The globalization of audit markets not only provides an opportunity for the U.S. Big 4 auditors to establish international expertise through global networks, but it also exposes them to reputation risk arising from the acts of their local partners. We analyze the audit failure of ChuoAoyama, one of the Japanese Big 4 audit firms, and find that its credibility impairment reduced security prices of not only the clients of PricewaterhouseCoopers (PwC), their U.S. affiliate, but also the American clients of all other Big 4 auditors affiliated with the Japanese Big 4. Because the quality of the U.S. audit firms is perceived as superior to that of auditors in other countries, we also analyze the premiums arising from the affiliation with the U.S.-led global audit firm networks. We compare the effect of Andersen's audit failure with ChuoAoyama's in Japanese capital markets and find that the magnitude of negative market reactions is larger for Andersen's failure than for ChuoAoyama's. Together, these results suggest that global audit firm networks have created a network-wide reputation for their services that is susceptible not only to audit failures of the U.S. Big 4 but also to those of non-U.S. affiliates and that there is a quality premium for the U.S. Big 4 in Japanese markets. Our results provide a rational explanation for PwC's aggressive efforts to temper the negative impact of ChuoAoyama's failure on their reputation.

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The main purpose of this paper is to examine accounting information which can be of poor quality for some industries because uniform regulation applies to all. However, there is a strong demand for reliable accounting data even when the quality of the data is poor. Consistent with this premise, I show that among young NASDAQ listings the valuation coefficient on BVE is higher and that on earnings is not lower for intangibleintensive ventures than for other firms. I also show that GAAP OCF provides additional information that enhances the quality of earning information. This results in a shift in valuation weight from BVE to earnings for intangible-intensive young NASDAQ listings. However, these phenomena do not appear for intangible-intensive S&P 500 firms listed on NYSE. My results suggest that variations in the demand for reliable financial data affect the valuation coefficients on earnings and BVE.

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Are CEO compensation packages designed to alleviate some of the personal risks that they bear? We employ a unified framework to test the relationship between the four major components of executive pay; salary, bonuses, option grants and restricted stock grants, and four factors that increase CEOs' personal risks; the real value of their pay, the riskiness of firm equity, the value of their equity portfolios, and the delta of these equity holdings. We show that personal risks that CEOs face have significant effects on the design of their compensation contracts. Our results suggest that the portion of salary compensation decreases many of the personal risks that they face. There are intriguing differences between salary and bonuses on one hand, and option and restricted stock grants on the other. As predicted, we find that the delta of CEOs' equity portfolios have strong nonlinear relationships with the different forms of compensation; especially with option grants.Keywords: CEO compensation structure, personal CEO risk bearing, executive stock holdings, delta of executive equity portfolios * The authors are respectively from Montclair State University and Old Dominion University. They thank the editor, Steven Young, and an anonymous referee for their very helpful comments in developing the paper. Any errors or omissions are the responsibility of the authors. (Paper