This study investigates whether legislative pressure influences credit rating agency (CRA) behavior. It covers a time period in which the European Union moves from exerting minimal to intense legislative pressure on CRAs, providing an almost ideal context for analyzing if and how CRAs are affected by this pressure. Two possible outcomes are discussed: 1) more timeliness in the flow of information and 2) more stickiness in the flow of information. The analysis is based on an examination of market reactions following CRA announcements between 2000 and 2019. The results show that the market reactions after CRA announcements decrease when legislative pressure increases. The interpretation is that as legislative pressure increases, the flow of information from CRAs becomes stickier. This confirms that legislative initiatives that put pressure on CRAs have an effect, evidence that legislators’ intention to change behavior by threatening or initiating new regulations works, which confirms assumptions underlying the theory of legislative threats (Halfteck, 2008). A reasonable interpretation of legislators’ push for changes in this context is that they want to see a faster flow of information. The results, however, show the opposite. A plausible explanation for this is increased caution on the part of CRAs because if in retrospect, the information in an announcement turns out to be wrong or misleading, the ensuing criticism could lead to additional pressure.

A firm's governance structure and business model might explain the firm’s failure or success. Franchising is a business model that has not received much attention within the corporate governance (CG) literature even though it obviously brings several unique CG challenges. Therefore, we review articles at the interface of CG and franchising. We identify and thematize the literature in four focus areas, each with a different relationship to CG: 1) traditional CG, 2) governance challenges unique to franchising, 3) governance modes, and 4) contracts. We find that the literature largely ignores the traditional view of CG when examining many aspects of franchising. We also find that the franchising literature covers governance topics when discussing governance modes, which provides a basis for developing CG theories. Altogether, our findings open a promising avenue for future research that incorporates CG into studies of franchising.

In the accounting and finance literature, the concept of the information environment (IE) is widely used, but its meaning varies across different articles. Given the considerable presence of the IE concept, it seems relevant to clarify the concept and allow a clearer path forward for future research. With this ambition, this paper reviews articles that apply the concept of IE. Our sample consists of 248 articles published within the accounting and finance field between 2000 and 2017. We confirm an increasing trend in the use of the concept over time and discuss the lack of distinctness in the concept's general meaning. Several definitions of IE appear parallel to one another in the literature; in many cases, these definitions are also inconsistent. To analyze the concept, we use a two-step approach with the following subordinated aims: 1) to identify and clarify different types of IE, and 2) to identify and clarify the components that constitute the firm's IE. We find that the description preceding the term IE signals a border between different types of information or between different societal levels of IE. Also, the concept appears as a “system concept,” and its inclusion of different actors, the relations among these actors, and the effect of these relations on information asymmetry are core aspects that need to be described in future research.

Auditing is one of the most obvious corporate governance mechanisms, and auditors play one of the most central gatekeeping roles in the corporate governance system. The auditing function has typically been examined as if it is essentially independent of the legal context in which it is applied. However, some studies emphasize that the auditor’s governance role is likely dependent on the national corporate governance system in which an auditor operates. One area that has received attention is how the legal environment, including the strength of shareholder protection regulations, affects the demand for auditing. However, entirely contradictory understandings of this relationship can be derived from the literature: that these two mechanisms act as substitutes and that they act as complements. A potential explanation for this discrepancy is that prior studies use static measures of regulations as proxies for shareholder protections and proxies for auditing service demand that have been criticized for being too rough. By using the Shareholder Protection Index developed by the Centre for Business Research at Cambridge and four measures capturing nuances of auditing service demand, this study makes a novel contribution to this line of research. By using data from two countries, the UK and Sweden, that belong to different legal traditions, the analysis also tests whether this aspect has any impact on the relationship between shareholder protections and auditor demand. The analysis shows that the demand for auditor services in general is positively correlated with the level of shareholder protection imposed by regulations, i.e., these two corporate governance mechanisms are compliments. There is no support for the argument that a country’s legal origin affects this relationship. The general interpretation is that the level of shareholder protections imposed by regulations will drive the demand for auditor services and that this is the case irrespective of a country’s legal origin. This study provides in-depth knowledge on the relationship between the legal environment and the demand for auditing, offers valuable information about the impact and consequences of legal reforms and is therefore especially valuable for policymakers and academics interested in this topic.

This dissertation is motivated by the circumstance that theoretical discussions of statutory auditing are dominated by the principal-agent perspective. The effect of this has been so pervasive that general assumptions characterising the principal-agent perspective may have become regarded as true. On this basis, there are fears that important decisions, for example, could be made on erroneous grounds, as principal-agent perspectives essentially lack external validity. Critics have pointed out that the basic assumptions of the principalagent theoretical perspective – that individuals always act out of self-interest and that there is a constant risk of opportunism – become too general and need to be made more nuanced. It has been argued that trust, which may be regarded as a contrasting concept to self-interest and opportunism, might be integrated to support external validity. It may also be noted that this term – trust – has become a catchword for describing the significance and role of auditing in the practical discourse. These arguments support the relevance of this dissertation, where the overall purpose is to elaborate on a theoretical perspective on the statutory auditing including trust. This will contribute to explaining and understanding statutory auditing in a way that balances the currently dominant theoretical perspectives on auditing.

The dissertation accomplishes this in three related ways building on three parts. The first of these aims to substantiate a theoretical proposition based on trust theory. It focuses on clarifying various dimensions of trust which may contribute to analysing the role and significance of auditing. The second is an empirical study aimed at elucidating auditing from a systems perspective and contains a historical analysis in which texts are used to reproduce and analyse some of the developments on the basis of the theoretical framework. The third is an empirical study which concerns auditing from an investors perspective. It is based on a survey of equity investors in companies listed on the Stockholm stock exchange, and also based on the theoretical framework. The two empirical studies contribute to substantiating the proposition that trust is a concept that should be integrated in theories explaining the role and function of auditing.

Financial analyst forecast properties are often used to measure the information environment (IE) within which firms operate. The three most common analyst proxies for IE are analyst following, analyst forecast accuracy, and analyst forecast dispersion. Research using these forecast properties indicates that country-level corporate governance (CCG) positively affects IE. However, consider that analyst properties are determined by both public and private information and that these proxies do not enable determining these two dimensions; even so, they can be interpreted as a rough proxy for IE, in particular because there are models that measure the proportion and precision of private information, the precision of public information and the precision of total information using analyst data. We claim that it is especially important to understand these dimensions and that the relationship between CCG and IE has not been fully investigated. The aim of this paper is therefore to investigate this relationship more thoroughly using a new model as a proxy for firms’ IE. We use a worldwide sample, and our results show that higher levels of CCG significantly and positively affect IE. Greater CCG improves the precision of both public and total information. Additionally, our results indicate that precision in private information is unaffected by greater CCG and that analysts use relatively less private information in their forecasts with increased CCG. We can therefore conclude a generally positive relationship between CCG and IE with improved public information. 

In the corporate governance landscape there are several different groups of so-called gatekeepers who act as intermediary between the company and investors. Financial analysts represent one of these groups that have been especially tied to the question of how corporate laws affect the overall efficiency of corporate governance. It has, for example, been proposed that their performance, that is, predicting earnings per share (EPS), is influenced by the strength of the legal system in terms of investor protection. In this study we analyze this relationship in four European countries using a newly developed index for investor protection. This allows us to conduct analysis both cross-sectionally and over time, which is an opportunity for a more refined analysis of the impact of strengthened investor protection than prior studies. Our main conclusion is that there is overall support for the proposition that there is a relation between financial analysts’ performance and the strength of legal protection based on both analyses of changes over time and between countries. Their performance is better with a higher degree of investor protection. But we also claim that the analysts’ role and investor protection can be seen as a substitution for each other when working as mechanisms in the corporate governance landscape, as there is a more extensive market for analysts when there is less investor protection. The results provide an in-depth analysis of the effect of strengthened legalization and also how different corporate governance mechanisms can affect each other. This is especially of value for policy makers and academics interested in the impact and consequences of legal reforms.

This study investigates the consequences of using different methods when making conclusions about the effect of IFRS. The study’s contribution is related to the suggestion that research design must be considered when analysing the results of prior studies on the adoption of IFRS. In summary, our results demonstrate that the impact of IFRS on accounting quality measured as financial analysts’ information environment depends on the model used. Using the same model as in prior research (the BKLS model) our results confirm earlier studies that IFRS adoption improves the information environment for analysts. However, when using a more sophisticated model no such improvement can be found.

This paper investigates the effect of shareholder protection on analysts’ performance. The important corporate governance role analysts can play by monitoring management has largely been ignored in the literature. Using a newly constructed index, we are for the first time able to analyse how changes in shareholder protection over time affect analysts’ performance as a gatekeeper. We find that strengthened shareholder protection improves analysts’ performance as a gatekeeper, i.e. analysts’ ability to reduce information asymmetry improves with strengthened shareholder protection. However, we also find a substitution effect: Strengthened shareholder protection makes analysts’ services less valuable to investors, thereby leading to a reduction in the number of analysts following firms.