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Since 2005, listed firms in Germany have been subject to the hybrid enforcement system that aims at ensuring consistent and faithful application of relevant accounting standards and in particular IFRS. Being first of its kind, the German enforcement system combines cooperative iestigations conducted by a private financial reporting enforcement panel (FREP) and federal powers through downstream iolvement of the German Financial Supervisory Authority (BaFin). The hybrid enforcement system’s main deterrent is adverse disclosure which iolves public dissemination of financial misreporting. In this dissertation, which comprises five separate manuscripts, I analyze both foundations and consequences of adverse disclosure in Germany. The first two manuscripts address different questions related to institutional premises and deduce avenues for future research. The remaining three manuscripts elaborate on selected research questions related to consequences of financial misreporting and their determinants. In summary, this dissertation has material impact on the understanding of hybrid enforcement systems
This paper investigates personal consequences for management executives in the context of financial misreporting exposed by German enforcement institutions. More specifically, we examine CEO and CFO turnover in the context of an error announcement. By doing so, we compare 103 firms that issued an error announcement between 2006 and 2013 with industryandsize-matched control firms. First, we find notable differences in executive turnover for the five-year period including two years before and after the year of the error announcements. Second, we show that the likelihood for executive turnover is significantly associated with executive tenure, firm size, firm performance, and chairperson turnover. However, multivariate analysis does not provide similar evidence for financial misreporting. Third, our analysis of the error announcements’ characteristics indicates that the probability for executive turnover particularly increases for errors related to professional judgment and management report issues. That is, executives face personal consequences for non-appropriate use of its discretion.
Mit der Einrichtung der Deutschen Prüfstelle für Rechnungslegung – kurz DPR – begann im Jahr 2005 die Erfolgsgeschichte des zweistufigen Enforcement-Systems in Deutschland. Seit mittlerweile zehn Jahren prüft die DPR die Abschlüsse kapitalmarktorientierter Unternehmen und trägt somit zu einer effektiven Durchsetzung der gültigen Rechnungslegungsstandards bei. Der Beitrag zeigt in einer Bestandsaufnahme, dass mehrere Indikatoren für ein insgesamt effektives Enforcement durch die DPR sprechen – auch wenn die Empirie derzeit ein eher heterogenes Bild zeichnet.
Regelmäßig wurde den IFRS vorgeworfen, die Erfassung von Aufwendungen und Erträgen im other comprehensive income (OCI) sei konzeptionslos. In neueren Beiträgen rücken zusätzlich der heterogene Ausweis bzw. der Detailgrad des Ausweises in den Fokus der konstruktiven Verbesserungsvorschläge. In den vergangenen Jahren wurde IAS 1 daher mehrfach überarbeitet und hat eine Reihe an Neuerungen erfahren, die sowohl die Erfassung als auch den Ausweis von Erträgen, Aufwendungen sowie korrespondierenden Steuern betreffen. Der Frage nach der Wertrelevanz der Ergebnisgröße geht die Beobachtung der Bedeutung selbiger vor – dieser widmet sich der vorliegende Beitrag. _x000D_ <div class="indent">
This paper contributes to the understanding of the German two-tiered enforcement system and the ‘name and shame’ mechanism as its deterrent. We investigate short-term reactions to error announcements published between 2006 and 2013 and find significant evidence for differences of investor reactions between the early and the current years of enforcement. Disentangling the contributing factors of error severity, we provide evidence that investor reactions are primarily driven by the impact of error announcements on profitability and financial leverage. Conversely, we detect the amount of errors established to be negatively associated with investor reactions indicating that extensive error announcements have an attenuating effect on investor reactions. Further multivariate analyses provide additional insights referring to determinants of investor reactions by examining effects of stated errors on core earnings, effects of errors triggered due to second-guessing the use of professional judgment, and changes of investor perception over time.
The main objective of international financial reporting under both US GAAP and IFRS is to provide information that is useful to iestors. However, it is questionable whether this goal can be fully realized without proper and strict enforcement, which ensures faithful and consistent application of the relevant accounting standards. Within the multiplicity of studies iestigating enforcement mechanisms and reactions to enforcement consequences, this paper provides an overview on the current state of research on enforcement as a corporate governance mechanism. We analyze prior enforcement literature from both internal and external corporate governance perspectives in order to show effects of enforcement on different mechanisms of financial reporting oversight. It becomes evident that most research does not address either efficiency or efficacy of enforcement mechanisms and that most causes and consequences of error announcements in the European setting have not been iestigated yet. Hence, we deduce further research opportunities focused on enforcement procedures and mechanisms in the European setting.
The main objective of financial reporting is to provide useful information to a firm’s stakeholders. However, it is questionable whether this goal can be fully realized without effective enforcement, which ensures faithful and consistent application of the relevant accounting standards. Within the multiplicity of studies iestigating enforcement mechanisms and consequences to enforcement actions, this paper provides an overview on the current state of research on enforcement from a corporate governance perspective. We therefore analyze enforcement literature from both internal and external corporate governance perspectives in order to show interactions between enforcement and other mechanisms of financial reporting oversight. In addition, it becomes evident that most preceding research addresses neither efficiency nor efficacy of enforcement systems due to missing effect variables or data accessibility. Furthermore, we deduce further research opportunities with respect to enforcement consequences and their determinants.
This HHL Working Paper 150 is a revised version of the HHL Working Paper 142.
Abschlüsse kapitalmarktorientierter Unternehmen sind Prüfungsgegenstand des deutschen Enforcement-Systems. Aus den häufig nicht bekannten Verfahrensunterschieden resultieren Missverständnisse hinsichtlich des Zusammenwirkens beider Qualitätssicherungsinstrumente. Der vorliegende Beitrag stellt die spezifischen Differenzen der beiden Prüfungsverfahren dar und würdigt diese vor dem jeweiligen konzeptionellen Hintergrund. Die spezifischen Verfahrensunterschiede ergänzen somit das zuvor im Beitrag „Rahmenbedingungen von Abschlussprüfung und Enforcement-Verfahren in Deutschland“ der Verfasser dargelegte Bild der grundlegenden Differenzen zwischen beiden Verfahren.
Seit 2009 besitzen kapitalmarktorientierte Unternehmen in Deutschland die Möglichkeit, IFRS-Anwendungssachverhalte mit der für das Enforcement-Verfahren zuständigen Deutschen Prüfstelle für Rechnungslegung (DPR e. V.) verfahrensunabhängig abzustimmen. Die Implementierung dieser sog. Pre-Clearance wurde von einer intensiven Diskussion um die kompetenzrechtliche und verfahrensprozessuale Ausgestaltung des Verfahrens begleitet. Rückblickend auf das seit über vier Jahren praktizierte Verfahren fällt auf, dass die Rezeption durch die Bilanzierenden bislang eher eingeschränkt ausfällt. Der Beitrag soll daher zunächst mögliche Gründe für dieses Verhalten identifizieren, um im Anschluss daran die Frage nach der Zukunftsfähigkeit der Pre-Clearance in Deutschland zu stellen.