Katsushi Suzuki

Abstract We use a Japanese dataset with unique regulatory features to examine information absorption in stocks with short‐selling constraints. Japanese stock exchanges place short‐sales restrictions on a specific subset of stocks and have distinctive regulations pertaining to seasoned equity offerings (SEOs). In sharp contrast to the United States, no offer‐related information is released on the Japanese SEO issue date. We observe a significant price reaction on the issue date only for short‐ sales restricted stocks, manifested when additional shares are introduced. We posit that the phenomenon is attributable to short‐sales restrictions causing a delayed reaction to the stale publicly available information, to which the market has already reacted at its announcement.

Abstract Prior studies have found that engagement partner busyness influences audit effectiveness. The more workload partners have from clients, the busier partners will be, resulting in lower audit quality. However, internal resources available to partners can attenuate the partners’ work burden, although the moderating effect of such resources has been mostly overlooked in the literature. As partners’ work burden could lessen for a partner with more internal resources, we elaborate on its effect in this study. We examine the following types of internal resources: (1) availability of higher‐ranked personnel and (2) accumulated client‐specific information. Our results show that engagement partners reduce audit quality for a client when partners bear higher work burden from other clients, for which limited internal resources are available. Moreover, the results indicate that this mutual impact on the audit quality of partners’ workload and internal resource availability for other clients is more pronounced for non‐Big 4 clients. These results suggest that internal resource allocation is critical for quality control, especially for non‐Big 4 audit firms.