顶刊推送Contemporary Accounting Research.2021-38-4
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《China Journal of Accounting Research》2021-14-4
《Journal of Accounting Research》2021年第59卷第4期
Contemporary Accounting Research
Volume 38, Issue 4
（Winter 2021）
About the Journal:Contemporary Accounting Research (CAR), the premiere research journal of the Canadian Academic Accounting Association, publishes leading- edge research that contributes to our collective understanding of accounting's role within organizations, markets or society. Canadian based, and global in scope, CAR seeks to reflect the worldwide intellectual diversity in accounting research. Therefore, CAR welcomes interesting and intellectually rigorous work in all topics of accounting, using any appropriate method, and based in any discipline or research tradition that can contribute to accounting knowledge.
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catalog
[1]. Immaterial Error Corrections and Financial Reporting Reliability
Preeti Choudhary, Kenneth Merkley, Katherine Schipper
[2]. Is There a Brain Drain in Auditing? The Determinants and Consequences of Auditors Leaving Public Accounting
W. Robert Knechel, Juan Mao, Baolei Qi, Zili Zhuang
[3]. Group Recruiting Events and Gender Stereotypes in Employee Selection
Kirsten Fanning, Jeffrey Williams, Michael G. Williamson
[4]. The Role of Deferred Equity Pay in Retaining Managerial Talent
Radhakrishnan Gopalan, Sheng Huang, Johan Maharjan
[5]. Career Concerns and Financial Reporting Quality
Suil Pae
[6]. Internal Information Quality and State Tax Planning
Stacie Kelley Laplante, Daniel P. Lynch, Mary E. Vernon
[7]. Does the Threat of a PCAOB Inspection Mitigate US Institutional Investors' Home Bias?
Yue He, Bing Li, Zhenbin Liu, Jeffrey Pittman
[8]. Do PCAOB Inspections of Foreign Auditors Affect Global Financial Reporting Comparability?
Matthew Ege, Young Hoon Kim, Dechun Wang
[9]. Why Firms Announce Good News Late: Earnings Management and Financial Reporting Timeliness
Mark P. Kim, Spencer R. Pierce, Ira Yeung
[10]. Risk-Taking Incentives and Earnings Management: New Evidence
Michael Mayberry, Hyun Jong Park, Tian Xu
[11]. Investors' Perceptions of Activism via Voting: Evidence from Contentious Shareholder Meetings
Francois Brochet, Fabrizio Ferri, Gregory S. Miller
[12]. The Impact of Risk and the Potential for Loss on Managers' Demand for Audit Quality
Patrick J. Hurley, Brian W. Mayhew, Kara M. Obermire, Amy C. Tegeler
[13]. Voluntary Disclosure in Light of Control Concerns
Anil Arya, Ram N.V. Ramanan
[14]. Is Framing More Effective Than Regulating Disclosures? The Effects of Risk Disclosure Frame and Regime on Managers' Disclosure Choices
Feng Yeo
[15]. The Impact of Mandatory Auditor Tenure Disclosures on Ratification Voting, Auditor Dismissal, and Audit Pricing
Ryan T. Dunn, Nathan G. Lundstrom, Michael S. Wilkins
[16]. Large Shareholder Portfolio Diversification and Voluntary Disclosure
Herita Akamah, Sydney Qing Shu
[17]. Firm Unionization and Disruptions in Customer Relationships
Gary Chen, J. Scott Judd, Shailendra (Shail) Pandit
[18]. Tax Haven Incorporation and the Cost of Capital
Christina M. Lewellen, Landon Mauler, Luke Watson
[19]. Bank Lending and Corporate Innovation: Evidence from SFAS 166/167
Yiwei Dou, Zhaoxia Xu
[20]. Can Staggered Boards Improve Value? Causal Evidence from Massachusetts
Robert Daines, Shelley Xin Li, Charles C.Y. Wang
[21]. The Effects of Information Acquisition Effort, Psychological Ownership, and Reporting Context on Opportunistic Managerial Reporting
Katlijn Haesebrouck
[22]. Do Foreign Component Auditors Harm Financial Reporting Quality? A Subsidiary-Level Analysis of Foreign Component Auditor Use
William M. Docimo, Joshua L. Gunn, Chan Li, Paul N. Michas
[23]. Bundled Earnings Guidance and Analysts' Forecast Revisions
Charles Hsu, Rencheng Wang
[24]. The Effects of High Estimate Uncertainty in Auditor Negligence Litigation
Jeffrey Pickerd, M. David Piercey
[25]. Expanded Auditor's Report Disclosures and Loan Contracting
Vlad-Andrei Porumb, Yasemin Zengin-Karaibrahimoglu, Gerald J. Lobo, Reggy Hooghiemstra, Dick de Waard
Abstract
1.Immaterial Error Corrections and Financial Reporting Reliability
Preeti Choudhary
University of Arizona
Kenneth Merkley
Indiana University
Katherine Schipper
Duke University
Abstract：We provide large-sample archival evidence on the nature and consequences of errors deemed immaterial to the previously issued financial statements containing the errors (immaterial errors). The incidence of immaterial error corrections has been increasing since about 2004, and these corrections are associated with modestly and discernibly negative share returns that are more negative for income-decreasing corrections and corrections that involve multiple issues. We find that immaterial errors are a leading indicator of poor reporting reliability as measured by future material and immaterial reporting errors, material weaknesses in internal controls, and SEC comment letters. Our findings suggest that immaterial errors provide researchers and investors with a more frequent and less severe indicator of potential audit or financial reporting issues as compared to more extreme reporting problems such as material errors corrected by restatements.
Keywords: misstatement correction, error correction, materiality, revision, out-of-period adjustment, financial reporting quality
2.Is There a Brain Drain in Auditing? The Determinants and Consequences of Auditors Leaving Public Accounting
W. Robert Knechel
University of Florida - Fisher School of Accounting
Juan Mao
University of Texas at San Antonio - Department of Accounting
Baolei Qi
Xi'an Jiaotong University (XJTU) - School of Management
Zili Zhuang
The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration
Abstract：This study investigates why auditors leave public accounting and the consequences of auditor departures, both of which have been of great concern for audit firms and regulators worldwide. Using data from China and controlling for demographics, we find that audit partners and managers, auditors who generate more revenue, and auditors who provide higher audit quality have a lower likelihood of departure, while non–Big 4 auditors have a higher likelihood of departing public accounting. We also find that an audit firm is likely to lose clients when an auditor departs. Clients who stay with the same firm pay lower audit fees but with no drop-off in audit quality after a signing auditor departs. In supplementary analyses, we also demonstrate that the determinants and consequences of auditor departures are different for auditors who leave the firm but not the profession (i.e., auditor turnover). Specifically, high audit quality is associated with a lower likelihood of auditor departure, but it increases auditor turnover. We also observe that audit quality is reduced for the clients who stay with an audit firm after highly skilled auditors depart for high-visibility corporate positions. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators.
Keywords: audit partner; auditor departure; audit firm switch; audit fees; audit quality
3.Group Recruiting Events and Gender Stereotypes in Employee Selection
Kirsten Fanning
DePaul University
Jeffrey Williams
Utah Valley University - Department of Accounting
Michael G. Williamson
University of Illinois at Urbana-Champaign - Department of Accountancy
Abstract：This paper reports the results of multiple studies that together provide converging evidence in support of theory that gender stereotypes bias employee selection during group recruiting events. Specifically, we find that female (male) job candidates who exhibit stereotypically male behaviors receive lower (higher) evaluations during group recruiting events, particularly among male recruiters. Prior research suggests gender stereotypes do not bias employee selection during one-on-one interviews. However, our results suggest that evaluating job candidates in the more social context of group events can have important unintended consequences on employee selection, a key component of the accounting control environment. Given the importance of group recruiting events to inform hiring decisions across organizations such as investment banks and public accounting firms, our results contribute to a better understanding of survey and field evidence suggesting that entry-level male and female employees have different personalities at these organizations which appear to influence their career trajectories.
Keywords: employee selection, gender stereotypes, accounting control environment, group recruiting events
4.The Role of Deferred Equity Pay in Retaining Managerial Talent
Radhakrishnan Gopalan
Washington University in St. Louis - John M. Olin Business School
Sheng Huang
China Europe International Business School (CEIBS)
Johan Maharjan
Rensselaer Polytechnic Institute (RPI)
Abstract：We examine the extent to which deferred vesting of stock and option grants (deferred pay) helps firms retain executives. To the extent an executive forfeit all deferred pay if they leave the firm, deferred vesting will increase the cost (to the executive) of an early exit. The impact of deferred pay on executive retention, a key ingredient for firms to create shareholder value, is hence an important empirical issue. Using pay duration proposed in Gopalan et al. (2014) as a measure of the extent of deferred equity, we find that CEOs and non-CEO executives with longer pay duration are less likely to leave the firm voluntarily. The talent retention role of deferred pay is mitigated by performance-vesting provisions and signing bonuses offered by industry peers. Moreover, we also find that voluntary turnover is less sensitive to pay duration for executives who are perceived to be more talented and have more firm-specific skills. Overall, our study highlights a strong link between compensation design and turnover of top executives. It suggests that firms take into account the need for retaining managerial talent in designing executive compensation.
Keywords: executive compensation, pay duration, talent retention, management turnover, turnover-performance sensitivity
5.Career Concerns and Financial Reporting Quality
Suil Pae
Sungkyunkwan University, SKK GSB
Abstract：Managerial career concerns could affect firm efficiency through financial reporting quality, but this important link has received relatively little attention in the literature. The present study examines this link by developing a model that has the following elements. A risk-neutral manager provides effort to increase the market value of the firm and to favorably influence the market assessment of the manager’s ability. Depending on the magnitude of career concerns, the manager either under- or overinvests effort relative to an efficiency-maximizing level. The analysis identifies conditions un-der which higher-quality reporting induces the manager to invest more effort. Under these condi-tions, the model is extended to a setting in which the manager also chooses the quality of financial reporting at some cost. In doing so, the manager seeks to reduce distortion in their effort invest-ment. The equilibrium reporting quality and effort investment are determined by a trade-off be-tween them. In the presence of high uncertainty about the firm’s future cash flows, if the manager’s career concerns exceed a threshold, the manager underinvests in reporting quality and overinvests effort. The empirical implication is a negative relation between managerial career concerns and fi-nancial reporting quality. To a large extent, this is consistent with findings in prior empirical studies. Thus, the present study offers a theoretical explanation for the empirical findings as an equilibrium outcome.
Keywords: career concerns, financial reporting quality, efficiency
6.Internal Information Quality and State Tax Planning
Stacie Kelley Laplante
University of Wisconsin - Madison
Daniel P. Lynch
affiliation not provided to SSRN
Mary E. Vernon
University of Connecticut
Abstract：This study examines the association between internal information quality and state tax planning. Prior literature documents a positive association between internal information quality and summary measures of tax avoidance. However, we know little about specific forms of tax planning internal information quality facilitates. State tax planning is difficult because of the number of jurisdictions, variety of tax rules, variation of enforcement, and apportionment requirements. We find internal information quality facilitates state tax planning and is most important when firms face more restrictive state tax laws and for domestic firms relative to multinational firms with international income shifting opportunities. Our results provide a baseline of the economic effects of internal information quality on different forms of tax planning. Understanding internal information quality’s role in state tax planning is especially relevant as countries propose to modify international tax rules to mirror the state taxation format of a single entity system with apportionment.
Keywords: internal information, tax avoidance, tax planning, state tax, foreign tax, federal tax
7.Does the Threat of a PCAOB Inspection Mitigate US Institutional Investors' Home Bias?
Yue He
City University of Hong Kong
Bing Li
City University of Hong Kong (CityU)
Zhenbin Liu
Hong Kong Baptist University
Jeffrey Pittman
Memorial University of Newfoundland (MNU) - Faculty of Business Administration
Abstract：We exploit the staggered introduction of the PCAOB’s international inspection program to examine the role that the stringency of public audit oversight plays in shaping US institutional investors’ home bias. Analyzing a sample of foreign firms listed in the United States, we evaluate whether US institutional investors hold larger equity stakes in these firms―a longstanding issue that reflects investor portfolio decisions―if their auditors are exposed to the threat of a PCAOB inspection. In a differences-in-differences framework, we find that US listed foreign firms enjoy an increase in US institutional investors’ equity positions after their auditors become subject to PCAOB inspection access. Cross-sectional analysis implies that the benefit of the PCAOB inspection threat in mitigating US institutional investors’ home bias is concentrated in: foreign countries without a strict local audit oversight system; active US institutional investors that are known to value accounting transparency; and firms from countries that grant PCAOB access later (after the onset of its international inspection program in 2005). Our evidence suggests that foreign firms become better known in the capital markets under the PCAOB inspection program, which induces US institutional investors to acquire larger equity stakes in US listed foreign firms given the lower information asymmetry that ensues under the PCAOB inspection threat.
Keywords: PCAOB inspection, audit quality, US institutional investors, home bias, inspection threat
8.Do PCAOB Inspections of Foreign Auditors Affect Global Financial Reporting Comparability?
Matthew Ege
Texas A&M University - Department of Accounting
Young Hoon Kim
Texas A&M University - Department of Accounting; George Mason University - Department of Accounting
Dechun Wang
Texas A&M University
Abstract：This study investigates whether PCAOB inspections of foreign auditors affect global financial reporting comparability. Foreign auditors may adjust audit methodologies to address PCAOB inspection findings, which could affect financial reporting of local clients. Exploiting both within- and cross-country variation in PCAOB inspections, we predict and find that non-US-listed foreign companies’ financial reporting becomes more comparable to their US and non-US industry peers after their auditors undergo an initial inspection. However, there is a decrease in comparability compared to local peers whose auditors have not been inspected. Subsample tests suggest that the improvement in comparability is driven by (i) auditors that satisfactorily address deficiencies and (ii) auditors that do not publicly push back against deficiencies. The effects are dampened after local audit regulators begin inspection programs. Overall, our evidence suggests that the PCAOB international inspection program affects audit methodologies of inspected auditors in a consistent way, improving comparability across jurisdictions. The improved comparability implies that the PCAOB international inspection program may unintentionally help meet accounting regulators’ goals of cross-country financial reporting convergence, which potentially promotes efficient cross-country capital allocation.
Keywords: PCAOB inspections, earnings comparability, foreign auditors, global financial reporting, audit regulation
9.Why Firms Announce Good News Late: Earnings Management and Financial Reporting Timeliness
Mark P. Kim
University of California, Los Angeles - Anderson School of Management
Spencer R. Pierce
Florida State University - College of Business
Ira Yeung
University of British Columbia (UBC) - Sauder School of Business
Abstract：Prior studies find that delayed earnings announcements tend to communicate unfavorable news, and investors react negatively when firms delay earnings announcements. However, these findings do not explain why investors discount delayed earnings, even after controlling for the earnings news, and why firms sometimes announce good news late. Motivated by theory from Trueman (1990) that attempts to explain these phenomena, we examine whether announcement delays indicate earnings management. We predict and find that good news firms with higher discretionary accruals are more likely to announce earnings late. Consistent with post fiscal year-end activities driving announcement delays, we fail to find a relation between measures of real earnings management and late announcements. Using a last-chance earnings management measure based on tax expense manipulation, we also predict and find strong evidence that good news firms engaging in last-chance earnings management are more likely to delay earnings announcements. Consistent with Trueman’s (1990) theory that earnings management explains why investors discount delayed earnings announcements, we find that, on average, earnings announcement returns are 1.4 percent lower for late announcers relying on last-chance earnings management to report good news. Overall, our findings suggest that announcement delays provide information about not only the sign of the earnings news but also the potential for earnings management.
Keywords: earnings announcements; announcement timing; earnings management; last-chance earnings management; tax expense; earnings calendar
10.Risk-Taking Incentives and Earnings Management: New Evidence
Michael Mayberry
University of Florida - Fisher School of Accounting
Hyun Jong Park
University of Florida - Fisher School of Accounting
Tian Xu
Texas A&M University- Corpus Christi
Abstract：We reexamine the positive association between stock option vega and earnings management previously documented by Armstrong, Larcker, Ormazabal, and Taylor (2013; henceforth, ALOT). In contrast to ALOT, prior empirical research and practitioner literature emphasizes earnings management's goals of increasing stock price and reducing volatility. Specifically, we assess whether the association is robust to (i) employing discretionary accruals that are less prone to misspecification, (ii) focusing on a more recent time period, and (iii) including additional controls for period-specific factors. Our main findings are as follows. First, we fail to find a positive association between vega and earnings management after controlling for performance-related misspecification in discretionary accruals. Second, we find no association between vega and earnings management in a more recent time period, suggesting the results of ALOT may be sensitive to period-specific factors. Last, the positive association vanishes when we control for year fixed effects, growth opportunities, or monitoring, suggesting the original results of ALOT's research may be sensitive to correlated, omitted variables. Overall, our results question the extent to which vega incentivizes earnings management. Our results may be of interest to boards of directors in designing executive compensation contracts, to regulators in crafting policies that maintain high levels of financial reporting quality, and to researchers seeking to identify settings where earnings management incentives are most salient.
Keywords: Risk-taking incentives, Executive compensation, Earnings management
11.Investors' Perceptions of Activism via Voting: Evidence from Contentious Shareholder Meetings
Francois Brochet
Boston University - Department of Accounting
Fabrizio Ferri
University of Miami - Miami Business School; European Corporate Governance Institute
Gregory S. Miller
University of Michigan, Stephen M. Ross School of Business
Abstract：We examine investors’ perceptions of shareholder activism via voting. To identify instances of activism via voting, we focus on annual meetings with at least one ballot item where a substantial fraction of shareholders is expected to vote against management’s voting recommendation, indicating an increase in their monitoring activity. We define such meetings as “contentious”. Using a sample of almost 28,000 meetings between 2003 and 2012, we examine stock returns over the period between the proxy filing and the annual meeting, when investors learn about the contentious nature of the upcoming meeting and form expectations about its likely impact on firms’ policies. We find that abnormal stock returns prior to contentious meetings are significantly positive and higher than prior to non-contentious meetings. These higher abnormal returns increase with the contentiousness of the meeting, are more pronounced in firms with poor past performance (which are more likely to respond to shareholder pressure) and persist after controlling for firm-specific news and proxies for risk factors. Our results are consistent with investors expecting activism via voting to have a positive impact on firm value, on average, and cast doubts on regulatory attempts to restrict the use of shareholder votes.
Keywords: Shareholder votes, shareholder activism, disclosures, annual meetings, corporate governance
12.The Impact of Risk and the Potential for Loss on Managers' Demand for Audit Quality
Patrick J. Hurley
Northeastern University - Accounting Group
Brian W. Mayhew
University of Wisconsin - Madison - Department of Accounting and Information Systems
Kara M. Obermire
Oregon State University
Amy C. Tegeler
University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business
Abstract：This study uses experimental economic markets to investigate the impact of risk and the potential for loss on managers’ demand for audit quality. We posit that these two important contextual factors influence managers’ audit quality preferences. We study these factors because they are ubiquitous to companies, and we focus on their influence on managers because managers continue to play a significant role in the auditor hiring process and we know relatively little about their auditor preferences. We predict risk, the potential for loss, and their interaction will each decrease manager demand for high audit quality due to a desire to achieve greater reporting flexibility. Experimental results are consistent with our predictions; specifically, increased risk, the potential for loss, and to a lesser extent their interaction, significantly reduce managers’ likelihood of hiring the best available auditor in the market. Path analysis indicates that this reduction in audit quality demand leads to increases in misreporting. Finally, we observe investors overpaying for assets to a greater extent when managers hire lower-quality auditors. Our results show that the contextual factors of risk and the potential for loss, that are ubiquitous to companies, can reduce demand for audit quality, which can increase misreporting behavior and ultimately harm investors.
Keywords: audit quality, demand, risk, risk aversion, loss aversion, experimental economics
13.Voluntary Disclosure in Light of Control Concerns
Anil Arya
Ohio State University (OSU) - Fisher College of Business
Ram N.V. Ramanan
SUNY at Binghamton - School of Management
Abstract：The centrality of private information in the design of accounting institutions has been explored via agency models that address control concerns as well as disclosure models that amplify valuation issues. Somewhat surprisingly, the joint analysis of control and valuation considerations, and their implication for firms’ voluntary disclosure practices have not received much attention. Our paper addresses this shortcoming. With embedded control and valuation concerns, the nature of the firm’s disclosure in the stock market is altered profoundly – disclosure is two-tailed or intermediate, but not single-tailed as is the norm in the disclosure literature bereft of control problems. The severity of the control problem is also altered in that disclosure changes managerial incentives to acquire and exploit private information.
Keywords: adverse selection, control problems, private information, voluntary disclosure
14.Is Framing More Effective Than Regulating Disclosures? The Effects of Risk Disclosure Frame and Regime on Managers' Disclosure Choices
Feng Yeo
University of South Carolina - Darla Moore School of Business
Abstract：I conduct an experiment with senior executives (CEOs, CFOs, controllers) to examine how their risk disclosure quality, with respect to disclosure volume and specificity, is influenced by three factors. First, whether the disclosure behavior is framed internally by the firm as obtaining a gain or avoiding a loss from disclosure. Second, whether the external disclosure regime mandates risk mitigation disclosures that explain how a risk is handled. Third, whether the risk under consideration for disclosure is weakly- or strongly-mitigated. This research question is important because high-quality risk disclosures are challenging to regulate and changing how disclosure behavior is framed could substitute for costly disclosure regulations. I find that a gain frame prompts managers to make more detailed risk disclosures than a loss frame, regardless of the disclosure regime. A loss frame also leads to less detailed and more boilerplate disclosure of weakly-mitigated risks when risk mitigation plans are mandated. Given that the SEC (2016) is considering mandating risk mitigation disclosures similar to the practice in other regimes, my findings provide insights on the limitations of mandating these disclosures. My results suggest that changing managers’ disclosure frame internally through firm initiatives could be more effective in prompting higher quality risk disclosures.
Keywords: risk disclosures, disclosure frame, disclosure regime, disclosure specificity, risk management plans, risk mitigation strength
15.The Impact of Mandatory Auditor Tenure Disclosures on Ratification Voting, Auditor Dismissal, and Audit Pricing
Ryan T. Dunn
Auburn University - School of Accountancy
Nathan G. Lundstrom
University of Kansas
Michael S. Wilkins
University of Kansas
Abstract：Recent amendments to Auditing Standard (AS) 3101 require disclosure of the initial year of the auditor-client relationship in the audit report. As the standard was being discussed, auditors, clients, and some PCAOB members expressed reservations about the necessity of tenure disclosures and were particularly concerned about disclosing tenure in the audit report. Our purpose is to investigate whether the tenure disclosures mandated by AS 3101 are associated with changes in stakeholder behavior. We find that after the implementation date, ratification votes against the auditor and the probability of subsequent auditor dismissal increase for long-tenured versus short-tenured auditors. Results from a path analysis further suggest that the relative increase in dismissal for long-tenured auditors appears to be influenced directly through tenure disclosures and indirectly through ratification voting. We also find that negotiating power may decrease for long-tenured auditors as evidenced by lower audit fees. Our results are comparable for companies that voluntarily disclosed and companies that did not disclose auditor tenure in their proxy statements prior to the AS 3101 amendment. Overall, our study suggests that mandatory disclosure of auditor tenure in the audit report significantly affects stakeholder behavior. The PCAOB should consider our findings carefully as they evaluate whether AS 3101 is achieving its intended purpose.
Keywords: Auditor Tenure, PCAOB, Auditor Ratification, Auditor Dismissal, Audit Fees
16.Large Shareholder Portfolio Diversification and Voluntary Disclosure
Herita Akamah
University of Nebraska at Lincoln - School of Accountancy
Sydney Qing Shu
Miami University of Ohio - Department of Accountancy
Abstract：Although large shareholders have sufficient influence to engage privately with management, extant literature provides inconclusive evidence on the relation between large equity positions and corporate disclosure. This study examines whether large shareholders’ portfolio diversification affects voluntary corporate disclosure. We define diversification as the extent to which investors spread investments among portfolio stocks. We predict that holding a diversified portfolio deters large shareholders from incurring the costs of private information gathering about a portfolio firm. We document that firms provide more voluntary disclosure when their large shareholders hold a more diversified portfolio, consistent with investors relying more on public disclosure about portfolio firms when their portfolio diversification is higher. Evidence from cross-sectional analyses suggests that, as predicted, the positive relation between portfolio diversification and voluntary disclosure is weaker as the net benefit of acquiring private information increases for large shareholders (i.e., when portfolio firms are more connected, have alternative information channels, or are more complex). Overall, our results suggest that diversified large shareholders’ preference for a richer public disclosure environment creates a positive externality of lowering the information costs for external stakeholders without private access to management.
Keywords: large shareholder, portfolio diversification, voluntary disclosure, private information, alternative information channel, firm complexity
17.Firm Unionization and Disruptions in Customer Relationships
Gary Chen
University of Illinois at Chicago
J. Scott Judd
University of Illinois at Chicago
Shailendra (Shail) Pandit
University of Illinois at Chicago; University of Illinois at Chicago
Abstract：Relationships with major customers may be advantageous to suppliers due to economies of scale and reputational benefits. In this study, we investigate whether unionization leads to disruptions in a firm’s relationships with its customers. We argue that major customers shift purchases away from suppliers that unionize to avoid potential disruptions. Using a difference-in-differences research design, our results show a negative association between supplier unionization and sales to major customers. Our findings are robust to addressing endogeneity concerns through a propensity score matched analysis and regression discontinuity research design. Additionally, we find that supplier firm performance declines subsequent to unionization. We also find that suppliers experience significant increases in their cost of goods sold and the number of employees after supplier unionization, suggestive of higher input prices driving the disruption with major customers. Finally, we provide evidence that higher switching costs mitigate the decline in sales to major customers. Overall, our findings suggest that employee unionization can adversely affect a firm’s relationships with their major customers.
Keywords: labor unions; major customers; supply chain disruptions; firm performance
18.Tax Haven Incorporation and the Cost of Capital
Christina M. Lewellen
North Carolina State University - Department of Accounting
Landon Mauler
Florida State University - Department of Accounting
Luke Watson
Villanova University
Abstract：Incorporating the firm’s corporate parent in a tax haven is a major decision that receives significant attention from many stakeholders, yet certain implications of this corporate strategy remain unclear. While tax haven incorporation offers tax savings, it also imposes risks that are potentially costly and hence important to consider. We predict and find a higher cost of equity capital in firms with parent companies that are incorporated in tax havens but that are primarily based in nonhaven countries. We also predict and find that the observed cost of equity premium is more pronounced in firms with greater tax risk, firm-level information risk, and country-level legal risk. We also employ corporate inversions in a difference-in-differences test and again find a positive relation between tax haven parent incorporation and the cost of capital. Our findings imply that an increased cost of capital is a material cost of tax haven parent incorporation. We contribute to the literatures on valuation of tax haven use, tax and nontax costs of corporate tax strategies, corporate inversions, and the relation between taxes and the cost of capital. Our study provides evidence on the tax and nontax risks of a uniquely observable tax strategy (i.e., tax haven parent incorporation) that could factor into firms’ decisions about whether to incorporate in a tax haven and policymakers’ efforts to deter such activity.
Keywords: tax avoidance, tax havens, corporate inversions, cost of equity
19.Bank Lending and Corporate Innovation: Evidence from SFAS 166/167
Yiwei Dou
New York University (NYU) - Department of Accounting
Zhaoxia Xu
UNSW Australia Business School, School of Banking and Finance
Abstract：Understanding the role of bank lending in corporate innovation is important to policymakers, practitioners, and academics. We provide new evidence on such a role by exploiting the implementation of SFAS 166/167, which removed the off--balance sheet status of certain securitized assets of banks. The regulation affects bank lending and thus represents a credit supply shock to borrowing firms. We find that affected banks raise spreads and cut loan amounts after the regulation. Firms that borrow from affected banks reduce R\&D investment and the number and quality of the patents they generate. The reduction is concentrated among firms whose banks experience more downward pressure on capital ratios and greater market discipline, and firms that are more dependent on external financing. Additional analyses reveal that information asymmetry between incumbent banks and outsiders with respect to borrowing firms prevent them from switching. The overall findings suggest that bank lending promotes borrowing firms' innovation activities. Policies that restrict bank lending are likely to hurt innovation of borrowers.
Keywords: Bank Lending, Innovation, R&D, Patents, SFAS 166/167, Securitization
20.Can Staggered Boards Improve Value? Causal Evidence from Massachusetts
Robert Daines
Stanford Graduate School of Business; Stanford Law School; European Corporate Governance Institute (ECGI)
Shelley Xin Li
University of Southern California - Marshall School of Business
Charles C.Y. Wang
Harvard Business School (HBS)
Abstract：Staggered boards (SBs) are one of the most potent common entrenchment devices, and their value effects are considerably debated. We study SBs' effects on firm value, managerial behavior, and investor composition using a quasi-experimental setting: a 1990 law that imposed an SB on all Massachusetts-incorporated firms. The law led to an increase in Tobin's Q, investment in CAPEX and R&D, patents, higher-quality patented innovations, and resulted in higher profitability. These effects are concentrated in innovating firms, especially those facing greater Wall Street scrutiny. An increase in institutional and dedicated investors also accompanied the imposition of SBs, facilitating a longer-term orientation. The evidence suggests SBs can benefit early-life-cycle firms facing high information asymmetries by allowing their managers to focus on long-term investments and innovations.
Keywords: Staggered board; Entrenchment; Life-cycle; Tobin's Q; Investments; Innovation; Profitability; Institutional investors; Investor composition
21.The Effects of Information Acquisition Effort, Psychological Ownership, and Reporting Context on Opportunistic Managerial Reporting
Katlijn Haesebrouck
Maastricht University
Abstract：Within the context of managerial reporting, the tasks of acquiring and reporting information are logically connected. Although the accounting literature acknowledges their importance, it often treats these tasks as distinct processes. I investigate how the effort exerted to acquire information influences managers’ reporting. Managers’ information acquisition effort can induce psychological ownership that can lead to a sense of deservingness that increases opportunistic reporting or to a sense of responsibility that reduces opportunism. I predict that the reporting context determines the ultimate effect of information acquisition effort on reporting behavior. I test this prediction with a 2×2 budget reporting experiment. Managers are either endowed with information to report or required to exert effort to earn it, with the latter expected to generate more psychological ownership. In addition, I manipulate the saliency of honesty in the reporting context by framing reporting in terms of a business dilemma (less salient honesty) or an ethical dilemma (more salient honesty). I find that when honesty is less salient, managers build more slack into their report under earned information than endowed information. In contrast, more salient honesty alleviates the effect of earned information on slack. In a supplemental experiment, I find similar results when all managers are endowed with information to report but psychological ownership is manipulated via different firm messaging. These results have important implications for theory and practice. For example, in a less salient honesty context, technological investments that reduce managers’ effort needed to acquire information can also help decrease opportunistic reporting.
Keywords: information acquisition, opportunistic reporting, other-regarding preferences, honesty, budgeting, slack, effort, responsibility, experiment
22.Do Foreign Component Auditors Harm Financial Reporting Quality? A Subsidiary-Level Analysis of Foreign Component Auditor Use
William M. Docimo
University of Pittsburgh - Katz Graduate School of Business
Joshua L. Gunn
University of Pittsburgh - Katz Graduate School of Business
Chan Li
University of Kansas
Paul N. Michas
University of Arizona - Eller College of Management
Abstract：We hypothesize and find that financial reporting quality at the foreign subsidiaries of U.S. multinational corporations (MNCs) is higher when the MNC’s principal auditor engages a component auditor to audit the foreign subsidiary on its behalf. An important innovation of this study is that we focus on comparing financial reporting quality of equivalent subsidiaries with and without component auditor work. Our approach contrasts with extant studies that examine the consequences of variation in the total amount of component auditor work at the MNC level. Our results are important for two reasons. First, we provide an alternative view on the consequences of component auditor use compared to the emerging literature in this area, which typically finds a negative association between the extent of component auditor use and financial reporting quality at the MNC level. Thus, we show that a different research design, conducted at the level at which component auditors actually perform their work, yields different inferences. Second, we demonstrate that using component auditors on U.S. MNC group audits is an avenue through which U.S. auditing institutions can affect financial reporting quality in foreign locations. We also reconcile our subsidiary-level results to the MNC-level by introducing a new MNC-level component auditor “coverage” variable. Overall, we highlight that the best way to audit a foreign subsidiary is likely to be with a component auditor in the local country, which informs the debate surrounding recently proposed PCAOB guidance.
Keywords: audit quality; component auditor; financial reporting quality; group audit; multinational corporation; Public Company Accounting Oversight Board
23.Bundled Earnings Guidance and Analysts' Forecast Revisions
Charles Hsu
Hong Kong University of Science & Technology
Rencheng Wang
Singapore Management University - School of Accountancy
Abstract：Bundling managerial earnings guidance with quarterly earnings announcements (EAs) has become an increasingly common practice. This study investigates the impact of bundled guidance on analysts’ forecast revisions. Our findings indicate that analysts respond more to bundled guidance than non-bundled guidance. This effect increases with analysts’ time pressure and cognitive constraints around the EA. Analysts’ revisions also incorporate more of the bundled management guidance when accompanied by additional information, such as conference calls. We further find that analysts revise their forecasts more quickly following bundled guidance than non-bundled guidance. Together, these findings are consistent with the notion that analysts place more weight on bundled guidance than non-bundled guidance in their forecast revisions as bundled guidance facilities analysts’ timely forecast revisions following EAs. Finally, we find that analysts’ forecast revisions following bundled guidance generate significant market reactions. Our findings enhance our understanding of analysts’ information processing and shed light on why bundling can be an effective guidance strategy.
Keywords: bundled guidance, management forecast, analyst forecast, earnings announcement, timely forecast, information processing
24.The Effects of High Estimate Uncertainty in Auditor Negligence Litigation
Jeffrey Pickerd
The University of Mississippi
M. David Piercey
University of Massachusetts Amherst
Abstract：We examine how jurors’ negligence judgments and attorneys’ out-of-court settlements are differently impacted by two features of a materially misstated accounting estimate—the amount of estimate uncertainty and whether the misstated account is disaggregated into its own line-item or aggregated with other accounts into a single financial statement line-item. We predict and find that jurors and attorneys react to estimate uncertainty in opposite directions under common conditions. This finding is important because, when jurors’ judgments and attorneys’ settlements differ, research into juror judgments alone may not capture a complete picture of auditor liability, since the vast majority of audit litigation is resolved by attorneys in out-of-court settlement without ever going to trial. Consistent with attribution theory, results from our first experiment show that jurors hold auditors more responsible for misstatements of lower estimate uncertainty when the misstated account is disaggregated, as opposed to misstatements that are of higher uncertainty and/or aggregated with other, accurate accounts. However, in a second experiment we find that attorneys negotiate auditor settlements under the incorrect assumption that jurors will hold auditors more responsible for failing to prevent misstatements of higher uncertainty. Our results illustrate that accounting research should not focus solely on juror judgments in the study of how specific factors impact auditor liability, and that attorneys would benefit from a better understanding of juror decision making.
Keywords: estimate uncertainty, disaggregation, auditor liability, juror judgments, attorney judgments, out-of-court settlement
25.Expanded Auditor's Report Disclosures and Loan Contracting
Vlad-Andrei Porumb
University of Manchester - Alliance Manchester Business School
Yasemin Zengin-Karaibrahimoglu
University of Groningen
Gerald J. Lobo
University of Houston - C.T. Bauer College of Business
Reggy Hooghiemstra
University of Groningen - Faculty of Economics and Business
Dick de Waard
University of Groningen
Abstract：Starting in October 2013, auditors of premium-listed firms in the UK are mandated to prepare an expanded auditor’s report that provides details on audit procedures, risks of material misstatement (RMMs), and materiality thresholds. We examine whether the disclosures in the expanded auditor’s report provide information that is relevant for adopting firms’ loan contracting terms in the post-adoption period. Our results indicate that the introduction of the expanded auditor’s report is associated with reduced loan spread and longer maturity for loan facilities of adopting firms relative to non-adopting UK firms. When we focus on adopting firms in the post-adoption period, we find that “unique RMMs” (i.e., risks mentioned in the auditor’s report, but not in the report of the audit committee) are positively associated with loan spread, but are not associated with maturity and with number of lenders in the loan syndicate. Additional tests show that the benefits, in terms of a reduced spread, of having a low number of “unique RMMs” accrue mostly to adopters with a poor information environment. Taken together, our results provide preliminary evidence that the expanded auditor’s report disclosures contain relevant information for loan contracting in the UK. This study highlights the unique role of the expanded auditor's report in providing information relevant to lenders and supports standard setters' efforts to enrich its informational content.
Keywords: expanded auditor’s report, audit risk disclosures, risks of material misstatement (RMMs), loan contracting terms
来源：https://onlinelibrary.wiley.com/toc/19113846/2021/38/4
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《China Journal of Accounting Research》2021-14-4
《Journal of Accounting Research》2021年第59卷第4期
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