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PurposeThis study aims to empirically investigate whether the adoption of fair‐value‐accounting decreases the relevance of banks' capital adequacy ratios (CARs) in explaining insolvency risks. Additionally, how the disclosure quality affects the superiority of fair‐value‐based CARs over cost‐based CARs is also explored.Design/methodology/approachUsing data from Taiwan banks from 2004 to 2010, the following tests are conducted. First, the insolvency risk is regressed on the reported CAR, along with the related interaction with the adoption of TFAS No. 34 to test the weakened relevance of CARs during the post‐TFAS No. 34 periods. Second, the relative relevance of fair‐value‐based CARs and cost‐based CARs is assessed using Vuong's Z‐statistic. Lastly, observations are partitioned into two groups – banks of higher and lower disclosure quality – to investigate whether fair‐value‐based CARs is superior (inferior) to cost‐based CARs for banks with higher (lower) disclosure quality.FindingsFirst, adopting TFAS No. 34 reduces the relevance of CARs in explaining banks' insolvency risks. Second, fair‐value‐based CARs are superior to cost‐based ones in relation to insolvency risks only for banks of higher disclosure quality.Originality/valueThis study is the first to fill the empirical gap by demonstrating that the ability of CARs to explain the insolvency risk is adversely influenced by the adoption of fair value accounting. In particular, the results shed some light on the move toward fair‐value accounting, and may be interpreted that adopting fair‐value reporting is not flawless, drawing attention to the potential information loss in abandoning historical‐cost‐based regimes. Moreover, because the application of fair‐value accounting in the Taiwan banking industry is fairly similar to that of international or US GAAP, these results also yield insights into other standard‐setters.

Research Question/Issue The study examines whether the presence of social ties between compensation committee members and executives explains pay‐for‐luck asymmetry in compensation, which means that the compensation contracts reward executives with higher pay for good luck but minimally penalize them with lower pay for bad luck. Research Findings/Insights We find that half of our sample firms have a friendly compensation committee, defined as the majority of the committee members having at least two social ties with executives. For firms with a friendly compensation committee, executives tend to be rewarded for good luck but not be penalized for bad luck, which indicates the presence of pay‐for‐luck asymmetry. For firms without a friendly compensation committee, their executive compensation is not associated with good luck or bad luck. Theoretical/Academic Implications The higher homophily due to social ties between compensation committee members and executives induces the committee to be more mentally close to or loosen the monitoring intensity over executives, and to be less likely to make an unfavorable design of compensation toward executives in the presence of bad luck. We complement existing studies by clearly demonstrating the channel through which executives influence the committee members. We also highlight the decisive role of the compensation committee in examining pay‐for‐luck asymmetry research issues. Practitioner/Policy Implications Our findings inform practitioners that social ties between compensation committee members and executives may impair the monitoring intensity of the committee, and hence, regulators should take measures to mandate or at least encourage firms to provide social ties information. https://www.youtube.com/watch?v=UL9iGjERnRo&feature=youtu.be

Purpose The purpose of this paper is to examine the role of D&O insurance in audit pricing in Taiwan, an emerging market in which auditors face negligible litigation risk and intense competition. Design/methodology/approach It examines the association between audit fees and D&O insurance coverage. Findings Results indicate that audit fees are higher for clients with higher D&O coverage after controlling for other determinants. Further analysis shows that auditors charge additional audit fees for clients whose insurer is foreign owned. Originality/value Overall, the study provides evidence that the induction of financial misstatement risks by D&O insurance is one of the contributing audit risk factors in an emerging economy context.

Abstract. The aim of the present study was to report a rare case of single-clone, immunoglobulin heavy chain (IgH)-rearranged mucosa-associated lymphoid tissue (MALT) lymphoma in the conjunctiva, with nasal cavity dissemination through the nasolacrimal duct. A 24-year-old female was diagnosed with MALT lymphoma of the nasal cavity at the Department of Otolaryngology, Wan Fang Medical Center, Taipei Medical University (Tapei, Taiwan) in October 2008. A biopsy of the relapsing conjunctival lesion revealed a MALT lymphoma by pathological staining, while a single-clone, IgH-rearranged tumor lesion in the nasal cavity and conjunctiva was confirmed using continuous sinus computed tomography scans and polymerase chain reaction. Tumor lesions were negative for Helicobacter pylori and Chlamydia infection, but exhibited bilateral neck lymph node dissemination. A combination of radiation therapy (a total dosage of 46.8 Gray, in two phases covering the left lacrimal sac, nasal cavity and bilateral neck region) and topical ciprofloxacin plus steroid (0.3% ciprofloxacin 4 times a day and betamethasone eye ointment before sleep for 1 month) was provided as an effective therapeutic strategy, and no recurrence was found in the next 3 years. The nasolacrimal duct serves as a channel for conjunctival tumor spreading and is easily neglected. IgH-involved translocation in MALT lymphoma is a factor in the progression of the disease, and aggressive combination therapy is essential for a high-risk, disseminated IgH-rearranged MALT lymphoma.