China's financial deregulation has led to the rise of individual-controlled fund management companies, where the largest shareholder is a person rather than an institution. This study examines these mutual funds, known as “individual-controlled funds” (ICFs), particularly from the perspective of potential conflict of interest. ICFs are more likely to prioritize performance given there is limited interference in their activities by affiliated institutions. They consistently outperform peers by 0.7 % per month, after accounting for fund characteristics. This outperformance is more pronounced when the largest individual owner has greater influence in the fund company. We also document the lower propensity of ICFs to engage in misconduct. Our findings demonstrate that minimizing conflicts of interest benefits performance in the mutual fund industry.

There is a considerable amount of research that seeks to determine the extent to which retail market participants exert market discipline on banks either through the price approach (the correlation of price to risk), or the quantity approach (the movement of funds in response to changes in risk). In this paper we propose and implement a third approach: the retail market conditions approach. We seek to determine if the prerequisites for the exertion of effective market discipline by stakeholder monitors, as set out in Llewellyn and Mayes (2003. The role of market discipline in handling problem banks. Bank of Finland Discussion Papers. extlesshttp://www.bof.fi/eng/7_tutkimus/index.stm extgreater (retrieved 13.04.04)), prevail by directly examining conditions that prevail among retail market participants. We find little evidence to support the proposition that they are being met among New Zealand retail depositors.

This study examines the externalities of mandatory IFRS adoption on firms' investment efficiency in 17 European countries. We use the ROA difference between the firm and its peers to proxy for the information on the peers' investment performance. We find that the spillover effect of a firm's ROA difference versus its foreign peers, but not domestic peers, on the firm's investment efficiency increases after IFRS adoption. We also find that increased disclosure by both foreign and domestic peers after IFRS adoption has a spillover effect on a firm's investment efficiency. Further, a firm's investment changes induced by its ROA difference versus foreign peers are more value-relevant after IFRS adoption, and those induced by increased disclosure by foreign peers under IFRS are value-relevant. Additional analyses reveal that our results are affected by legal enforcement strength, peer composition, and industry competition. Overall, we document positive externalities of mandatory IFRS adoption. Data Availability: Data are available from commercial providers (Worldscope, DataStream, and I/B/E/S).

We examine whether and how language barriers influence a country’s decision to adopt International Financial Reporting Standards (IFRS). Our findings reveal that as the distance between a country’s official language and English (i.e., linguistic distance) increases, the likelihood and speed of a country adopting IFRS decrease. Our evidence is consistent with the notion that language barriers impose significant information costs on preparers and users of financial reporting, making IFRS costlier to adopt for countries with severe language barriers. In further analysis, we find that such information costs materialize when these countries eventually adopt IFRS. Specifically, firms in countries with the most severe language barriers experience a worsened post-adoption information environment, as evidenced by increased analyst forecast errors and widened bid-ask spreads. Overall our study suggests that language barriers impede achievement of international accounting harmonization by increasing the costs associated with adopting, understanding, and applying IFRS.

Relying on the size of partner signatures in audit reports in Taiwan to measure their narcissism, we find that audit quality rises with partner narcissism. Our analysis also implies that changes in audit quality are positively associated with changes in partner narcissism stemming from mandatory partner rotation. We also find that the impact of partner narcissism on audit quality only manifests when auditor independence is more likely to be compromised, although it does not vary with engagement complexity. These results suggest that partner narcissism improves audit quality mainly through increased auditor independence, rather than auditor competence. Additionally, we document that although partner narcissism has no perceptible impact on the incidence of Type I going concern reporting errors, it is negatively associated with the probability of making a Type II error, implying that more narcissistic partners are less likely to succumb to client pressure to issue opportunistic reports. Data Availability: Data are available from public sources as identified in the text.

This study investigates why auditors leave public accounting and the consequences of auditor departures, both of which have been of great concern for audit firms and regulators worldwide. Using data from China and controlling for demographics, we find that audit partners and managers, auditors who generate more revenue, and auditors who provide higher audit quality have a lower likelihood of departure, while non–Big 4 auditors have a higher likelihood of departing public accounting. We also find that an audit firm is likely to lose clients when an auditor departs. Clients who stay with the same firm pay lower audit fees but with no drop‐off in audit quality after a signing auditor departs. In supplementary analyses, we also demonstrate that the determinants and consequences of auditor departures are different for auditors who leave the firm but not the profession (i.e., auditor turnover). Specifically, high audit quality is associated with a lower likelihood of auditor departure, but it increases auditor turnover. We also observe that audit quality is reduced for the clients who stay with an audit firm after highly skilled auditors depart for high‐visibility corporate positions. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators.

Relying on the frequency of typos in engagement partners’ graduate theses to measure their conscientiousness, we find that more conscientious partners conduct higher-quality audits, evident in that they are more likely to require an audit adjustment. Our core results hold for both upward and downward adjustments, implying that being conscientious is not equivalent to being overly conservative. Consistent with DeAngelo’s (1981) theory, cross-sectional evidence suggests that the role that partner conscientiousness plays in audit quality comes through both the auditor competence and independence channels. Additionally, we find that the frequency of partner thesis typos is negatively associated with auditor effort. Collectively, our evidence implies that engagement partner conscientiousness plays a major role in shaping audit outcomes. Data Availability: Data are available from the public sources cited in the text.

In response to growing economic and environmental concerns, companies in a range of industries seek to repurpose products (assets) that retain functional capacity beyond their initial first life. This paper examines a generic valuation model for used capacity assets that can either be recycled immediately or repurposed for a second life application. We apply our model framework to lithium-ion batteries retired from electric vehicles, as these assets typically retain substantial energy storage capacity at the end of their first life. Our analysis focuses on two battery chemistries: lithium-iron-phosphate (LFP) and nickel-cobalt-X (NCX) based. We project their future fair market values in the United States and China. Our findings indicate that repurposing LFP batteries will be economically viable in both countries for the coming decade. In contrast, for most NCX batteries immediate recycling will soon be preferable due to their more valuable raw material content and shorter usable lives.