The management accounting and operations management literatures argue that the adoption of advanced manufacturing practices, such as just‐in‐time (JIT), necessitates complementary changes in a firm's management accounting and control systems. This study uses a sample of JIT and non‐JIT plants operating in the Canadian automotive parts manufacturing industry to study the interaction among performance outcomes, intensity of JIT practices, and productivity measurement. This study provides evidence that productivity measurement mediates the relationship between performance outcomes and intensity of JIT practices. Specifically, both JIT and non‐JIT plants that use a broader range of productivity measures are more efficient and profitable than other plants. Also, plants that employ industry‐driven productivity measures are more profitable and efficient than plants that employ idiosyncratic productivity measures, especially if the former are more JIT‐intensive than the latter. Furthermore, plants that employ quality productivity measures are less efficient and less profitable than those that do not, especially if they use more intensive JIT practices. The latter result is consistent with JIT‐intensive plants overinvesting in quality. This study also finds that plants that invest more in buffer stock are less efficient and less profitable, especially if they use more intensive JIT practices. Despite the fact that plant profitability and efficiency are highly correlated, JIT‐intensive plants are more profitable but less efficient than plants that are not JIT‐intensive, after controlling for productivity measures, plant size, and buffer stock. This result suggests that despite wasting resources, JIT‐intensive plants are still able to generate relatively higher profits than plants that are not JIT‐intensive.

This study examines whether the term of the auditor–client relationship (i.e., auditor tenure) is associated with future stock price crash risk measured both ex ante and ex post. Using a large sample of U.S. public firms with Big 4 auditors, we find robust evidence that auditor tenure is negatively related to one†year†ahead stock price crash risk. The evidence is consistent with monitoring†by†learning where development of client†specific knowledge over the term of the auditor–client relationship enhances auditors’ ability to detect and deter bad news hoarding activities by clients, thereby reducing future crash risk. This result holds even after controlling for endogeneity of the tenure/crash risk relation. We further provide evidence indicating that option market investors do not fully incorporate the information contained in the term of auditor–client relationship in predicting future stock price crash risk. Our empirical results have important policy implications for regulators concerned with ensuring auditor independence.Les auteurs se demandent si la durée de la relation auditeur†client (soit la durée du mandat de l'auditeur) est en relation avec le risque d'effondrement futur du cours des actions, évalué ex ante et ex post. En étudiant un vaste échantillon de sociétés des États†Unis faisant appel public à l’épargne qui ont recours aux services des Quatre Grands cabinets d'audit, ils recueillent des preuves convaincantes que la durée du mandat de l'auditeur est en relation négative avec le risque d'effondrement du cours des actions une année à l'avance. Ces preuves sont conformes à la pratique de la « surveillance par l'apprentissage », le perfectionnement des connaissances relatives au client pendant la durée de la relation auditeur†client améliorant l'aptitude des auditeurs à déceler et prévenir chez les clients le comportement de thésaurisation des mauvaises nouvelles, ce qui a pour effet de réduire le risque d'effondrement futur. Ces résultats persistent même une fois contrôlée l'endogénéité de la relation entre la durée du mandat et le risque d'effondrement. Les auteurs produisent d'autres preuves que les investisseurs sur le marché des options n'incorporent pas entièrement l'information que recèle la durée de la relation auditeur†client dans la prévision du risque d'effondrement futur du cours des actions. Les résultats empiriques de l’étude ont d'importantes conséquences au chapitre des politiques pour les autorités de réglementation soucieuses de l'indépendance des auditeurs.

In frictionless capital markets with complete information and rational investors, stock prices adjust to new information instantaneously and completely. However, a substantial body of research studies information imperfections such as asymmetric information and incomplete information. Information imperfections potentially hinder timely price discovery and are likely associated with delayed stock price adjustment to information. Our first research question therefore is whether the quality of accounting information (or “accounting quality”) is one such information imperfection that is associated with cross‐sectional variation in stock price delay. We define accounting quality as the precision with which financial reports convey information to equity investors about the firm’s expected cash flows. Poor accounting quality is likely associated with higher expected returns through uncertainty about stock valuation parameters and incomplete information. Our second research question therefore is whether the accounting quality component of price delay is associated with higher future stock returns. Consistent with our hypotheses, the results show that poor accounting quality is associated with delayed price adjustment and higher future stock returns. Thus, accounting quality plays a role in timely stock price discovery.

This study examines the relation between performance covenants in private debt contracting and conservative accounting under adverse selection. We find that under severe adverse selection (i.e., high information asymmetry), accounting conservatism and performance covenants act as complements to signal that the borrower is unlikely to appropriate wealth from the lender. No such relation obtains in a low information asymmetry regime. We further show that in the high information asymmetry regime, borrowers with high levels of conservatism and tight performance covenants generally enjoy lower interest rate spreads than borrowers with low levels of conservatism and loose performance covenants. Consistent with our signaling theory, in the high information asymmetry regime, borrowers with high levels of conservatism and tight performance covenants are less likely to make abnormal payouts to shareholders. Our empirical results are robust to alternative measures of conservatism and covenant restrictiveness.

This study examines the relation between performance covenants in private debt contracting and conservative accounting under adverse selection. We find that under severe adverse selection (i.e., high information asymmetry), accounting conservatism and performance covenants act as complements to signal that the borrower is unlikely to appropriate wealth from the lender. No such relation obtains in a low information asymmetry regime. We further show that in the high information asymmetry regime, borrowers with high levels of conservatism and tight performance covenants generally enjoy lower interest rate spreads than borrowers with low levels of conservatism and loose performance covenants. Consistent with our signaling theory, in the high information asymmetry regime, borrowers with high levels of conservatism and tight performance covenants are less likely to make abnormal payouts to shareholders. Our empirical results are robust to alternative measures of conservatism and covenant restrictiveness.