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Lauren Cunningham and her coauthors examine whether audit quality improved in the reporting period following initial audit partner identification in Form AP. While they do find that audit quality in the U.S. improved in the first year of partner identification relative to the previous year, they struggle to attribute this improvement to Form AP partner identification specifically and instead attribute it to general trends in improving audit quality. Further research is needed to understand how investors use partner identification in investment decisions.Read More
Inadequate testing of fair value accounting estimates, including goodwill, is often cited as an audit deficiency in PCAOB inspection reports, and, in some cases, these deficiencies have led to enforcement actions against the auditor. Joe Carcello, Terry Neal and their coauthors examine whether non‐audit fees are associated with goodwill impairment decision outcomes. Their results indicate that as the proportion of non‐audit fees paid by an audit client increases, the likelihood of goodwill impairment decreases. This potential lapse in auditor independence is driven by clients who are most incentivized to exert their influence over the auditor, highlighting the importance of audit committee oversight over audit quality.Read More
Joan Heminway and her co-author describe blockchains and their potentially expansive use in several aspects of the governance of publicly traded corporations and outline ways in which blockchain technology affects what business lawyers should know and do, now and in the future.Read More
Matthew Serfling and his coauthors study the adoption of state-level labor protection laws in the U.S. They find that, following the adoption of these laws, capital expenditures decrease and sales growth slows down. They attribute their findings to theories predicting that greater employment protection discourages corporate investment by making projects more irreversible. Their findings should be of interest to states considering the adoption of labor protection laws by highlighting a potential unintended consequence on corporate investment and growth.Read More
Kathleen Schuchard and her coauthors examine the determinants and consequences of U.S. media coverage of corporate tax policies. They find that media coverage for firms that “underpay” their income tax is greater for larger companies than it is for smaller companies and is more likely during economic recessions than stronger economic periods. In contrast to the significant influence that other stakeholders may have (e.g., proxy advisory firms or institutional investors), firms do not respond to media attacks with higher tax payments, suggesting that the media has a weaker influence over corporate policy than might be expected.Read More