Section 404 of the Sarbanes-Oxley Act requires managers to assess, and their auditors to express an opinion on, the effectiveness of internal controls over financial reporting (ICFR). Policymakers expect the ICFR audits to enhance the credibility of firms' financial statements. Prior research argues that audit characteristics that enhance the credibility of financial reporting are associated with stronger earnings-return associations. We examine whether earnings accompanied by the first-time Section 404 ICFR reports were associated with higher informativeness compared with earnings in the prior year when only financial statement audit reports were available. We conduct our analysis for a test sample of accelerated filers with clean ICFR reports and clean previous Section 302 disclosures. Using a difference-in-differences approach, we compare the change in earnings informativeness for the test sample with that for a control sample of non-accelerated filers. We find that earnings informativeness for companies with clean internal control reports was greater in the Section 404 adoption year than in the previous year, while there was no change in earnings informativeness for the non-accelerated filers. Also, there is no difference in the increase in earnings informativeness across firms with small and large compliance costs (measured by change in audit fees), suggesting that both groups benefited from the Section 404 ICFR audits.

Since the outbreak of Coronavirus Disease 2019 (COVID-19), the Chinese government has taken a number of measures to effectively control the pandemic. By the end of 2021, China achieved a full vaccination rate higher than 85%. The Chinese Plan provides an important model for the global fight against COVID-19. Internet search reflects the public's attention toward and potential demand for a particular thing. Research on the spatiotemporal characteristics of online attention to vaccines can determine the spatiotemporal distribution of vaccine demand in China and provides a basis for global public health policy making. This study analyzes the spatiotemporal characteristics of online attention to vaccines and their influencing factors in 31 provinces/municipalities in mainland China with Baidu Index as the data source by using geographic concentration index, coefficient of variation, GeoDetector, and other methods. The following findings are presented. First, online attention to vaccines showed an overall upward trend in China since 2011, especially after 2016. Significant seasonal differences and an unbalanced monthly distribution were observed. Second, there was an obvious geographical imbalance in online attention to vaccines among the provinces/municipalities, generally exhibiting a spatial pattern of “high in the east and low in the west.” Low aggregation and obvious spatial dispersion among the provinces/municipalities were also observed. The geographic distribution of hot and cold spots of online attention to vaccines has clear boundaries. The hot spots are mainly distributed in the central-eastern provinces and the cold spots are in the western provinces. Third, the spatiotemporal differences in online attention to vaccines are the combined result of socioeconomic level, socio-demographic characteristics, and disease control level.

This paper investigates the relationship between business strategy and cost stickiness under different ownership. Using the data from listed firms in China from 2002 to 2015, we find that first, firms with different strategies exhibit different cost behavior. The cost stickiness of choosing a differentiation strategy is higher than that of choosing a low-cost strategy. Second, management expectations will affect cost stickiness. Optimistic expectations will increase cost stickiness, while pessimistic expectations will reduce cost stickiness. Third, management expectations can adjust the relationship between business strategy and cost stickiness in terms of government-created advantages (GCAs). If management expectations tend to be optimistic, the cost stickiness is higher with a differentiation strategy than with a low-cost strategy. If management expectations tend to be pessimistic, then cost stickiness is higher with a low-cost strategy than with a differentiation strategy. Finally, the state-owned equity affects the extent of the effect of a differentiation strategy on cost stickiness. State-owned firms, which receive more GCAs than non-state-owned firms, have stronger cost stickiness than non-state-owned firms, even if both categories of firms use more differentiation strategy.

Previous studies have found that CEOs manage their firms through traditional methods such as leadership and management practices. In this study, we investigate how the parasocial relationship (PSR) between middle-level managers and CEOs affects the organizational trust and the organizational identification (OI) of middle managers. We find that the PSR between middle managers and CEOs has a positive effect on the OI of middle managers, which is mediated by the organizational trust of middle managers.Purpose:Middle managers and CEOs are the key components of a firm and are crucial to firm strategies and control systems. Middle managers play a vital role in information transmission like in the organizational hierarchy while CEOs influence low-level employees through middle managers. In this study, we investigate how the PSR between middle managers and CEOs affects organizational trust and OI.Design/Methodology:In this study, the data concerning OI, integrity perception, and organizational trust are derived from a survey conducted by the internal control research group of the China Securities Regulatory Commission (CSRC). The research group began the survey on September 5, 2014, for the firms listed in the A-share market, accounting firms with securities and future practice qualifications, and institutional investors through the accounting department of the CSRC, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, and the Asset Management Association of China. The research group members surveyed 2,536 A-share firms listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange. As of October 31, 2014, 2,154 sets of questionnaires with a total of 12,551 questionnaires were received, with a response rate of 84.95%. The financial and accounting data are from the China Stock Market and Accounting Research (CSMAR) database.Findings:We find that the PSR between middle managers and CEOs has a positive effect on the OI of middle managers, which is mediated by the organizational trust of middle managers. This study extends the application of the parasocial interaction (PSI) theory, organizational trust theory, and social identity theory in listed firms.Practical Implication:There are practical implications for internal relationship management, corporate governance, and performance management. CEOs should value the influence of organizational trust and improve his/her own social and work abilities on middle-level managers as the organizational trust of middle-level managers has a significant positive impact on their sense of responsibility, ethical behavior, organizational commitment, job satisfaction, and performance. CEOs should adopt various methods to influence different managers because organizational trust mediates the relationship between the PSR and OI.Originality/Value:Our study is one of the first attempts to apply the PSI theory to the corporate world. Given the dynamics of present-day markets and changing stakeholder demands, there is little insight into how this relationship affects organizational health and functioning. Much less what a PSR between CEO and middle management looks like in practice. Our study attempts to fill the gap by investigating how CEOs might come to affect middle managers through their practices and behaviors.

Purpose: SOX Section 404 requires that public companies evaluate and have their auditors attest to the effectiveness of their internal control over financial reporting (ICFR). These companies compare their ICFR effectiveness to the Internal Control Frameworks issued by Committee of the Sponsoring Organizations of the Treadway Commission (COSO). This paper aims to examine whether the implementation of the 2013 Control Framework has a positive impact on the information environment of U.S. public companies. Design/methodology/approach: The study sample comprises firms from the S&P 1500 index and the Russell 2000 index firms that filed their annual reports after December 15, 2014. This paper uses bid-ask spread as a primary measure of information asymmetry, while controlling for the simultaneous effects of the new COSO framework on trading volumes and price volatility. Findings: This paper finds a significant reduction in bid-ask spreads – a proxy for an improved information environment – among our sample firms following the adoption of the 2013 Control Framework, leading us to conclude that the 2013 Control Framework represents a substantial improvement. Research limitations/implications: This study specifically examines the impact of control frameworks on the information environment under SOX 404. Future research could explore other economic consequences associated with the adoption of the new COSO Framework. Additionally, it would be valuable to investigate whether the Cadbury model, which also qualifies as a “suitable” control framework under the SEC rules for ICFR assessments, produces similar or different outcomes. Future studies could also analyze the implementation details across all five components concerning the three types of objectives. Practical implications: The findings will provide valuable insights for policymakers on the effectiveness of the COSO 2013 Framework in enhancing internal control reporting. Social implications: The findings will also contribute to improving the information environment in the capital markets by guiding policymakers and regulators in assessing the effectiveness of the new COSO framework. Originality/value: While extensive research has focused on the consequences of accounting and related internal control disclosures, there has been limited examination of how the underlying internal control benchmarks affect the quality and reliability of ICFR assessments and disclosures. This research aims to address this gap.

Drawing on prior studies regarding the use of peers for investment decisions and compensation practices and the recent reports which suggest that firms use peer information for audit pricing, we examine the effect of peer groups on the audit pricing process under high information asymmetry environment. Using observations from the emerging markets of China, we find that peer group information is used in audit pricing with peer groups defined as the Industry, Industry/Region, Industry/Big4, Industry/Size, and Industry/Region/Big4. This is consistent with above complementary theories. We also find evidence that peer group information is more likely to be used by firms from low-technology industries, less developed regions, and firms audited by non-Big 4 CPA firms than those from high-technology industries, more developed regions, and firms audited by Big 4 CPA firms. Also, peer group information is more likely to be used in clients firms with shorter auditor tenure and with lower analyst following compared with their counterparts. Finally, we find that clients with lower audit fees than their peer groups in the previous period are more likely to increase audit fees in the current period. Our results are qualitatively the same regardless of whether we use an overall sample across different industries or for each industry separately. These results are consistent with the peer group literature and also indicate that peer group information is more likely to be used in conditions when information asymmetry is high.