{"title":"Disclosure paternalism","authors":"Jeremy Bertomeu","doi":"10.1016/j.jacceco.2023.101662","DOIUrl":"10.1016/j.jacceco.2023.101662","url":null,"abstract":"<div><p>This study presents a model in which behavioral investors shape their current expectations based on statistical analysis of historical non-disclosure events. Investors may hold overly optimistic expectations following a non-disclosure event, thereby disrupting unraveling toward forthcoming disclosures. While a regulator can mandate disclosure, this protective intervention has its drawbacks. Overprotection prevents investors from learning from losses and leads to cycles of high compliance followed by high mispricing when innovations in transactions render current regulations ineffective. An unregulated market, on the other hand, tends toward high transparency over time. The model further explains negative market reactions to regulation, an association between price drift and transparency, reversals in market confidence, and that regulators should favor laissez-faire in times of investor pessimism. Further implications are explored for regulations that facilitate learning and prevent cycles.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101662"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138438940","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Accounting information and risk shifting with asymmetrically informed creditors","authors":"Tim Baldenius , Mingcherng Deng , Jing Li","doi":"10.1016/j.jacceco.2023.101667","DOIUrl":"10.1016/j.jacceco.2023.101667","url":null,"abstract":"<div><p>This paper explores the effects of public information such as accounting earnings in a competitive lending setting with risk shifting. Debt financing creates incentives for borrowers to take on excessive risks, in particular in bad states of the world. If a privately informed inside creditor bids against outside creditors to extend a loan, public information levels the playing field, which affects the bidding and risk shifting. Nonetheless, a perfect public signal would yield the least efficient outcome: introducing some measurement noise alleviates risk shifting by subjecting outside creditors to the winner’s curse, allowing borrowers in bad states cheaper access to loans. However, for pessimistic priors about the borrower, greater public signal precision can alleviate risk shifting, at the margin. We discuss implications for financial reporting regulations along the business cycle and for creditor turnover.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101667"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135566256","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Gone with the big data: Institutional lender demand for private information","authors":"Jung Koo Kang","doi":"10.1016/j.jacceco.2023.101663","DOIUrl":"10.1016/j.jacceco.2023.101663","url":null,"abstract":"<div><p>I explore whether big-data sources can crowd out the value of private information acquired through lending relationships. Institutional lenders have been shown to exploit their access to borrowers' private information by trading on it in financial markets. As a shock to this advantage, I use the release of the satellite data of car counts in store parking lots of U.S. retailers. This data provides accurate and near–real-time signals of firm performance, which can undermine the value of borrowers' private information obtained through syndicate participation. I find that once the satellite data becomes commercially available, institutional lenders are less likely to participate in syndicated loans. The effect is more pronounced when borrowers are opaque or disseminate private information to their lenders earlier and when the data predicts borrower performance more accurately. I also show that institutional lenders’ reduced demand for private information leads to less favorable loan terms for borrowers.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101663"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135515793","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The misuse of regression-based x-Scores as dependent variables","authors":"Dmitri Byzalov, Sudipta Basu","doi":"10.1016/j.jacceco.2023.101643","DOIUrl":"10.1016/j.jacceco.2023.101643","url":null,"abstract":"<div><p>Researchers often use regression-based <em>x-Scores</em> (e.g., conservatism <em>C-Score</em>, misstatement <em>F-Score</em>) from a stage 1 model as a dependent variable in stage 2. We argue that this <em>x-Score</em> analysis can cause coefficient biases and interpretation problems because (1) <em>x-Score</em> does not capture new sources of variation, and (2) the estimates often hinge on unacknowledged technical assumptions. Instead, we recommend that researchers include the test variables and the relevant controls in stage 1, obviating the need for an <em>x-Score</em>. In replication analyses, some important published findings change after we remove the coefficient bias caused by the use of <em>x-Score</em> as a dependent variable.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101643"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135255365","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Stacie O. Kelley , Christina M. Lewellen , Daniel P. Lynch , David M.P. Samuel
{"title":"“Just BEAT it” do firms reclassify costs to avoid the base erosion and anti-abuse tax (BEAT) of the TCJA?","authors":"Stacie O. Kelley , Christina M. Lewellen , Daniel P. Lynch , David M.P. Samuel","doi":"10.1016/j.jacceco.2023.101648","DOIUrl":"10.1016/j.jacceco.2023.101648","url":null,"abstract":"<div><p><span><span>This study empirically examines whether firms reclassify related-party payments to avoid the base erosion and anti-abuse tax (BEAT) of the Tax Cuts and Jobs Act (TCJA). We leverage the BEAT filing threshold and use both a difference-in-differences design among U.S. firms and a triple-difference design utilizing the parent company's location to provide evidence that firms reclassify related-party payments to avoid the BEAT. This effect is stronger in firms with greater pre-TCJA </span>income shifting incentives. We estimate a $6 billion aggregate reduction in U.S. taxes for our sample firms in 2018. We also examine the consequences of reclassifying related-party payments and find some evidence of an increase in tax reserves and a reduction in internal information quality for firms that engage in cost reclassification to avoid the BEAT. These findings help explain observed </span>BEAT collection<span> shortfalls, contribute to the current policy debate about international tax reform, and document spillover effects of tax policy.</span></p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101648"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135565060","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Long-term firm gains from short-term managerial focus: Myopia and voluntary disclosures","authors":"Anil Arya , Ram N.V. Ramanan","doi":"10.1016/j.jacceco.2023.101646","DOIUrl":"10.1016/j.jacceco.2023.101646","url":null,"abstract":"<div><p>A CEO's short horizon and associated myopic actions are typically viewed as detrimental to the firm. In contrast, studying a voluntary disclosure model wherein capital market and product market strategic considerations are in play, we show that the CEO's myopic behavior can improve a firm's long-term value. In particular, the disclosures of a long-horizon CEO are seen as being entirely focused on the firm's interests and thus as being exploitative of customers. A short-horizon CEO myopically focused on short-term stock price is less aligned with the firm and, consequently, her disclosures are more customer friendly. As a corollary, when no disclosure is forthcoming, customers are less skeptical that the myopic CEO is withholding information to exploit them. This improves customers' willingness to pay with a myopic CEO, leading to higher firm profitability. The paper also layers in compensation design to derive the optimal degree of managerial short-term focus to induce.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101646"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134995084","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Travis A. Dyer , Stephen Glaeser , Mark H. Lang , Caroline Sprecher
{"title":"The effect of patent disclosure quality on innovation","authors":"Travis A. Dyer , Stephen Glaeser , Mark H. Lang , Caroline Sprecher","doi":"10.1016/j.jacceco.2023.101647","DOIUrl":"10.1016/j.jacceco.2023.101647","url":null,"abstract":"<div><p>The patent system grants inventors temporary monopoly rights in exchange for a public disclosure detailing their innovation. These disclosures are meant to allow others to recreate and build on the patented innovation. We examine how the quality of these disclosures affects follow-on innovation. We use the plausibly exogenous assignment to patent applications of examiners who differ in their enforcement of disclosure requirements as a source of variation in disclosure quality. We find that some examiners are significantly more lenient with respect to patent disclosure quality requirements, and that patents granted by these examiners include significantly lower-quality disclosures and generate significantly less follow-on innovation. Overall, our evidence suggests that high-quality patent disclosures create knowledge spillovers that spur follow-on innovation.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101647"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134995583","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Peter Fiechter , Wayne R. Landsman , Kenneth Peasnell , Annelies Renders
{"title":"Do industry-specific accounting standards matter for capital allocation decisions?","authors":"Peter Fiechter , Wayne R. Landsman , Kenneth Peasnell , Annelies Renders","doi":"10.1016/j.jacceco.2023.101670","DOIUrl":"10.1016/j.jacceco.2023.101670","url":null,"abstract":"<div><p>This study examines whether the implementation of industry-specific accounting standards helps capital market participants in making decisions about providing capital to firms. We predict and find an, on average, increase in firms’ capital growth in years following implementation of the relevant industry standard. The increase in capital growth arises primarily from equity issuances and is attributable to the implementation of the standards rather than industry-specific trends or economic shocks. We explore heterogeneity in industry standards and find more pronounced effects for (i) industry standards that reveal new information, provide explicit guidance, or increase accounting uniformity, and (ii) small firms, firms with greater information asymmetry, and firms with greater capital constraints before implementation of the standards. We also find evidence consistent with two channels explaining the documented increase in capital flows: reduction of information asymmetry and increase in financial statement comparability.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101670"},"PeriodicalIF":5.9,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0165410123000940/pdfft?md5=8f252844df5aa0923d7f1ac7edb84c61&pid=1-s2.0-S0165410123000940-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139076774","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The managerial perception of uncertainty and cost elasticity","authors":"Jason V. Chen , Itay Kama , Reuven Lehavy","doi":"10.1016/j.jacceco.2023.101613","DOIUrl":"10.1016/j.jacceco.2023.101613","url":null,"abstract":"<div><p>Theoretical research demonstrates the important role of uncertainty in shaping a firm's cost elasticity. We contribute to this literature by analyzing the inherent tension between the effects of uncertainty about unit contribution margin (CM) and sales volume on cost elasticity. We identify the occurrence of words implying uncertainty in managerial forward-looking statements and employ a novel methodology to construct distinct measures of the managerial perceptions of overall, unit CM, and volume uncertainty. We find a significantly positive (negative) association between the uncertainty about unit CM (volume) and cost elasticity. These associations vary predictably with firm and industry characteristics. Our empirical evidence supports the theoretical argument that managerial perceptions of uncertainty and its components differentially influence their resource allocation decisions and suggests that any analysis of the relation between uncertainty and a firm's cost elasticity should specify the type of uncertainty as well as the firm and industry characteristics.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 1","pages":"Article 101613"},"PeriodicalIF":5.9,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135703461","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The effects of non-Big 4 mergers on audit efficiency and audit market competition☆","authors":"Andrew R. Kitto","doi":"10.1016/j.jacceco.2023.101618","DOIUrl":"10.1016/j.jacceco.2023.101618","url":null,"abstract":"<div><p><span>This study examines whether recent mergers between small and midsize accounting firms influence competition by increasing the number of firms that can compete with larger rivals in the U.S. public company audit market. I find that in-market mergers generate efficiencies that are reflected in a post-merger reduction in audit hours but not in reduced audit quality. For both in-market and out-of-market mergers, clients switching to post-merger firms are more likely to be accelerated filers and are significantly larger in terms of several proxies for size and complexity. Lastly, I find that an increase in market-level merger activity is associated with lower profitability of Big 4 firms operating in the same market but only in the smaller client segment. These findings suggest that recent mergers have actually </span><em>increased</em> competition in some segments of the audit market despite already high concentration and concerns about a lack of sufficient competition.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 1","pages":"Article 101618"},"PeriodicalIF":5.9,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136169371","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}