Yuanyuan Liu

Research Question/Issue: This study examines how organizational structures adapt to digital technologies in the digital age. Many nontechnology firms are undergoing transformations driven by data‐driven digital technologies. However, their existing structures often fail to accommodate these changes, thus prompting a need for strategic adaptation to integrate these technologies into business operations. Specifically, we propose that digitalization facilitates decentralized power in governance structures. Research Findings/Insights: To better capture how digitalization influences governance structure, we focus on the adoption of digital technologies and apply multiple measures of digitalization to examine its impact on the empowerment of subsidiaries by parent firms. Using public data from China's listed companies between 2009 and 2020, we find that firms with higher levels of digitalization tend to decentralize decision‐making authority to their subsidiaries. Moderation tests indicate that this effect is more pronounced for companies with greater business diversification and those operating in environments of higher uncertainty, highlighting the role of digital technologies in managing task uncertainty and governance costs. Further analysis suggests that this shift in power allocation significantly enhances firm productivity. Theoretical/Academic Implications: This study contributes to the growing literature on corporate digitalization by shifting the focus from antecedents and production efficiency to proactive adaptation strategies. By exploring changes in internal power structures and their financial consequences, we offer insights into how digital technologies can drive competitive advantage within firms. Additionally, we contribute to organizational structure theory by positing that digital technologies act as an external contingency for nontech firms, requiring structural decentralization to align with technological shifts. Practitioner/Policy Implications: Our findings have implications for both professional managers and shareholders. For nontech firms seeking to enhance operational efficiency through digitalization, they should consider optimizing internal power structures in response to technological shifts, which can improve firm performance.

In this paper, we empirically examine whether financial statement comparability mitigates corporate fraud in China. Using the FSC measure proposed by De Franco, Kothari and Verdi (2011), we find that firms with greater comparability are less likely to commit frauds, either accounting – or non-accounting-related frauds. Further tests confirm that regulators can more quickly detect the fraudulent activities of accused firms if their financial statements are more comparable with those of their same-industry peers. Cross-sectional analyses show that the negative relationship between FSC and fraud incidence is more pronounced for firms with lower institutional ownership, and for those operating in regions with more developed markets. Overall, our study provides evidence for the benefits of peer comparisons in the fraud context, and has implications for investors, regulators, and standard setters.

SUMMARY: In this study, we examine the roles of audit firms and individual auditors in improving financial statement comparability. We conduct the study in the Chinese setting, in which the identities of signing auditors are revealed in audit reports and accounting standards are principle based. After controlling for audit firm style, we find that firm pairs with shared signing auditors have incrementally greater comparability. Our results indicate that individual auditors exhibit their own personal style in implementing accounting standards and exercising professional judgment in the audit process. Overall, our study underscores the association between individual auditors and comparability, with practical implications for market participants and policymakers.

Exploiting regulatory sanctions as quasi‐exogenous shocks and unique data at the individual‐director level from China, we examine whether board monitoring can spread between firms via shared directors. Our results show that a director experiencing regulatory sanction at another firm is more likely to attend the board meetings, indicating his or her greater monitoring efforts. We also find that a firm is more likely to provide transparent financial statement when it shares a common director with an accused firm, and the effect is mainly concentrated among non‐state‐owned enterprises. These findings shed new light on the positive role of director interlocks in spreading monitoring efforts after regulatory sanction.