Contemporary Accounting Research最新文献

We explore the turnover intentions of creative R&D employees and the role of performance management practices in shaping these considerations. Since the success of a firm's R&D efforts hinges on the innovative ideas of its employees, it is crucial to retain particularly creative individuals. At the same time, however, we argue that this is especially difficult because both the higher outside options of creative employees and their specific individual characteristics make them, on average, more likely to leave their company. Most importantly, we suggest that two widely studied performance management design choices (target difficulty and career tournaments) typically used to motivate effort may influence the loss of creative talent. Using survey data from our unique access to R&D employees of a large manufacturing firm and a complementary experiment among business students, we find evidence that creative employees are, on average, more likely to leave their firm. Consistent with creative employees possessing a stronger learning orientation, we also predict and find that this tendency to leave is mitigated by target difficulty (as difficult targets speak to creative individuals' learning orientation) and exacerbated by the intensity of career tournaments (as they reduce team cohesion and, ultimately, undermine learning opportunities).

Many companies use color codes in their internal performance reports to highlight how current performance compares to performance in a previous period. We examine whether the use of color coding affects managers' decision-making in a resource allocation task. We argue that managers' decision accuracy will be lower if they receive noisier feedback, but that this detrimental effect of noise can be mitigated through color coding. Using two experiments, we find evidence consistent with our theory. Managers who receive reports in which performance increases are color-coded green and performance decreases are color-coded red are less affected by noise than managers who receive feedback reports without color coding. Supplemental analyses suggest that color coding induces managers to process feedback in a more holistic manner, which reduces the adverse effect of noise on managers' learning processes. Our findings have several important implications for research and practice.

We examine whether peer audit choices influence a bank's decision to obtain an audit voluntarily. We find that the likelihood of a bank voluntarily obtaining an audit is significantly associated with the audit decisions of peers. The relation is stronger when the peers are more salient due to closer geographic proximity, similarity in loan portfolio, and similarity in size. In addition, we find that peer influence on a bank's audit decision is moderated by the bank's existing level of assurance. Specifically, banks already obtaining a lower level of assurance are less likely to begin an audit in response to peer influence. We also find no evidence that peer influence extends to banks' decisions to cease obtaining an audit. Overall, our findings are consistent with peer influence significantly influencing banks' decisions to begin obtaining an audit.

Fiscal-year-end cash holdings are an important indicator in external stakeholders' assessment of a firm's liquidity and credit risk. Do fiscal-year-end cash holdings reflect a firm's intra-year liquidity conditions? We observe that firms report significantly higher cash holdings in the fourth fiscal quarter, followed by a subsequent reversal. This pattern is pervasive across industries, persistent over time, and not explained by conventional factors or calendar effects. The extent of the fourth-quarter cash increase is more pronounced for informationally opaque firms reliant on external markets and those with financial constraints and reduced monitoring. We investigate firms' real, financing, and timing activities that could potentially account for this pattern. Our study suggests that a complete picture of intra-year cash holdings dynamics is necessary for external stakeholders to fully assess a firm's liquidity and credit conditions.

Stock prices often provide firm managers with new information that can be used in real decisions. Studies generally focus on the ex ante disclosure policy and show that the presence of market feedback crowds out firms' disclosure. We instead examine a manager's ex post biasing incentives and find that market feedback amplifies overreporting bias, but not necessarily underreporting bias, due to three interacting effects. First, the manager biases the report more with feedback since decreased information quality crowds in the speculator's private information acquisition and improves investment efficiency, regardless of the reporting scenario (the information rationing effect). Second, the manager biases more in the overreporting scenario and less in the underreporting scenario, because reporting more favorable information crowds in private information acquisition, as the speculator expects a higher subsequent investment and therefore higher trading profits (the investment scale effect). Third, market feedback influences reporting bias not only through the speculator's information acquisition but also directly through the market maker's pricing function. Specifically, the market maker decreases the price discount, as he expects that the manager may learn correct information from the price and may invest more efficiently. Expecting a lower price penalty in the presence of feedback, the manager biases more in the overreporting scenario and less in the underreporting scenario (the investment correction effect). Overall, our results suggest that granting firms reporting discretion could improve investment efficiency and firm value when managers can learn through price.

Foreign workers have been an important part of the labor force in public accounting firms over the past two decades. In this paper, we investigate whether and why foreign workers influence audit quality. We find that audit offices with more newly hired foreign labor have a lower mean absolute value of discretionary accruals and a smaller rate of restatements for their clients. The effect is more pronounced for audit offices that face more resource constraints or require greater foreign expertise. The results of improved audit quality are robust to alternative measures of immigrant intensity and audit quality, alternative samples, and using different ways to address endogeneity concerns. Overall, our paper contributes to the literature by showing the impact of foreign labor in the auditing profession and provides public policy implications for the recent H-1B visa debate.

Previous research on calculative intermediaries shows how these effectively challenge, distort, and disrupt accounting practices in ways that policy-makers might not anticipate. The promises of surveillance capitalism—with its attendant data architectures, datafication processes, and technological sophistication—are different, supposing more accurate ways of reading individuals and greater calculative certainty overall. Yet there is little empirical research to explore how surveillance capitalism manifests itself at the organizational level, either conceptually or operationally. As a result, it remains uncertain whether such specters of omniscience are as haunting in reality as they appear in theory. We explore these themes by way of an ethnographic study into credit scoring in China, showing how intermediary organizations developed a multiplicity of credit scoring models based on machine learning and big data that differed both from original expectations and from each other. These different “renditions” of credit scoring suggest that the data architectures of surveillance capitalism are just as much subject to challenge and adaptation by intermediary organizations as calculative practices, such as accounting, are in more analog environments.

Auditor changes are significant corporate events marking disruptions in the auditor-client relationship. Prior studies have primarily examined the impact of such changes on audit quality and investment decisions of market participants. We study the effect of auditor changes on the voluntary disclosure of forward-looking information. Managers may choose to reduce disclosure due to the possible adverse effect of the disruptions on disclosure credibility. Alternatively, shareholders may demand increased disclosure to intensify monitoring, as the auditor change signals potential issues between the company and the auditor. Employing multiple identification strategies, we find that firms are less likely to issue management earnings forecasts (MEFs) following auditor changes. We also find that governance quality mitigates the negative impact of auditor changes on the issuance of MEFs. Additionally, auditor changes are associated with lower market reactions to forecast releases. The overall evidence is consistent with the notion of reduced forecast credibility. Lastly, we conduct cross-sectional analyses on characteristics of the auditor changes and find evidence consistent with signaling and anticipated successor audit quality to be underlying mechanisms for the association between auditor changes and MEFs. Our study provides the first large sample evidence that auditor changes have a disruptive effect on the voluntary disclosure of forward-looking information.

We examine the economic determinants and informational effects of credit rating affirmations (i.e., the reiteration of past credit ratings) for a sample of US public firms from 1995 to 2020. We find that credit rating affirmations typically follow major corporate events and changes in firm fundamentals that increase information uncertainty about a firm's creditworthiness, suggesting that affirmations reduce uncertainty. We further document that rating affirmations provide value-relevant information to equity and debt investors. Using a short-window event study method, we show that equity investors react positively to rating affirmations and that information uncertainty around affirmations diminishes. These findings are more pronounced for firms with non-investment-grade ratings. We further show that our results strengthen for firms with greater pre-affirmation information uncertainty. Finally, consistent with our information uncertainty reduction results from the stock market, we report that bond yield spreads decrease for affirmed firms. Again, the effect is more pronounced for firms with non-investment-grade ratings. In summary, we highlight the significant capital markets' effects of credit rating affirmations, an area that the literature has largely ignored.

Exclusions from street earnings can include both expected exclusions, forecasted ex ante by analysts, and unexpected exclusions, revealed after earnings are reported. While prior research largely examines total exclusions from street earnings, unexpected exclusions reflect the news or surprise in exclusions. We investigate the properties and informativeness of unexpected exclusions for future profitability, benchmark beating, analyst forecast errors, and future stock returns. We find that unexpected exclusions represent a mix of transitory and recurring items and are informative about future street earnings. In an analysis of hand-collected analysts' reports, we find that unexpected exclusions are more likely to reflect misestimated recurring items when analysts forecasted exclusions, and unexpected transitory items when analysts did not forecast exclusions. We also examine benchmark-beating behavior, in which street earnings meet street forecasts but GAAP earnings miss GAAP forecasts. We observe that benchmark beating is more likely to occur when analysts forecast exclusions than when they do not. Moreover, we find unexpected exclusions are more persistent when street earnings meet street forecasts but GAAP earnings miss GAAP forecasts. These findings are consistent with recurring earnings amounts being opportunistically shifted to excluded items to meet analysts' street forecasts. Finally, we find some evidence that analysts and investors react to, but do not fully incorporate, the information in unexpected exclusions, based on forecast revisions and stock price reactions.