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!
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
University of Maryland researchers contribute to historic detection of gravitational waves and light created by event
On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...
Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.
Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....
Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).
When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...
Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.
How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...
Scientists from the Max Planck Institute of Quantum Optics, using high precision laser spectroscopy of atomic hydrogen, confirm the surprisingly small value of the proton radius determined from muonic hydrogen.
It was one of the breakthroughs of the year 2010: Laser spectroscopy of muonic hydrogen resulted in a value for the proton charge radius that was significantly...
17.10.2017 | Event News
10.10.2017 | Event News
10.10.2017 | Event News
20.10.2017 | Information Technology
20.10.2017 | Materials Sciences
20.10.2017 | Interdisciplinary Research