This study investigates the effect of firms' adoption of SFAS No. 131 segment disclosure rules on the stock market's ability to predict the firms' earnings, as captured by the forward earnings response coefficient (FERC). The FERC is the association between current-year returns and next-year earnings. SFAS No. 131, effective for fiscal years beginning after December 15, 1997, arguably increased both the quantity and quality of segment disclosure. Consistent with the standard's intended qualitative effects, pre-131 multi-segment firms experienced a significant increase in FERC after adopting SFAS No. 131. Consistent with the standard's intended quantitative effects, many pre-131 single-segment firms began disclosing multiple segments, and those that did experienced an increase in FERC. However, pre-131 single-segment firms that remained single segment (i.e., were unaffected by SFAS No. 131) had no change in FERC, indicating that the increase in FERC for 131-affected firms is not due to some other event concurrent to the adoption of SFAS No. 131. These results are robust under numerous procedures that control for characteristics of the sample firms and their earnings, providing strong evidence that SFAS No. 131 resulted in an increase in stock price informativeness for affected firms. Thus, we provide the first empirical price-based evidence that SFAS No. 131 provided more information (about future earnings) to the market, as the standard's proponents have suggested.

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.

Abstract:Our study assesses whether SFAS No. 131 improved disclosure about the diversity of multiple segment firms' operations. We find a post-SFAS No. 131 increase in cross-segment variability of segment profits, an increase in the association between reported and inherent cross-segment variability, and an increase in association between reported variability and capital market incentives to disclose. We interpret the results as evidence that SFAS No. 131 increased the transparency of segment profitability disclosures, and as indicating SFAS No. 131 allowed firms depending more on external financing to disclose more about differences in segment profitability. To determine whether the increase in cross-segment profit variability is attributable to the adoption of SFAS No. 131 and to provide a basis for testing our remaining hypotheses, we develop and test models that include variables proxying for other factors that could affect the cross-segment variability of reported profits: the cross-segment variability that would exist absent incentives to conceal differences (inherent variability), proprietary costs, and market incentives to reveal value-relevant segment differences. The inclusion of proprietary cost variables is prompted by previous research (e.g., Harris 1998; Berger and Hann 2003b), which shows that firms with higher proprietary costs report fewer segments. It also is motivated by the often-stated claim that companies that disclose additional segment information suffer competitive harm (Taub 2004). The inclusion of variables for market incentives is motivated by insights from Chen and Zhang (2003) and analysis of the incentives firms needing external financing have to disclose value relevant information (Frankel et al. 1995).H2 is based on the premise that a reported profit measure is more transparent if it is more strongly, and positively, associated with a measure of the inherent ('true') cross-segment variability of profits. Our primary proxy for the latter is the cross-segment profit variability of Comparison of the coefficients of a variable reflecting a firm's need for external financing shows that the positive association between need for external financing and crosssegment profit variable is more positive after SFAS No. 131. This is consistent with firms that depend more on external financing disclosing more about differences in operating profitability after SFAS No. 131, and also with H4.Our results are robust to experimentation with interacting variables representing competing incentives to conceal (reveal) differences in segment profitability, with elimination of high net loss segments, with adjustments to the dependent variable (cross-segment profit variability) to control for the effects of differences in segment size, and to use of different operationalizations of explanatory variables.The remainder of the paper is organized into five additional sections. Section 1 provides background. Section 2 develops hypotheses, explains variable measurement, and No. 131. In this section we also expla...

SUMMARY: Using a unique setting in which mandatory audit firm rotation was required from 2006–2010, and in which both audit fees and audit hours were disclosed (South Korea), this study provides empirical evidence of the economic impact of this policy initiative on audit quality, and the associated implications for audit fees. This study compares both pre- and post-policy implementation and, after the implementation of the policy, mandatory long-tenure versus voluntary short-tenure rotation situations. Where audit firms were mandatorily rotated post-policy, we observe that audit quality (measured as abnormal discretionary accruals) did not significantly change compared with pre-2006 long-tenure audit situations and voluntary post-rotation situations. Audit fees in the post-regulation period for mandatorily rotated engagements are significantly larger than in the pre-regulation period, but are discounted compared to audit fees for post-regulation continuing engagements. We also find that the observed increase in audit fees and audit hours in the post-regulation period extends beyond situations where the audit firm was mandatorily rotated, suggesting that the introduction of mandatory audit firm rotation had a much broader impact than the specific instances of mandatory rotation. Data Availability: Most of the financial data used in the present study are available from the KIS Value Database. The data for audit hours and fees were drawn from statements of operating results filed with the Financial Supervisory Services (FSS) in Korea.

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Black and Hispanic patients are at higher risk of ICH recurrence; hypertension severity (average BP and its variability) does not fully account for this finding. Additional studies will be required to further elucidate determinants for this health disparity.

BackgroundComplications from typhoid fever disease have been estimated to occur in 10%–15% of hospitalized patients, with evidence of a higher risk in children and when delaying the implementation of effective antimicrobial treatment. We estimated the prevalence of complications in hospitalized patients with culture-confirmed typhoid fever and the effects of delaying the implementation of effective antimicrobial treatment and age on the prevalence and risk of complications.MethodsA systematic review and meta-analysis were performed using studies in the PubMed database. We rated risk of bias and conducted random-effects meta-analyses. Days of disease at hospitalization (DDA) was used as a surrogate for delaying the implementation of effective antimicrobial treatment. Analyses were stratified by DDA (DDA <10 versus ≥10 mean/median days of disease) and by age (children versus adults). Differences in risk were assessed using odds ratios (ORs) and 95% confidence intervals (CIs). Heterogeneity and publication bias were evaluated with the I2 value and funnel plot analysis, respectively.ResultsThe pooled prevalence of complications estimated among hospitalized typhoid fever patients was 27% (95% CI, 21%–32%; I2 = 90.9%, P < .0001). Patients with a DDA ≥ 10 days presented higher prevalence (36% [95% CI, 29%–43%]) and three times greater risk of severe disease (OR, 3.00 [95% CI, 2.14–4.17]; P < .0001) than patients arriving earlier (16% [95% CI, 13%– 18%]). Difference in prevalence and risk by age groups were not significant.ConclusionsThis meta-analysis identified a higher overall prevalence of complications than previously reported and a strong association between duration of symptoms prior to hospitalization and risk of serious complications.

This study investigates client choice of industry specialist auditors from among the Big N (Big 4 or 5) in an international (non-U.S.) setting. We investigate client-specific, industry-level and country-level factors hypothesized to enhance or decrease Big N clients' demand for industry expertise. Using data for twenty-nine countries and fourteen broad industries from 1993-2005, we find that international client choice of industry specialist Big N auditors is positively associated with client size, client growth opportunities, and client capital intensity. The choice of industry specialists from among the Big N is more prevalent in countries where levels of investor protection, quality of financial reporting environment, and national economic development are higher. Clients belonging to regulated industries tend to select industry specialists.