Internal control weakness and accounting conservatism in China

Purpose: The purpose of this study is to investigate the impact of internal control weaknesses on accounting conservatism in Chinese listed firms. It also investigates the relationship between the demand for external audit and accounting conservatism, and whether additional assurance of internal control reports (ICRs) can mitigate the negative impact of ICWs on accounting conservatism.

Design/methodology/approach: An empirical research approach is taken through the use of ordinary least squares (OLS) models and hand-collected internal control weakness data from ICRs released by Chinese listed firms.

Findings: The results of this paper show that the existence of ICWs has a negative effect on accounting conservatism in China. Further, the results demonstrate that both accounting-related and non-accounting-related ICWs affect accounting conservatism. The authors also find that there is a complementary relationship between accounting conservatism and the demand for additional assurance of ICRs, and additional assurance of ICRs can mitigate the negative impact of ICWs on accounting conservatism.

Practical Implications: This study provides timely evidence to Chinese regulators of the possible economic consequences of the official implementation of internal control standard in China from 2012. The findings of this paper can also benefit regulators around the world and, in particular, the regulators in emerging markets that are considering implement regulations similar to the US SOX.

Originality/value: The paper demonstrates that a wider scope of ICWs, including non-accounting-related ICWs, also has a significant impact on accounting conservatism. Therefore, this research provides a more general evidence on the relationship between internal control quality and accounting conservatism.

Differences in underpricing of A-REIT IPOs and Australian property company IPOs

Purpose – A variety of papers have analyzed the underpricing of REIT IPOs or property company IPOs. The purpose of this paper is to compare the two sectors and examines differences in the underpricing of the two types of IPOs. Design/methodology/approach – An OLS regression is used to identify factors influencing the underpricing of A-REIT and property company IPOs from 1994 until 2014. Findings – This study finds that A-REIT IPOs have a significantly lower underpricing on average than Australian property company IPOs. The time taken to list appears to influence the underpricing of both A-REIT IPOs and property company IPOs, in that issues that are filled more quickly have higher underpricing but with the magnitude of the impact being less for A-REITs. The sentiment toward the stock market also appears to impact on the underpricing of A-REIT and property company IPOs again with the magnitude of the impact being less for A-REITs. Practical implications – The paper provides information to new A-REIT and property company issuers, underwriters and investors. Originality/value – The study is the first to compare and examine the differences in the underpricing of both REITs and property companies in the one country over the same time period.

On the estimation and testing of predictive panel regressions

Hjalmarsson (2010) considers an OLS-based estimator of predictive panel regressions that is argued to be mixed normal under very general conditions. In a recent paper, Westerlund et al. (2016) show that while consistent, the estimator is generally not mixed normal, which invalidates standard normal and chi-squared inference. The purpose of the present paper is to study the consequences of this theoretical result in small samples, which is done using both simulated and real data.

Examining health literacy disparities in the United States: a third look at the National Assessment of Adult Literacy (NAAL)

BACKGROUND: In the United States, disparities in health literacy parallel disparities in health outcomes. Our research contributes to how diverse indicators of social inequalities (i.e., objective social class, relational social class, and social resources) contribute to understanding disparities in health literacy.

METHODS: We analyze data on respondents 18 years of age and older (N = 14,592) from the 2003 National Assessment of Adult Literacy (NAAL) restricted access data set. A series of weighted Ordinary Least Squares (OLS) regression models estimate the association between respondent's demographic characteristics, socioeconomic status (SES), relational social class, social resources and an Item Response Theory (IRT) based health literacy measure.

RESULTS: Our findings are consistent with previous research on the social and SES determinants of health literacy. However, our findings reveal the importance of relational social status for understanding health literacy disparities in the United States. Objective indicators of social status are persistent and robust indicators of health literacy. Measures of relational social status such as civic engagement (i.e., voting, volunteering, and library use) are associated with higher health literacy levels net of objective resources. Social resources including speaking English and marital status are associated with higher health literacy levels.

CONCLUSIONS: Relational indicators of social class are related to health literacy independent of objective social class indicators. Civic literacy (e.g., voting and volunteering) are predictors of health literacy and offer opportunities for health intervention. Our findings support the notion that health literacy is a social construct and suggest the need to develop a theoretically driven conceptual definition of health literacy that includes a civic literacy component.