The effects of industry expertise on cost of debt: an individual auditor-level analysis

2017 ◽  
Vol 25 (3) ◽  
pp. 322-334 ◽  
Author(s):  
Ying-Chieh Wang ◽  
Hua Wei Huang ◽  
Jeng-Ren Chiou ◽  
Yu Chieh Huang
Keyword(s):  
Policy Implications ◽  
Cost Of Debt ◽  
Firm Level ◽  
Industry Specialization ◽  
Content Type ◽  
Asian Context ◽  
The Interest Rate ◽  
The Individual ◽  
The Cost ◽  
Industry Expertise

Purpose The purpose of this paper is to examine the association between the cost of debt (COD) and auditor industry expertise using Taiwanese data. Since previous studies (Li et al., 2010) have only examined the relation between industry specialization and COD at the audit firm level in western countries, the authors further examine the association between industry specialization and COD at the individual auditor level in an Asian context. Design/methodology/approach The authors use the interest rate on the firm’s debt as a proxy variable for the COD (Francis, Khurana and Pereira, 2005). The authors adopt three different methods to measure industry specialization, which consist of the auditors’ market share in terms of client sales and number of clients, and client assets. Findings The results indicate that the clients of industry specialists at individual auditor levels have a lower COD. Originality/value First, the authors extend the research of Li et al. (2010) and find that the clients of individual auditor industry specialists also have a lower COD. Second, the authors also believe the evidence on the effects of industry expertise at the individual auditor level may have policy implications for regulators and public investors. Finally, in contrast to works carried out in the US market, the authors provide empirical evidence for the relation between industry specialization and COD in an Asian market.

Does occupational licensing costs disproportionately affect the self-employed?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alicia Morgan Plemmons
Keyword(s):  
The Self ◽  
Policy Implications ◽  
Occupational Licensing ◽  
Firm Level ◽  
Content Type ◽  
Firm Structure ◽  
Self Employment ◽  
State Affect ◽  
Future Policy ◽  
The Individual

PurposeThe purpose of this study is to analyze how occupational licensing costs within a state affect the performance of self-employed firms, as measured through annual sales.Design/methodology/approachThis study utilizes an empirical approach to determine if there are additional effects on the annual sales for firms that are self-employed in high-cost states that are not explained through the individual estimations. Since the choice of self-employment is plausibly nonrandom, this study also uses a propensity score matching method to develop a matched subsample of self-employed and employee-maintaining firms. This selection methodology ensures that the set of self-employed and employee-maintaining firm observations are similar in all measurable attributes besides their regulatory environment and firm structure. Using this representative subsample, the empirical framework is repeated to reevaluate the effects of high occupational licensing fees on the sales of self-employed firms.FindingsIn both the unmatched and matched samples, there are significant, large, negative interactions representing a reduction in annual sales per employee within self-employed firms relative to employee-maintaining firms when located in states with above-average occupational licensing costs. The results using the matched subsamples are noticeably smaller in magnitude, which indicates that future policy assessments would benefit from ensuring that the sample pool, when dealing with self-employment, is limited only to firms under a common convex hull in order to not skew the size of results.Originality/valueThis study contributes new understanding of the financial relationship of self-employed firms and occupational licensing costs using firm-level observations of sales and firm structure. This has important policy implications for the development and evaluation of occupational licensing policies when considering effects on the self-employed.

scholarly journals Determinants of bank loan spread in project finance

2019 ◽  
Vol 12 (1) ◽  
pp. 161-186 ◽  
Author(s):  
Wouter Thierie ◽  
Lieven De Moor
Keyword(s):  
Bank Lending ◽  
Policy Implications ◽  
Bank Loan ◽  
Economic Environment ◽  
Project Finance ◽  
Cost Of Debt ◽  
Infrastructure Projects ◽  
Content Type ◽  
Pricing Decisions ◽  
The Cost

Purpose The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in infrastructure deals. As infrastructure projects are typically highly leveraged, the cost of bank lending is an important driver of the overall funding costs for the project. Design/methodology/approach First, the paper provides a general review of the drivers of the cost of funds in PF. Second, the paper develops a regression analysis of the loan’s spread on four categories: project, loan, bank characteristics and the economic environment. By using a new data set of InfraDeals containing data on bank spreads of more than 700 infrastructure projects worldwide from 2006 to 2016. Findings The results show that the cost of debt is predominantly affected by the market and the business cycle, rather than the structuring of the project. This implicates that the timing when the deal is closed weighs more heavily than the specificities of the project itself. Practical implications The results have important policy implications. As PF deals are often paid for by taxpayers, this paper could help policymakers to use public funds for infrastructure in the most efficient way. Originality/value One weakness of existing studies in PF loan pricing is that they undervalue the role of the economic environment in the cost of debt. Few studies in the literature include macroeconomic control variables in their model and the others do not seem to find significant results. This paper reveals new insights on the pricing decisions of banks for PF loans.

Voluntary and timely disclosure and the cost of debt: South African evidence

2014 ◽  
Vol 22 (2) ◽  
pp. 149-164 ◽  
Author(s):  
Achraf Guidara ◽  
Hichem Khlif ◽  
Anis Jarboui
Keyword(s):  
South African ◽  
Voluntary Disclosure ◽  
Developing Economies ◽  
Policy Implications ◽  
Cost Of Debt ◽  
The South ◽  
Content Type ◽  
Publicly Traded Companies ◽  
The Cost ◽  
African Setting

Purpose – The aim of this study is to investigate the effect of voluntary and timely disclosure on the cost of debt for the South African setting. Design/methodology/approach – The sample of this paper consists of 20 South African listed non-financial companies for the period 2008-2011. A content analysis is used to measure the extent of voluntary disclosure. Timely disclosure is proxied by earnings reporting lag. Findings – Results show that the extent of voluntary disclosure is negatively and significantly associated with the cost of debt. In contrast, timely disclosure exerts a trivial effect on the cost of debt. When testing for the moderating effect of timely disclosure on the association between the extent of voluntary disclosure and the cost of debt, this paper documents that this association is only negative and significant for the shorter earnings announcement lag group. Originality/value – The findings of this paper have policy implications for managers in the South African setting and other developing economies similar to South Africa, given the crucial role played by debt as an important source of external financing for publicly traded companies.

The impact of Shariah finance compliance level on the cost of debt

2020 ◽  
Vol 11 (6) ◽  
pp. 1211-1226
Author(s):  
Harit Satt ◽  
Fatima Zahra Bendriouch ◽  
Sarah Nechbaoui
Keyword(s):  
Interest Rate ◽  
Corporate Finance ◽  
Cost Of Debt ◽  
Content Type ◽  
Compliance Level ◽  
Theoretical Predictions ◽  
Large Scope ◽  
The Interest Rate ◽  
The Cost ◽  
The Impact

Purpose Does Shariah finance have any impact on the cost of debt? The existing literature on Shariah finance revolves around its effect on the macroeconomic level but remains poor when looking at its impact on the corporate level. The purpose of this paper is to strengthen the latter by examining the relationship between the Shariah compliance level and the interest rate. Design/methodology/approach The authors have used a sample of 600 companies, all Shariah-compliant but with different levels of compliance, from 2002 to 2015. A variable determining the level of Shariah compliance was created in accordance with the methodology by S&P 500 Shariah and its underlying index S&P 500; then, a Probit relapse study was conducted to identify the impact of Shariah level on the cost of debt. Findings Consistent with the theoretical predictions of the authors, the findings reveal that there is a positive relationship between the level of Shariah compliance and the cost of debt, suggesting that the higher the level of Shariah compliance of a firm, the higher the interest rate. Research limitations/implications One important portfolio implication of this study is that the level of Shariah compliance plays a major rule in the cost of debt determination besides the firm-specific factors. The revealed results can be of interest to actors in the fields of corporate finance, corporate governance, decision-makers and investors. Originality/value Islamic finance has been one of the most studied and researched topics in the finance world. However, the interest of scholars thoroughly assessed the dynamics of Islamic banking. The effect of Shariah compliance on corporate finance can still be more explored. To the best of the authors’ knowledge, this is a first attempt to capture the effect of Shariah compliance on the cost of debt through the use of a large scope to enrich the literature and at the same time analyzing the effects of Islamic characteristics on firms’ fundamentals.

An equilibrium displacement approach to analyzing the effects of tariff reduction on farmers’ profits

2016 ◽  
Vol 20 (4) ◽  
pp. 349-363 ◽  
Author(s):  
Byeong-Il Ahn ◽  
Jeong-Bin Im
Keyword(s):  
Cost Function ◽  
Supply And Demand ◽  
Differential Forms ◽  
Trade Agreement ◽  
Tariff Reduction ◽  
Content Type ◽  
Equilibrium Displacement ◽  
Demand Equations ◽  
The Individual ◽  
The Cost

Purpose The purpose of this paper is to develop an equilibrium displacement model (EDM) that is able to evaluate the impacts of a free trade agreement (FTA) on the profits of farmers. Empirical applications of the developed EDM are performed for evaluating the influences of Korea-Chile FTA on the grape industry in Korea. Design/methodology/approach Supply and demand equations together with profit function of individual farmers are converted into log-differential forms that compose the EDM. The cost function of grape producers is estimated for deriving the parameters that are required in applying the developed EDM. Findings The share of profit within revenue and the elasticity of cost with respect to quantity in the cost function play key roles in assessing the change in farmers’ profit. The empirical assessment of the effects of Korea-Chile FTA indicates that this FTA has little impact on the Korean grape market and grape producers in Korea. Originality/value Usefulness of the existing EDM has been limited in evaluating the impacts of exogenous shocks on the individual farmer level. This paper fills this gap by developing an EDM that assesses the impacts of tariff reduction on farm-level profit.

scholarly journals Duration of low-wage employment: a study based on a survival model

2018 ◽  
Vol 45 (2) ◽  
pp. 286-299
Author(s):  
Francisco Silva ◽  
José Vieira ◽  
António Pimenta ◽  
João Teixeira
Keyword(s):  
Survival Analysis ◽  
Training Programs ◽  
Decision Makers ◽  
Policy Implications ◽  
Asian Origin ◽  
Content Type ◽  
Level Of Education ◽  
Industry Affiliation ◽  
The Individual ◽  
Low Pay

Purpose The purpose of this paper is to investigate low-wage retention using a survival analysis approach. Design/methodology/approach Variables explaining low-wage retention take into account the characteristics of the employee, such as education, age, tenure with the company, gender and nationality, and the characteristics of the job and the company such as industry affiliation, number of employees, age of the company and location. Findings Female workers and workers with low level of education, older ones, those with more seniority in the company and those of Asian origin remain longer in a low-wage situation. Also, workers in smaller and older companies located outside the Lisbon region are more likely to stay in a low-wage situation. Practical implications The policy implications are clear. Education plays a prominent role: the higher the level of education of the individual, the higher the probability of him/her leaving low pay. Training programs may help employees in Portugal to leave the low-wage situation. Furthermore, policies must address the different mobility rates of different nationalities and different activities. Training programs are more urgent for hotels and restaurants and transports and communication. The findings also indicate that those initially working in younger firms and larger firms have a higher probability of leaving the low-wage situation. This is a stimulus for decision makers to stimulate employment in the younger firms or in the larger firms. Originality/value Despite low-wage retention being a well-known field of research, to our knowledge this is the first research paper using survival analysis to explain the duration of a low-wage situation.

The effect of engagement partner workload on audit quality

2021 ◽  
Vol 36 (8) ◽  
pp. 1068-1091
Author(s):  
Yun Cheng ◽  
Christine M. Haynes ◽  
Michael D. Yu
Keyword(s):  
Audit Quality ◽  
Firm Level ◽  
Content Type ◽  
Big 4 ◽  
The Us ◽  
Performance Benchmarks ◽  
Partner Characteristics ◽  
Partner Firm ◽  
The Individual ◽  
The Relationship

Purpose Auditing studies have shifted the research focus from the audit firm level to the individual audit partner level in recent years. Motivated by the call from Lennox and Wu (2018) to explore the effect of audit partners’ characteristics on audit quality in the US, this study aims to develop a new measure of engagement partner workload (EPW), which includes both the size and number of clients audited to test the effect of EPW on audit quality. This study also examines the moderating effect of the partner firm size on audit quality. Design/methodology/approach To test the effect of the EPW on audit quality, this study runs multivariate regressions of EPW on each specific client’s discretionary accruals and audit report delays. This study also runs a logistic regression of EPW on clients’ probability of having small profit increases to meet performance benchmarks. Findings Results of the hypotheses show that partner workload is positively related to audit quality. The results indicate that partners with larger, but fewer, clients conduct higher quality audits. Further analysis indicates that the relationship between partner workload and audit quality only holds for partners from the non-Big 4 firms. Originality/value This study contributes to the literatures of both audit quality and audit partner characteristics, and the results complement initial research aimed at identifying US partner-related characteristics that influence audit quality.

Responsible consumption: addressing individual food waste behavior

2021 ◽  
Vol 123 (9) ◽  
pp. 3245-3263
Author(s):  
Wei-Zhi Ang ◽  
Suresh Narayanan ◽  
Meenchee Hong
Keyword(s):  
Food Waste ◽  
Individual Utility ◽  
Food Diary ◽  
Content Type ◽  
Responsible Consumption ◽  
And Gender ◽  
The Individual ◽  
Economic Tools ◽  
The Cost ◽  
Food Wastage

PurposeFood wastage is a major contributor to pervasive world hunger. Cutting global food waste in half by 2030 is one of the United Nation's top priorities. Hence, this paper aims to provide useful insights on how individual behavior might be influenced to help reduce food wastage and hunger by identifying individual food waste determinants.Design/methodology/approachA total of 297 useable responses were obtained from a survey using a food diary method. A logit model was employed to estimate the relationship between leftovers and its determinants (preparedness to take own action, price conscious, food review, religiosity, health conscious, cost, marital status and gender).FindingsResults show that preparedness to be responsible for one's actions, depending on food reviews and being waste conscious had a significant positive relationship with food waste reducing behavior, along with being male and being married.Research limitations/implicationsThe study suggests that there is scope for policy initiatives to reduce the individual utility from discarding food and increase the individual utility from food saving activities. Penalizing individual or household food wastage through a tax will directly raise the cost of wastage and reduce the net utility from discarding food. Reducing food waste could help reduce global hunger.Originality/valueRationally, no one will have any intention to waste when buying food. Instead, in the context of deciding whether or not to leave leftover food, an individual is posited to weigh the potential utility from saving food or throwing it away. Thus, this study examines food waste behavior by utilizing economic tools, which is rare in the food waste literature.

Does opening high-speed railways affect the cost of debt financing? A quasi-natural experiment

2020 ◽  
Vol 10 (4) ◽  
pp. 473-496
Author(s):  
Hongling Guo ◽  
Keping Wu
Keyword(s):  
High Speed ◽  
Geographical Location ◽  
Debt Financing ◽  
Cost Of Debt ◽  
High Speed Railway ◽  
Content Type ◽  
Financing Cost ◽  
Debt Market ◽  
The Cost ◽  
The Impact

PurposeThis study aims to investigate how opening high-speed railways affects the cost of debt financing based on China's background.Design/methodology/approachUsing panel data on Chinese listed firms from 2008 to 2017, this study constructs a quasi-natural experiment and adopts a difference-in-difference model with multiple time periods to empirically examine the relation between the high-speed railway openings and debt financing cost.FindingsOur results show that opening high-speed railways reduces the cost of debt financing, and this negative correlation is more significant in non-state firms, firms with weaker internal control, and firms that hire non-Big Four auditors. Besides, we explore the impact mechanisms and find that opening high-speed railways improves analyst attention, institutional investor participation, and information disclosure quality, which in turn lowers the cost of debt financing.Research limitations/implicationsThe results imply that the opening of high-speed railways helps to alleviate the information asymmetry and adverse selection between firms and creditors and ultimately reduces the cost of corporate debt financing.Practical implicationsThis paper can inform firms and stakeholders about the impact of opening high-speed railways on debt financing cost: it improves the information environment, reduces the geographical location restrictions of debt financing, ensures the reasonable pricing of corporate debt, and thus promotes the healthy and sound development of the debt market.Originality/valueThis paper provides theoretical support and empirical evidence for the impact of infrastructure construction on the information environment of the debt market in China, which enriches the research on the “high-speed railway economy.” In addition, as an exogenous event, the opening of high-speed railways instantly shortens the time distance between firms and external stakeholders, which gives us a natural environment to conduct empirical research, thus providing a new perspective for financial research on firms' geographical location.

Drivers of efficiency and their influence on airline performances in South Africa: a bootstrapped meta-frontier approach

2019 ◽  
Vol 14 (1) ◽  
pp. 121-135
Author(s):  
Oswald Mhlanga
Keyword(s):  
South Africa ◽  
South African ◽  
Airline Industry ◽  
Policy Implications ◽  
Niche Markets ◽  
African Government ◽  
Content Type ◽  
Political Interference ◽  
Run Up ◽  
The Cost

Purpose This paper aims to identify drivers of efficiency and their influence on airline performances in South Africa. Unfortunately, the methods currently used to measure airline efficiency fail to address the heterogeneity problem, which blurs inefficiency. Design/methodology/approach To remedy the heterogeneity problem, this paper adopts the meta-frontier framework to identify drivers of efficiency. The interesting feature of the model is that it ensures that heterogeneous airlines are compared based on one homogeneous technology. The model is tested using a panel data sample of nine South African airlines, which operated from 2015 to 2018. Findings The paper demonstrates that structural drivers, namely, “aircraft size”, and “airline ownership” and one executional driver, namely, “the cost structure” significantly influence (p < 0.05) airline efficiency thereby corroborating evidence from some prior studies. Research limitations/implications First, because of the small size of the industry, fewer airlines and a lack of detailed data, the study could not consider other important factors such as optimal routing and network structure. Second, a more rigorous analysis over a period of time would yield better understanding about the growth of the industry in South Africa and recognise the variation in the influence of drivers of efficiency on airline performances over time. Practical implications The results have potential policy implications. First, as the market in South Africa is too small to operate with a smaller aircraft probably, for airlines that operate with smaller aircraft to operate efficiently they should first identify niche markets where they can have a route monopoly. Second, while all state-owned airlines are perfect statehood symbols that define and represent countries, most state carriers in South Africa are highly inefficient. The researcher recommends policymakers to privatise state airlines or seek equity partners. Many nationalised airlines have turned losses to profits in the run-up to privatisation. British Airways, once a large burden on the British taxpayer, is now one of the world’s most efficient airlines. After the privatisation of Air France and Iberia, all two turned from loss-making concerns into profitable airlines. It, therefore, makes no sense for the South African government to expect state carriers to pursue a commercial mandate with such political interference. The very notion of efficiency itself is at risk. Originality/value This paper is a first attempt to identify drivers of operational efficiency using a bootstrapped meta-frontier approach in the airline industry in South Africa. By applying the meta-frontier approach the paper ensures that all heterogeneous airlines are assessed based on their distance from a common and identical frontier.

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