We propose that family firms with religious founders have less risk than other family firms. Using a sample of 4159 family firms in China, we find that firms founded by religious entrepreneurs have lower leverage and less investment in fixed and intangible assets compared to firms founded by nonreligious entrepreneurs. These findings are consistent with our proposition. However, these findings primarily hold for entrepreneurs who adhere to Western religions but not to Eastern religions. As such, our paper makes important contributions to the literature on family-firms and their risk-taking and the literature on the relation between religion and risk aversion.

We develop a dynamic structural model of stock splits, in which managers signal their private information through the timing of the split decisions. Our approach is consistent with the empirical evidence which shows that the majority of stock splits have a 2:1 ratio of old-to-new shares, but are announced at various pre-split price levels. Moreover, it explains why split announcement returns are decreasing with the pre-split price. In addition, by matching the model to the data, we estimate the nominal share price preferences of investors and decompose the split announcement return into the value of new information and the signalling cost.

Using a sample of Chinese firms, we examine the influence of state-pyramids on corporate tax burden. We find results that state-pyramidal layers are significantly and negatively associated with effective tax rates, indicating that pyramids formed by the state protect local state-owned enterprises (SOEs) from political intervention. The results hold after controlling for potential endogeneity. We further find evidences suggesting that taxation is one of the channels through which state-controlled pyramids increase firm value. Our study contributes to both corporate finance and corporate tax literatures by documenting the role of pyramidal organizational structures in reducing local SOEs' tax burden.

Research suggests that board members value financial reporting quality because executive dismissal often follows low reporting quality events. However, inferences about the board’s demand for reporting quality in these studies are confounded by board members’ reputation incentives because the events examined are public (e.g., restatements). We investigate boards’ demand for reporting quality by exploiting a private signal of misreporting: audit adjustments communicated to the Board by the external auditor. We first survey 29 audit committee chairs to understand whether boards use audit adjustments in their oversight of management and then conduct an empirical investigation to answer our research question. We find an increased likelihood of CFO dismissal following audit adjustments. This association is driven by adjustments that reduce income and by firms with better board oversight. These findings suggest that boards proactively use nonpublic signals of reporting quality and incorporate information from auditors into their monitoring function.

Many countries have converged their domestic auditing standards with International Standards on Auditing (ISA). This study provides global empirical evidence on first-order determinants of audit quality by examining whether and how convergence affects audit quality through utilizing data on 41 jurisdictions and using a staggered difference-in-differences approach. We find that ISA convergence leads to higher audit quality on average. The positive effect is stronger for clients of domestic audit firms, in jurisdictions with stronger enforcement, and when the ISA convergence level is higher. Insights from textual features suggest that changes in principle-orientation, comparability, readability, and size (or length) of auditing standards are positively related to audit quality. Exploratory analyses of textual content using machine learning reveal that the emphases of ISA on going-concern assessment and legal compliance, fraud risk assessment and internal control evaluation, and related-party transactions and subsequent events contribute to enhanced audit quality.