Research and Curriculum Development Projects Approved for Funding
Research project funding approved during 2007-2008
The Relative Importance of Information Disclosures in the Biotechnology Industry
Bruce J. McConomy (WLU) and Bixia Xu (WLU)
Non-financial disclosure contains new information content. Biotech firms disclose a rich set of non-financial information covering drug discovery and development and business innovations which aim to provide investors with relevant information. Our aim in this study is to explore the relative importance of different types of non-financial information disclosures, using financial disclosure as the benchmark. Results of the study will make a significant contribution to the accounting literature via revealing how biotech stock prices are driven by information releases, and which types of news provide more informative. In addition, the results provide implications for investors who trade on news.
Approved research assistantship grant applications during 2007-2008
Voluntary Disclosure of Performance Expectations
Director compensation, firm ownership structure and firm performance
Firms ownership structure and its choice between dividends and share repurchases
Approved teaching assistantship grant applications during 2007-2008
Proposed Curriculum Changes to Bu357: Introduction to Federal Taxation
Research and Curriculum Development Projects Funded 2006 -2007
Auditors’ reputation and off-balance sheet activities: The case of operating leases
Robert Mathieu (WLU), Ling Chu (WLU) and Ping Zhang (UofT)
The objective of this research is to investigate the impact of operating leases on audit fees and auditors’ reputation. External auditors are likely to be affected by the presence of operating leases for the following reasons. For a given level of debt, the presence of operating leases will increase the riskiness of firms (the clients) which, in turn, will increase auditor's litigation risk and leading the auditor to increase fees. Furthermore, higher litigation risk may prompt the auditor to exert higher effort for reducing the litigation risk, which also increases audit fees. In addition, there could be a more direct link between the proportion of operating leases and legal fees since the external auditors may have to spend more time to go through legal documents and lease schedules. Furthermore, in the event that international audit firms (big-4 CA firms) are more concerned about the cost of reputation associated with the bankruptcy of their clients, these audit firms may avoid firms having a large proportion of leases treated as operating leases.
Information Uncertainty, Investor’s Behavior, and Share Price Volatility
Bixia Xu (WLU) and Michel Magnan (Concorida)
The cost of improved disclosure is important to corporate disclosure strategy. For industries with high information uncertainty, more disclosure may be costly. Our aim is to explore indirect costs of improved disclosure for such types of industries using non-financial disclosures of the biotech industry as the context. Results of the study will make a significant contribution to the accounting literature via examinations of the association between information characteristics and disclosure costs. In addition, they will have critical implications for corporate voluntary disclosure strategies.
Corporate governance, ownership structure and firm performance
Flora Niu (WLU)
Corporate governance issues have drawn a significant amount of attention in the financial community since the wake of corporate accounting scandals. Governance also significantly influences financial reporting quality and accounting choices made by corporations. The proposed project examines how corporate governance features, such as board independence and its composition, executives and director compensation and expertise, influence financial reporting quality and management behavior, and how their interactions affect firm performance.
Approved teaching assistantships grant applications
Funding of a proposal to investigate a possible MBA program for CAs at Laurier
Advanced Auditing (BU447) Professional Exam Marking
Based on the feedback from students and the overall success of the Spring term marking, a similar grant was approved for the Fall Advanced Auditing (BU447) sessions
Approved research assistantship grant applications
Cosmetic surgery and the definition of medical expenses for tax purposes
Non-audit fees, audit quality and earnings restatements
Corporate governance failures at Canadian corporations
Earnings and dividends informativeness, ownership structure, and corporate governance practice in Canada
Corporate Governance Failures (Phase II)
Internal Control Weakness and Cost of Corporate Debt
The effect of financial analysts’ coverage on biotech IPO firms
Firm’s ownership structure and its choice between dividends and share repurchases
Research project funding approved during 2005-2006 for research related software and/or data collection
Assurance on Internal Control over Financial Reporting in Smaller Public Companies
Lorie Kopp (Lethbridge), Natalia Kotchetova (Waterloo) and Thomas Kozloski (WLU)
The project examines how the PCAOB AS 5 requirement to perform an audit of internal control in conjunction with the audit of the financial statements can be implemented effectively and efficiently by auditors of smaller entities, while maintaining the confidence of the financial statement users in the quality of work performed by those auditors. The research team investigates a number of inter-related research questions. First, whether focusing, in the case of smaller entities, on higher, entity level controls is likely to (a) provide an appropriate level of auditor confidence relating to the quality of the audit and the reliability of the financial statements, and (b) result in a more efficient resource allocation decisions by audit professionals, compared to the detailed testing of lower level, often system-oriented controls that have been the focus of testing in the past. Next, we examine user perceptions of audit quality and financial statement reliability under conditions of modified reporting requirements in the area of management's assessment of internal control and the external auditor attestation of such an assessment.
The Market Reaction to the Events in the FASB’s Deliberation of Recognizing Stock Options Cost
Flora Niu (WLU)
Accounting for employee stock options has been a controversial issue. Although stock options were a significant form of compensation, in the past, they were not reported as an expense on a company's income statement under U.S. or Canadian regulations. Following the significant accounting scandals, mandatory expensing of options received strong public support. The FASB has since issued a series of pronouncements to actively promote the adoption of expensing rule. Thus, the purpose of this study is twofold. First, it examines the impact of FASB pronouncements on equity prices of a sample of U.S. companies. Examination of the market’s reaction to individual announcements provides insight into the market’s perception as to the relative importance of each successive step in the deliberation process. Second, it also examines whether individual firms were affected by the deliberation and determines whether the relative impact varies according to firm’s attributes, such as transparency of accounting earnings, strength of corporate governance, the level of option granted and the extent of earnings management.
The Effect of Tax Rates and Assets’ Useful Lives on Firms’ Leasing Decisions in Canada
Robert Mathieu (WLU), Ling Chu (WLU) and Ping Zhang (UofT)
This research examines the impact of assets useful lives on firms’ leasing decisions in Canada. Our theoretical analysis demonstrates that firms are more likely to lease assets with shorter useful lives. More specifically, we show that, in a competitive financing market, lease payments are a decreasing function of lessors’ tax rates. Therefore, the useful life of an asset is relevant in leasing decisions because lessors’ tax rates are less likely to remain at the highest level over a longer horizon leading to higher leasing costs and less leasing activity. Using a sample of publicly traded Canadian companies, we also provide empirical evidence that the useful life of an asset is negatively associated with the proportion of assets leased by a firm.
Approval of a study of factors affecting WLU-SBE UFE pass rate
The Determinants of Success on the Uniform Final Evaluation
Greg Berberich (WLU)
Each year in Canada thousands of students aspiring to be Chartered Accountants write the Uniform Final Evaluation, a thirteen-hour exam held over three days in mid-September. Despite the importance of the UFE to the students and the profession, little research has been done into the factors that lead to success on this difficult exam. In fact, the only apparent research in this area was done by Kapoor (1985), who studied roughly 600 Quebec students that wrote the 1984 UFE. My study aims to update our knowledge of the attributes that lead to success on the contemporary UFE by analyzing demographic, academic, and UFE data for over 3,000 Ontario students who wrote the exam in the years 2004-2007. The results of the study should help students, universities, employers, and the profession to better prepare aspiring CAs for success.
Approved Research assistantship grant applications
Factors affecting the long-term survivorship of Canadian IPO firms
(The funding for these projects goes directly to students as compensation for their assistance provided to WLU professors on research projects)
Derecognition of transferred assets
Information needs of investors across industries
Stock market volume reactions to information disclosures in the Biotechnology industry
Taxation – Reasons for withholding at source
Stock Compensation Expense – Pricing variables of Canadian companies
Asset Retirement Obligations – Stock market impact of new accounting requirements
The association of nonaudit service purchases and voting structure
Information needs of investors across industries – Dataset expansion and testing
Approved Curriculum Development assistantship funding
(The funding for these projects goes directly to students as compensation for their assistance provided to WLU professors on curriculum development projects)
Updating of the CA Candidates’ Competency Map Self-Assessment to reflect the current course structure of the B.A. Economics – accounting option.
Development of a consolidations tutorial supplement