Stock market reactions to audit failure in Japan: The case of Kanebo and ChuoAoyama

Numata, Shingo; Takeda, Fumiko

doi:10.1016/j.intacc.2010.04.004

Cited by 41 publications

(39 citation statements)

References 36 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In Panel B of Numata and Takeda (2010), and Saito and Takeda (2011). We find substantial overlap Table 5 panel A provides mean and median market-adjusted returns for the threeday window centered on the event dates in Appendix A.…”

mentioning

confidence: 94%

See 1 more Smart Citation

Audit Quality and Auditor Reputation: Evidence from Japan*

Skinner

Srinivasan²

2009

SSRN Journal

View full text Add to dashboard Cite

ABSTRACT:We study events surrounding ChuoAoyama's failed audit of Kanebo, a large Japanese cosmetics company whose management engaged in a massive accounting fraud. ChuoAoyama was PwC's Japanese affiliate and one of Japan's largest audit firms. In May 2006, the Japanese Financial Services Agency (FSA) suspended ChuoAoyama for two months for its role in the Kanebo fraud. This unprecedented action followed a series of events that seriously damaged ChuoAoyama's reputation. We use these events to provide evidence on the importance of auditors' reputation for quality in a setting where litigation plays essentially no role. Around one quarter of ChuoAoyama's clients defected from the firm after its suspension, consistent with the importance of reputation. Larger firms and those with greater growth options were more likely to leave, also consistent with the reputation argument.

show abstract

mentioning

confidence: 94%

“…Numata and Takeda (2010) also conduct market reaction tests on the ChuoAoyama event dates. That paper includes four of our event dates-events 2, 3, 4, and 11-and does not follow the Schipper and Thompson (1983) approach to the event study, instead carrying out a market model test for a sample of First Section companies only.…”

mentioning

confidence: 99%

Audit Quality and Auditor Reputation: Evidence from Japan*

Skinner

Srinivasan²

2009

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…61 Numata and Takeda (2008) explain details about the changes associated with the main bank system and the role of auditors.…”

Section: Introductionmentioning

confidence: 99%

Managerial ownership, capital structure and firm value

Ruan¹,

Tian²,

Ma³

2009

COC

View full text Add to dashboard Cite

This paper extends prior research to examine the managerial ownership influences on firm performance through the choices of capital structures by using a new sample of S&P 500 firm in 2005. The empirical results of OLS regressions replicate the nonlinear relationship between managerial ownership and firm value. However, we found that the turning points had moved up in our sample compared with previous papers, which implies that the managerial control for pursuing self-interest, and the alignment of interests between managers and other shareholders can only be achieved now by management holding more ownership in a firm than that found in the previous studies. Managerial ownership also drives the capital structure as a nonlinear shape, but with a direction opposite to the shape of firm value. The results of simultaneous regressions suggest that managerial ownership affects capital structure, which in turn affects firm value. Capital structure is endogenously determined by both firm value and managerial ownership; while managerial ownership is not endogenously determined by the other two variables. As a part of good tradition we have focused on a wide international representation of contributions. We have contributions made by authors from many countries of the world both developed and developing. These are papers by authors from Japan, the USA, Spain, Australia, Taiwan, Qatar, Brazil, Denmark.In this issue we were fortunate in composing a section devoted to corporate governance in a particular region with application to Japan. This is the first time for our journal to publish the special section on corporate governance in Japan. This is a result of efforts undertaken by us to get and develop very good and future-oriented relationships with corporate governance experts from Japan. I think you will enjoy reading the papers on corporate governance in Japan.In this issue of the journal we came back to the traditional issue of corporate governance -ownership structure as a special section. Major attention is paid to the link between ownership structure and performance. Our contributors were fortunate in generating new ideas and made new findings in this way.Our strategic purpose is to develop the new concepts and practices how to overcome the financial crisis with the corporate governance toolkit including mechanisms, instruments and participants. SECTION 1. ACADEMIC INVESTIGATIONS AND CONCEPTS CORPORATE GOVERNANCE AND FINANCIAL CONTRACTING: BONDHOLDER TAKEOVER DEFENSES IN POISON PUTS 9Ai-Fen Cheng, Tao-Hsien Dolly KingBondholder governance through the use of bond covenants and the interactions between shareholder and bondholder governance mechanisms has been recently highlighted in the corporate governance literature. In this paper, we study bondholder governance mechanisms through takeover-related bond covenants (i.e., poison puts), confirm with agency theory on the characteristics of firms that are more likely to use these covenants, and emphasize the importance of bondholder governance in the overall struc...

show abstract

“…Prior evidence suggests that egregious audit failure is detected 9 and cause reputational and financial loss to the auditor (Chaney and Philipich, 2002;He et al, 2015;Numata and Takeda, 2010).…”

Section: Impact On Audit Qualitymentioning

confidence: 99%

“…This evidence on the cost of audit failure along with the demise of Big N auditors such as Arthur Andersen in the USA, ChuoAoyama in Japan and Zhongtianqin (ZTQ) in China following the discovery of major audit failure is likely to make the Big N auditors more aware of the negative consequences of audit failure and provide greater incentives to them to provide higher quality auditing services 9 Many large global companies disclosed financial misstatements. Examples include US firms like Adelphia Communications, Sunbeam Corporation, Xerox, Enron, Waste Management, and WorldCom (GAO, 2002), Japanese firm Kanebo (Numata and Takeda, 2010), and Chinese firm Yinguangxia (He et al, 2015). than ever before.…”

Section: Impact On Audit Qualitymentioning

confidence: 99%

Audit failure of New Zealand finance companies – an exploratory investigation

Kabir

Rahman

2016

PAR

View full text Add to dashboard Cite

The authors appreciate the helpful comments of two anonymous reviewers. 2 Audit failure of New Zealand finance companies -An exploratory investigation AbstractPurpose -The setting of private finance companies that failed in New Zealand during 2006-12 was characterized by weaker corporate governance and enforcement of securities law. This paper explores audit failure in this setting and examines whether auditors erred in their audits of the failed finance companies and whether the audit failure rate of Big N auditors was different from that of non-Big N auditors. Design/methodology/approach -This paper adopts the archival research method, and utilizes three sets of evidence to assess audit failure -the frequency of going concern opinion (GCO) prior to failure, misstatements in the last audited financial statements, and the violation of the Code of Ethics. Findings -The study finds that only 41% of the sample companies received the GCO in their last audit prior to failure, and provides evidence of material misstatements in the financial statements of a number of failed finance companies that received clean audit opinions prior to failure and breaches of the Code of Ethics by a number of auditors. These results strongly indicate audit failure for a number of failed finance companies. The audit failure rate, however, appears less for Big N auditors than for non-Big N auditors. Practical implications -The study draws attention of the stock market regulator and the accounting profession to an area, the audit of private finance companies, that needs better quality audits. Originality/value -This paper provides systematic evidence of audit failure in failed finance companies in New Zealand. It also furnishes preliminary evidence of Big N auditors compensating for weaker corporate governance.

show abstract

Stock market reactions to audit failure in Japan: The case of Kanebo and ChuoAoyama

Cited by 41 publications

References 36 publications

Audit Quality and Auditor Reputation: Evidence from Japan*

Audit Quality and Auditor Reputation: Evidence from Japan*

Managerial ownership, capital structure and firm value

Audit failure of New Zealand finance companies – an exploratory investigation

Contact Info

Product

Resources

About