Carlos Fernández Méndez

The Effects of Ownership Structure and Board Composition on the Audit Committee Meeting Frequency: Spanish evidence

This paper examines the factors that affect the activity of the audit committees in Spain. The data used in the analyses are collected from the Spanish stock market in 2003. The results show the existence of a non-linear relationship between the managerial stock ownership and the activity of the audit committee. We have also verified the existence of a lower audit committees activity in highly leveraged firms and when the ownership structure is concentrated in the hands of large shareholders. The large firms have more active committees than small firms. Finally, we have not found any evidence of a significant influence of the composition of the board or the audit committee on the activity of the latter.

Financial Constraints and Dividend Policy

Using a sample of US listed firms over the 1989–2012 period, we find that financially constrained dividend-increasing firms experience superior short-run abnormal stock returns, but suffer worse operating performance compared to similar unconstrained firms. More specifically, constrained firms in more competitive industries realize poorer long-run and operating performance. Likewise, constrained firms that increase dividends during the financial crisis also deliver inferior post-dividend-increase long-run return than do unconstrained firms. We also find evidence that constrained firms show worse stock market reaction to new equity issue announcements following dividend increase, but display a positive market response if they potentially have high investment growth opportunities. Our results are robust to alternative financial constraint proxies and abnormal return measures.

The effectiveness of the audit committee in Spain: implications of its existence on the auditor’s opinion

This research work is aimed at determining the effectiveness of the Audit Committee (AC), analyzing its impact on the reliability of accounting information issued by spanish listed companies. With this aim, we study whether certain features such as its voluntary or otherwise compulsory formation, its independence and activity lead to an improvement of financial reporting quality, which is defined as the removal of avoidable qualifications in the audit report. We considered the periods where ACs were voluntary (1998–2002) and compulsory (2003 onwards). The results obtained suggest that: (a) compulsory ACs are more effective than voluntary ones; (b) ACs with a higher proportion of independent members do not lead to greater improvements in the quality of accounting information; and (c) the number of meetings of the AC is directly related to improvements in the quality of accounting information.

Monitoring by Busy and Overlap Directors: An Examination of Executive Remuneration and Financial Reporting Quality

ABSTRACT We examine the influence of multiple board directorships and boards’ committee memberships on three board supervisory outcomes: executive remuneration, external auditor opinion, and earnings management. The study uses a panel of 122 non-financial companies listed on the Spanish Stock Exchange over the period 2004–2011. Our results show that firms with busy directors offer low executive remuneration and present a low probability of a qualified audit opinion. Furthermore, the results indicate that firms with overlap directors exhibit a higher probability of receiving a qualified audit opinion. Additionally, we find evidence that the overcommitment effects of busy and overlap directors are more evident for large firms. Overall, our findings suggest that busy (overlap) directors are beneficial (detrimental) to the monitoring capability of the board in the Spanish context.

Efectos económicos de las calificaciones de auditoría. Factores determinantes de las reacciones del mercado ante las salvedades

RESUMEN El objetivo de este trabajo es profundizar en el estudio del contenido informativo de los informes de auditoría calificados. Para ello, tras emplear la metodología de eventos para comprobar si en torno a su divulgación se producen rentabilidades anormales en los precios de los títulos de sus empresas receptoras, se trata de determinar, mediante la aplicación de diversas técnicas, las variables explicativas de las reacciones negativas identificadas. Este aspecto constituye una aportación plenamente novedosa y necesaria a esta línea de investigación, llegando a la conclusión de que las empresas cuyos informes de auditoría calificados causan efectos en el mercado presentan unos perfiles específicos caracterizados bien por una situación financiera muy mala, bien por haber intervenido otros auditores y no estar la propiedad muy concentrada, bien por tener una rentabilidad elevada o bien tener una rentabilidad pequeña pero positiva unida a una escasa solvencia a corto plazo.