Directors’ and officers’ (D&O) legal liability insurance is commonly provided to corporate executives and directors. Prior literature suggests managers are more willing to engage in opportunistic ...behaviors when their personal assets are more protected from litigation risk. Therefore, information about D&O policy details is potentially useful in assessing potential managerial opportunism. However, many countries, including the U.S., do not require firms to disclose this information. We provide evidence on whether mandatory D&O disclosures are likely to provide information about managerial opportunism that is incremental to that provided by other sources of information using a sample of Canadian firms, who are required to make D&O disclosures. We examine the association between excess D&O coverage limits and audit fees since auditors have extensive private information about the likelihood of managerial opportunism and strong incentives to incorporate this information into their audit fees. We find a positive association between excess D&O coverage limits and audit fees after controlling for numerous other audit fee determinants, including other proxies for managerial opportunism such as discretionary accruals and corporate governance variables. Additional analyses suggest auditors are more sensitive to potential managerial opportunism when managers are more likely to act on their opportunistic incentives. We also find a positive association between excess D&O coverage limits and the likelihood of future shareholder litigation. Our findings suggest that D&O insurance disclosures convey incremental information to shareholders and other capital market participants. As such, they suggest a beneficial role for mandatory D&O disclosures.
ABSTRACT
This study examines the effect of capitalizing acquired in‐process research and development (IPR&D) on information asymmetry under Statement of Financial Accounting Standards No. 141 (R) ...(SFAS 141R). SFAS 141R requires acquirers to fully recognize IPR&D at fair value as an indefinite‐lived intangible asset until completion or discontinuation of the project. Prior research suggests IPR&D capitalization will result in an improvement in the information environment. In contrast, we find no evidence that capitalizing IPR&D improved the information environment for IPR&D acquirers. Instead, most of our results suggest no significant change in information asymmetry for IPR&D acquirers during the post‐SFAS 141R period, relative to the concurrent changes for non‐IPR&D acquirers. In cases in which the results suggest a statistically significant increase, the economic magnitudes are relatively small. In addition, we find no evidence that IPR&D acquirers engaged in increased classification shifting between IPR&D and goodwill during the post‐SFAS 141R period, as critics of capitalization had feared.
RÉSUMÉ
Inscription à l'actif des projets de recherche et de développement en cours conformément à la SFAS 141R et asymétrie de l'information
Les auteurs s'intéressent à l'incidence de l'inscription à l'actif des projets de recherche et de développement en cours (projets de R&D en cours) qui sont acquis sur l'asymétrie de l'information sous le régime de la SFAS (Statement of Financial Accounting Standards) 141R (SFAS 141R), norme exigeant que l'acquéreur comptabilise intégralement les projets de R&D en cours à la juste valeur à titre d'immobilisation incorporelle d'une durée de vie indéterminée, jusqu’à l'achèvement ou l'abandon du projet. Les études antérieures donnent à penser que l'inscription à l'actif des projets de R&D en cours entraîne une amélioration de l'environnement informationnel. Or, les auteurs ne relèvent aucun élément permettant de conclure que l'inscription à l'actif des projets de R&D en cours ait amélioré l'environnement informationnel chez les acquéreurs de tels projets. Au contraire, les résultats qu'ils obtiennent ne semblent indiquer aucun changement important de l'asymétrie de l'information chez les acquéreurs de projets de R&D en cours dans la période postérieure à l'adoption de la SFAS 141R, par rapport aux changements concurremment observés chez les non‐acquéreurs de tels projets. Dans les cas où les résultats permettent de croire à une hausse statistiquement significative, l'ampleur économique de cette hausse est relativement modeste. De plus, les auteurs ne relèvent aucune donnée permettant d’établir que les acquéreurs de projets de R&D en cours aient intensifié les modifications de classement auxquelles ils se livrent entre les projets de R&D en cours et le goodwill dans la période postérieure à l'adoption de la SFAS 141R, comme l'avaient craint les critiques de l'inscription à l'actif.
PurposeThis paper aims to investigate whether the stock market reacts to presentation options available to auditors under AS 2 (providing separate financial statement audit and internal control over ...financial reporting ICOFR audit reports, or presenting a combined report with both audit opinions).
Design/methodology/approachDrawing on psychology theory, the authors hypothesize that presenting material weaknesses in ICOFR with an unqualified financial statement audit in a combined report effectively dilutes the weight placed on the material weaknesses perceived by investors. The authors further hypothesize the presentation format effect to vary by type of material weaknesses since some material weaknesses are considered more serious than others. The authors examine ICOFR and audit reporting and cumulative abnormal return data from 2007 to 2017 using two-stage least squares regression analysis.
FindingsThe results show that a combined report of ineffective ICOFR and unqualified financial statement audit reduces the negative impact of material weakness disclosures on stock price reactions, but only when the weaknesses involve more serious entity-wide controls, as opposed to controls over specific accounts.
Practical implicationsThe findings help inform preparers, auditors, regulators and investors about the potentially unintended consequences of reporting format choice.
Originality/valueThe findings contribute to the literature on internal control disclosures by demonstrating that market reactions to these disclosures depend not only on the types of material weaknesses disclosed but also on their presentation format.
This viewpoint article, which represents the opinions of the authors, discusses the barriers to developing a patient-oriented frailty website and potential solutions. A patient-oriented frailty ...website is a health resource where community-dwelling older adults can navigate to and answer a series of health-related questions to receive a frailty score and health summary. This information could then be shared with health care professionals to help with the understanding of health status prior to acute illness, as well as to screen and identify older adult individuals for frailty. Our viewpoints were drawn from 2 discussion sessions that included caregivers and care providers, as well as community-dwelling older adults. We found that barriers to a patient-oriented frailty website include, but are not limited to, its inherent restrictiveness to frail persons, concerns over data privacy, time commitment worries, and the need for health and lifestyle resources in addition to an assessment summary. For each barrier, we discuss potential solutions and caveats to those solutions, including assistance from caregivers, hosting the website on a trusted source, reducing the number of health questions that need to be answered, and providing resources tailored to each users' responses, respectively. In addition to screening and identifying frail older adults, a patient-oriented frailty website will help promote healthy aging in nonfrail adults, encourage aging in place, support real-time monitoring, and enable personalized and preventative care.
Outdoor air pollution is a potential risk factor for lower lung function and chronic obstructive pulmonary disease (COPD). Little is known about how airway abnormalities and lung growth might modify ...this relationship.
To evaluate the associations of ambient air pollution exposure with lung function and COPD and examine possible interactions with dysanapsis.
We made use of cross-sectional postbronchodilator spirometry data from 1,452 individuals enrolled in the CanCOLD (Canadian Cohort Obstructive Lung Disease) study with linked ambient fine particulate matter (PM
) and nitrogen dioxide (NO
) air pollution estimates. Dysanapsis, or the ratio of the airway-to-lung volume calculated from thoracic computed tomography images, was used to examine possible interactions.
In adjusted models, 101.7 ml (95% confidence interval CI, -166.2 to -37.2) and 115.0 ml (95% CI, -196.5 to -33.4) lower FEV
were demonstrated per increase of 2.4 ug/m
PM
and 9.2 ppb NO
, respectively. Interaction between air pollution and dysanapsis was not statistically significant when modeling the airway-to-lung ratio as a continuous variable. However, a 109.8 ml (95% CI, -209.0 to -10.5 lower FEV
and an 87% (95% CI, 12% to 213%) higher odds of COPD were observed among individuals in the lowest, relative to highest, airway-to-lung ratio, per 2.4 μg/m
increment of PM
.
Ambient air pollution exposure was associated with lower lung function, even at relatively low concentrations. Individuals with dysanaptic lung growth might be particularly susceptible to inhaled ambient air pollutants, especially those at the extremes of dysanapsis.
Individuals with COPD and preserved ratio impaired spirometry (PRISm) findings in clinical settings have an increased risk of cardiovascular disease (CVD).
Do individuals with mild to moderate or ...worse COPD and PRISm findings in community settings have a higher prevalence and incidence of CVD compared with individuals with normal spirometry findings? Can CVD risk scores be improved when impaired spirometry is added?
The analysis was embedded in the Canadian Cohort Obstructive Lung Disease (CanCOLD). Prevalence of CVD (ischemic heart disease IHD and heart failure HF) and their incidence over 6.3 years were compared between groups with impaired and normal spirometry findings using logistic regression and Cox models, respectively, adjusting for covariables. Discrimination of the pooled cohort equations (PCE) and Framingham risk score (FRS) in predicting CVD were assessed with and without impaired spirometry.
Participants (n = 1,561) included 726 people with normal spirometry findings and 835 people with impaired spirometry findings (COPD Global Initiative for Chronic Obstructive Lung Disease GOLD stage 1 disease, n = 408; GOLD stage ≥ 2, n = 331; PRISm findings, n = 96). Rates of undiagnosed COPD were 84% in GOLD stage 1 and 58% in GOLD stage ≥ 2 groups. Prevalence of CVD (IHD or HF) was significantly higher among individuals with impaired spirometry findings and COPD compared with those with normal spirometry findings, with ORs of 1.66 (95% CI, 1.13-2.43; P = .01∗) (∗ indicates statistical significane with P < .05) and 1.55 (95% CI, 1.04-2.31; P = .033∗), respectively. Prevalence of CVD was significantly higher in participants having PRISm findings and COPD GOLD stage ≥ 2, but not GOLD stage 1. CVD incidence was significantly higher, with hazard ratios of 2.07 (95% CI, 1.10-3.91; P = .024∗) for the impaired spirometry group and 2.09 (95% CI, 1.10-3.98; P = .024∗) for the COPD group compared to individuals with normal spirometry findings. The difference was significantly higher among individuals with COPD GOLD stage ≥ 2, but not GOLD stage 1. The discrimination for predicting CVD was low and limited when impaired spirometry findings were added to either risk score.
Individuals with impaired spirometry findings, especially those with moderate or worse COPD and PRISm findings, have increased comorbid CVD compared with their peers with normal spirometry findings, and having COPD increases the risk of CVD developing.
Exertional breathlessness is a cardinal symptom of cardiorespiratory disease.
How does breathlessness abnormality, graded using normative reference equations during cardiopulmonary exercise testing ...(CPET), relate to self-reported and physiologic responses in people with chronic airflow limitation (CAL)?
An analysis was done of people aged ≥ 40 years with CAL undergoing CPET in the Canadian Cohort Obstructive Lung Disease study. Breathlessness intensity ratings (Borg CR10 scale 0-10 category-ratio scale for breathlessness intensity rating) were evaluated in relation to power output, rate of oxygen uptake, and minute ventilation at peak exercise, using normative reference equations as follows: (1) probability of breathlessness normality (probability of having an equal or greater Borg CR10 rating among healthy people; lower probability reflecting more severe breathlessness) and (2) presence of abnormal breathlessness (rating above the upper limit of normal). Associations with relevant participant-reported and physiologic outcomes were evaluated.
We included 330 participants (44% women): mean ± SD age, 64 ± 10 years (range, 40–89 years); FEV1/FVC, 57.3% ± 8.2%; FEV1, 75.6% ± 17.9% predicted. Abnormally low exercise capacity (peak rate of oxygen uptake < lower limit of normal) was present in 26%. Relative to peak power output, rate of oxygen uptake, and minute ventilation, abnormally high breathlessness was present in 26%, 25%, and 18% of participants. For all equations, abnormally high exertional breathlessness was associated with worse lung function, exercise capacity, self-reported symptom burden, physical activity, and health-related quality of life; and greater physiologic abnormalities during CPET.
Abnormal breathlessness graded using CPET normative reference equations was associated with worse clinical, physiological, and functional outcomes in people with CAL, supporting construct validity of abnormal exertional breathlessness.
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