We examine the stock market reaction to the SEC announcement to permanently exempt non-accelerated filers from compliance with Section 404(b) of the Sarbanes–Oxley Act. Mandatory compliance with auditor attestation under Section 404(b) is highly controversial. Using a sample of non-accelerated issuers for 2006–2011, we find a negative market reaction to the November 4, 2009 exemption announcement. However, most of the negative returns accrue to non-accelerated filers that do not voluntarily comply with Section 404(b), suggesting that auditor attestation enhances firm value. The use of a Big 4 auditor, strong analyst following, and superior internal controls over financial reporting (ICFR) are associated with positive/less negative market responses. Voluntary compliers with Section 404(b) are more likely to have a Big 4 auditor, stronger analyst coverage, effective ICFR, stronger firm performance and lower information asymmetry. Our results are consistent with firms using voluntary compliance with SOX 404(b) as a signal of superior operating performance and ICFR quality to overcome information asymmetry and therefore mitigate the negative valuation impact of the permanent exemption from auditor attestation.

We use the SEC's 2007 decision that eliminates the reconciliation requirement for foreign listed private issuers (FPIs) reporting under IFRS as a natural experiment to examine whether IFRS and U.S. GAAP produce accounting information of comparable quality. We conduct statistical analyses using a sample of 563 firm?year observations of FPIs during the period 2002 through 2008 for a panel of 70 FPIs that report under IFRS as our treatment group and 46 FPIs that report under U.S. GAAP as our control group. Using a stock?valuation model and a difference?in?differences (DD) analysis of scaled residuals we examine whether the reconciliation values reported by IFRS FPIs prior to 2007 were value relevant and if the elimination of the reconciliation information in the post?intervention period (2007 and 2008) has adversely affected the information available to investors to make stock?valuation decisions. The results for the 2002 through 2006 period suggest that the reconciliation values for book value were value relevant. The DD analysis shows that while the residual?value model incorporating reconciliation information produced comparable scaled stock price residuals for IFRS and U.S. GAAP FPIs prior to 2007, the removal of the reconciliation information did not lead to statistically significant increases in scaled stock price residuals for IFRS and U.S. GAAP FPIs.Résumé Aux fins de la réalisation d'une expérience naturelle, les auteurs utilisent la décision prise en 2007 par la SEC de supprimer l'exigence de rapprochement imposée aux émetteurs privés étrangers inscrits à la cote (EPE) qui présentent l'information conformément aux IFRS en vue de déterminer si les IFRS et les PCGR des États?Unis produisent de l'information comptable d'une qualité comparable. Ils soumettent à des analyses statistiques un échantillon de 563 observations entreprise?année d'EPE entre 2002 et 2008, pour 70 EPE appliquant les IFRS à titre de groupe expérimental et 46 EPE appliquant les PCGR des États?Unis à titre de groupe de contrôle. À l'aide d'un modèle d'évaluation des titres et d'une analyse de l'écart dans les différences des valeurs résiduelles pondérées, ils vérifient si les valeurs de rapprochement présentées par les EPE appliquant les IFRS avant 2007 étaient pertinentes aux fins de l'évaluation et si la suppression de l'information contenue dans les rapprochements dans la période postérieure à l'intervention (2007 et 2008) a eu une incidence négative sur l'information dont disposaient les investisseurs pour prendre des décisions en matière d'évaluation des titres. Les résultats pour la période s'échelonnant de 2002 à 2006 semblent indiquer que les valeurs de rapprochement relatives à la valeur comptable étaient pertinentes aux fins de l'évaluation. L'analyse de l'écart dans les différences révèle que même si le modèle de la valeur résiduelle incorporant l'information contenue dans les rapprochements produisait des valeurs résiduelles pondérées des cours comparables pour les EPE appliquant les IFRS et les EPE appliquant les PCGR des États?Unis avant 2007, la suppression de l'information contenue dans les rapprochements n'a pas entraîné de hausses statistiquement significatives des valeurs résiduelles pondérées des cours pour les EPE appliquant les IFRS et les EPE appliquant les PCGR des États?Unis.

We examine the earnings management implications of using nonfinancial performance measures (NFPM) in executive compensation contracts. We argue and test that when a manager's compensation is based on financial and NFPM, he/she has less incentive to manipulate earnings to maximize compensation. Using panel data covering the period 1992-2005, we compare earnings management behavior for a sample of firms that used both financial and nonfinancial measures to a matched sample of firms that based their performance measurement solely on financial measures. The results are mainly consistent with a reduction in earnings management behavior for those firms that rely on NFPM in their compensation contracts.

The state of the art in the analyst forecasting literature is that analyst earnings-forecast ability is only firm specific. This view is based on Park and Stices (2000) finding of the absence of a "spillover" effect, that is, investors do not consider an analysts earningsforecast ability regarding firm k when reacting to his earnings forecast revision for firm j. We re-examine the issue of whether or not earnings-forecast ability is only firm specific by introducing a broad measure of general ability defined as earnings-forecast ability for all other firms the analyst follows. We show that a broad measure of general ability is incremental to firm-specific ability both for explaining earnings-forecast accuracy in holdout periods and investor reactions to earnings-forecast revisions. Our findings suggest that earnings-forecast ability has a general aspect incremental to its firm-specific aspect. © 2010 The Canadian Academic Accounting Association.

Prior research has examined several ethical questions related to executive compensation. The issues that have received most attention are whether executives' pay is fair and justified by performance. Since more recent studies show that stock options grants constitute the single largest component in executive compensation, we examine the relations of these grants to economic determinants and corporate governance for firms in the stagnant stage of their lifecycle. We find that, on average, stock options grants comprise a significant portion of annual CEO compensation (26.4%) for stagnant firms. We also find that economic (corporate governance) factors explain less (or more) of the cross-sectional variation in stock options grants for stagnant firms than for growth firms. Furthermore, we document lower pay-performance sensitivity (i.e., weaker incentive alignment) and no improvement in future firm performance from past stock options grants to CEOs of stagnant firms. In particular, our study provides empirical evidence on some inefficiencies associated with stock options grants to CEOs of low potential (stagnant) firms, a long-standing concern of business ethics researchers (Moriarty, 2005; Nichols and Subramaniam, 2001; Perel, 2003). Our results also provide support for the corporate governance reforms discussed in Matsumura and Shin (2005), especially those proposed provisions that curtail the power of CEOs in the governance of firms. © Springer 2009.

Purpose The purpose of this paper is to examine the factors leading to turnover among sell?side financial analysts and the consequences of turnover. Design/methodology/approach The paper identifies two types of turnover, voluntary and involuntary, and defines voluntary (involuntary) as when analysts leave their employment at one brokerage firm and find (do not find) employment at another brokerage firm. Logistic models are estimated relating the probability of turnover to factors that explain turnover for both voluntary and involuntary turnover. Findings The paper finds that job performance is positively (negatively) related to voluntary (involuntary) turnover. This finding is consistent with Jackofsky's theory predicting U?shaped relationship between performance and turnover. For voluntary turnover, analysts' performance and job conditions at the new brokerage firm are examined and related to the factors leading to turnover. It was found that turnover analysts move to smaller brokerage firms and become more accurate. They have lighter workload and enjoy more prestige at the new brokerage firm as they follow larger firms and fewer firms and industries. Originality/value This is the first study to apply Jackofsky's theory to the financial analysts' profession. Also, it is the first study to document the consequences to voluntary analyst turnover. © 2008, Emerald Group Publishing Limited

We investigate the association between large CEO pay and the underlying economic determinants of pay, governance variables, variables capturing director pay, and other potential variables that may explain large CEO payouts. We also examine whether firms with large CEO pay have better future performance and use more financial reporting discretion than other firms. Our study is motivated by the large payouts to CEOs over the last decade that continue to attract considerable attention from institutional investors, regulators and the popular press. Our results indicate that whether a firm has large CEO pay is only weakly related to the underlying economic determinants but strongly related to components of outside director remuneration, the dual role of CEO and board chair, asset change, whether the firm has a new CEO, and CEO equity ownership. Additionally, we find that large CEO pay firms engage in higher levels of financial reporting discretion and have weaker future performance.

We use the SEC's 2007 decision that eliminates the reconciliation requirement for foreign listed private issuers (FPIs) reporting under IFRS as a natural experiment to examine whether IFRS and U.S. GAAP produce accounting information of comparable quality. We conduct statistical analyses using a sample of 563 firm-year observations of FPIs during the period 2002 through 2008 for a panel of 70 FPIs that report under IFRS as our treatment group and 46 FPIs that report under U.S. GAAP as our control group. Using a stock-valuation model and a difference-in-differences (DD) analysis of scaled residuals we examine whether the reconciliation values reported by IFRS FPIs prior to 2007 were value relevant and if the elimination of the reconciliation information in the post-intervention period (2007 and 2008) has adversely affected the information available to investors to make stock-valuation decisions. The results for the 2002 through 2006 period suggest that the reconciliation values for book value were value relevant. The DD analysis shows that while the residual-value model incorporating reconciliation information produced comparable scaled stock price residuals for IFRS and U.S. GAAP FPIs prior to 2007, the removal of the reconciliation information did not lead to statistically significant increases in scaled stock price residuals for IFRS and U.S. GAAP FPIs.