Daniel Zéghal

The Pricing of Audit Services: Further Evidence from the Canadian Market

Abstract Since the seminal work of Simunic (1980), many studies have investigated audit pricing, competition in the audit industry, product differentiation and audit cost functions. This study expands on the work done to date by examining Canadian audit fees across time, audit firm and industry. The observations of audit fee data span the period of time during which the provincial codes of professional ethics with respect to fee tenders and advertising in general were relaxing in Canada. The results reported in this study support the existence of differentiated audit services in the Canadian audit market, and are consistent with DeAngelos (1981) size interpretation of audit quality. Although no significant differences in the pricing of audit services across time are detected, the data provide evidence of significant pricing differences across (pre-merger) Big Eight audit firms in the small auditee market, suggesting that treating these audit firms as a homogeneous group in future research may not be appr...

The effect of board’s quality on performance: a study of Canadian firms

We investigate the impact of boards quality as defined by a Score published in a Canadian National Newspaper on the performance of the firm. Based on the current literature, we ranked the boards of 219 Canadian firms in terms of four board characteristics: composition of the board, compensation of board members, shareholder rights, and disclosure. Then, we defined firm performance by using traditional accounting-based measures such as ROI, ROE, EPS, and Market-to-book ratio and value creation-based measures such as EVA(R) and MVA. To test the effects of boards quality on firm performance, we adopted different models of univariate and multivariate statistical analysis. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

The accounting treatment of intangibles – A critical review of the literature

Abstract Intangible investments have become the main value creators for many companies and economic sectors. However, these investments are rarely recognized as assets by current accounting standards. We provide a critical review of the literature on the consequences of this lack of accounting recognition of intangibles for the value-relevance of financial information, resource allocation in the capital market, growth of intangible investments, and the firms market value. We then review recent empirical research on voluntary disclosure of information on intangibles. Our survey concludes that disclosure can considered as a solution to the negative consequences of non-recognition of intangibles in financial statements.

Financial Reporting of Small Business Entities in Canada

Financial reporting for small business entities (SBEs) has been the subject of much debate and concern by the accounting bodies (institutes) in Canada, the United States, the United Kingdom, Ireland, Australia, New Zealand, and other countries. The main issue for the standard setters is whether they should have one set of standards for all companies or two sets of standards (one for big companies and one for SBEs). The main objective of our study is to examine whether SBEs in Canada should have their own new set of Generally Accepted Accounting Principles (GAAP) or should they continue to use big GAAP used by public companies. To address this issue in the Canadian environment, we sent out a questionnaire to a sample of managers and owners of small businesses, preparers, auditors, and users of small business accounts. These stakeholders were asked to identify the purposes of SBE financial statements, their levels of satisfaction or dissatisfaction with the present accounting standards for SBEs, the burdens imposed on the preparers of the financial statements, and the weaknesses of the present standards. Furthermore, they were asked to give the expected advantages of adopting new standards, after having ranked four models of financial reporting of SBEs. The results are quite interesting. Stakeholders indicated that financial statements of SBEs are prepared mainly for taxation purposes and borrowing. They are not satisfied with the present standards because they are costly to comply with and very complex. The burden of producing SBE financial statements can be reduced by simplifying the present standards. The new standards would mean a shorter and simpler form of financial statements. It is hoped that the results of this study will provide the standard setters in Canada and other countries with an indication of the future direction for SBE reporting and accounting.

The effect of accounting firm mergers on international markets for accounting services

Abstract The purpose of this paper is to examine the effect of the accounting firm mergers on competition in the market for accounting services. This paper investigates accounting firm concentration both before and after the accounting firm mergers in ten countries. Large firms were found to dominate the market before the mergers and this dominance was extended further following the mergers, particularly in the European market. When the performance of large and small firms was compared, large firms were found to be significantly superior both before and after the merger in some European countries, possibly indicating reduced competition. Performance of large and small firms did not significantly differ in several other countries, suggesting that high levels of concentration do not necessarily mean low levels of competition.

Investigating transparency and disclosure determinants at firm-level in MENA emerging markets

The objective of this study is to examine transparency and disclosure (henceforth T&D) determinants for Middle Eastern and North African (MENA) companies. Using a sample of 216 annual reports for companies followed by S&P/IFC and pertaining to 13 MENA emerging markets, we expect that the business milieu mostly inherited from the former British/French colonial era and shaped by privileged economic ties with the Anglo-American versus Continental European world has the potential to affect T&D. We investigate T&D determinants from a firm-level perspective. Our findings show that MENA companies from countries having historical links with Great Britain have substantially higher T&D scores than those from countries having historical links with France. Moreover, companies operating in the information technology sector exhibit higher levels of T&D. Multivariate analysis outlines that the nature of business culture, company size and the importance of intangibles affect positively the level of T&D in the MENA region.

Corporate Governance and Bankruptcy Filing Decisions

This paper examines the nature and extent of potential linkages between corporate governance characteristics and bankruptcy filing decisions. To test the papers research hypotheses and follow prior related literature, a sample of financially distressed firms was formed and matched with a group of financially healthy firms in the US between 2001 and 2003. Results show that in addition to lower business and financial health indicators faced by financially distressed firms compared to their financially healthy counterparts, the former group also faced higher director turnover and shorter outside director tenure. In addition, the results indicate that interactions between two or more corporate governance characteristics could have a significant impact on the bankruptcy filing decision, thus suggesting that a multi-theory foundation for governance research could be warranted in the future. Further research is needed to investigate in more depth how boards and management work together, change, make decisions and manage their reputations and careers, not only in the case of financial distress but also in normal business situations.

A study of corporate governance disclosure and its country-level determinants in the emerging markets

Purpose – This study examines country-level attributes that impact on Corporate Governance Disclosure (CGD) depending on the emerging market countrys legal system. Methodology/approach – We evaluate CGD level using 749 annual reports (year ended 2006) in 57 emerging market countries. We develop a CGD determinants model that compares differences in country level attributes between common law and civil law emerging market countries. Our model builds on a multiple regression and assumes interaction between the origin of the legal system and country-specific attributes. Findings – Common law emerging markets have substantially higher levels of CGD than civil law ones. CGD is positively associated with the size of the capital market for the entire sample of emerging markets and for the sub-samples of common law and civil law countries. Law enforcement also has a strong positive influence on CGD in common law emerging countries, whereas it has no influence on CGD in civil law emerging countries. Practical implications – Providing CGD levels for emerging markets helps to a better understanding of the corporate governance characteristics that prevail in each country. Decision makers (international investors, market authorities, standard setters, etc.) should be aware of how country level attributes may interact with the legal system (common law or civil law) to influence CGD. Originality of the paper – This is one of the few papers to present evidence of the impact of country level attributes on CGD. This study contributes to identifying the attributes that influence CGD with reference to common law and civil law emerging markets.

Analyzing the effect of using international accounting standards on the development of emerging capital markets

Purpose - The purpose of this paper is to analyze the consequences of using international accounting standards (IAS/IFRS) for the development of capital markets located in developing countries (emerging capital markets). Design/methodology/approach - The authors conduct an empirical study using a sample of 38 developing countries with capital markets, starting by comparing the means of the different measures studied before and after the use of IAS/IFRS. A multivariate statistical analysis is conducted based on the estimation of a model of panel data with fixed effects. Findings - The results show that the development of the emerging capital markets is positively and significantly associated with the use of international accounting standards. Practical implications - The papers findings are of interest to several different parties, primarily the national accounting standardization body, the IASB, many international organizations and international investors. Originality/value - The paper describes an empirical study, conducted on a group of developing countries, which provides a better understanding of the potential consequences of the use of IASB standards. The paper is also a meaningful contribution to the international accounting literature, as it examines an interesting subject that has not yet been investigated.

An Analysis of Voluntary Disclosure of Performance Indicators by Canadian Universities

Managing by performance indicators (PIs) is an important and controversial issue for many stakeholders concerned with higher education in the university systems all over the world. This study analyzes the voluntary disclosures of PIs by Canadian universities. The sample consisted of the 44 universities used by Maclean’s Canadian Universities ranking, which divide the universities into Primarily Undergraduate, Comprehensive, and Medical-Doctoral. We were able to identify 123 PIs which were regrouped in 18 categories. The top two categories were disclosures about research and finance which are not surprising since research and the financing thereof appear to be the mission of most universities. The larger universities in the Medical-Doctoral category appear to engage in a much higher level of disclosure of PIs than the Comprehensive and Primarily Undergraduate categories. According to our results, voluntary disclosure of PIs is positively affected by university size and mission. These results seem to be consistent with disclosure theories, particularly political cost theory and legitimacy theory and with previous results in the corporate sector. They are relevant to different stakeholders concerned with higher education.