Rudolph A. Jacob

An Examination of the Determinants and Contents of Corporate Voluntary Disclosure of Management's Responsibilities for Financial Reporting

The Sarbanes-Oxley Act (SOX) of 2002 requires principal officers to certify under oath to the veracity of information contained in Securities and Exchange Commission (SEC) filings and opine on the effectiveness of the internal control system. This study examines the determinants and contents of corporate voluntary disclosure of managements responsibilities during the five-year period preceding the SOX Act. We predict that the voluntary disclosure of managements responsibilities for financial information signals certain incentives and characteristics of the reporting firm that are relevant to financial statement users and regulators. Consistent with our predictions, our findings reveal significant differences between issuing and nonissuing firms as to the effectiveness of the firms internal control system, access to capital markets, audit committee characteristics, and ownership structure. An empirical analysis of the contents of these assertions also reveals different areas of emphasis and selectivity by management, which represents an informative link to existing disclosure mandates. The results of this study contribute to our knowledge of managements motivations for voluntary disclosure and lend credence to the mandatory certification requirements and related disclosure reforms established in the post-Enron era.

The valuation effects of embedded value disclosure by life insurers

Many life insurance companies outside the US disclose embedded value (EV), an actuarial estimate of the present value of the future net cash flows arising from the companys in-force life insurance business. Industry surveys have shown that EV is used by analysts for valuation purposes. However, there is little empirical research of EV disclosures. This study fills that void by testing the valuation relevance, information content and reduction in information asymmetry associated with the reporting of EV. We provide evidence supporting the premise that the market prefers EV to traditional accounting metrics in assessing security prices. This study advances our understanding of the valuation effects of corporate voluntary disclosures, and should be of interest to financial reporting standard setters such as the IASB and the FASB who are currently working on harmonizing financial reporting in the insurance industry.

The Internet and global cultural transformation

In this article, we discuss the role of the internet in cultural changes and transformation. The traditional view is that inherent cultures affect business operations so corporations must be cognizant of the prevalent cultures in their operating environments. Frequently, failures of multinational corporations in new environments are often blamed on corporate lack of knowledge and understanding of these prevalent cultures. While this may still be true in today’s environment, the influence of technology, particularly the internet in the 21st century, has been so significant that the world may be approaching a “unification of cultures”. Thus, this paper argues that the internet will lead to a global cultural transformation that will enhance global business operations by removing cultural barriers that lead to sub‐optimal business operations.

Multiple perspectives and cognitive mapping to technology transfer decisions

Abstract Multiple perspectives are used to analyse the technology transfer process. The use of multiple perspectives eschews the problems one encounters in using purely technical or ‘rational’ models, such as management science/operational research techniques in solving sociotechnical problems. Emphasis is placed on technology transfer to LDCs where previous rational techniques have not been successful. By using two case studies, one focusing on the development of agricultural v oil technology, and the other focusing on the transfer of production technology, it is shown how the use of multiple perspectives allows the consideration of the technical, organizational and personal perspectives in the technology transfer decision-making process, thus enhancing and facilitating the process.

Evolution of financial reporting of life insurers: The predominance of unregulated embedded value disclosure

Purpose - This paper examines the capital market effects and predominance of unregulated embedded value (EV) financial reporting in the life insurance industry in foreign domestic markets, and US markets for foreign firms that cross-list in the US. Design/methodology/approach - Recent empirical archival data is analyzed and evaluated to determine the incremental and relative value relevance of an unregulated valuation metric that is disclosed by life insurers. Findings - Our findings support the proposition that embedded value is valuable supplemental information in foreign domestic markets, as well as US markets for foreign life insurers that cross-list in the US. Given that IASB and the FASB are engaged in projects to improve accounting standard for insurance companies, and have faced criticism with the existing drafts on this issue, the two institutions ought to consider the valuation relevance of EV disclosures. Moreover, our analysis strongly suggests that financial analysts in the US should consider EV in valuing life insurers’ stocks. Practical implications - The findings discussed in this paper are of special interest to financial reporting policy makers, financial analysts, firm compensation committees and managers, and academics. Originality/value - We contribute to the extant literature by providing recent evidence that suggests that embedded value, an unregulated fair value market driven metric, is more value relevant than traditional earnings metrics such as earnings and book value. It’s the only study that we are cognizant of that critically examines the recent empirical literature on this evolving issue.

Compliance and determinants of US-listed foreign firms’ 20-F filings under the new Securities and Exchange Commission accelerated deadline

Purpose - – The purpose of this paper is to investigate the impact of the US Securities and Exchange Commission (SEC) accelerated deadline on foreign firms, and the 20-F filing practices and factors relating to the filing lags. Design/methodology/approach - – The authors identified 338 firms that file 20-F reports with the SEC during the period of 2010 and 2011. The authors then used multivariate regressions to examine the effects of the shortened deadline on foreign firms’ filing practices and the factors associated with these practices. In the regression models, the authors also control for other firm characteristics that have shown to affect the filing lags of US firms such as firm performance, size, mergers and restructures, audit firm, compliance with internal control requirements under Sarbanes Oxley Act, internal control weaknesses, going concern audit opinion and operating complexity. Findings - – Based on a sample of 338 US-listed foreign firms, the results indicate that there is a significant reduction in the filing lags and a change in their distribution for fiscal year 2011, as compared to the preceding year, and as intended by the SEC. The authors also find that 20-F filing lags are negatively related to the use of International Financial Reporting Standards (IFRS) or US-GAAP in 20-F reports and use of the English language in foreign firms’ home countries. Practical implications - – The findings of this paper are of interest to accounting regulatory bodies including the SEC, US Financial Accounting Standards Board and the International Accounting Standards Board by showing that registrants respond positively to regulations intending to promote timeliness of accounting disclosures and reporting, although many firms may oppose them in the due process stage. Originality/value - – The authors contribute to the extant literature by providing new evidence that 20-F filing lags are negatively related to the use of IFRS or US-GAAP in 20-F reports, and the use of English language in foreign firms’ home countries.