Firms expend costly resources on audit-based monitoring schemes to improve interdivisional coordination. This study investigates the premise that the effectiveness of and demand for audit-based monitoring may be sensitive to societal factors. Data from a between-subjects experiment involving 60 compensated groups of four (a total of 240 subjects) indicates an interaction between the experiment's two factors: (1) country (20 groups conducted in Canada, 20 in Hong Kong and 20 in the People's Republic of China (PRC)), and (2) the degree of anonymity in internal reporting. Specifically, we find that audit-based monitoring is less effective and less demanded in Hong Kong and the PRC than in Canada, but this difference arises only in a setting with a low degree of anonymity. The interaction with anonymity supports the attribution of results to differing cultural values.

Managers frequently encounter situations involving a trade-off between financial reporting and tax reporting incentives. This paper examines whether inside ownership concentration, a proxy for reduced capital market pressure, influences the balance of these two opposing external reporting incentives. The empirical tests use a sample of major asset divestitures to show that, for high tax- rate firms, managers of firms with lower levels of inside ownership concentration realize larger gains or smaller losses, on average. This work extends previous research by combining insights from the micro-economics tax incentives literature and financial reporting incentives literature, and by considering explicitly the effect of a firm-specific variable on the balance between these two incentives

This study finds that, for a sample of 335 open-market repurchase announcements during 1978 to 1992, the market reaction to the announcement is significantly associated with the firm's sales growth and accounting profitability in prior periods. This result holds after controlling for two known correlates of the market response, the announced fraction to be repurchased and prior returns. This result is consistent with the market reinterpreting previously released accounting information when interpreting a subsequent repurchase announcement by the firm. Further, the association between the market response and prior accounting information is more pronounced for firms that are smaller in size or have fewer analysts following them. This suggests that the degree of reinterpretation of prior accounting information at the time of the repurchase announcement increases in the information asymmetry between managers and investors.

[This study finds that, for a sample of 335 open-market repurchase announcements during 1978 to 1992, the market reaction to the announcement is significantly associated with the firm's sales growth and accounting profitability in prior periods. This result holds after controlling for two known correlates of the market response, the announced fraction to be repurchased and prior returns. This result is consistent with the market reinterpreting previously released accounting information when interpreting a subsequent repurchase announcement by the firm. Further, the association between the market response and prior accounting information is more pronounced for firms that are smaller in size or have fewer analysts following them. This suggests that the degree of reinterpretation of prior accounting information at the time of the repurchase announcement increases in the information asymmetry between managers and investors.]

[This study shows that subjects acting as auditors in laboratory experiments have more trouble assessing fraud risk when their optimal strategies are highly sensitive to those assessments. Interestingly, risk assessment is particularly difficult when the auditor faces high legal liability for audit failure and audits a firm with strong internal controls. The results have practical implications for auditors, who must assess fraud risk accurately in order to be cost competitive while avoiding audit failures that might result in legal liability. The results also have implications for auditing research, because they indicate settings in which traditional equilibrium analyses (which assume accurate fraud risk assessment) are likely to have low predictive power.]

[Pownall et al. (1993) document that nearly 80 percent of their sample of voluntary management earnings forecasts are not precise point forecasts. Imprecise forecast forms include closed-interval forecasts (i.e., ranges), open-interval forecasts (i.e., minimums and maximums), and general impressions about firms' earnings prospects. We perform cross-sectional logistic regressions to document determinants of forecast precision. Our sample consists of 1,212 annual and interim management forecasts. After controlling for firm-specific and horizon-specific earnings uncertainty, we find that managers produce more precise forecasts of annual earnings for firms with greater analyst following (our proxy for private information) and for smaller firms (our proxy for public information). The results are robust across subsamples. The majority of the results, however, do not hold for interim forecasts.]

[This paper analyzes seven mandated disclosures contained in Management Discussion and Analysis (MD&A) to assess their information content. Generally, the results show that certain MD&A disclosures, particularly the discussions of future operations and planned capital expenditures, are associated with future (short-term) performance measures and investment decisions, after controlling for information contained in financial-statement-based ratios. However, the associations with longer-term results are generally not significant. The study illustrates that, in conjunction with the financial statements, the MD&A disclosures, especially prospective disclosures, can assist in assessing firms' future (short-term) prospects

[Stock dividends which increase outstanding shares by less than 25 percent require a transfer from retained earnings of the market value of the new shares, a much larger transfer than that required for stock dividends of 25 percent or more. Choosing a distribution factor near, but below, 25 percent may be an indication of management optimism that future income will replenish retained earnings, avoiding constraints on future cash distributions. In this study, firms declaring 20 percent and 25 percent stock dividends are compared. The 20 percent stock dividend firms exhibit significantly greater announcement-period abnormal returns and significantly greater post-declaration cash dividend growth. These effects are greatest for firms incorporated in states where the level of retained earnings more strictly constrains the payment of cash dividends.]

[This study investigates the separate and joint effects of prior knowledge and accountability on performance in the information search phase of a tax research task. An experiment is reported in which 63 tax professionals performed a computer-based tax research task. The results indicate that increases in effort duration, which are partly attributable to the accountability manipulation, improved search effectiveness regardless of the level of prior knowledge. In addition, after controlling for the effect of effort duration, accountability had an incremental positive effect on performance among the more knowledgeable professionals. These results suggest that effort can substitute for knowledge in performing information search tasks, but this substitution does not appear to be complete. The results also support the hypothesis that the effect of accountability on performance depends upon the level of knowledge, which suggests that certain aspects of effort and knowledge act as complements in improving performance.]

[This paper studies information system design in a model of double moral hazard in which there is both a decision problem and a control problem. If either problem is considered in isolation, an information system that provides more public information is preferred. However, an information system that provides less public information can, in fact, be desirable because of an interaction between the two problems. The benefit of choosing an information system that provides less information is that it serves as a substitute for commitment for the principal. The cost is that neither the principal's decision (act) nor the agent's payments can be conditioned on the information. We provide sufficient conditions under which less information and more information are each optimal