This study extends prior studies by examining how managerial ownership and external unrelated blockholdings affect the informativeness of earnings. The results are in contrast to prior studies. A non-linear relation exists between managerial ownership and earnings informativeness. Earnings informativeness increases with managerial ownership at low levels but not at higher levels of managerial ownership where the entrenchment effect sets in. Consistent with the role of large shareholder monitoring, the evidence shows a strong positive relationship between external unrelated blockholdings and earnings informativeness. These results are supported when income-increasing and absolute discretionary accruals are used to measure the extent of earnings management Copyright Blackwell Publishers Ltd 2002.

This paper extends prior studies in auditor industry specialization to an international setting and examines if the impact of industry specialist auditors on earnings quality is dependent on the legal environments. Using data for 28 countries over 20 industries from 1993 to 2003, we find that clients of industry specialist auditors have lower discretionary current accruals and higher earnings response coefficients than clients of nonspecialist auditors. In addition, we find that the impact of auditor industry specialization on earnings quality increases as the legal environment weakens. Collectively, the results suggest that the benefits from engaging the services of industry specialist auditors increase as a country's legal environment shifts from a strong to a weak environment. Our results are robust to the inclusion of additional control variables.

This paper seeks to investigate how control-cash flow divergence of a firm's ultimate oMiner may affect the timeliness of accounting recognition of economic losses (TLR) relative to recognition of economic gains, und $ engaging an audit industry specialist mitigates the reduced TLR arising fi-om control divergence. Our results show that firms with ~y r~a t e i~ divergenc~c in control and cash flow rights are less timely in loss recognition (relative to gain recognition). We also find evidence that clients audited by industry specialists are associated with greater TLR. More importunt, we find that the negative association between control di\qyencr and the TLR is moderated by the auditor industry specialization. The results are robust to controls for legal institutions, political econoniy, extrulegul institutions, firm and industry characteristics, and the potential endogeneity between auditor choice and control diverg c n c~. Given that Bushman, Piotroski, and Smith (2006) provide evidence to suggest that TLR is a desirable attribute of accounting since it leads to signijicant positive economic consequences, the findings of our study suggest that hiring an audit industry specialist in the presence of control diiw;yence can lead to positive economic consequences for the jirm .

Market risk, Value-at-risk, Value relevance, Earnings-returns relation, Stock return volatility, G18, M41,

This study experimentally examines how the size of a profit-sharing contract offered to a pair of employees and a feedback system that provides information on individual employee cooperativeness affect the sustainability of cooperation. Both the larger profit-sharing contract and the feedback system do not provide explicit economic incentives for cooperation. We find that when there is no feedback system, a larger profit-sharing contract increases the sustainability of cooperation as well as employees’ self-reported reciprocity to the experimental firm and trust in fellow employee. Introducing the feedback system improves the sustainability of cooperation and employees’ self-reported trust in fellow employee. However, the feedback system reduces the positive impact of a larger profit-sharing contract on cooperation sustainability. Our results suggest that firms can rely on increased profit-sharing and feedback, rather than explicit economic incentives for cooperation, to motivate sustained cooperation and improve interpersonal trust.