Commercial law


Recent Submissions

  • Ittonen, Kim; Myllymäki, Emma-Riikka; Tronnes, Per Christen (2019-07-01)
    Purpose This paper focuses on bankaudit committees and examines whether audit committee members who are formerauditors are associated with the acquisition of audit and non-audit servicesfrom their former employers.   Design/methodology/approach The study empirically examinesa sample of large banks that are included in the S&P Composite 1500.   Findings The paper reportssignificantly lower audit fees and a higher proportion of non-audit fees tototal fees when the audit committee chair is an alumnus of the incumbent auditfirm. Moreover, additional analysis reveals that these findings are strongerfor banks with more earnings management.   Researchlimitations/implications Overall, the findings indicatethat audit firms might consider banks using their alumni as audit committeechairs to be less risky or easier to audit, thus requiring relatively lesseffort from the auditors. The reduced effort required to audit clients withaudit firm alumni on their audit committees then has the effect of reducing theaudit fees charged. Alternatively, their auditing experience and cognitiveproximity might influence the assessment of the need for auditing or theability to negotiate lower audit fees on the part of audit firm alumni.   Originality/value This paper provides empiricalevidence of the association between audit firm alumni in influential positionson an audit committee and fees paid to those audit firms in the bankingindustry. The findings contribute to the literature by suggesting that bankswith affiliated former auditors chairing their audit committees not only havesignificantly lower audit fees but also a higher proportion is spent onnon-audit services.
  • Sundvik, Dennis (2019-06-07)
    Purpose The purpose of this paper is to explore whether principles-based vs rules-based accounting standards have an effect on measures of financial reporting quality and earnings management strategies. Design/methodology/approach This study uses a firm-year-specific variable that captures the extent to which firms’ accounting and operating behavior is affected by the characteristics of a specific standard in the USA. Measures of absolute accruals, financial misconducts, signed abnormal accruals and abnormal cash flows are used to assess the effects. Findings The results show that absolute magnitude of accruals and probability of financial misconduct is lower, and accrual earnings management is higher when firms’ standards are more based on principles. The study also suggests that potentially costlier real earnings management is a consequence of rules-based standards. Research limitations/implications This study relies heavily on measures from the prior accounting literature, hence, care has been exercised in generalizing the findings. Practical implications This study has direct implications for a number of stakeholders, including standard setters, policymakers, securities regulators, researchers, investors, financial statement preparers and auditors. For example, the future development of accounting standards can be supported by the empirical conclusions in this study together with previous standard-setting ambitions, commentaries, experiments and analytical work. Originality/value This study extends prior single-country studies on reporting quality and cross-country studies on transition effects of firms switching from local to International Accounting Standards by observing the impact of accounting standard characteristics on additional measures of reporting quality and accrual as well as real earnings management when holding institutional factors constant. The study also offers archival evidence complementing prior commentaries, experiments and analytical work.
  • Bruun, Niklas; Norrgård, Marcus (2018-12-20)
  • Pitkänen, Olli (Helsinki Institute for Information Technology HIIT, 2002)
  • Pitkänen, Olli Pekka; Heikkilä-Kauppinen, Marja (2018-02-21)
  • Siekkinen, Jimi Ville-Pekka (2016-06-09)
    This paper examines whether audit quality and auditor independence have an impact on the information quality of fair values. It is assumed that higher audit quality and higher auditor independence decrease the incentives for managerial opportunism, thereby increasing investors' trust in book values. By analysing financial firms from 28 European countries, this study finds evidence that non-audit services have a positive association with the value relevance of Level 3 fair value assets. Furthermore, the more important the client is to the auditor, the lower is the value relevance of fair value estimates (Level 3). The association between a Big 4 auditor and the information quality of fair value estimates depends on the legal traditions in the firm's home country. The association is positive or non-existent in Northern and Western European countries and negative in Southern and Eastern European countries.
  • Siekkinen, Jimi Ville-Pekka (2017)
  • Timmer, Ryan; Broussard, John Paul; Booth, G. Geoffrey (2018-01-21)
    We study the asset allocation decision of a life insurance company’s general account with respect to the possibility of large negative economic shocks and examine how this account is affected by policyholder investment decisions in the company’s separate account. This is accomplished using a performance metric that incorporates downside risk measured using univariate and multivariate extreme value distributions. Because of its well-known price volatility, diversification attributes, and significant weight in the combined general and separate accounts, our primary focus is the company’s equity investments. Although industry asset allocations have varied over the past two decades, we find that the actual allocations to equity in the general account are close to the allocation percentages suggested by our extreme value metrics and both are far below the maximum values indicated by the relevant regulatory bodies.
  • Flores Ituarte, Inigo; Salmi, Mika; Ballardini, Rosa; Tuomi, Jukka; Partanen, Jouni (2017-09-26)
  • Pitkänen, Olli Pekka; Ruuska, Petra (IPR University Center, 2017)
  • Pitkänen, Olli Pekka (Kunnallisalan kehittämissäätiö, 2017)
  • Andres, Pablo de; Arranz-Aperte, Laura; Rodriguez-Sanz, Juan Antonio (2017)
    Our study reveals how two separate dimensions of board composition-the proportion of independent directors and of non-independent directors-influence CEO compensation in Western European firms. Controlling for the simultaneous determination of CEO pay structure and board design, we find that firms with a higher proportion of non-independent outsiders on their boards pay less direct compensation (salary + bonus) and less equity-linked compensation to their CEOs. By contrast, CEOs working for firms with more independent boards receive more equity based-pay. When we control for the fact that equity linked is not granted systematically in Europe we find that firms with more independent directors on the board tend to grant equity linked compensation more often than firms with more non independent outside directors. Our results challenge the commonly accepted view of independent directors as safeguards of shareholder value, uncovering the relevance of non-independent outsiders for pay moderation and incentives.
  • Sundvik, Dennis (2017-09-05)
    Purpose The purpose of this paper is to examine three different responses to the Finnish 2005 tax reform that, among other things, reduced the corporate tax rate and hiked dividend taxation. Focus lies on the factors influencing the decision to change the fiscal year-end and whether earnings management is more prevalent when the decision is not taken. Design/methodology/approach This study uses the financial statement data of Finnish private firms and studies 350 fiscal year-end changing firms and 700 non-changing firms with logistic and linear regression analysis. Discretionary accruals are the proxy for earnings management. Findings The results suggest that firms seize the window of opportunity and extend fiscal years depending on the magnitude of the expected tax savings. Firms that do not change their fiscal year-end engage in more tax-induced earnings management. In terms of economic consequences, the earnings management approach is less economically significant. Research limitations/implications This study only examines a limited number of firms that change their fiscal year-end, hence, care has been exercised in generalising the findings. Practical implications The findings may be considered when structuring future tax reforms, particularly when considering transition rules relating to changes in fiscal year-ends. The study may also have implications beyond tax reforms since the evidence of opportunistic changes in the fiscal year-end can be informative for tax authorities, independent auditors and creditors. Originality/value This study contributes to the relatively scarce literature on private firm responses to tax policy changes by analysing both upward and downward earnings management, as well as changes in the fiscal year-end. This is in contrast to previous research that mainly focusses on listed firms and absolute earnings management or earnings management in one direction.
  • Arranz Aperte, Laura (2016)
    Controlling the composition of the board is important in corporate governance. In order to prevent incumbent members to capture the nomination process, an external nomination committee has been introduced in some Nordic countries. In Finland both internal and external nomination committees are used by listed companies. This feature provides an ideal case to test whether differences in nominating board members make a difference for board composition.Companies with a nomination committee composed of a group of external experts have, on average, more female directors on their boards, but less international diversity and less diversity in terms of age dispersion and director tenure. However, these differences become non-significant when the voting rights of the largest shareholders are included in the regression analysis. The results suggest that when ownership structure is taken into account the procedure used to select director candidates has a limited impact on the final board composition or diversity.
  • Killström, Ulla; Virola, Heli; Galli, Luca; Immonen, Olli; Pitkänen, Olli; Kijl, Björn (2006)
  • Giest, Sarah; Koene, Ansgar; Perez Vallejos, Elvira; Pitkänen, Olli Pekka; Fosci, Mattia (2016)

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