Faculty News

Congratulations to Prof. Charles HSU for the paper Forthcoming at Journal of Accounting and Economics

“Non-GAAP Earnings and Stock Price Crash Risk " at Journal of Accounting and Economics, Forthcoming. (with Rencheng Wang and Benjamin Whipple)

 Abstract

We investigate whether non-GAAP earnings disclosures increase stock price crash risk. Consistent with non-GAAP disclosures allowing managers to inflate investors’ perceptions about firm performance, our results indicate that income increasing non-GAAP reporting increases crash risk. We also find that managers can use non-GAAP reporting as a substitute for earnings management to withhold bad news from investors (the traditional explanation for crashes). Finally, we find a positive association between non-GAAP reporting and the likelihood of subsequent events that can trigger a crash. Overall, our evidence is consistent with some non-GAAP disclosures exposing investors to risks of large and sudden price declines.

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Congratulations to Prof. Kevin CHEN and Prof. Tai Yuan CHEN for the paper Forthcoming at Journal of Accounting Research

“Auditors under Fire: The Association between Audit Errors and the Career Setbacks of Individual Auditors.” at Journal of Accounting Research, Forthcoming. (with W.F. Han and H. Yuan)

Abstract

This paper examines whether and how individual auditors are disciplined for audit errors.  Taking advantage of the long history of auditor identity data from China, we find that signing auditors with client restatements are likely to lose the privilege of signing the audit reports of public clients.  However, auditors can avoid this consequence by issuing a modified audit opinion to warn of the potential misstatement.  We show that auditors are more likely to be disciplined when their firms operate in less concentrated audit markets.  Finally, we find positive outcomes from the disciplinary action of the audit firms.  Firms that discipline their auditors for restatements have a larger decrease in the rate of client restatements and a larger increase in market share, compared to nondisciplining firms.  Their clients have a higher earnings response coefficient after the disciplinary action. In summary, our results suggest that individual auditors in China can face career setbacks when they produce poor quality audits.

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Congratulations to Prof. Charles HSU for the paper Forthcoming at Journal of Business Finance & Accounting

"Does Product Similarity of Audit Clients Influence Audit Efficiency and Pricing Decisions?" Journal of Business Finance & Accounting, Forthcoming (with Hsihui Chang and Zhiming Ma)

Abstract

We examine how client product similarity within an auditor’s portfolio affects audit efficiency and pricing decisions.  Using a unique set of intra-portfolio client-level data, we find that clients with product offerings more similar to those of other clients in the auditor’s portfolio are charged lower audit fees and experience a shorter audit reporting lag, suggesting that product similarity contributes to audit efficiency.  In a cross-sectional analysis, we also find that the effect of product similarity on fee reduction is greater when knowledge transfer across clients is more useful in improving audit efficiency.  Finally, we find that industry specialists reduce fee premiums for clients whose products are more similar to those of other clients in their portfolios, consistent with the conjecture that client product similarity helps specialists build up their market positions while improving their audit efficiency. 

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Congratulations to Prof. Tai-Yuan CHEN and Prof. Ming Yi HUNG for the paper Forthcoming at Journal of International Business Studies

“Uneven Regulatory Playing Field and Bank Transparency Abroad” at Journal of International Business Studies, Forthcoming. (with Y.C. Chen)

Abstract

Restrictive home-country regulations lead to degraded transparency abroad and exert negative externalities on the global banking system.  Our finding that the negative externalities primarily exist in countries with weak supervisory power highlights the importance of bank supervision when regulators consider using lax regulations to attract foreign capital.  Tighter home-country regulations reduce the transparency of banks’ foreign subsidiaries.  Our result highlights the importance of monitoring the disclosure practices among banks’ foreign subsidiaries.

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Congratulations to Dr. Kelvin P. MAK has been elected as a Council Member of the Taxation Institute of Hong Kong

Dr. Kelvin P. MAK has been elected as a Council Member of The Taxation Institute of Hong Kong for one year, starting September 2021.  The Taxation Institute of Hong Kong is a professional body that has been established since 1972.  It is committed to represent its members in the tax profession through the advancement of tax knowledge and advocacy.  At present, the Institute has around 3000 members who are licensed “Chartered Tax Adviser” practitioners.

Congratulations to Prof. Charles HSU for the paper Forthcoming at Journal of Financial and Quantitative Analysis

"Does Industry Competition Influence Analyst-level Coverage Decisions and Career Outcomes?" Journal of Financial and Quantitative Analysis, Forthcoming (with Xi Li, Zhiming Ma and Gordon Phillips)

Abstract

We analyze whether industry competition influences analyst coverage decisions and whether analysts benefit from covering product market competitors.  We find that analysts are more likely to cover a firm when this firm competes with more firms already covered by the analyst.  We also find that the intensity of competition among these competitors is additionally important to the coverage decision.  Moreover, we find that analysts who cover product market competitors are more likely to obtain analyst star status.  These results are consistent with the importance to analysts of industry competition and product market knowledge accumulated through covering product market competitors.

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Dr. Steven CHEUNG joined the Department of Accounting on 2 July 2021

Congratulations to Prof. Haifeng YOU promoted to Professor on 1 July 2021

Congratulations to Dr. Kelvin P. MAK has been appointed as a committee member of Qualification and Examinations Board (“QEB”) of the Hong Kong Institute of Certified Public Accountants

Dr. Kelvin P. MAK has been appointed as a committee member of Qualification and Examinations Board (“QEB”) of the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for one year, beginning January 2021.  The QEB is one of the statutory boards of the HKICPA.  As an advisory board, the QEB is delegated with the authority to conduct and control the professional examinations of the HKICPA and approve the appointment and remuneration of examiners.