The rapid growth of the private sector in China in recent decades has resulted in a large number of capital-hungry private sector firms. An increasing number of these firms choose to raise equity capital on international exchanges, which typically have stronger disclosure, corporate governance, and investor protection regulations. In light of international investors' and regulators' concerns about the corporate finance practice of China's private sector firms, particularly regarding the integrity of their reported earnings, we investigate whether these firms aggressively manipulate their accounts by examining those listed in Hong Kong, commonly known as P-chips. We find systematic evidence that P-chips engage in more earnings management and other corporate misbehaviors than their counterparts in Hong Kong. We posit and provide evidence consistent with cross-jurisdictional enforcement difficulty as a possible explanation for P-chips' questionable practices, and discuss its implications.

ABSTRACT The traditional view of equity analysts is that they are a source of new information about future cash flows. We broaden this view by demonstrating that equity analysts are also a substantive source of new information about priced risk. In particular, we document that, when announced, changes in analyst risk ratings distinctly and significantly affect equity returns, and are generally followed by significant changes in Fama–French factor loadings. Also, while less frequent than credit rating changes, equity risk rating changes are timelier, and with a larger overall stock price impact than credit rating changes.

ABSTRACT We examine the determinants and the informativeness of financial analysts' risk ratings using a large sample of research reports issued by Salomon Smith Barney, now Citigroup, over the period 1997–2003. We find that the cross‐sectional variation in risk ratings is largely explained by variables commonly viewed as measures of risk, such as idiosyncratic risk, size, book‐to‐market, and leverage. In addition, earnings‐based measures of risk, such as earnings quality and accounting losses, also contribute to explaining the cross‐sectional variation in the risk ratings. Finally, we document that the risk ratings can be used to predict future return volatility after controlling for other predictors of future volatility. We conclude that analysts play an important role as providers of information about investment risk.

ABSTRACT We investigate the link between the expanded audit report and firms’ financial disclosure decisions, focusing on auditors’ mentions of goodwill impairment as a key audit matter (KAM). Drawing from a sample of the United Kingdom Premium Listed companies with goodwill on their balance sheets during 2014–2019, we identify instances where goodwill impairment is flagged as a KAM and contrast firms’ disclosure levels on goodwill impairment using textual measures constructed from information in their annual reports. We find that firm disclosure on goodwill impairment increases (decreases) when auditors start (stop) mentioning goodwill impairment as a KAM. The increase in disclosure is more pronounced in the presence of stronger external information demand and better internal governance. Finally, firms are more likely to impair goodwill in the period following auditors’ mention of goodwill impairment as a KAM. Overall, this paper establishes the role of the expanded audit report for firm disclosure.