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Material ESG Alpha: A Fundamentals-Based Perspective 物质环境、社会和治理阿尔法:基于基本面的视角
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2022-0256
Byung Hyun Ahn, Panos N. Patatoukas, G. Skiadopoulos
{"title":"Material ESG Alpha: A Fundamentals-Based Perspective","authors":"Byung Hyun Ahn, Panos N. Patatoukas, G. Skiadopoulos","doi":"10.2308/tar-2022-0256","DOIUrl":"https://doi.org/10.2308/tar-2022-0256","url":null,"abstract":"\u0000 Using SASB’s materiality framework, prior research finds alpha for the portfolio of firms with improving ratings on material ESG issues. We replicate this finding and provide a fundamentals-based perspective on why the materiality portfolio outperforms. Our basic premise is that changes in material ESG issues reflect fundamental firm characteristics. More financially established firms—firms with larger size, lower growth, and higher profitability relative to their sector—are more likely to not only create material strengths but also resolve material weaknesses in their ESG scoring. This fundamental link dictates that one should comprehensively control for fundamental determinants of stock returns before attributing portfolio outperformance to improving material ESG scores. Indeed, we find that the materiality portfolio does not generate alpha after we account for its exposure to profitability and growth factors. Our evidence underscores the issue of correlated omitted fundamental factors in the debate of ESG alpha.\u0000 Data Availability: Data are available from the sources cited in the text.\u0000 JEL Classifications: G11; G12; G14; M14; M41; Q51.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139879356","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The Economic Consequences of Heightened Materiality Uncertainty: An Auditing Perspective 重要性不确定性加剧的经济后果:审计视角
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2021-0716
Ying Huang, Ningzhong Li, Jieying Zhang, Xiaolu Zhou
{"title":"The Economic Consequences of Heightened Materiality Uncertainty: An Auditing Perspective","authors":"Ying Huang, Ningzhong Li, Jieying Zhang, Xiaolu Zhou","doi":"10.2308/tar-2021-0716","DOIUrl":"https://doi.org/10.2308/tar-2021-0716","url":null,"abstract":"\u0000 Using a Supreme Court ruling that rejected the use of “bright-line” rules previously relied upon in evaluating materiality claims, this study examines how heightened materiality uncertainty impacts audit pricing. We expect the heightened uncertainty to make it more difficult for auditors and clients to assess materiality and to reach a consensus on materiality assessment, which increases audit effort and engagement risk, leading to higher audit fees. Consistent with this prediction, we find that after the ruling, audit fees increase significantly for treatment firms in the circuits using bright-line rules in the pre-ruling period, relative to control firms not affected by the ruling. This effect is stronger when auditors have lower quality or lower industry expertise, and when investors have more diverse opinions. We also find that for firms audited by low-expertise auditors, auditor turnover due to auditor-client disagreement on materiality-related issues increases significantly for treatment firms relative to control firms.\u0000 Data Availability: Data are available from the public sources cited in the text.\u0000 JEL Classifications: K2; M41; M42.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139813608","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Accounting Standardization and Separation in the Municipal Debt Market: Evidence from GASB 34 市政债务市场的会计标准化与分离:来自 GASB 34 的证据
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2021-0472
William Baber, Amanda Beck, Allison Koester
{"title":"Accounting Standardization and Separation in the Municipal Debt Market: Evidence from GASB 34","authors":"William Baber, Amanda Beck, Allison Koester","doi":"10.2308/tar-2021-0472","DOIUrl":"https://doi.org/10.2308/tar-2021-0472","url":null,"abstract":"\u0000 Governmental Accounting Standards Board Statement No. 34 (GASB 34, 1999) standardized financial reporting and disclosure requirements for U.S. state and local governments. We interpret debt issuing patterns surrounding GASB 34 implementation as evidence of strategic behavior by governments in anticipation of GASB 34 consequences. Specifically, governments that expected more favorable post-GASB 34 evaluations by municipal bond investors delayed new uninsured debt issues until after, whereas governments that expected less favorable evaluations accelerated debt issues to before, GASB 34 information became publicly available. Governments expecting favorable consequences were more likely than governments expecting adverse consequences to substitute away from insured debt and toward uninsured debt, and to choose new debt financing rather than alternative financing sources following GASB 34. These findings are consistent with the notion that expectations about GASB 34 consequences were realized, and that standardization created through GASB 34 facilitated separation in the municipal debt market.\u0000 Data Availability: Data are from publicly available sources identified in the manuscript.\u0000 JEL Classifications: G18; H74; M48.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139821728","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Material ESG Alpha: A Fundamentals-Based Perspective 物质环境、社会和治理阿尔法:基于基本面的视角
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2022-0256
Byung Hyun Ahn, Panos N. Patatoukas, G. Skiadopoulos
{"title":"Material ESG Alpha: A Fundamentals-Based Perspective","authors":"Byung Hyun Ahn, Panos N. Patatoukas, G. Skiadopoulos","doi":"10.2308/tar-2022-0256","DOIUrl":"https://doi.org/10.2308/tar-2022-0256","url":null,"abstract":"\u0000 Using SASB’s materiality framework, prior research finds alpha for the portfolio of firms with improving ratings on material ESG issues. We replicate this finding and provide a fundamentals-based perspective on why the materiality portfolio outperforms. Our basic premise is that changes in material ESG issues reflect fundamental firm characteristics. More financially established firms—firms with larger size, lower growth, and higher profitability relative to their sector—are more likely to not only create material strengths but also resolve material weaknesses in their ESG scoring. This fundamental link dictates that one should comprehensively control for fundamental determinants of stock returns before attributing portfolio outperformance to improving material ESG scores. Indeed, we find that the materiality portfolio does not generate alpha after we account for its exposure to profitability and growth factors. Our evidence underscores the issue of correlated omitted fundamental factors in the debate of ESG alpha.\u0000 Data Availability: Data are available from the sources cited in the text.\u0000 JEL Classifications: G11; G12; G14; M14; M41; Q51.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139819160","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Accounting Standardization and Separation in the Municipal Debt Market: Evidence from GASB 34 市政债务市场的会计标准化与分离:来自 GASB 34 的证据
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2021-0472
William Baber, Amanda Beck, Allison Koester
{"title":"Accounting Standardization and Separation in the Municipal Debt Market: Evidence from GASB 34","authors":"William Baber, Amanda Beck, Allison Koester","doi":"10.2308/tar-2021-0472","DOIUrl":"https://doi.org/10.2308/tar-2021-0472","url":null,"abstract":"\u0000 Governmental Accounting Standards Board Statement No. 34 (GASB 34, 1999) standardized financial reporting and disclosure requirements for U.S. state and local governments. We interpret debt issuing patterns surrounding GASB 34 implementation as evidence of strategic behavior by governments in anticipation of GASB 34 consequences. Specifically, governments that expected more favorable post-GASB 34 evaluations by municipal bond investors delayed new uninsured debt issues until after, whereas governments that expected less favorable evaluations accelerated debt issues to before, GASB 34 information became publicly available. Governments expecting favorable consequences were more likely than governments expecting adverse consequences to substitute away from insured debt and toward uninsured debt, and to choose new debt financing rather than alternative financing sources following GASB 34. These findings are consistent with the notion that expectations about GASB 34 consequences were realized, and that standardization created through GASB 34 facilitated separation in the municipal debt market.\u0000 Data Availability: Data are from publicly available sources identified in the manuscript.\u0000 JEL Classifications: G18; H74; M48.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139881487","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The Impact of Performance Reporting on Investment Behavior: Evidence from Disclosure Reform in the U.K. 业绩报告对投资行为的影响:英国信息披露改革的证据
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2021-0863
Gitae Park
{"title":"The Impact of Performance Reporting on Investment Behavior: Evidence from Disclosure Reform in the U.K.","authors":"Gitae Park","doi":"10.2308/tar-2021-0863","DOIUrl":"https://doi.org/10.2308/tar-2021-0863","url":null,"abstract":"\u0000 I examine the real effects of a disclosure mandate that, with the aim of enhancing performance reporting, requires a subset of London Stock Exchange (LSE) firms to describe operational and strategic aspects of value creation, such as business operations and strategies, in their annual reports. Using an instrumented difference-in-differences design, I find that compliance with this initiative, evidenced by more disclosures of performance measures and commentaries relating to business operations and strategies, promotes intangible investments. My analysis of external and internal control systems suggests that enhanced performance reporting promotes investments because it attracts long-term investors and reduces CEO pay sensitivity to earnings performance.\u0000 JEL Classifications: D22; D82; O30; M41.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139874397","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The Economic Consequences of Heightened Materiality Uncertainty: An Auditing Perspective 重要性不确定性加剧的经济后果:审计视角
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2021-0716
Ying Huang, Ningzhong Li, Jieying Zhang, Xiaolu Zhou
{"title":"The Economic Consequences of Heightened Materiality Uncertainty: An Auditing Perspective","authors":"Ying Huang, Ningzhong Li, Jieying Zhang, Xiaolu Zhou","doi":"10.2308/tar-2021-0716","DOIUrl":"https://doi.org/10.2308/tar-2021-0716","url":null,"abstract":"\u0000 Using a Supreme Court ruling that rejected the use of “bright-line” rules previously relied upon in evaluating materiality claims, this study examines how heightened materiality uncertainty impacts audit pricing. We expect the heightened uncertainty to make it more difficult for auditors and clients to assess materiality and to reach a consensus on materiality assessment, which increases audit effort and engagement risk, leading to higher audit fees. Consistent with this prediction, we find that after the ruling, audit fees increase significantly for treatment firms in the circuits using bright-line rules in the pre-ruling period, relative to control firms not affected by the ruling. This effect is stronger when auditors have lower quality or lower industry expertise, and when investors have more diverse opinions. We also find that for firms audited by low-expertise auditors, auditor turnover due to auditor-client disagreement on materiality-related issues increases significantly for treatment firms relative to control firms.\u0000 Data Availability: Data are available from the public sources cited in the text.\u0000 JEL Classifications: K2; M41; M42.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139873856","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
The Impact of Performance Reporting on Investment Behavior: Evidence from Disclosure Reform in the U.K. 业绩报告对投资行为的影响:英国信息披露改革的证据
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2021-0863
Gitae Park
{"title":"The Impact of Performance Reporting on Investment Behavior: Evidence from Disclosure Reform in the U.K.","authors":"Gitae Park","doi":"10.2308/tar-2021-0863","DOIUrl":"https://doi.org/10.2308/tar-2021-0863","url":null,"abstract":"\u0000 I examine the real effects of a disclosure mandate that, with the aim of enhancing performance reporting, requires a subset of London Stock Exchange (LSE) firms to describe operational and strategic aspects of value creation, such as business operations and strategies, in their annual reports. Using an instrumented difference-in-differences design, I find that compliance with this initiative, evidenced by more disclosures of performance measures and commentaries relating to business operations and strategies, promotes intangible investments. My analysis of external and internal control systems suggests that enhanced performance reporting promotes investments because it attracts long-term investors and reduces CEO pay sensitivity to earnings performance.\u0000 JEL Classifications: D22; D82; O30; M41.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139814685","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Firm Boundaries and Voluntary Disclosure 公司界限与自愿披露
The Accounting Review Pub Date : 2024-02-01 DOI: 10.2308/tar-2022-0182
Thomas Bourveau, John D. Kepler, Guoman She, L. Wang
{"title":"Firm Boundaries and Voluntary Disclosure","authors":"Thomas Bourveau, John D. Kepler, Guoman She, L. Wang","doi":"10.2308/tar-2022-0182","DOIUrl":"https://doi.org/10.2308/tar-2022-0182","url":null,"abstract":"\u0000 We study how vertical integration shapes firms’ public disclosures. Theory suggests that firms can use public disclosure to coordinate with supply chain partners and predicts a substitution between vertical integration and public disclosure of future strategic plans, since the internalization of production reduces the need to publicly coordinate. Using data on the extent of vertical integration, we find that firms that become more vertically integrated reduce their public disclosures about their product strategies and that the reduction is most pronounced for vertically integrated firms with greater internalization of production and those with the largest informational and strategic frictions along the supply chain.\u0000 JEL Classifications: D83; G14; L14; M41.","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139872225","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Does Political Uncertainty Obfuscate Narrative Disclosure? 政治不确定性是否会掩盖叙事披露?
The Accounting Review Pub Date : 2024-01-01 DOI: 10.2308/tar-2021-0884
Mohamed Mekhaimer, Marwa Soliman, Weining Zhang
{"title":"Does Political Uncertainty Obfuscate Narrative Disclosure?","authors":"Mohamed Mekhaimer, Marwa Soliman, Weining Zhang","doi":"10.2308/tar-2021-0884","DOIUrl":"https://doi.org/10.2308/tar-2021-0884","url":null,"abstract":"\u0000 We examine the relation between political uncertainty and narrative disclosure complexity in conference calls. Using firm-level political uncertainty, we find that political uncertainty is positively associated with firms’ disclosures complexity as measured by the Fog index. Decomposing complexity into two latent components—information and obfuscation—we show that political uncertainty significantly increases the obfuscation but has no impact on the information. Further analysis reveals that complex disclosure is motivated by expected poor future performance amid political uncertainty. We also show that, during periods of heightened political uncertainty, obfuscated disclosure is associated with reduced earnings informativeness, increased dispersion in analyst forecasts, and higher volatility in forecast revisions. These findings are robust to including and excluding sentences containing complex political bigrams when calculating Fog. Further evidence shows that, during periods of political uncertainty, managers tend to use a more ambiguous tone and provide scripted and shorter (longer) responses to analysts’ questions (presentations).","PeriodicalId":503285,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139454559","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
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