Voluntary disclosure can lower the cost of capital and improve market monitoring of managers. However, market participants may be uncertain about how much managers intend to bias any voluntary disclosure. Firm owners can adjust managerial compensation to mitigate uncertainty about managerial bias. This paper builds an optimal-contracting model to show how reductions in cost of capital and higher sensitivities of equity pay to performance need to be traded off against distortions in managerial compensation. The model predicts that, across firms, voluntary disclosure is positively related to managers’ bias and strength of equity incentives, and negatively to the cost of capital.
{"title":"Outside investor access to top management: market monitoring versus managerial bias","authors":"Josef Schroth","doi":"10.2139/ssrn.3669235","DOIUrl":"https://doi.org/10.2139/ssrn.3669235","url":null,"abstract":"Voluntary disclosure can lower the cost of capital and improve market monitoring of managers. However, market participants may be uncertain about how much managers intend to bias any voluntary disclosure. Firm owners can adjust managerial compensation to mitigate uncertainty about managerial bias. This paper builds an optimal-contracting model to show how reductions in cost of capital and higher sensitivities of equity pay to performance need to be traded off against distortions in managerial compensation. The model predicts that, across firms, voluntary disclosure is positively related to managers’ bias and strength of equity incentives, and negatively to the cost of capital.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121568371","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}
We show that financial reporting spurs consumer behavior. Using granular GPS data, we show that foot-traffic to firms’ commerce locations significantly increases in the days following their earnings announcements. Foot-traffic increases more for announcements with extreme earnings surprises, that correspond to firms’ fiscal year-ends, that occur outside of Fridays, and that elicit greater internet search volume, consistent with earnings announcements spurring consumer behavior by garnering attention. Consumer activity also rises with reductions in solvency risk among firms selling durable goods, consistent with consumers responding to information about firms’ longevity conveyed by their earnings. Using demographic information, we show financial reporting disproportionately affects foot-traffic in populations more likely to consume financial news. Collectively, these results suggest earnings announcements serve a marketing function by drawing attention to firms, and that a byproduct of the financial reporting process is that it shapes consumer behavior.
{"title":"Financial Reporting and Consumer Behavior","authors":"Suzie Noh, Eric C. So, C. Zhu","doi":"10.2139/ssrn.3932590","DOIUrl":"https://doi.org/10.2139/ssrn.3932590","url":null,"abstract":"We show that financial reporting spurs consumer behavior. Using granular GPS data, we show that foot-traffic to firms’ commerce locations significantly increases in the days following their earnings announcements. Foot-traffic increases more for announcements with extreme earnings surprises, that correspond to firms’ fiscal year-ends, that occur outside of Fridays, and that elicit greater internet search volume, consistent with earnings announcements spurring consumer behavior by garnering attention. Consumer activity also rises with reductions in solvency risk among firms selling durable goods, consistent with consumers responding to information about firms’ longevity conveyed by their earnings. Using demographic information, we show financial reporting disproportionately affects foot-traffic in populations more likely to consume financial news. Collectively, these results suggest earnings announcements serve a marketing function by drawing attention to firms, and that a byproduct of the financial reporting process is that it shapes consumer behavior.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132439033","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}
This research paper summarizes the arguments and counterarguments within the scientific discussion on the Small and medium scale enterprises constitute the backbone of any nations economic development and had remained a major contributor in poverty alleviation,employment generation, and industrialization. The purpose of this phenomenological study was to explore the lived experiences of small and medium scale enterprise owners in the development country, regarding the raising of finances from lending institutions to ensure their business growth and sustenance. A phenomenological qualitative approach for this study as it empowers the researcher to investigate the lived experiences of participants to gain a deep understanding of the small number of participants who had raised funding from financing institutions and how to improve their experiences thereby reducing the challenges while seeking for financing. The relevance of this scientific problem discussion from the organizational life cycle theory and working capital management theory to emphasize the concept of study environment, financing institutions, knowledge, and experience of small business owners. Key findings emerged that within the business environment, there are lack of government policies to support small businesses, and financing institutions are not favorably disposed to support small and medium scale business. The wide-ranging factors discussed in this article also brought to fore additional financing strategies adopted by small businesses as alternatives to banks funding, the effect adequate fundingwill have their operations and the improvement required by government, financing institutions and owners of small businesses to support the growth and development of small businesses. The results of the research study may contribute to positive social change by creating awareness amongst small and medium scale business owners on the best financial strategies to fund their operations to remain profitable and sustained. The research study highlighted the need for both the government and financing institutions to support small businesses to function effectively to remain relevant, continue to generate more employment, improve the living standard of the owners of small business, and ultimately impact development country at large. Finally, this study added to the existing literature on small and medium scale enterprises financing strategies, their challenges, and their means to ameliorate the difficulties experienced by their owners when seeking for funding from lending institutions.
{"title":"Innovative Strategies ForSocial-Economic Development Financial Strategies In The Development Country","authors":"Karina Kasztelnik","doi":"10.2139/ssrn.3853127","DOIUrl":"https://doi.org/10.2139/ssrn.3853127","url":null,"abstract":"This research paper summarizes the arguments and counterarguments within the scientific discussion on the Small and medium scale enterprises constitute the backbone of any nations economic development and had remained a major contributor in poverty alleviation,employment generation, and industrialization. The purpose of this phenomenological study was to explore the lived experiences of small and medium scale enterprise owners in the development country, regarding the raising of finances from lending institutions to ensure their business growth and sustenance. A phenomenological qualitative approach for this study as it empowers the researcher to investigate the lived experiences of participants to gain a deep understanding of the small number of participants who had raised funding from financing institutions and how to improve their experiences thereby reducing the challenges while seeking for financing. The relevance of this scientific problem discussion from the organizational life cycle theory and working capital management theory to emphasize the concept of study environment, financing institutions, knowledge, and experience of small business owners. Key findings emerged that within the business environment, there are lack of government policies to support small businesses, and financing institutions are not favorably disposed to support small and medium scale business. The wide-ranging factors discussed in this article also brought to fore additional financing strategies adopted by small businesses as alternatives to banks funding, the effect adequate fundingwill have their operations and the improvement required by government, financing institutions and owners of small businesses to support the growth and development of small businesses. The results of the research study may contribute to positive social change by creating awareness amongst small and medium scale business owners on the best financial strategies to fund their operations to remain profitable and sustained. The research study highlighted the need for both the government and financing institutions to support small businesses to function effectively to remain relevant, continue to generate more employment, improve the living standard of the owners of small business, and ultimately impact development country at large. Finally, this study added to the existing literature on small and medium scale enterprises financing strategies, their challenges, and their means to ameliorate the difficulties experienced by their owners when seeking for funding from lending institutions.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"2018 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-05-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121577379","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}
The purpose of this research is an attempt to present a mixed model based on the residual income valuation model, where two new factors, business cycles and financial items, are added. We offer a practical investment opinion by which investors and fundamental analysts can either establish or adjust their portfolios if there is an effort made to reverse the present economic atmosphere due to the ongoing COVID-19 pandemic.We find that the items in financial reports don’t have the same impacts for different business cycles. However, tax has a significantly positive sign when economies are expanding or contracting.
{"title":"A New Investment Strategy with Economic Cycle Alternations Based on Residual Income Valuation Model: Empirical Results from Taiwan Stock Markets","authors":"Tang-Lin Hwang","doi":"10.2139/ssrn.3832462","DOIUrl":"https://doi.org/10.2139/ssrn.3832462","url":null,"abstract":"The purpose of this research is an attempt to present a mixed model based on the residual income valuation model, where two new factors, business cycles and financial items, are added. We offer a practical investment opinion by which investors and fundamental analysts can either establish or adjust their portfolios if there is an effort made to reverse the present economic atmosphere due to the ongoing COVID-19 pandemic.We find that the items in financial reports don’t have the same impacts for different business cycles. However, tax has a significantly positive sign when economies are expanding or contracting.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131203198","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}
International firms are highly sensitive to the performance of their subsidiaries and want to understand the factors behind their monetary success. Thus, numerous strategies are employed by these International firms to explore subsidiaries’ performance determinants; usually these includes subsidiary level attributes, ignoring parent’s impact along with its country. To address this gap we construct a multi-level research that focuses the subsidiary, parent attributes along with countries’ Governance Indicators, while predicting the determinants of subsidiary performance in Pakistan. We use two different levels i.e. parent & subsidiary level; multi-level analysis approach with HLM (Hierarchical Linear Model) in this research paper. Governance indicators of both parents and subsidiaries were taken explanatory factors along with Market growth, size, Performance, R & D, capital structure as well as asset management policies of parent. Subsidiary level factors included parents’ ownership, size, equity, and capital investment. 26 multinational companies listed in Pakistan Stock Exchange were included. Data was taken from the year 2012 to 2018. Selected companies cover around ten sectors of Pakistan Stock Exchange. The study revealed that on both level; parents and subsidiary, Governance institutions are more influencing factors rather than companies’ own attributes. We recommend that before investing in a country, international businesses should take into account Governance institutions (by World Bank); more than their own attributes. Originality/value; This study contributes to the existing approaches of determining subsidiary performance through adding Governance institutions and parent level attributes. Especially it explores the determinants of subsidiary performance in a developing country; Pakistan in Asia continent.
{"title":"Can Parents Companies Be Attributed for Their Subsidiary Performance? A Multi-Level Analysis for Performance Determinants of Multinational Enterprises in Pakistan","authors":"Nayab Zahra, D. Siddiqui","doi":"10.2139/ssrn.3719319","DOIUrl":"https://doi.org/10.2139/ssrn.3719319","url":null,"abstract":"International firms are highly sensitive to the performance of their subsidiaries and want to understand the factors behind their monetary success. Thus, numerous strategies are employed by these International firms to explore subsidiaries’ performance determinants; usually these includes subsidiary level attributes, ignoring parent’s impact along with its country. To address this gap we construct a multi-level research that focuses the subsidiary, parent attributes along with countries’ Governance Indicators, while predicting the determinants of subsidiary performance in Pakistan. We use two different levels i.e. parent & subsidiary level; multi-level analysis approach with HLM (Hierarchical Linear Model) in this research paper. Governance indicators of both parents and subsidiaries were taken explanatory factors along with Market growth, size, Performance, R & D, capital structure as well as asset management policies of parent. Subsidiary level factors included parents’ ownership, size, equity, and capital investment. 26 multinational companies listed in Pakistan Stock Exchange were included. Data was taken from the year 2012 to 2018. Selected companies cover around ten sectors of Pakistan Stock Exchange. The study revealed that on both level; parents and subsidiary, Governance institutions are more influencing factors rather than companies’ own attributes. We recommend that before investing in a country, international businesses should take into account Governance institutions (by World Bank); more than their own attributes. Originality/value; This study contributes to the existing approaches of determining subsidiary performance through adding Governance institutions and parent level attributes. Especially it explores the determinants of subsidiary performance in a developing country; Pakistan in Asia continent.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"106 6","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120843275","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}
Generally two types of banking system exist in Bangladesh: conventional banking system and Islamic banking system. The conventional banking system consists of interest based banking system. On the other hand Islamic banking system is free of interest. As a result their profitability also differs. The purpose of this study is to compare the profitability of conventional banking system with that of Islamic banking system. Total 270 bank-years are considered as sample from the 30 listed banks of DSE of which 23 are conventional and 7 are Islamic banks during the period of 2010 to 2018 (3rd quarter for 2018). The result of this study is that conventional banks are more profitable than Islamic banks. Conventional banks’ Return on Assets (ROA) and Profit Expense Ratio (PER) is significantly higher than those of Islamic banks but there is no significant difference in Return on Equity (ROE). Moreover it is also found that for conventional banks Total Equity to Total Assets (TETA) and Deposit to Total Assets (DTA) significantly affect ROA but for Islamic banks only Total Equity to Total Assets (TETA) affects ROA significantly. For conventional banks Deposit to Total Assets (DTA) affects ROE significantly and for Islamic banks Total Equity to Total Assets (TETA) and Debt Equity Ratio (DER) affects ROE significantly. This result may help these two sectors to know their position so that they can improve their present conditions. Besides, the regulatory authority will find it easier to incorporate new rules and regulations for those banking system. Further research can be done using the data of other countries where Islamic banking system exists.
{"title":"A Comparative Evaluation of Profitability of Conventional Banks versus Islamic Banks in Bangladesh","authors":"Dewan Azmal Hossain","doi":"10.5281/ZENODO.4274900","DOIUrl":"https://doi.org/10.5281/ZENODO.4274900","url":null,"abstract":"Generally two types of banking system exist in Bangladesh: conventional banking system and Islamic banking system. The conventional banking system consists of interest based banking system. On the other hand Islamic banking system is free of interest. As a result their profitability also differs. The purpose of this study is to compare the profitability of conventional banking system with that of Islamic banking system. Total 270 bank-years are considered as sample from the 30 listed banks of DSE of which 23 are conventional and 7 are Islamic banks during the period of 2010 to 2018 (3rd quarter for 2018). The result of this study is that conventional banks are more profitable than Islamic banks. Conventional banks’ Return on Assets (ROA) and Profit Expense Ratio (PER) is significantly higher than those of Islamic banks but there is no significant difference in Return on Equity (ROE). Moreover it is also found that for conventional banks Total Equity to Total Assets (TETA) and Deposit to Total Assets (DTA) significantly affect ROA but for Islamic banks only Total Equity to Total Assets (TETA) affects ROA significantly. For conventional banks Deposit to Total Assets (DTA) affects ROE significantly and for Islamic banks Total Equity to Total Assets (TETA) and Debt Equity Ratio (DER) affects ROE significantly. This result may help these two sectors to know their position so that they can improve their present conditions. Besides, the regulatory authority will find it easier to incorporate new rules and regulations for those banking system. Further research can be done using the data of other countries where Islamic banking system exists.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132722437","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}
How really is performance influenced by capital structure? There have being different views by different scholars on this topic. Therefore this study examined the relationship between capital structure and firm’s performance of quoted industrial goods on Nigeria Stock Exchange (NSE). Five firms were selected for the study with secondary data covering for six years (2014-2019). We employed the multiple regression model in testing our hypotheses, return on equity (ROE) serve as the dependent variable for measuring performance while the independent variables are measured by three variables which Non-current debt to total assets (NCD), current debts to total assets (CD) and total debts to equity (TDE). Our findings revealed that two of our independent variables (NCD and TDE) have a statistical significant relationship with ROE however TDE have a negative relationship with ROE, while the other independent variable CD has no statistical significant on performance. We therefore recommend that in considering the capital mix/structure of the firms long term financing should be consider first, while CD should be consider last and also proper matching should be carried out between equity and debt.
{"title":"Capital Structure and Performance of Selected Industrial Goods Firms on the Nigerian Stock Market","authors":"Promise Nkak","doi":"10.2139/ssrn.3649130","DOIUrl":"https://doi.org/10.2139/ssrn.3649130","url":null,"abstract":"How really is performance influenced by capital structure? There have being different views by different scholars on this topic. Therefore this study examined the relationship between capital structure and firm’s performance of quoted industrial goods on Nigeria Stock Exchange (NSE). Five firms were selected for the study with secondary data covering for six years (2014-2019). We employed the multiple regression model in testing our hypotheses, return on equity (ROE) serve as the dependent variable for measuring performance while the independent variables are measured by three variables which Non-current debt to total assets (NCD), current debts to total assets (CD) and total debts to equity (TDE). Our findings revealed that two of our independent variables (NCD and TDE) have a statistical significant relationship with ROE however TDE have a negative relationship with ROE, while the other independent variable CD has no statistical significant on performance. We therefore recommend that in considering the capital mix/structure of the firms long term financing should be consider first, while CD should be consider last and also proper matching should be carried out between equity and debt.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126151111","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}
We develop a novel methodology for studying the causal impact of announcement timing. Our methodology uses firms' earnings announcements and leverages quasi-exogenous variation attributable to the specific day-of-week on which a calendar month begins. We refer to the resulting variation in announcement timing as 'calendar rotations,' which are uncorrelated with proxies for announcement content. In applying our methodology, we show announcements moved forward by calendar rotations receive heightened media and investor attention, and experience greater earnings announcement premia. Taken together, our study details a method for studying how the timing of information flows impacts outcomes of interest to financial economists.
{"title":"Calendar Rotations: A New Approach for Studying the Impact of Timing using Earnings Announcements","authors":"Suzie Noh, Eric C. So, Rodrigo S. Verdi","doi":"10.2139/ssrn.3473873","DOIUrl":"https://doi.org/10.2139/ssrn.3473873","url":null,"abstract":"We develop a novel methodology for studying the causal impact of announcement timing. Our methodology uses firms' earnings announcements and leverages quasi-exogenous variation attributable to the specific day-of-week on which a calendar month begins. We refer to the resulting variation in announcement timing as 'calendar rotations,' which are uncorrelated with proxies for announcement content. In applying our methodology, we show announcements moved forward by calendar rotations receive heightened media and investor attention, and experience greater earnings announcement premia. Taken together, our study details a method for studying how the timing of information flows impacts outcomes of interest to financial economists.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"140 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134505313","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}
In this paper we explore the association between asymmetric cost behavior and firm value. Using a large sample of U.S. data, we find a robust negative relationship between cost asymmetry and firm value. We then explore whether the resource adjustment, managerial expectations, and agency theories of asymmetric cost behaviour affect the negative relation, and find support for the managerial expectation and agency theories. Furthermore, we find evidence that the detrimental impact of asymmetric cost behaviour on firm value is mediated partially through the cost of equity and cash flow channels. Further investigation suggests that the detrimental impact of cost asymmetry on firm value is stronger in the presence of high information asymmetry. We enrich the cost management literature by integrating cost asymmetry with corporate finance.
{"title":"Cost asymmetry and firm value","authors":"M. Costa, Ahsan Habib","doi":"10.2139/ssrn.3949093","DOIUrl":"https://doi.org/10.2139/ssrn.3949093","url":null,"abstract":"In this paper we explore the association between asymmetric cost behavior and firm value. Using a large sample of U.S. data, we find a robust negative relationship between cost asymmetry and firm value. We then explore whether the resource adjustment, managerial expectations, and agency theories of asymmetric cost behaviour affect the negative relation, and find support for the managerial expectation and agency theories. Furthermore, we find evidence that the detrimental impact of asymmetric cost behaviour on firm value is mediated partially through the cost of equity and cash flow channels. Further investigation suggests that the detrimental impact of cost asymmetry on firm value is stronger in the presence of high information asymmetry. We enrich the cost management literature by integrating cost asymmetry with corporate finance.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134197907","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}
We examine whether Governmental Accounting Standards Board (GASB) financial statement disclosure influence local governments’ economic decision-making. To do so, we exploit a recent GASB standard that differentially changed the disclosure requirements for pension obligations for county governments. The standard, GASB 68, had no effect on pension economics nor on the annual budget — it only affected whether and how information was presented on GASB financial statements and did so differently depending on the type of pension plan sponsored by the county. Using a broad hand-collected dataset, we document that counties that did not previously disclose pension liabilities reduced public welfare expenditures, employment, and salary expenses relative to those that had disclosed such information prior to GASB 68. The effects we document are concentrated in larger counties and in those that are more active in debt markets, suggesting that either political or capital market pressures contribute to our findings.
{"title":"The Economic Consequences of GASB Financial Statement Disclosure","authors":"Michael Dambra, Omri Even-Tov, J. Naughton","doi":"10.2139/ssrn.3538354","DOIUrl":"https://doi.org/10.2139/ssrn.3538354","url":null,"abstract":"We examine whether Governmental Accounting Standards Board (GASB) financial statement disclosure influence local governments’ economic decision-making. To do so, we exploit a recent GASB standard that differentially changed the disclosure requirements for pension obligations for county governments. The standard, GASB 68, had no effect on pension economics nor on the annual budget — it only affected whether and how information was presented on GASB financial statements and did so differently depending on the type of pension plan sponsored by the county. Using a broad hand-collected dataset, we document that counties that did not previously disclose pension liabilities reduced public welfare expenditures, employment, and salary expenses relative to those that had disclosed such information prior to GASB 68. The effects we document are concentrated in larger counties and in those that are more active in debt markets, suggesting that either political or capital market pressures contribute to our findings.","PeriodicalId":113347,"journal":{"name":"Chicago Booth ARC: Financial Accounting (Topic)","volume":"137 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-02-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133554093","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}
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