Yaowen Shan - Academia.edu (original) (raw)

Papers by Yaowen Shan

Accounting and finance, Mar 8, 2018

Financial statement comparability enables weighing the similarities and differences in financial ... more Financial statement comparability enables weighing the similarities and differences in financial performance between firms. Prior studies mainly focus on the role of accounting standards in the production of comparability, but the role of economic agents has been largely overlooked. We find that a firm's audit committee size and financial expertise affect its financial statement comparability. Financial information tends to be more comparable among industry peers when audit committees are larger and more members have financial and accounting expertise. The effect of audit committee expertise on comparability is stronger for firms with less independent and smaller boards, for firms with non‐Big 4 auditors and for firms with CEOs serving as the chairperson of the boards.

The Accounting Review, Jul 19, 2023

This study assesses the impact of minority shareholder empowerment via lower defeat thresholds in... more This study assesses the impact of minority shareholder empowerment via lower defeat thresholds in "say-on-pay" votes on CEO compensation and career prospects for directors. We exploit the adoption of the Australian "two-strikes" rule as a quasi-exogenous shock, which empowers shareholders to vote on board dismissal if a firm's remuneration report receives 25 percent or more dissent votes for two consecutive years. Using a differencein-differences methodology, we find that firms respond to a "strike" by curbing excessive CEO pay. Under the twostrikes regime, independent directors are held more accountable for poor oversight and experience significant reputational penalties in terms of turnover and the loss of outside directorships subsequent to receiving a strike. The results are mainly driven by firms receiving a nonmajority strike, indicating that the effectiveness of the two-strikes regime stems largely from the lower defeat threshold.

Abacus, Dec 1, 2016

Responses and Rejoinders to Commentaries We are fortunate to have received 13 excellent commentar... more Responses and Rejoinders to Commentaries We are fortunate to have received 13 excellent commentaries on our paper. Each commentary is quite unique, perhaps reflecting how controversial is the topic of trying to set down fundamental design principles for managerial reward systems. Below we provide a brief response to each of the commentaries, setting out a summary of the issues that are raised and pointing out particular aspects that contribute to our ultimate goal of obtaining a consensus among finance and accounting academics on the central issue. Of course, once this set of papers are in the public domain, there will be further discussion and exchange of ideas. In accord with academic norms, we respond to each paper in alphabetical order. Beaumont et al. (2016) conduct an empirical experiment to gauge whether CEO pay is too high in the US, Australia and the UK. They do so by comparing the pay of CEOs to that of athletes in professional sports. The conclusion from this empirical analysis is that in the US 'the shape and nature of the distribution of CEO pay appears quite similar to that of professional athletes' (p. xx) and 'the data suggests [sic] that the bulk of the CEOs receive low pay' (p. xx). For Australia and the UK (where the sample sizes are much more limited) the conclusion is that Australian CEOs 'receive roughly twice the compensation of the … professional athletes' (p. xx) whereas in the UK 'CEOs earn higher equitylinked salaries than soccer players, but lower base salaries than these players' (p. xx). While we find this analysis interesting, especially in relation to some of the historical insights that are developed in the commentary, it does not offer any specific recommendations on the principles we set down. We also doubt the validity of a comparison to professional sporting reward systems, remembering that CEO rewards are dominated by stock-based incentive-aligning payments, which do not exist for most professional sports athletes. Our understanding of the remuneration structures for athletes in the major leagues in the US is that they tend to have salary caps with predetermined maximum tenures, salaries and salary growth rates and are tied to the income of the league. These issues make comparisons to CEO compensation even more dubious.

Finance Research Letters, May 1, 2023

Journal of Contemporary Accounting & Economics, Dec 1, 2012

ABSTRACT This study examines the determinants and performance consequences of changes in CEO comp... more ABSTRACT This study examines the determinants and performance consequences of changes in CEO compensation structure. The study uses the unique setting when Australian companies have changed from cash bonus to equity-based compensation. While most US CEOs receive some form of equity-based compensation, Australian CEOs have not always been paid equity-based compensation. According to efficient contracting theories, we argue that the change to equity-based compensation is driven by changes in firm characteristics and by the occurrence of CEO turnover, the latter of which provides a less costly opportunity for such change. Our results are consistent with the above arguments. We also document a significant negative association between changes in compensation structure and subsequent firm performance in the following year, even after controlling for CEO turnover and poor governance environments. Overall, our results suggest that the initial change to equity-based compensation is part of an error learning process made by firms that leads them towards efficient CEO compensation contracts.

Accounting and finance, Jul 8, 2022

International Review of Financial Analysis, May 1, 2021

Abstract The recent requirement to disclose key audit matters (KAMs) in audit reports aims to imp... more Abstract The recent requirement to disclose key audit matters (KAMs) in audit reports aims to improve audit quality and provide extra information to external users. Using a quasi-natural experiment in China and the difference-in-differences approach, we document causal evidence that KAM disclosures provide incremental firm-specific information and reduce stock price synchronicity. The effect of KAM disclosures is more pronounced in firms with controlling shareholders and fewer institutional shareholders. Overall, the findings suggest that KAM disclosures reduce information acquisition costs and facilitate firm-specific information impounded in price, especially when such information is less accessible to outside shareholders.

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The Accounting Review, May 26, 2022

SSRN Electronic Journal, 2021

Accounting and Finance, 2020

This paper investigates changes in corporate marginal tax rates (MTRs) in the United States over ... more This paper investigates changes in corporate marginal tax rates (MTRs) in the United States over the past three decades. Similar to effective tax rate, MTR exhibits a significant but much more modest decline over time, even after accounting for tax-related firm characteristics and industry variations. In contrast to Dyreng et al., we find that MTR declines more rapidly for purely domestic firms than for multinationals. Our findings highlight the puzzling evidence in Dyreng et al. and call for future research to study possible drivers that explain the sustained and differential decline in corporate tax rate over time between domestic and multinational firms.

Pacific-Basin Finance Journal, 2022

Accounting Research Journal, 2020

Purpose This paper aims to provide a critical discussion of the application of the research pitch... more Purpose This paper aims to provide a critical discussion of the application of the research pitching template developed by Professor Robert Faff to a research topic of tax avoidance and firm risk. This letter provides a brief commentary on using the pitching template and discusses personal reflections on the pitching process. Design/methodology/approach This pitching research letter applies Faff’s pitching template and provides a critical commentary of the pitching process. Findings The team found that Faff’s pitching template is a valuable tool for conceiving research ideas. It helped the authors to identify, develop and articulate key aspects of the project. Further, they believe that completing the template was a beneficial and rewarding exercise, especially for early-career researchers. Originality/value This pitching research letter is tied to the team’s research idea that was pitched at the 2020 AFAANZ “Shark Tank” event. It provides original commentary on the use of Faff’s pi...

ERN: Governance & Ownership (Topic), 2017

We argue that the broader applicability of accounting research is often limited by the way accoun... more We argue that the broader applicability of accounting research is often limited by the way accounting researchers typically place far greater weight on the relative cost of type I versus type II errors. To illustrate the extent of this problem, we examine the performance of simple financial ratio-type analysis for detecting earnings overstatements when the total misclassification costs are minimized subject to the relative cost of type I versus type II errors. We then contrast the likelihood of type I versus type II errors from this approach with those arising from several widely used measures of unexpected accruals. The results demonstrate how commonly-used unexpected accruals measures reduce the type I error rate by sacrificing the type II error rate. Given that accounting information users and auditors typically face much higher costs of type II errors, we explicitly identify why unexpected accruals models are likely far less useful in detecting earnings overstatements than a rel...

Systems Engineering, 2004

We examine the performance of Chinese close-end funds during 2000-2002. Using PPW and GT, two ben... more We examine the performance of Chinese close-end funds during 2000-2002. Using PPW and GT, two benchmark portfolios and three-factor model, we find CAPM lacks efficiency and it's more proper to use multifactor models. The Funds haven't exhibited significant selectivity ability in the whole sample period. But they exhibit superior securities selectivity in a bullish which may attribute to the excess return of policy.

Pacific-Basin Finance Journal, 2020

This study examines the impact of economic policy uncertainty (EPU) on capital investment by Aust... more This study examines the impact of economic policy uncertainty (EPU) on capital investment by Australian firms. Following a replication of prior US evidence (Gulen and Ion 2016), we show that EPU has a persistent and negative effect (up to four years) on capital investment by Australian Stock Exchange (ASX) listed firms, in contrast to the more short-lived effect of EPU in the US. The different results are consistent with the high proportion of ASX-listed firms in the resources and mining industries, where investment projects frequently proceed in stages and have time-to-build considerations. In accordance with real option theory, the findings reinforce the notion that EPU can dampen investment opportunities due to investment irreversibility.