Contemporary Accounting Research最新文献

Using a sample of 30,270 forecasts by 2,280 analysts under a stacked difference-in-differences framework involving 22 major climatic disasters in the United States, we examine the effect of climatic disasters on information production by security analysts, who play a crucial role in the financial market as information intermediaries. We find that earnings forecasts by analysts who experienced a major climatic disaster become less accurate than those by unaffected analysts within 3 months after the disaster, due to distracted attention. Disaster-zone analysts are more likely to allocate their attention to firms of greater importance or salience, and they tend to reiterate their previous forecasts to maintain the quantity and timeliness of their forecasts. Overall, we document the real impact of cognitive bias on financial professionals' performance.

Firms are required to provide financial information via the financial statements and the management discussion and analysis (MD&A), a narrative explanation of the financial statements. Our study examines how firms use the MD&A channel when their financial statement channel is inadequate. We focus on two textual attributes of the MD&A: non-GAAP disclosure and forward-looking statements. We find that firms with less adequate financial statements discuss non-GAAP measures more and provide a larger number of forward-looking statements. We then identify the topics, and therefore the context, in which non-GAAP and forward-looking disclosures are provided. Our study provides evidence on how managers use the MD&A, a relatively more flexible channel, to provide information when their financial statement channel is less adequate.

Given that tax-related critical audit matters (tax CAMs) were prevalent among accelerated filers (18.5% of observations) during the initial year of CAM disclosures, we examine whether an auditor's disclosure of tax CAMs is associated with variation in tax-related financial reporting quality, tax avoidance, and tax-related earnings management. Finding an association between tax CAMs and one of these tax outcomes would indicate that the new auditor reporting standard has indirectly affected investors. Examining the first year of CAM disclosures, we do not find that tax CAMs are associated with broad proxies of tax-related audit or financial reporting quality (e.g., restatements, internal control weaknesses, comment letters) or tax avoidance (e.g., effective tax rates or book-to-tax differences). We do find that tax CAMs are associated with a modest increase in tax accrual quality, an increase in the reserve for unrecognized tax benefits, and a reduction in the likelihood of tax-related earnings management. However, we do not find these tax CAM effects persist into the second year of CAM reporting. Our evidence is consistent with tax CAM disclosures having a modest but short-lived effect on companies' reporting of tax accounts. Our findings should inform the PCAOB as they conduct their post-implementation review of the new audit reporting standard.

Building on Banker, Byzalov, and Plehn-Dujowich's (2014, The Accounting Review, 89(3), 839–865) congestion cost theory, we model firms' trade-off between a rigid cost structure and a high inventory level to reduce the congestion costs caused by uncertain demand. We demonstrate that firms with a higher inventory level adopt a less rigid cost structure, but the effect of cost structure on inventory is theoretically ambiguous. Using a large sample of manufacturing firms in the United States, we empirically investigate the dynamic interdependence between cost structure and inventory choices. Our results reveal that cost structure rigidity and inventory are negatively associated with each other over time, suggesting that they serve as substitutes in tackling demand uncertainty. Further analysis demonstrates that firms favor higher inventory levels over more rigid costs when inventory-carrying costs decrease, fixed input costs increase, or downside risk escalates.

In empirically estimating the relation between CEO compensation and accounting-based firm and peer performance, researchers often define the performance variables net of CEO compensation expense. We analytically show that a researcher's use of CEO compensation as a regression's dependent variable and as an expense in defining a regression's independent variables representing accounting-based firm and peer performance will bias the researcher's pay-for-performance and relative performance evaluation (RPE) regression coefficients. In a panel estimation of CEO compensation, we document an attenuation bias in the coefficients on net firm and net peer performance. This evidence may partially explain inferences of weak CEO incentives and limited usage of RPE in prior work. Our results imply that in CEO compensation regressions, a researcher can remove biases in inferring CEO incentives and RPE usage by using gross rather than net accounting performance variables—that is, by adding back CEO compensation expense to net accounting measures.

Focusing on multidivisional companies, this paper analyzes the hardening of local forecasts at the intersection of business units (BUs) and the corporate finance function. It investigates how BU controllers, accountable to both local management and the corporate finance function, seek to establish themselves as competent and trustworthy forecasters vis-à-vis their functional superiors. Drawing on Goffman's dramaturgical sociology, we demonstrate how these encounters constitute episodes in a multiperiod hardening game feeding into the management of forecast quality and anticipatory control. We illustrate how expressive performances of their competence and trustworthiness are vital for BU controllers to manage vertical information flows between the local and the corporate level and for aligning corresponding interests. Convincing performances can reinforce BU controllers' status as stewards of the forecasting process and help to maintain a “truce” between the local and the corporate level, assuring corporate controllers that the unit's future is under control.

In this paper, we introduce the construct of proactive auditing behaviors to the accounting literature and report the first experimental investigation of their antecedents. Regulators and practitioners agree that proactive behaviors are needed to consistently achieve high-quality audit outcomes, but also that these behaviors are scarce. Drawing on theory from management, accounting, and psychology, we predict that an environmental factor (autonomy) and a dispositional factor (tacit knowledge) interact to increase a range of distinct proactive auditing behaviors. These behaviors involve responding to evidence that has out-of-task implications, coordinating with clients to acquire task-related evidence, and two forms of coaching junior auditors. As predicted, we find that auditors are more proactive when they have both higher autonomy and higher tacit knowledge than when they lack either or both factors. Our theory and findings inform academics, regulators, and practitioners about the types of work environments and policies that can promote auditor proactivity successfully.

This paper presents new evidence on the economic benefits arising from common institutional ownership. We find a negative and significant effect of common institutional ownership on stock price crash risk. This effect is robust to a battery of robustness checks and is causal according to some identification tests, including difference-in-differences analyses on financial institution mergers. We find evidence that the negative effect is attributable to the monitoring role of common institutional owners—a role that is enabled by common owners' lower information processing cost and greater monitoring incentives owing to governance externalities. We also find that common owners negatively influence crash risk through constraining bad news hoarding and that common owners are more likely to force CEO turnover when a firm has higher crash risk. Overall, our results suggest that common institutional shareholders play a unique and effective monitoring role that fends off stock price crashes.

This study examines the effect of shareholder scrutiny of corporate tax avoidance behavior and its related financial reporting. Specifically, we explore the factors associated with shareholder tax litigation and its effect on the future tax behavior of the sued firm and its peers. We find that sued firms have lower cash and GAAP effective tax rates (ETRs) and engage in extreme tax avoidance before litigation. After litigation, they decrease tax avoidance activities, relative to matched control firms. Peer firms in the same industry as sued firms similarly reduce their level of tax avoidance and the likelihood of extreme tax avoidance after the litigation, relative to control firms. Additional analyses suggest that sued firms change their tax avoidance behavior, rather than merely their tax financial reporting. Finally, the spillover results are strongest for peer firms with the most tax avoidance (i.e., the lowest cash ETRs) when the sued firm's alleged misconduct is revealed.

Extant management accounting research has conceptualized the interplay between trust, distrust, and open-book accounting (OBA) as a relationship-level phenomenon, largely ignoring that inter-organizational relationships are often complex entities that comprise multiple arenas of exchange where (dis)trust and OBA can interact in different—and potentially contradictory—ways. To address this theoretical oversight, we draw on relational exchange theory to propose that (dis)trust largely forms within OBA domains where different forms of data are exchanged for different purposes. Trust and distrust may thereby coexist within a relationship. We also propose that (dis)trust spills over to influence the conditions for OBA in other domains. Consequently, trust and distrust not only take shape in cumulative processes within OBA domains but also diffuse between domains in a relationship. Empirical observations from a longitudinal case study of a retail buyer's attempts to introduce OBA in three vendor relationships lead us to suggest that competence-trust spillover is determined largely by domain similarity, while goodwill-trust spillover relies to a greater extent on staff mobility between OBA domains. Overall, the negative effects of distrust spillover on the implementation of OBA appear greater than the positive effects of trust spillover. Our study shows that, by analyzing the domain-specific nature of trust and distrust, future research can increase our understanding of the relationship between data characteristics and (dis)trust, as well as explain how trust and distrust interact to determine conditions for data exchange between organizations.