PurposeThis paper documents the impact of political uncertainty on the decision of private firms to use external auditors to verify their financial statements.Design/methodology/approachThe authors use the data from 141 countries and the pooled logistic regression to test our arguments. The data is provided by the World Bank's Enterprise Surveys and is collected during the period between 2006 and 2019.FindingsThe results show that firms with high exposure to political uncertainty are more likely to use external auditors to verify their financial statements. The results are robust across various sub-samples and hold when we use alternate proxy for political uncertainty. The results are also robust after controlling for potential endogeneity concerns. The authors also find that the effect of political uncertainty on the choice of external audit is more pronounced for firms that are headquartered in countries with weak institutional environment. The authors document significant role of democracy, rule of law and accountability in determining the relationship between political uncertainty and the choice of external audit.Originality/valueThe authors believe that theirs is one of the initial attempts (if not the first) to investigate the effect of political uncertainty on the choice of external audit among the private firms in developing countries.

The article investigates how investment decisions are affected by stock prices, and whether this relation varies from affiliated to nonaffiliated firms. The results reveal that the investments of group-affiliated firms are more sensitive to stock prices than those of standalone firms. JEL Codes: O16, G3

This study examines the potential predictive power of changes in deferred revenues on future profitability based on evidence from the region of the Middle East and North Africa (MENA). It examines whether financial analysts should consider deferred revenues as useful information when evaluating a firm’s future profitability. A pooled OLS regression is used to test the relation. The observations of different companies from various periods are combined into a pooled sample of observations consisting of data from the 500 largest companies in the MENA in terms of market share. Aligned with the existing literature, the findings reveal that changes in deferred revenues are a predictive tool for future financial performance as proven by the positive correlation with the growth of future annual sales, gross profit margin, net profit margin, return on asset, and Tobin’s Q. Testing for this impact adds to the literature given various robustness tests under different circumstances and economic conditions.