Pornsit Jiraporn, assistant professor of finance at Penn State Great Valley graduate school, in suburban Philadelphia, said it's hard to say exactly why this was the case. Could it be that Arthur Anderson was inferior to the other "Big Six" accounting firms—as some prior research has concluded—and thus less likely to catch auditing errors or "fudged" financial statements, was there perhaps something more complicit at work, or neither?
"For some reason, Arthur Anderson attracted companies with weak shareholder rights," he said. "There's been a question in the accounting world of whether the Houston office and the Enron fiasco brought the company down, or whether there were company-wide problems that spread throughout the organization. Based on this study, I think the whole system at Arthur Anderson was faulty."
Jiraporn published his findings in the article "Shareholder Rights, Corporate Governance, and Arthur Anderson," in the fall/winter issue of Journal of Applied Finance,
In the study, the Penn State researcher employed the Governance Index, which measures the restrictions placed on shareholder rights, to rate more than 1,000 companies. It is widely accepted that companies that score high on the GI place greater power in the hands of management, often to the detriment of shareholder return.
When shareholders have greater rights, this signals a stronger link between ownership and control, and typically leads to better return on their investment. The corporate clients of Arthur Anderson tended to score higher on this index than those of the other "Big Six" accounting firms.
This correlation between weak shareholder rights and employing Arthur Anderson was not present in regulated firms, according to the study.
"I argue that this is because regulatory monitoring substitutes for external auditing and, hence, influences the association between shareholder rights and auditor choice," said Jiraporn.
David Jwanier | EurekAlert!
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik
More and more automobile companies are focusing on body parts made of carbon fiber reinforced plastics (CFRP). However, manufacturing and repair costs must be further reduced in order to make CFRP more economical in use. Together with the Volkswagen AG and five other partners in the project HolQueSt 3D, the Laser Zentrum Hannover e.V. (LZH) has developed laser processes for the automatic trimming, drilling and repair of three-dimensional components.
Automated manufacturing processes are the basis for ultimately establishing the series production of CFRP components. In the project HolQueSt 3D, the LZH has...
Reflecting the structure of composites found in nature and the ancient world, researchers at the University of Illinois at Urbana-Champaign have synthesized thin carbon nanotube (CNT) textiles that exhibit both high electrical conductivity and a level of toughness that is about fifty times higher than copper films, currently used in electronics.
"The structural robustness of thin metal films has significant importance for the reliable operation of smart skin and flexible electronics including...
The nearby, giant radio galaxy M87 hosts a supermassive black hole (BH) and is well-known for its bright jet dominating the spectrum over ten orders of magnitude in frequency. Due to its proximity, jet prominence, and the large black hole mass, M87 is the best laboratory for investigating the formation, acceleration, and collimation of relativistic jets. A research team led by Silke Britzen from the Max Planck Institute for Radio Astronomy in Bonn, Germany, has found strong indication for turbulent processes connecting the accretion disk and the jet of that galaxy providing insights into the longstanding problem of the origin of astrophysical jets.
Supermassive black holes form some of the most enigmatic phenomena in astrophysics. Their enormous energy output is supposed to be generated by the...
The probability to find a certain number of photons inside a laser pulse usually corresponds to a classical distribution of independent events, the so-called...
Microprocessors based on atomically thin materials hold the promise of the evolution of traditional processors as well as new applications in the field of flexible electronics. Now, a TU Wien research team led by Thomas Müller has made a breakthrough in this field as part of an ongoing research project.
Two-dimensional materials, or 2D materials for short, are extremely versatile, although – or often more precisely because – they are made up of just one or a...
20.04.2017 | Event News
18.04.2017 | Event News
03.04.2017 | Event News
27.04.2017 | Life Sciences
27.04.2017 | Physics and Astronomy
27.04.2017 | Earth Sciences