M. Cronin, David H. Erkens, Jason D. Schloetzer, C. Tinsley
We conducted a clustered randomized field experiment with 20 Brazilian distributorships of a multi-national direct sales organization to examine whether controlling failure perceptions through formal communications increases performance. We used the organization’s weekly sales meetings to deliver a video-based message from the regional head that either communicates workers should view failure as a natural part of learning rather than an indictment of their ability (treatment condition) or simply summarizes the organization’s history (control condition). We find that those who were assigned to the treatment condition were more likely to sustain their effort in response to economic adversity that coincided with our experiment. Additional analyses suggest that our treatment accomplished this by increasing job-specific confidence, and by reinforcing social norms that encourage workers to persevere after failure. Overall, our findings highlight that formal communications from senior management are a viable control mechanism for sustaining effort in the face of failure.
{"title":"How Controlling Failure Perceptions Affects Performance: Evidence from a Field Experiment","authors":"M. Cronin, David H. Erkens, Jason D. Schloetzer, C. Tinsley","doi":"10.2308/tar-2018-0146","DOIUrl":"https://doi.org/10.2308/tar-2018-0146","url":null,"abstract":"We conducted a clustered randomized field experiment with 20 Brazilian distributorships of a multi-national direct sales organization to examine whether controlling failure perceptions through formal communications increases performance. We used the organization’s weekly sales meetings to deliver a video-based message from the regional head that either communicates workers should view failure as a natural part of learning rather than an indictment of their ability (treatment condition) or simply summarizes the organization’s history (control condition). We find that those who were assigned to the treatment condition were more likely to sustain their effort in response to economic adversity that coincided with our experiment. Additional analyses suggest that our treatment accomplished this by increasing job-specific confidence, and by reinforcing social norms that encourage workers to persevere after failure. Overall, our findings highlight that formal communications from senior management are a viable control mechanism for sustaining effort in the face of failure.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131671025","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}
Terrence Blackburne, Zahn Bozanic, Bret A. Johnson, D. Roulstone
Drawing on financial reporting, institutional, and social psychology theories, we consider whether awareness of SEC scrutiny affects the extent to which managers exercise financial reporting discretion. Because there is a higher probability that the SEC will detect misconduct and impose penalties on firms under investigation, we predict that managers will change their behavior during periods of increased scrutiny. We test our predictions using novel data on all Division of Enforcement (DoE) investigations completed during the 2000-2016 period. The evidence we present offers three insights. First, our results suggest that managers perceive the SEC will be more concerned, and potentially more punitive, with firms that employ discretion through accruals rather than real activities. Second, the actions taken by managers appear to reflect improvements in accounting misstatement risk, reductions in accounting irregularities, and increases in conservatism. Third, firms investigated by the SEC, but not ultimately subject to an enforcement action, exhibit decreased R&D and increased likelihoods of CEO turnover, comment letter receipt, earnings restatements, and class-action lawsuits. The implications of our study should be of interest to academics, investors, and regulators in understanding how heightened regulatory monitoring over financial reporting can affect both accounting practices and operating decisions.
{"title":"The Regulatory Observer Effect: Evidence from SEC Investigations","authors":"Terrence Blackburne, Zahn Bozanic, Bret A. Johnson, D. Roulstone","doi":"10.2139/ssrn.3514915","DOIUrl":"https://doi.org/10.2139/ssrn.3514915","url":null,"abstract":"Drawing on financial reporting, institutional, and social psychology theories, we consider whether awareness of SEC scrutiny affects the extent to which managers exercise financial reporting discretion. Because there is a higher probability that the SEC will detect misconduct and impose penalties on firms under investigation, we predict that managers will change their behavior during periods of increased scrutiny. We test our predictions using novel data on all Division of Enforcement (DoE) investigations completed during the 2000-2016 period. The evidence we present offers three insights. First, our results suggest that managers perceive the SEC will be more concerned, and potentially more punitive, with firms that employ discretion through accruals rather than real activities. Second, the actions taken by managers appear to reflect improvements in accounting misstatement risk, reductions in accounting irregularities, and increases in conservatism. Third, firms investigated by the SEC, but not ultimately subject to an enforcement action, exhibit decreased R&D and increased likelihoods of CEO turnover, comment letter receipt, earnings restatements, and class-action lawsuits. The implications of our study should be of interest to academics, investors, and regulators in understanding how heightened regulatory monitoring over financial reporting can affect both accounting practices and operating decisions.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116877587","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 work, we examine how the adoption of enterprise information systems affects the ability of high agency organizational actors to control the activities performed by firms, including both what those activities are and where they are done. While extant research highlights the ability of managers to more carefully manipulate the activities performed by the firm when enterprise IT is adopted, work has yet to examine whether high agency subordinates will use such technology to appropriate rents. Empirically, we investigate whether surgeons reallocate patients to ambulatory care settings for treatment after the adoption of electronic health records (EHR). Findings suggest that while the adoption of basic EHR technology has limited effect, the adoption of advanced EHRs dramatically increases the number of patients treated in an ambulatory care setting. Interestingly, these relationships are strongly moderated by both the financial incentives of the physician and the profit motives of the hospital. Practical and theoretical implications are discussed within.
{"title":"The Doctor will See You Elsewhere: Enterprise Information Systems and the Changing Control of Firm Activities","authors":"Brad N. Greenwood, Russell J. Funk","doi":"10.2139/ssrn.3481443","DOIUrl":"https://doi.org/10.2139/ssrn.3481443","url":null,"abstract":"In this work, we examine how the adoption of enterprise information systems affects the ability of high agency organizational actors to control the activities performed by firms, including both what those activities are and where they are done. While extant research highlights the ability of managers to more carefully manipulate the activities performed by the firm when enterprise IT is adopted, work has yet to examine whether high agency subordinates will use such technology to appropriate rents. Empirically, we investigate whether surgeons reallocate patients to ambulatory care settings for treatment after the adoption of electronic health records (EHR). Findings suggest that while the adoption of basic EHR technology has limited effect, the adoption of advanced EHRs dramatically increases the number of patients treated in an ambulatory care setting. Interestingly, these relationships are strongly moderated by both the financial incentives of the physician and the profit motives of the hospital. Practical and theoretical implications are discussed within.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133962679","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}
Long Chen, B. Srinidhi, Albert H. C. Tsang, Wei Yu
ABSTRACT: Prior studies show that corporate social responsibility (CSR) reporting is informative to investors but lacks credibility. This study examines whether a commitment to audits of financial ...
{"title":"Audited Financial Reporting and Voluntary Disclosure of Corporate Social Responsibility (CSR) Reports","authors":"Long Chen, B. Srinidhi, Albert H. C. Tsang, Wei Yu","doi":"10.2139/ssrn.2666872","DOIUrl":"https://doi.org/10.2139/ssrn.2666872","url":null,"abstract":"ABSTRACT: Prior studies show that corporate social responsibility (CSR) reporting is informative to investors but lacks credibility. This study examines whether a commitment to audits of financial ...","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"292 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2015-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116095632","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 study conflicting incentives of the master and special servicers in handling troubled loans in a CMBS deal and how the frictions between the interests of the two servicers might be diminished if the master and special servicing rights are held by the same firm. We show that concentrating both servicing rights in one firm reduces the likelihood that a defaulted loan terminates in foreclosure.
{"title":"Servicers and Mortgage-Backed Securities Default: Theory and Evidence","authors":"B. Ambrose, A. Sanders, Abdullah Yavas","doi":"10.2139/ssrn.1789695","DOIUrl":"https://doi.org/10.2139/ssrn.1789695","url":null,"abstract":"We study conflicting incentives of the master and special servicers in handling troubled loans in a CMBS deal and how the frictions between the interests of the two servicers might be diminished if the master and special servicing rights are held by the same firm. We show that concentrating both servicing rights in one firm reduces the likelihood that a defaulted loan terminates in foreclosure.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"191 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115618286","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 find substantial regional variations in CMBS loan default rates based on a 10-year history of nearly 38,000 CMBS loans. We seek to explain those variations with well documented risk factors such as negative equity, insolvency, property type, originator and state foreclosure law, as well as some newly introduced factors such as local unemployment rate, loan covenant (lock out) and natural disaster (Katrina). Many of the aforementioned factors are significant for CMBS loan default risk and they help explain part of the regional variations in CMBS loan default rate. We also find a significant negative relationship between local residential real estate appreciation and CMBS loan default – those regions with higher house price appreciation rates have lower default risk in CMBS loans. Moreover, differences in MSA-level residential real estate appreciation rate add explanatory power of the regional variations in CMBS loan risk, even though they do not fully explain the regional risk. Our findings have important implications for the CMBS investment community.
{"title":"Default Risk of CMBS Loans: What Explains the Regional Variations?","authors":"Xudong An, Yongheng Deng, A. Sanders","doi":"10.2139/ssrn.1672367","DOIUrl":"https://doi.org/10.2139/ssrn.1672367","url":null,"abstract":"We find substantial regional variations in CMBS loan default rates based on a 10-year history of nearly 38,000 CMBS loans. We seek to explain those variations with well documented risk factors such as negative equity, insolvency, property type, originator and state foreclosure law, as well as some newly introduced factors such as local unemployment rate, loan covenant (lock out) and natural disaster (Katrina). Many of the aforementioned factors are significant for CMBS loan default risk and they help explain part of the regional variations in CMBS loan default rate. We also find a significant negative relationship between local residential real estate appreciation and CMBS loan default – those regions with higher house price appreciation rates have lower default risk in CMBS loans. Moreover, differences in MSA-level residential real estate appreciation rate add explanatory power of the regional variations in CMBS loan risk, even though they do not fully explain the regional risk. Our findings have important implications for the CMBS investment community.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"55 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125913934","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 study investigates a crucial aspect of the reputation mechanism design in electronic markets – the ability of buyers and sellers to revoke or mutually withdraw negative feedback and ratings. Based on an analysis of recent changes in eBay’s feedback mechanism design, we find that the two-way reputation system enables certain sellers to behave opportunistically by revoking negative feedbacks they receive. This makes the reputation system less effective in discerning the quality of sellers. We also find that changes in the reputation system have a significant influence on these sellers’ behaviors. After eBay’s ban on revoking, sellers exert more effort to improve the quality of their transactions. Our findings support the moral hazard assumption regarding seller’s strategic behavior. We discuss the implications of the above findings for reputation mechanism design and practice.
{"title":"The Good, the Bad, or the Ugly? An Empirical Investigation of Revoking Behavior on Ebay","authors":"Shun Ye, G. Gao, S. Viswanathan","doi":"10.2139/ssrn.1664822","DOIUrl":"https://doi.org/10.2139/ssrn.1664822","url":null,"abstract":"This study investigates a crucial aspect of the reputation mechanism design in electronic markets – the ability of buyers and sellers to revoke or mutually withdraw negative feedback and ratings. Based on an analysis of recent changes in eBay’s feedback mechanism design, we find that the two-way reputation system enables certain sellers to behave opportunistically by revoking negative feedbacks they receive. This makes the reputation system less effective in discerning the quality of sellers. We also find that changes in the reputation system have a significant influence on these sellers’ behaviors. After eBay’s ban on revoking, sellers exert more effort to improve the quality of their transactions. Our findings support the moral hazard assumption regarding seller’s strategic behavior. We discuss the implications of the above findings for reputation mechanism design and practice.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115915818","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}
Theoretical expectations suggest that with increasing competition online retailers would lower prices and within a given market, online retailers with higher levels of service quality would charge higher prices. Empirical investigations of online price differentiation have found reduction in price dispersion with increase in number of competitors. However, the effect of service quality on online retailers' prices has not been found to be consistent. Empirical evidence from offline markets indicates that retailers customize prices at the brand store level and that market characteristics that reflect competition are a major determinant of their pricing strategies. Together, these findings lead us to believe that a better understanding of the sources of online price dispersion can be obtained by examining interactions between retailer and market characteristics. In this paper we examine if retailer characteristics such as service quality and transaction channels impact online prices. Departing from earlier studies, we specifically seek to answer when and how, in the context of different market characteristics, do they enable the retailers to price differentiate? The market characteristics examined include number of competitors, nature of competition, and scope for differentiation in terms of both service quality and transaction channels, Given that the retailer and market level determinants are at different levels of abstractions, simple linear models are not suitable for capturing the interactions between them. We adopt a hierarchical linear modeling approach that closely reflects the levels of abstraction in the market structure and allows us to test for interactions between retailer and market characteristics. Using 13,393 price quotes for 1,880 best selling products across eight product categories, from 194 Internet retailers, we find that retailer and market characteristics interact significantly in influencing retailer price levels. The better fit between the model and the online market structure is reflected by an 25% increase in the explanation of price dispersion as compared to similar studies. Extending prior research, and consistent with theoretical expectations, we find empirical evidence for a significant positive influence of service quality on posted prices across all product categories. We observe that an increase in number of competitors induces a downward pressure in prices for all retailers, albeit at a decreasing rate. Interestingly, highly competitive markets, marked by the presence of a large number of competitors, a wider variance in the service quality of the retailers selling the product accentuates the price-premiums demanded by high service quality retailers. On the other hand, retailers with low service quality charge higher prices either when there are a large number of competitors and low variation in service quality or when there is a large variance in service quality and few competitors. Our results indicate that the
{"title":"Do Market Characteristics Impact the Relationship between Retailer Characteristics and Online Prices?","authors":"R. Venkatesan, K. Mehta, R. Bapna","doi":"10.2139/ssrn.878203","DOIUrl":"https://doi.org/10.2139/ssrn.878203","url":null,"abstract":"Theoretical expectations suggest that with increasing competition online retailers would lower prices and within a given market, online retailers with higher levels of service quality would charge higher prices. Empirical investigations of online price differentiation have found reduction in price dispersion with increase in number of competitors. However, the effect of service quality on online retailers' prices has not been found to be consistent. Empirical evidence from offline markets indicates that retailers customize prices at the brand store level and that market characteristics that reflect competition are a major determinant of their pricing strategies. Together, these findings lead us to believe that a better understanding of the sources of online price dispersion can be obtained by examining interactions between retailer and market characteristics. In this paper we examine if retailer characteristics such as service quality and transaction channels impact online prices. Departing from earlier studies, we specifically seek to answer when and how, in the context of different market characteristics, do they enable the retailers to price differentiate? The market characteristics examined include number of competitors, nature of competition, and scope for differentiation in terms of both service quality and transaction channels, Given that the retailer and market level determinants are at different levels of abstractions, simple linear models are not suitable for capturing the interactions between them. We adopt a hierarchical linear modeling approach that closely reflects the levels of abstraction in the market structure and allows us to test for interactions between retailer and market characteristics. Using 13,393 price quotes for 1,880 best selling products across eight product categories, from 194 Internet retailers, we find that retailer and market characteristics interact significantly in influencing retailer price levels. The better fit between the model and the online market structure is reflected by an 25% increase in the explanation of price dispersion as compared to similar studies. Extending prior research, and consistent with theoretical expectations, we find empirical evidence for a significant positive influence of service quality on posted prices across all product categories. We observe that an increase in number of competitors induces a downward pressure in prices for all retailers, albeit at a decreasing rate. Interestingly, highly competitive markets, marked by the presence of a large number of competitors, a wider variance in the service quality of the retailers selling the product accentuates the price-premiums demanded by high service quality retailers. On the other hand, retailers with low service quality charge higher prices either when there are a large number of competitors and low variation in service quality or when there is a large variance in service quality and few competitors. Our results indicate that the ","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127833114","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 paper presents a dynamic model of bank behavior that explains net interest margin changes for different groups of banks in response to credit, interest-rate, and term-structure shocks. Using quarterly data from 1986 to 2003, we find that banks with different product-line specializations and asset sizes respond in predictable yet fundamentally dissimilar ways to these shocks. Banks in most bank groups are sensitive in varying degrees to credit, interest-rate, and term-structure shocks. Large and more diversified banks seem to be less sensitive to interest- rate and term-structure shocks, but more sensitive to credit shocks. We also find that the composition of assets and liabilities, in terms of their repricing frequencies, helps amplify or moderate the effects of changes and volatility in short-term interest rates on bank net interest margins, depending on the direction of the repricing mismatch. We also analyze subsample periods that represent different legislative, regulatory, and economic environments and find that most banks continue to be sensitive to credit, interest-rate, and term-structure shocks. However, the sensitivity to term-structure shocks seems to have lessened over time for certain groups of banks, although the results are not universal. In addition, our results show that banks in general are not able to hedge fully against interest-rate volatility. The sensitivity of net interest margins to interest-rate volatility for different groups of banks varies across subsample periods; this varying sensitivity could reflect interest-rate regime shifts as well as the degree of hedging activities and market competition. Finally, by investigating the sensitivity of ROA to interest-rate and credit shocks, we have some evidence that banks of different specializations were able to price actual and expected changes in credit risk more efficiently in the recent period than in previous periods. These results also demonstrate that banks of all specializations try to offset adverse changes in net interest margins so as to mute their effect on reported after-tax earnings.
{"title":"The Sensitivity of Bank Net Interest Margins and Profitability To Credit, Interest-Rate, and Term-Structure Shocks Across Bank Product Specializations","authors":"G. Hanweck, Lisa Ryu","doi":"10.2139/ssrn.886727","DOIUrl":"https://doi.org/10.2139/ssrn.886727","url":null,"abstract":"This paper presents a dynamic model of bank behavior that explains net interest margin changes for different groups of banks in response to credit, interest-rate, and term-structure shocks. Using quarterly data from 1986 to 2003, we find that banks with different product-line specializations and asset sizes respond in predictable yet fundamentally dissimilar ways to these shocks. Banks in most bank groups are sensitive in varying degrees to credit, interest-rate, and term-structure shocks. Large and more diversified banks seem to be less sensitive to interest- rate and term-structure shocks, but more sensitive to credit shocks. We also find that the composition of assets and liabilities, in terms of their repricing frequencies, helps amplify or moderate the effects of changes and volatility in short-term interest rates on bank net interest margins, depending on the direction of the repricing mismatch. We also analyze subsample periods that represent different legislative, regulatory, and economic environments and find that most banks continue to be sensitive to credit, interest-rate, and term-structure shocks. However, the sensitivity to term-structure shocks seems to have lessened over time for certain groups of banks, although the results are not universal. In addition, our results show that banks in general are not able to hedge fully against interest-rate volatility. The sensitivity of net interest margins to interest-rate volatility for different groups of banks varies across subsample periods; this varying sensitivity could reflect interest-rate regime shifts as well as the degree of hedging activities and market competition. Finally, by investigating the sensitivity of ROA to interest-rate and credit shocks, we have some evidence that banks of different specializations were able to price actual and expected changes in credit risk more efficiently in the recent period than in previous periods. These results also demonstrate that banks of all specializations try to offset adverse changes in net interest margins so as to mute their effect on reported after-tax earnings.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"103 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123292504","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}
An event study demonstrates that disclosures of changes in deferred tax valuation allowances (VA) provide information beyond contemporaneous earnings reports. Prior research shows that, in setting VA, managers consider the extent that taxable income is available from various sources for the realization of deferred tax assets (DTA). Our evidence supports a characterization where investors use VA disclosures to infer management's expectations about DTA realizability and future taxable income available for their realization. These findings are potentially important evidence on the implications of financial accounting standards that allow discretion in measurement. In particular, they support the view that such discretion can serve to elicit management's expectations for the benefit of investors.
{"title":"The Information Content of the Deferred Tax Valuation Allowance: An Event Study of News Disclosures of Valuation Allowance Changes","authors":"Krishna R. Kumar, Gnanakumar Visvanathan","doi":"10.2139/ssrn.314728","DOIUrl":"https://doi.org/10.2139/ssrn.314728","url":null,"abstract":"An event study demonstrates that disclosures of changes in deferred tax valuation allowances (VA) provide information beyond contemporaneous earnings reports. Prior research shows that, in setting VA, managers consider the extent that taxable income is available from various sources for the realization of deferred tax assets (DTA). Our evidence supports a characterization where investors use VA disclosures to infer management's expectations about DTA realizability and future taxable income available for their realization. These findings are potentially important evidence on the implications of financial accounting standards that allow discretion in measurement. In particular, they support the view that such discretion can serve to elicit management's expectations for the benefit of investors.","PeriodicalId":142280,"journal":{"name":"George Mason University School of Business Research Paper Series","volume":"76 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121232492","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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