Issues in Financial Accounting
“New Institutional Accounting Research”
Professor Tianyu ZhangEmail: [email protected] Tel: (852) 3493-7841 1. Objectives
The main objective of the course is to provide students a framework, based on
institutional economics, to study the capital market, financial accounting and auditing issues using international or non-US settings. Particularly, this framework would be useful for studying accounting topics in transition economies or emerging market setting such as China and other East Asian economies.
We will study the recent literature in financial accounting, auditing, corporate governance and corporate transparency using this research framework. These papers illustrate how economic institutions shape the role of accounting and auditing, which serve as a foundation for our pursuit of accounting and auditing research in a non-US country setting.
We hope that by going through these papers, you will have the research tools and a more comprehensive framework to identify and embark on a new research agenda in financial accounting research. To better understand each discussed paper, you should try to address the questions like “What did the author do?”; “What’s the motivation of the paper?”; “What’s the theoretical background of the paper?”; “What’s the finding of the paper?”; “Why is the finding important?”; “What’s the contribution of the paper?”. Based on understanding of these elements of the paper, you should push further by asking the following questions to develop your own research ideas.
“What’s alternative way to address the same topic in the literature?” “Is there any new way to address the same topic?”, “What’s the limitation of the methodology?”,
“What’s the remaining unsolved issue in the same area?”, “What’s the expected outcome if the issue was put in a different setting, say China?”, “What’s the fundamental factor driving the difference in output if you apply the research in China?”, “Will this be a relevant issue, say in China, given the expected difference in finding?”, “Shall we address a even more fundamental question before touching this issue in other settings, such as in China?”
2. Requirements
The course includes seminar-type discussions of the assigned topics. Each student is expected to read the assigned papers and participate actively in class. Later on in the course, students will be asked to make presentations of assigned papers in class. As a final assignment for the course, each student has to write a research proposal and present in class. We will provide more details of the final assignment later. 3. Grading
The purpose of grading is twofold. One is the usual evaluation of your performance of academic purposes. The second is to encourage active discussion in the classroom, so that everyone achieves a deeper understanding of the topics. In line with these
objectives, your grade will be based on the following components: Class participation 20%
Class presentation 20%
Research proposal 60%
Class participation – You are expected to participate in discussions and ask intelligent questions in the seminar.
Class presentation – You need to help the class to understand the assigned paper. You are in charge of presenting the motivation, objectives, theory, hypotheses, results and conclusion of the paper and facilitate all the discussions.
Research proposal-Within the framework delivered in the lecture, you need to submit a proposal with original research idea. This proposal should have some potential to be developed into a working paper.
4. Outline
Topic 1: Corporate governance and accounting in China: Framework
Fan, J., T., Wong and T., Zhang, 2013. Institutions and Organizational Structure: The Case of State-Owned Corporate Pyramids. Journal of Law, Economics and Organization.
Long, C., 2010. Doe the rights hypothesis apply to China? Journal of Law and Economics 53(4): 629-650.
*Qian, Y. (2008). Impacts of Entry by Counterfeiters. Quarterly Journal of Economics, 123(4), 1577-1610.
Topic 2: Ownership and accounting: family firms vs. SOES a. Background
Jensen, M. C. and W. H. Meckling (1976). "Theory of the firm: Managerial behavior, agency costs and ownership structure." Journal of Financial Economics 3(4): 305-360.
Bortolotti, B., Faccio, M., 2009. Government Control of Privatized Firms. Review of Financial Studies 22, 2907-2939
Burkart, Panunzi, and Shelifer. Family Firms. Journal of Finance 2003.
La Porta,R., F., Lopez-De-Silanes, And A. Shleifer. 1999. Corporate Ownership Around The World. The Journal Of Finance 54, 471-517
Mehrotra, V., & Morck, R. (2013). Chapter 9 - Entrepreneurship and the Family Firm. In M. H. George M. Constantinides & M. S. Rene (Eds.), Handbook of the Economics of Finance
Morck, R., 1996. On the Economics of Concentrated Ownership. Canadian Business Law Journal 26, 63-85
b. Ownership concentration and accounting properties
Ball and Shivakumar. Earnings Quality in UK Private Firms: Comparative Loss Recognition Timeliness. Journal of Accounting and Economics 2005. Fan and Wong. Corporate Ownership and the Informativeness of Accounting
Information. Journal of Accounting and Economics 2002. C. Family ownership and accounting properties
Fan, J., Wong, T.J., Zhang, T.. 2012. Founder succession and accounting properties. Contemporary Accounting Research.
*Chen, Shuping, Xia Chen and Qiang Cheng. Do Family Firms Provide More or Less Voluntary Disclosure? 2007.
Topic 3 Social network a. Background
Granovetter, M.. 2005. The impact of Social Structure on Economic Outcomes. Journal of Economic Perspectives Vol. 19: 33-50.
Munshi, K. and M. Rosenzweig (2006). "Traditional Institutions Meet the Modern World: Caste, Gender, and Schooling Choice in a Globalizing Economy." American Economic Review 96(4): 1225-1252.
b. Application in Finance and Accounting.
Allen, F., J. Qian, et al., 2005. "Law, finance, and economic growth in China." Journal of Financial Economics 77: 57-116.
Allen, F. and A. Babus, 2009. Network in Finance. in “The Network Challenge: Strategy, Profit, and Risk in an Interlinked World” Edited by Kleindorfer P., Wind, Y., and Gunther, R.. Pearson Education, Inc.
Cohen, L., A. Frazzini, and C. Malloy. 2008. The small world of investing: board connections and mutual fund return. Journal of Political Economy Vol. 116:951-979.
Cohen. L., A. Frazzini, and C. J. Malloy. 2012. Hiring Cheerleaders: Boards Appointments of “Independent Directors”. Management Science Vol. 58:1039-1058.
McMillan, J. and C. Woodruff, 1999. "Interfirm Relationships and Informal Credit in Vietnam." The Quarterly Journal of Economics 114(4): 1285-1320.
Pistor, K.. The Governance of China’s Finance. In Fan, J. and R. Morck (Eds). Capitalizing China. The University of Chicago Press.
Larcker, D, E. So, and C. Wang. 2010. Boardroom centrality and stock returns. Working paper.
Topic 4-5: Politics, corporate finance and accounting a. Value of political connection
Claessens, S., Laeven, L., 2008. Political connections and preferential access to finance: The role of campaign contributions. Journal of Financial Economics 88, 554-580
Daron, A. and A. R. James (2013). "Economics Versus Politics: Pitfalls of Policy Advice." Journal of Economic Perspectives 27(2): 173-192.
Faccio, M., 2006. Politically Connected Firms. The American Economic Review 96, 369-386
Perotti, E., 2013. The Political Economy of Finance. Working paper.
*Dinc, I. S. and N. Gupta (2011). "The Decision to Privatize: Finance and Politics." The Journal of Finance 66(1): 241-269.
Piotroski, J. and T. Zhang (2013) “Politicians and the IPO Mechanism: The impact of impending political promotions on IPO activity in China” Journal of Financial Economics
Shleifer and Vishny. Politicians and Firms. Quarterly Journal of Economics 1994. b. Political connection and corporate transparency
Leuz, C., Oberholzer-Gee, F., 2006. Political relationships, global financing, and corporate transparency: Evidence from Indonesia. Journal of Financial Economics 81, 411-439
Piotroski, J., Wong, T.J., Zhang, T., 2014. Political Incentives to Suppress Negative Financial Information: Evidence from China. Working Paper
Ramanna, K., Roychowdhury, S., 2010. Elections And Discretionary Accruals: Evidence From 2004. Journal Of Accounting Research 48, 445-475
*Fisman, R., Y. Wang. 2013. The mortality cost of political connections. Working Paper.
Topic 6: Role of media
Jensen, M., 1979. Toward A Theory Of The Press. Economics And Social Institutions, By Karl Brunner, Ed., Martinus Nijhoff Publishing Company,
Dyck, A., Volchkova, N., Zingales, L., 2008. The Corporate Governance Role Of The Media: Evidence From Russia. THE JOURNAL OF FINANCE 63, 1093-1135 *Bushee, B., Core, J., Guay, W., And Hamm, S.. 2010. The Role Of The Business
