Santanu Mitra's article 'Highly Commended' in 2018 Emerald Literati Awards

Accounting professor Dr. Santanu Mitra's article, which was published in Review of Accounting and Finance in 2017, has been selected by the editorial team as Highly Commended in the 2018 Emerald Literati Awards.

"The criteria used to judge the awards are based on six areas that inform the development of our products: internationality; diversity; support for scholarly research; encouragement of applied research (impact); commitment to high quality scholarship; and a desire to ensure reader, author and customer experience is the best it can be," according to Emerald Publishing.

Review of Accounting and Finance publishes high quality research papers covering a wide range of accounting and finance topics, offering a global perspective on issues including the role of accounting internal and external communications on capital market valuation, microstructure, asset pricing, corporate financial decision making and users' and preparers' behavior and public policy, according to its website.

His article, co-authored by Bikki Jaggi and Talal Al-Hayale, is titled “ The effect of managerial stock ownership on the relationship between material internal control weaknesses and audit fees.”

Abstract: The purpose of the study is to examine the effect of managerial stock ownership on the relationship between material internal control weaknesses (ICW) and audit fees. For the firms with low managerial stock ownership (up to 5% stockholdings), we find no significant ownership effect on the positive relationship between audit fees and ICW. However, the impact of managerial stock ownership on the relationship between ICW and audit fees is significantly positive when the managerial ownership is at medium level, i.e. more than 5% but less than or equal to 25% stockholdings; and the managerial ownership effect is more robust with high managerial stock ownership, i.e. more than 25% stockholdings. The additional analyses further show that the managerial ownership effect is more pronounced when the firms suffer from company-level material control weaknesses having pervasive negative effect on financial reporting quality. Our results imply that in a low managerial ownership firms with substantial misalignment between manager and shareholder incentives, managerial stock ownership has little effect on ICW and audit fee relationship. However, when the ownership interest is at a high level, managers are more prone to purchase higher quality audit service to reduce the risk of financial misstatements caused by material internal control weaknesses, which results in higher audit fees. The results add to the audit fee literature by suggesting that managerial incentive at various ownership levels is a critical governance factor that affects auditor’s fee structure especially when higher reporting risk exists in presence of material internal control weaknesses.  

 

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