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PurposeWhen firms are dealing with negative earnings and/or economic downturns, operational restructuring is often initiated as a rescue tool. Some firms recover and prevail, while the others fail to survive and are subsequently delisted from stock exchange. The purpose of this paper is to identify factors that are significantly associated with the delisting risk of restructuring firms.Design/methodology/approachThe authors draw on a sample of firms with negative earnings that undertook restructuring during the 2001 economic recession. Logistic regression estimation is used to examine the delisting risk of these firms following the restructuring.FindingsThe paper finds that delisting risk increases when firms undertake repetitive restructurings, massive workforce reduction, and large‐scale asset downsizing. Firms with high levels of debt and failure to cut costs and/or narrowing its focus on core competencies are also more likely to delist.Practical implicationsBy analyzing and synthesizing the information from empirical data and business experience, this paper provides a guide for managers to effectively plan and implement a restructuring program to improve performance amid an economic downturn.Originality/valueThis is the first study to examine the survivability or delisting risk of a poorly performing firm undergoing restructuring amid an economic recession.

The importance of fostering more accurate audits has been heightened by a series of high-profile accounting scandals at the beginning of the millennium. These scandals prompted more stringent regulations over corporate governance and financial reporting and the creation of audit oversight bodies as the Public Company Accounting Oversight Board (PCAOB) in the United States and the Public Oversight Board (POB) in the United Kingdom. In parallel, the growing globalization of business has brought forth calls for adherence to a common set of International Financial Reporting Standards (IFRS). Even if a common standard is promulgated, it will not lead to similar results if implementation differs across countries. Therefore, it is important to investigate the auditing regulatory regimes in different nations and the status of cross-border audit inspections. Accordingly, we begin by describing the cross-national institutions (e.g., the International Federation of Accountants [IFAC]) that impact national regulatory choices. Then we survey the audit regulatory practices of public company auditors of a select group of major economic powers and based on this analysis, we discuss the challenges and obstacles to engaging in intra-national audit, cross-national audit/inspections, and the challenges posed by differences in auditing standards used in various linked (e.g., by joint ventures, etc.) nations. We include in this discussion the effects of national culture, investor legal protection, economic development, and differing financial standard sources.

Purpose The purpose of this study is to investigate the decision usefulness of key audit matters (KAMs) disclosures from the perspective of financial analysts. Design/methodology/approach Using data from two groups of Chinese-listed firms subject to different audit standards, the authors use a quasi-natural experiment and the difference-in-differences approach to examine the impact of KAMs on analyst forecasts. The authors also conduct a textual analysis on management disclosures as well as on the content of KAM disclosures. Findings The results of this study show that both forecast errors and dispersion have significantly declined for the firms disclosing KAMs compared to the firms without such disclosures. Further analysis presents evidence that KAM disclosures have resulted in simultaneous increase in management disclosures and audit quality. In addition, auditor characteristics, such as auditor’s dependence on client fees and its industry specialization, and firm’s characteristics, such as its ownership structure and its social connection with the auditor, appear to affect the informativeness of KAM disclosures. The authors also perform content analysis of KAMs to provide additional insight. Research limitations/implications As AH firms are required to adopt the expanded audit report one year before A shares firms, by design, there is only one year in which these two types of companies differ. Therefore, the results without overgeneralizing the impact of KAM disclosures should be interpreted. In addition, this study involves the Chinese market alone and, therefore, may be affected by factors peculiar to the functioning of the Chinese economy and financial markets. Originality/value The main contribution of this study lies in highlighting the salience of KAM context in shaping the relationship between auditors, managers and analysts and its collective impact on information environment. The findings of this study are significant in that they help establish the importance of KAM disclosures in helping to assure that higher quality financial information is available to capital markets, as well as information that is otherwise unavailable given disclosure mandates in China. This study adds to the literature on the importance of providing additional means of safeguarding auditor independence and on the value of auditor expertise in providing useful content in audit disclosures. Moreover, the findings suggest that the expanded audit report can help reduce the level of asymmetric information, especially for state-owned entities. They provide insight on how the new audit rule influences managers and auditors communicating complex accounting matters as well as the moderating effect of the social connections between auditors and firm executives.

The primary objective of this study is to examine the effect of prior restructuring charges on analyst forecast revisions and accuracy. We find evidence that analysts respond differently to first-time restructuring firms than to repeat restructuring firms. Analysts revise their forecasts of both one-year-ahead earnings and five-year long-term growth in earnings more negatively for first-time restructuring firms than for firms with prior charges. When we examine forecast errors in the year subsequent to the restructuring, we find that current charges complicate analysts’ earnings forecast task. We further find that the decline in analyst forecast accuracy is mitigated by prior charges within past two years. Copyright Springer Science + Business Media, LLC 2006Repeat restructuring charges, Analysts’ forecast revisions, Analysts’ forecast errors,