Zhenyang Shi

Journal of Business Economics (JBE) 95 p. 257-294 Doi: https://doi.org/10.1007/s11573-024-01198-4

This study is a quasi-replication and extension of Bae et al. (Account Rev 92(2):19– 40, 2017), which examines the relationship between auditors’ characteristics and their audit clients’ investment efficiency. Whereas Bae et al. (Account Rev 92(2):19–40, 2017) use U.S. public firm data, we draw a more general picture by using both public and private firm data from Norway. Overall, the results for Norwegian public and private firms are in line with those Bae et al. (Account Rev 92(2):19–40, 2017) find for public U.S. firms. That is, audit clients invest more efficiently if their auditors have more knowledge and resources, measured by auditor market shares or whether a Big N audit firm performs the audit. Further, an auditor’s influence on its client’s investment efficiency is more pronounced when clients have a higher demand for information, proxied by client complexity. Finally, exploiting a regulatory change in 2011 that allowed small private Norwegian firms to opt out of previously mandatory auditing, we extend the study by Bae et al. (Account Rev 92(2):19–40, 2017). We find that audits can increase investment efficiency for small private firms. Specifically, firms that dismiss their auditors tend to overinvest more than similar firms that are not eligible to opt out of auditing. Further, firms that voluntarily keep their auditor have an overall higher investment efficiency than similar firms that are not audited.

The British Accounting Review Doi: https://doi.org/10.1016/j.bar.2025.101694

According to Yonker (2017a), the U.S. executive labor market shows a striking “hiring home bias” in that firms are more likely to hire local CEOs (i.e., CEOs from their own states). We explore how investors perceive such hiring practices by examining whether they demand different costs of equity capital from firms led by local versus non-local CEOs. Our empirical evidence suggests that, on average, investors perceive hiring local CEOs positively by demanding lower costs of equity capital. The finding holds up to a battery of robustness tests. Cross-sectional tests show that the effect is more pronounced in firms that are more locally based, when firms potentially receive more local monitoring, when firms issue more earnings forecasts, and when firms have strong corporate governance. In addition, the level of social capital in the state where a firm is located attenuates the negative relation. Overall, we find evidence consistent with the notion that capital market participants price CEOs’ geographic characteristics and provide implications to the boards of directors on CEO-firm matches.

Accounting and Finance Doi: https://doi.org/10.1111/acfi.13337

We examine the effect of a local CEO (i.e., the CEO's state of origin is the same as his/her firm's headquarter states) on a firm's strategic capacity choices and the resulting cost asymmetry. We find that firms with local CEOs demonstrate greater cost asymmetry. Place attachment, local advantage and agency cost theory could all influence a firm's cost asymmetry. To differentiate between these explanations, we use a consequence test that examines the association between asymmetric costs and future performance. Our results indicate that the greater cost asymmetry in firms with local CEOs is associated with higher future firm value, which suggests that the greater cost asymmetry from local CEOs arises due more to a local advantage. We include several cross-sectional tests to explore when this result is more or less pronounced. Our results suggest that geographically segmented labour markets play an important role in a firm's resource capacity decisions.

Journal of Management Accounting Research 36(1) p. 173-201 Doi: https://doi.org/10.2308/JMAR-2022-013

Although relative performance evaluation (RPE) represents an important compensation practice, selecting a relevant peer firm poses a challenge for compensation committees. We study the implications of a committee’s peer-specific knowledge for the peer group property (i.e., RPE relevance). Committees likely know more about firms within their networks, and such peer-specific knowledge increases with their connections to potential peer firms. Our findings suggest that peer-specific knowledge facilitates not only the inclusion of more relevant peer firms, but also the exclusion of less relevant ones. Moreover, the committees incorporate connected peers’ performance information to a greater extent for risk removal. We address identification challenges by including an intensive set of fixed effects to control for characteristics of the focal and the peer firms and by exploiting exogenous changes to the connections between the committees and the peer firms. Our findings suggest that the compensation committee’s peer-specific knowledge facilitates the RPE practice.

Journal of Corporate Finance 72 Doi: https://doi.org/10.1016/j.jcorpfin.2021.102125

In this study, we examine the effectiveness of the China Securities Investor Services Center (CSISC), a new minority shareholder protection mechanism promoted by the China Securities Regulatory Commission, in constraining earnings management. Employing a difference-in-differences analysis for a sample of Chinese listed companies during 2015–2017, we find that CSISC shareholding reduces earnings management. We also find that this effect exists in firms with weaker internal or external corporate governance mechanisms and in firms without political connections. The additional analyses show that the difference in earnings management between the treatment firms (i.e., CSISC-holding firms) and control firms is diminishing after the CSISC shareholding pilot program was promoted nationwide, and that CSISC shareholding also constrains controlling shareholders' tunneling. Our findings have important policy implications for emerging markets that attempt to improve minority shareholder protection.