis severity increased when exposed to news information containing uncertain solutions. Both misinformation vulnerability and perceived severity were positively associated with information processing. Information seeking was positively associated with protective behavioral intention, whereas information avoidance was negatively associated with protective behavioral intention., Conclusions: Our findings imply that uncertainty, depending on its aspect, can be effectively communicated to the public during an emerging public health crisis. These results have theoretical and practical implications for health communicators and journalists. Given its limited influence on individuals' cognitive and behavioral responses, uncertainty related to a health threat should be disseminated to meet the public's expectation of information transparency. However, caution is advised when communicating uncertainty related to potential solutions, as this factor exhibited a mixed impact on individual responses during a crisis., (©Rui Zhao, Xuerong Lu, Jiayi Yang, Biao Li. Originally published in the Journal of Medical Internet Research (https://www.jmir.org), 14.05.2024.)