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External Monitoring (external + monitoring)
Selected AbstractsThe Association between External Monitoring and Earnings Management in the Property-Casualty Insurance IndustryJOURNAL OF ACCOUNTING RESEARCH, Issue 2 2001Jennifer J. Gaver This paper examines the association between external monitoring and earnings management by property-casualty insurers. We extend previous work by Petroni and Beasley (1996) by expanding the set of external monitors to include both auditors and actuaries. We investigate whether certain auditor-actuary pairs are associated with less understatement of the loss reserve account by financially struggling insurers. Our data consist of loss adjustments reported by 465 property-casualty insurers for reserves established in 1993. The results indicate that under-reserving by weak insurers is essentially eliminated when the firm uses auditors and actuaries that are both from Big Six accounting firms. In contrast, non-Big Six actuaries have less impact on under-reserving by weak insurers. Our results suggest that the quality usually associated with Big Six auditors falls when the audit firm relies on third party actuaries to evaluate the loss reserve estimates of struggling insurance clients. We conjecture that Big Six actuaries insist on more conservative loss reserve levels because, compared to actuarial consulting firms, they are more attuned to the liability exposure of the auditor. [source] The Role of Managerial Stock Option Programs in Governance: Evidence from REIT Stock RepurchasesREAL ESTATE ECONOMICS, Issue 1 2010Chinmoy Ghosh This article examines the role of stock option programs and executive holdings of stock options in real estate investment trust (REIT) governance. We study the issue by analyzing how the market reaction to a stock repurchase announcement varies as a function of the individual REIT's governance structure. In particular, we examine how executive and employee stock option holdings influence the market reaction to a firm's announcement of a stock repurchase. Using a sample of REIT repurchase announcements, we find that the market reacts more favorably to announcements by firms where executives have larger option holdings and the chief executive officer is not entrenched. Our results with respect to the roles of stock option holdings of executives and nonexecutives differ from those reported for a cross-section of non-REIT firms. While we find evidence supporting the importance of executive stock options in aligning the incentives of management and reinforcing the positive signaling associated with a repurchase announcement, we find little evidence that the market views REIT repurchases as being used primarily to fund option exercise. We attribute these findings to greater dependence by REIT investors on internal governance mechanisms (such as stock option programs) as a result of regulatory restrictions that limit external monitoring such as hostile takeovers. [source] CEO Power and Firm Performance: A Test of the Life-Cycle Theory,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 1 2009Maretno A. Harjoto Abstract We examine the effects of corporate governance and monitoring mechanisms on the choice of board leadership structure and the value and performance of a firm according to the firm's life-cycle changes. Employing a large and extensive sample during the 1995,2005 period, we find that the board leadership choice is associated with governance characteristics including board independence, managerial entrenchment, and CEO abilities measured by CEO age and CEO tenure after controlling for various firm characteristics. In addition, after correcting for the endogenous treatment effect, our results show that while CEO dualities-i.e., CEO-chair of the board or CEO-nomination committee member , or CEO pluralities-i.e., CEO-chair of the board, and a chair or a member of the nomination committee-positively influences firm value and performance in firm's early stage, CEO duality or CEO pluralities adversely influences firm value and operating performance in firm's late stage. These results are supportive of the life-cycle theory, suggesting that CEO power concentration is beneficial in firms' early stage, but harmful in firm's late stage at which firms require check-and-balance as opposed to dictatorship. In addition, the impact of external monitoring by institutional ownership on firm value and performance is more effective than those of independent board and blockholders' ownership while the impact of Sarbane-Oxley Act on firm performance is not significant. [source] | ||||||||||