The de facto independence of regulatory agencies and its consequences for policy making and regulatory outcomes

This dissertation focuses on the practice of regulatory governance, throughout the study of the functioning of formally independent regulatory agencies (IRAs), with special attention to their de facto independence. The research goals are grounded on a "neo-positivist" (or "reconstructed positivist") position (Hawkesworth 1992; Radaelli 2000b; Sabatier 2000). This perspective starts from the ontological assumption that even if subjective perceptions are constitutive elements of political phenomena, a real world exists beyond any social construction and can, however imperfectly, become the object of scientific inquiry. Epistemologically, it follows that hypothetical-deductive theories with explanatory aims can be tested by employing a proper methodology and set of analytical techniques. It is thus possible to make scientific inferences and general conclusions to a certain extent, according to a Bayesian conception of knowledge, in order to update the prior scientific beliefs in the truth of the related hypotheses (Howson 1998), while acknowledging the fact that the conditions of truth are at least partially subjective and historically determined (Foucault 1988; Kuhn 1970). At the same time, a sceptical position is adopted towards the supposed disjunction between facts and values and the possibility of discovering abstract universal laws in social science. It has been observed that the current version of capitalism corresponds to the golden age of regulation, and that since the 1980s no government activity in OECD countries has grown faster than regulatory functions (Jacobs 1999). Following an apparent paradox, the ongoing dynamics of liberalisation, privatisation, decartelisation, internationalisation, and regional integration hardly led to the crumbling of the state, but instead promoted a wave of regulatory growth in the face of new risks and new opportunities (Vogel 1996). Accordingly, a new order of regulatory capitalism is rising, implying a new division of labour between state and society and entailing the expansion and intensification of regulation (Levi-Faur 2005). The previous order, relying on public ownership and public intervention and/or on sectoral self-regulation by private actors, is being replaced by a more formalised, expert-based, open, and independently regulated model of governance. Independent regulation agencies (IRAs), that is, formally independent administrative agencies with regulatory powers that benefit from public authority delegated from political decision makers, represent the main institutional feature of regulatory governance (Gilardi 2008). IRAs constitute a relatively new technology of regulation in western Europe, at least for certain domains, but they are increasingly widespread across countries and sectors. For instance, independent regulators have been set up for regulating very diverse issues, such as general competition, banking and finance, telecommunications, civil aviation, railway services, food safety, the pharmaceutical industry, electricity, environmental protection, and personal data privacy. Two attributes of IRAs deserve a special mention. On the one hand, they are formally separated from democratic institutions and elected politicians, thus raising normative and empirical concerns about their accountability and legitimacy. On the other hand, some hard questions about their role as political actors are still unaddressed, though, together with regulatory competencies, IRAs often accumulate executive, (quasi-)legislative, and adjudicatory functions, as well as about their performance.

The impact of social relationships on the maintenance of independence in advanced old age: findings of a Swiss Longitudinal Study .

The impact of social relationships on the maintenance of independence over periods of 12-18 months in a group of 306 octogenarians is assessed in this study. The study is based on the results of the Swilsoo (Swiss Interdisciplinary Longitudinal Study on the Oldest Old). Participants (80-84 years old at baseline) were interviewed five times between 1994 and 1999. Independence was defined as the capacity to perform without assistance eight activities of daily living. We distinguished in our analyses kinship and friendship networks and evaluated social relationships with the help of a series of variables serving as indicators of network composition and contact frequency. Logistic regression models were used to identify the short-term effects of social relationships on independence, after controlling for sociodemographic and health-related variables; independence at a given wave of interviews was interpreted in the light of social factors measured at the previous wave. Our analyses indicate that the existence of a close friend has a significant impact on the maintenance of independence (OR=1.58, p<0.05), which is not the case with the other variables concerning network composition. Kinship contacts were also observed to have a positive impact on independence (OR=1.12, p<0.01).

The Formal Independence of Regulators: A Comparison of 17 Countries and 7 Sectors

This article seeks to explain the pattern of delegation to independent regulatory agencies in Western Europe. Two types of arguments are advanced to explain variations in the formal independence of regulators. Firstly, the need for governments to increase their credible commitment capacity may lead them to delegate regulation to an agency that is partly beyond their direct control. Secondly, delegation may be a response to the political uncertainty problem, which arises when governments are afraid of being replaced by another coalition with different preferences, which could decide to change existing policy choices. In addition, veto players may constitute a functional equivalent of delegation, since they influence policy stability and therefore tend to mitigate both the credibility and the political uncertainty problems. These arguments are consistent with the results of the empirical analysis of the formal independence of regulators in seventeen countries and seven sectors.

Development and validation of a self-report version of the Spinal Cord Independence Measure (SCIM III).

Study design:Cross-sectional validation study.Objectives:To develop and validate a self-report version of the Spinal Cord Independence Measure (SCIM III).Setting:Two SCI rehabilitation facilities in Switzerland.Methods:SCIM III comprises 19 questions on daily tasks with a total score between 0 and 100 and subscales for 'self-care', 'respiration & sphincter management' and 'mobility'. A self-report version (SCIM-SR) was developed by expert discussions and pretests in individuals with spinal cord injury (SCI) using a German translation. A convenience sample of 99 inpatients with SCI was recruited. SCIM-SR data were analyzed together with SCIM III data obtained from attending health professionals.Results:High correlations between SCIM III and SCIM-SR were observed. Pearson's r for the total score was 0.87 (95% confidence interval (CI) 0.82-0.91), for the subscales self-care 0.87 (0.81-0.91); respiration & sphincter management 0.81 (0.73-0.87); and mobility 0.87 (0.82-0.91). Intraclass correlations were: total score 0.90 (95% CI 0.85-0.93); self-care 0.86 (0.79-0.90); respiration & sphincter management 0.80 (0.71-0.86); and mobility 0.83 (0.76-0.89). Bland-Altman plots showed that patients rated their functioning higher than professionals, in particular for mobility. The mean difference between SCIM-SR and SCIM III for the total score was 5.14 (point estimate 95% CI 2.95-7.34), self-care 0.89 (0.19-1.59), respiration & sphincter management 1.05 (0.18-2.28 ) and mobility 3.49 (2.44-4.54). Particularly patients readmitted because of pressure sores rated their independence higher than attending professionals.Conclusion:Our results support the criterion validity of SCIM-SR. The self-report version may facilitate long-term evaluations of independence in persons with SCI in their home situation.

Functional independence within the self-memory system: new insights from two cases of developmental amnesia.

Neuropsychological and neuroimaging data suggest that the self-memory system can be fractionated into three functionally independent systems processing personal information at several levels of abstraction, including episodic memories of one's life (episodic autobiographical memory, EAM), semantic knowledge of facts about one's life (semantic autobiographical memory, SAM), and semantic knowledge of one's personality [conceptual self, (CS)]. Through the study of two developmental amnesic patients suffering of neonatal brain injuries, we explored how the different facets of the self-memory system develop when growing up with bilateral hippocampal atrophy. Neuropsychological evaluations showed that both of them suffered from dramatic episodic learning disability with no sense of recollection (Remember/Know procedure), whereas their semantic abilities differed, being completely preserved (Valentine) or not (Jocelyn). Magnetic resonance imaging, including quantitative volumetric measurements of the hippocampus and adjacent (entorhinal, perirhinal, and temporopolar) cortex, showed severe bilateral atrophy of the hippocampus in both patients, with additional atrophy of adjacent cortex in Jocelyn. Exploration of EAM and SAM according to lifetime periods covering the entire lifespan (TEMPAu task, Piolino et al., 2009) showed that both patients had marked impairments in EAM, as they lacked specificity, details and sense of recollection, whereas SAM was completely normal in Valentine, but impaired in Jocelyn. Finally, measures of patients' CS (Tennessee Self-Concept Scale, Fitts and Warren, 1996), checked by their mothers, were generally within normal range, but both patients showed a more positive self-concept than healthy controls. These two new cases support a modular account of the medial-temporal lobe with episodic memory and recollection depending on the hippocampus, and semantic memory and familiarity on adjacent cortices. Furthermore, they highlight developmental episodic and semantic functional independence within the self-memory system suggesting that SAM and CS may be acquired without episodic memories.

Effective corporate governance : experimental evidence on international auditors'judgments and the contribution of financial accounting education

1 Summary This dissertation deals with two major aspects of corporate governance that grew in importance during the last years: the internal audit function and financial accounting education. In three essays, I contribute to research on these topics which are embedded in the broader corporate governance literature. The first two essays consist of experimental investigations of internal auditors' judgments. They deal with two research issues for which accounting research lacks evidence: The effectiveness of internal controls and the potentially conflicting role of the internal audit function between management and the audit committee. The findings of the first two essays contribute to the literature on internal auditors' judgment and the role of the internal audit function as a major cornerstone of corporate governance. The third essay theoretically examines a broader issue but also relates to the overall research question of this dissertation: What contributes to effective corporate governance? This last essay takes the perspective that the root for quality corporate governance is appropriate financial accounting education. r develop a public interest approach to accounting education that contributes to the literature on adequate accounting education with respect to corporate governance and accounting harmonization. The increasing importance of both the internal audit function and accounting education for corporate governance can be explained by the same recent fundamental changes that still affect accounting research and practice. First, the Sarbanes-Oxley Act of 2002 (SOX, 2002) and the 8th EU Directive (EU, 2006) have led to a bigger role for the internal audit function in corporate governance. Their implications regarding the implementation of audit committees and their oversight over internal controls are extensive. As a consequence, the internal audit function has become increasingly important for corporate governance and serves a new master (i.e. the audit committee) within the company in addition to management. Second, the SOX (2002) and the 8th EU Directive introduced additional internal control mechanisms that are expected to contribute to the reliability of financial information. As a consequence, the internal audit function is expected to contribute to a greater extent to the reliability of financial statements. Therefore, effective internal control mechanisms that strengthen objective judgments and independence become important. This is especially true when external- auditors rely on the work of internal auditors in the context of the International Standard on Auditing (ISA) 610 and the equivalent US Statement on Auditing Standards (SAS) 65 (see IFAC, 2009 and AICPA, 1990). Third, the harmonization of international reporting standards is increasingly promoted by means of a principles-based approach. It is the leading approach since a study of the SEC (2003) that was required by the SOX (2002) in section 108(d) was in favor of this approach. As a result, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) commit themselves to the development of compatible accounting standards based on a principles-based approach. Moreover, since the Norwalk Agreement of 2002, the two standard setters have developed exposure drafts for a common conceptual framework that will be the basis for accounting harmonization. The new .framework will be in favor of fair value measurement and accounting for real-world economic phenomena. These changes in terms of standard setting lead to a trend towards more professional judgment in the accounting process. They affect internal and external auditors, accountants, and managers in general. As a consequence, a new competency set for preparers and users of financial statements is required. The basil for this new competency set is adequate accounting education (Schipper, 2003). These three issues which affect corporate governance are the initial point of this dissertation and constitute its motivation. Two broad questions motivated a scientific examination in three essays: 1) What are major aspects to be examined regarding the new role of the internal audit function? 2) How should major changes in standard setting affect financial accounting education? The first question became apparent due to two published literature reviews by Gramling et al. (2004) and Cohen, Krishnamoorthy & Wright (2004). These studies raise various questions for future research that are still relevant and which motivate the first two essays of my dissertation. In the first essay, I focus on the role of the internal audit function as one cornerstone of corporate governance and its potentially conflicting role of serving both management and the audit committee (IIA, 2003). In an experimental study, I provide evidence on the challenges for internal auditors in their role as servant for two masters -the audit committee and management -and how this influences internal auditors' judgment (Gramling et al. 2004; Cohen, Krishnamoorthy & Wright, 2004). I ask if there is an expectation gap between what internal auditors should provide for corporate governance in theory compared to what internal auditors are able to provide in practice. In particular, I focus on the effect of serving two masters on the internal auditor's independence. I argue that independence is hardly achievable if the internal audit function serves two masters with conflicting priorities. The second essay provides evidence on the effectiveness of accountability as an internal control mechanism. In general, internal control mechanisms based on accountability were enforced by the SOX (2002) and the 8th EU Directive. Subsequently, many companies introduced sub-certification processes that should contribute to an objective judgment process. Thus, these mechanisms are important to strengthen the reliability of financial statements. Based on a need for evidence on the effectiveness of internal control mechanisms (Brennan & Solomon, 2008; Gramling et al. 2004; Cohen, Krishnamoorthy & Wright, 2004; Solomon & Trotman, 2003), I designed an experiment to examine the joint effect of accountability and obedience pressure in an internal audit setting. I argue that obedience pressure potentially can lead to a negative influence on accountants' objectivity (e.g. DeZoort & Lord, 1997) whereas accountability can mitigate this negative effect. My second main research question - How should major changes in standard setting affect financial accounting education? - is investigated in the third essay. It is motivated by the observation during my PhD that many conferences deal with the topic of accounting education but very little is published about what needs to be done. Moreover, the Endings in the first two essays of this thesis and their literature review suggest that financial accounting education can contribute significantly to quality corporate governance as argued elsewhere (Schipper, 2003; Boyce, 2004; Ghoshal, 2005). In the third essay of this thesis, I therefore focus on approaches to financial accounting education that account for the changes in standard setting and also contribute to corporate governance and accounting harmonization. I argue that the competency set that is required in practice changes due to major changes in standard setting. As the major contribution of the third article, I develop a public interest approach for financial accounting education. The major findings of this dissertation can be summarized as follows. The first essay provides evidence to an important research question raised by Gramling et al. (2004, p. 240): "If the audit committee and management have different visions for the corporate governance role of the IAF, which vision will dominate?" According to the results of the first essay, internal auditors do follow the priorities of either management or the audit committee based on the guidance provided by the Chief Audit executive. The study's results question whether the independence of the internal audit function is actually achievable. My findings contribute to research on internal auditors' judgment and the internal audit function's independence in the broader frame of corporate governance. The results are also important for practice because independence is a major justification for a positive contribution of the internal audit function to corporate governance. The major findings of the second essay indicate that the duty to sign work results - a means of holding people accountable -mitigates the negative effect of obedience pressure on reliability. Hence, I found evidence that control .mechanisms relying on certifications may enhance the reliability of financial information. These findings contribute to the literature on the effectiveness of internal control mechanisms. They are also important in the light of sub-certification processes that resulted from the Sarbanes-Oxley Act and the 8th EU Directive. The third essay contributes to the literature by developing a measurement framework that accounts for the consequences of major trends in standard setting. Moreovér, it shows how these trends affect the required .competency set of people dealing with accounting issues. Based on this work, my main contribution is the development of a public interest approach for the design of adequate financial accounting curricula. 2 Serving two masters: Experimental evidence on the independence of internal auditors Abstract Twenty nine internal auditors participated in a study that examines the independence of internal auditors in their potentially competing roles of serving two masters: the audit committee and management. Our main hypothesis suggests that internal auditors' independence is not achievable in an institutional setting in which internal auditors are accountable to two different parties with potentially differing priorities. We test our hypothesis in an experiment in which the treatment consisted of two different instructions of the Chief audit executive; one stressing the priority of management (cost reduction) and one stressing the priority of the audit committee (effectiveness). Internal auditors had to evaluate internal controls and their inherent costs of different processes which varied in their degree of task complexity. Our main results indicate that internal auditors' evaluation of the processes is significantly different when task complexity is high. Our findings suggest that internal auditors do follow the priorities of either management or the audit committee depending on the instructions of a superior internal auditor. The study's results question whether the independence of the internal audit function is actually achievable. With our findings, we contribute to research on internal auditors' judgment and the internal audit function's independence in the frame of corporate governance.

External Validation of the Prestroke Independence, Sex, Age, National Institutes of Health Stroke Scale (ISAN) Score for Predicting Stroke-Associated Pneumonia in the Athens Stroke Registry.

BACKGROUND AND PURPOSE: The Prestroke Independence, Sex, Age, National Institutes of Health Stroke Scale (ISAN) score was developed recently for predicting stroke-associated pneumonia (SAP), one of the most common complications after stroke. The aim of the present study was to externally validate the ISAN score. METHODS: Data included in the Athens Stroke Registry between June 1992 and December 2011 were used for this analysis. Inclusion criteria were the availability of all ISAN score variables (prestroke independence, sex, age, National Institutes of Health Stroke Scale score). Receiver operating characteristic curves and linear regression analyses were used to determine the discriminatory power of the score and to assess the correlation between actual and predicted pneumonia in the study population. Separate analyses were performed for patients with acute ischemic stroke (AIS) and intracerebral hemorrhage (ICH). RESULTS: The analysis included 3204 patients (AIS: 2732, ICH: 472). The ISAN score demonstrated excellent discrimination in patients with AIS (area under the curve [AUC]: .83 [95% confidence interval {CI}: .81-.85]). In the ICH group, the score was less effective (AUC: .69 [95% CI: .63-.74]). Higher-risk groups of ISAN score were associated with an increased relative risk of SAP; risk increase was more prominent in the AIS population. Predicted pneumonia correlated very well with actual pneumonia (AIS group: R(2) = .885; β-coefficient = .941, P < .001; ICH group: R(2) = .880, β-coefficient = .938, P < .001). CONCLUSIONS: In our external validation in the Athens Stroke Registry cohort, the ISAN score predicted SAP very accurately in AIS patients and demonstrated good discriminatory power in the ICH group. Further validation and assessment of clinical usefulness would strengthen the score's utility further.