Pub Date : 2023-09-27DOI: 10.2308/0001-4826-98.6.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/0001-4826-98.6.i","DOIUrl":"https://doi.org/10.2308/0001-4826-98.6.i","url":null,"abstract":"","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135586818","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}
Heidi A. Packard, Andrea Pawliczek, A. Nicole Skinner
ABSTRACT This paper examines voluntary disclosure in the context of shareholder scrutiny of executive compensation contracts. We find that firms voluntarily increase discussion of their performance within their CD&A disclosures when peer-benchmarked compensation relative to performance is high. In contrast, we do not find a similar increase in performance discussion in the corresponding MD&A disclosures, which suggests that the effect is not driven by firms’ general disclosure practices. We also find that the relation between relatively high compensation and CD&A performance disclosure strengthens following the implementation of mandatory Say-on-Pay, which increased costs associated with investor criticism of pay. These disclosures appear to be used effectively to avoid negative compensation assessments, in that they are associated with higher levels of shareholder and proxy advisor approval. Altogether, our findings suggest that CD&A performance disclosures allow firms to communicate the context of their compensation choices to improve shareholder opinions of pay. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D22; J33; M41.
{"title":"Voluntary Performance Disclosures in the CD&A","authors":"Heidi A. Packard, Andrea Pawliczek, A. Nicole Skinner","doi":"10.2308/tar-2021-0181","DOIUrl":"https://doi.org/10.2308/tar-2021-0181","url":null,"abstract":"ABSTRACT This paper examines voluntary disclosure in the context of shareholder scrutiny of executive compensation contracts. We find that firms voluntarily increase discussion of their performance within their CD&A disclosures when peer-benchmarked compensation relative to performance is high. In contrast, we do not find a similar increase in performance discussion in the corresponding MD&A disclosures, which suggests that the effect is not driven by firms’ general disclosure practices. We also find that the relation between relatively high compensation and CD&A performance disclosure strengthens following the implementation of mandatory Say-on-Pay, which increased costs associated with investor criticism of pay. These disclosures appear to be used effectively to avoid negative compensation assessments, in that they are associated with higher levels of shareholder and proxy advisor approval. Altogether, our findings suggest that CD&A performance disclosures allow firms to communicate the context of their compensation choices to improve shareholder opinions of pay. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D22; J33; M41.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135471804","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}
ABSTRACT Following management theory on organizational legitimacy, we predict that managers mimic the accounting of industry-leading companies to gain legitimacy. Such demand for legitimacy is expected to be greater for new managers because stakeholders are more uncertain about the managers’ ability. Using a sample of CEO turnovers, we find that a firm increases financial statement comparability with industry leaders after the new CEO assumes office. This relation is stronger when (1) new managers lack executive experience at larger firms, are younger, or belong to an underrepresented group (i.e., are female or nonwhite); (2) networks that facilitate imitation are more intense, such as when firms and peers are located in the same metropolitan statistical area (MSA) and when they share auditors or blockholders; and (3) firms’ operating environments are more volatile. These findings support the idea that CEOs’ demand for legitimacy leads to more comparable accounting. Data Availability: Data are available from the public sources cited in the text.
{"title":"Do Firms Mimic Industry Leaders’ Accounting? Evidence from Financial Statement Comparability","authors":"Gus De Franco, Yu Hou, Mark (Shuai) Ma","doi":"10.2308/tar-2019-0405","DOIUrl":"https://doi.org/10.2308/tar-2019-0405","url":null,"abstract":"ABSTRACT Following management theory on organizational legitimacy, we predict that managers mimic the accounting of industry-leading companies to gain legitimacy. Such demand for legitimacy is expected to be greater for new managers because stakeholders are more uncertain about the managers’ ability. Using a sample of CEO turnovers, we find that a firm increases financial statement comparability with industry leaders after the new CEO assumes office. This relation is stronger when (1) new managers lack executive experience at larger firms, are younger, or belong to an underrepresented group (i.e., are female or nonwhite); (2) networks that facilitate imitation are more intense, such as when firms and peers are located in the same metropolitan statistical area (MSA) and when they share auditors or blockholders; and (3) firms’ operating environments are more volatile. These findings support the idea that CEOs’ demand for legitimacy leads to more comparable accounting. Data Availability: Data are available from the public sources cited in the text.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135476067","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}
Maximilian A. Müller, Caspar David Peter, Francisco Urzúa I.
ABSTRACT We study whether firms avoid financial disclosures to preserve their owners' financial privacy. We find that firms named after their owner, for whom firm disclosure would more directly expose owner information, are more opaque. Eponymous owners prefer firm opacity when disclosure exposes sensitive owner information with social stigma, in rural and anticapitalist areas, and in insider-oriented settings with high secrecy and distrust. When firms are forced to disclose, eponymous owners more frequently change their firms' names, and new firms are less frequently named after their founding owners. These findings indicate that owner-level privacy concerns dampen firm-level disclosure incentives. Data Availability: The data used in this study are available from public sources listed in the paper. JEL Classifications: D82; L51; M41.
{"title":"Owner Exposure through Firm Disclosure","authors":"Maximilian A. Müller, Caspar David Peter, Francisco Urzúa I.","doi":"10.2308/tar-2020-0270","DOIUrl":"https://doi.org/10.2308/tar-2020-0270","url":null,"abstract":"ABSTRACT We study whether firms avoid financial disclosures to preserve their owners' financial privacy. We find that firms named after their owner, for whom firm disclosure would more directly expose owner information, are more opaque. Eponymous owners prefer firm opacity when disclosure exposes sensitive owner information with social stigma, in rural and anticapitalist areas, and in insider-oriented settings with high secrecy and distrust. When firms are forced to disclose, eponymous owners more frequently change their firms' names, and new firms are less frequently named after their founding owners. These findings indicate that owner-level privacy concerns dampen firm-level disclosure incentives. Data Availability: The data used in this study are available from public sources listed in the paper. JEL Classifications: D82; L51; M41.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135476069","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}
ABSTRACT I develop a structural model to quantify the costs of tax avoidance. In the model, the firm trades off tax savings with tax audit risk, financial reporting considerations, and operational frictions imposed by tax avoidance, the last of which I label as nontax costs. The estimated parameters suggest nontax costs, which are difficult to observe, decrease pretax income by 6.4 percent or $58 million per firm-year. The large magnitude of this estimate can explain why firms appear to underutilize tax avoidance strategies. Through counterfactual analysis, I estimate the effect of tax audit risk and financial reporting considerations to find that financial reporting considerations have an effect on tax avoidance similar to the penalties imposed by tax authorities. Overall, the estimated parameters help explain the “undersheltering puzzle.” JEL Classifications: G14; H21; H25; H26; M41; M48.
{"title":"How Costly is Tax Avoidance? Evidence from Structural Estimation","authors":"Charles G. McClure","doi":"10.2308/tar-2020-0465","DOIUrl":"https://doi.org/10.2308/tar-2020-0465","url":null,"abstract":"ABSTRACT I develop a structural model to quantify the costs of tax avoidance. In the model, the firm trades off tax savings with tax audit risk, financial reporting considerations, and operational frictions imposed by tax avoidance, the last of which I label as nontax costs. The estimated parameters suggest nontax costs, which are difficult to observe, decrease pretax income by 6.4 percent or $58 million per firm-year. The large magnitude of this estimate can explain why firms appear to underutilize tax avoidance strategies. Through counterfactual analysis, I estimate the effect of tax audit risk and financial reporting considerations to find that financial reporting considerations have an effect on tax avoidance similar to the penalties imposed by tax authorities. Overall, the estimated parameters help explain the “undersheltering puzzle.” JEL Classifications: G14; H21; H25; H26; M41; M48.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135472063","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}
Nir Yehuda, Christopher S. Armstrong, Daniel Cohen, Xiaolu Zhou
ABSTRACT We examine how firms’ contractual relationships with their employees affect the design of their debt contracts, and the use of financial covenants in particular. Viewing the firm as the nexus of both explicit and implicit contractual relationships, we argue that managers cater to their employees’ preferences when negotiating contractual terms with creditors. We argue that an increase in unemployment-insurance benefits reduces employees’ cost of job loss, which, in turn, allows managers to take more risk. First, we show that more generous benefits are associated with a higher operating leverage, operating cash flow volatility, and product-development frequency. We then find that loans initiated following an increase in unemployment-insurance benefits include a higher proportion of performance, rather than capital covenants. Overall, our study demonstrates how the design of debt contracts changes in response to arguably exogenous changes in employees’ collective tolerance—and, in turn, managers’ preferences—for risk. JEL Classifications: M41; G32; J60.
{"title":"Unemployment Risk and Debt Contract Design","authors":"Nir Yehuda, Christopher S. Armstrong, Daniel Cohen, Xiaolu Zhou","doi":"10.2308/tar-2019-0150","DOIUrl":"https://doi.org/10.2308/tar-2019-0150","url":null,"abstract":"ABSTRACT We examine how firms’ contractual relationships with their employees affect the design of their debt contracts, and the use of financial covenants in particular. Viewing the firm as the nexus of both explicit and implicit contractual relationships, we argue that managers cater to their employees’ preferences when negotiating contractual terms with creditors. We argue that an increase in unemployment-insurance benefits reduces employees’ cost of job loss, which, in turn, allows managers to take more risk. First, we show that more generous benefits are associated with a higher operating leverage, operating cash flow volatility, and product-development frequency. We then find that loans initiated following an increase in unemployment-insurance benefits include a higher proportion of performance, rather than capital covenants. Overall, our study demonstrates how the design of debt contracts changes in response to arguably exogenous changes in employees’ collective tolerance—and, in turn, managers’ preferences—for risk. JEL Classifications: M41; G32; J60.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135476068","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}
ABSTRACT This paper examines how changes in risk disclosures affect uncertainty about risk. We measure changes in risk disclosures using the addition and removal of individual risk factors to firms’ 10-K filings, identified via textual analysis of the risk factors section. Our market outcome is the variance risk premium (VRP), which captures the market’s pricing of uncertainty about firm risk. Following recent theoretical predictions, we predict and empirically document that newly disclosed signals of risk factor exposure—reflected in added and removed individual risk factors—decrease the uncertainty surrounding firm risk, as proxied via the VRP. We further confirm that individual risk factors offer incremental insights compared with alternative textual risk measures. Collectively, our findings suggest that textually evaluating individual risk factors reveals information about the uncertainty regarding firm risk. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G18; G32; M40.
{"title":"Changes in Risk Factor Disclosures and the Variance Risk Premium","authors":"Matthew R. Lyle, Edward J. Riedl, Federico Siano","doi":"10.2308/tar-2021-0174","DOIUrl":"https://doi.org/10.2308/tar-2021-0174","url":null,"abstract":"ABSTRACT This paper examines how changes in risk disclosures affect uncertainty about risk. We measure changes in risk disclosures using the addition and removal of individual risk factors to firms’ 10-K filings, identified via textual analysis of the risk factors section. Our market outcome is the variance risk premium (VRP), which captures the market’s pricing of uncertainty about firm risk. Following recent theoretical predictions, we predict and empirically document that newly disclosed signals of risk factor exposure—reflected in added and removed individual risk factors—decrease the uncertainty surrounding firm risk, as proxied via the VRP. We further confirm that individual risk factors offer incremental insights compared with alternative textual risk measures. Collectively, our findings suggest that textually evaluating individual risk factors reveals information about the uncertainty regarding firm risk. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G18; G32; M40.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135471792","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}
ABSTRACT How prior trust moderates investor responses to restatements is unknown. We examine how societal trust affects the changes in institutional investors’ shareholdings around a restatement. We consider two competing hypotheses based on the erosion of trust and confirmatory bias. We find the change in institutional investors’ shareholdings around a restatement is more negative for investors from high trust areas compared to low trust areas, consistent with an erosion of trust where high trust institutional investors view the restatement as a violation of trust. Further analyses show that our findings vary with the regulatory or economic environment, type of institution, and type of restatement. Our results are also robust to different tests that address endogeneity and use alternative societal trust measures. Overall, we contribute to the literature by examining the role of societal trust in a dynamic setting where investors’ trust-based beliefs about the credibility of accounting information are not realized. Data Availability: GSS Sensitive Data Files are not available from the authors. Persons interested in obtaining these data should contact the GSS at GSS@NORC.org. Other data are available from the public sources cited in the text. JEL Classifications: G11; G23; G41.
{"title":"In Financial Statements We Trust: Institutional Investors’ Stockholdings after Restatements","authors":"Steven F. Cahan, Chen Chen, Li Chen","doi":"10.2308/tar-2019-0654","DOIUrl":"https://doi.org/10.2308/tar-2019-0654","url":null,"abstract":"ABSTRACT How prior trust moderates investor responses to restatements is unknown. We examine how societal trust affects the changes in institutional investors’ shareholdings around a restatement. We consider two competing hypotheses based on the erosion of trust and confirmatory bias. We find the change in institutional investors’ shareholdings around a restatement is more negative for investors from high trust areas compared to low trust areas, consistent with an erosion of trust where high trust institutional investors view the restatement as a violation of trust. Further analyses show that our findings vary with the regulatory or economic environment, type of institution, and type of restatement. Our results are also robust to different tests that address endogeneity and use alternative societal trust measures. Overall, we contribute to the literature by examining the role of societal trust in a dynamic setting where investors’ trust-based beliefs about the credibility of accounting information are not realized. Data Availability: GSS Sensitive Data Files are not available from the authors. Persons interested in obtaining these data should contact the GSS at GSS@NORC.org. Other data are available from the public sources cited in the text. JEL Classifications: G11; G23; G41.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136023805","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}
Andrea Pawliczek, A. Nicole Skinner, Sarah L. C. Zechman
ABSTRACT We examine how disclosure and manager reputation influence capital raised when there is no commercial substance underlying the investment. Special Purpose Acquisition Companies (SPACs or “blank check” companies) do not have operations or substantive assets at the IPO but promise to use the funds raised to acquire a private firm, generally within two years. Given the lack of commercial substance and historically poor ex post performance, it is unclear what SPACs disclose at the IPO and why investors invest. Although disclosure is important in traditional IPOs, the underlying information available differs for SPACs. Nonetheless, our evidence suggests disclosures are useful to SPAC investors, although differently than for traditional IPO investors. We also examine manager reputation and find prior SPAC or CEO experience and celebrity status are associated with funds raised. Even when an investment lacks commercial substance, disclosure and reputation are important for investing decisions. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G24; G34; M41; M50.
{"title":"Signing Blank Checks: The Roles of Disclosure and Reputation in the Face of Limited Information","authors":"Andrea Pawliczek, A. Nicole Skinner, Sarah L. C. Zechman","doi":"10.2308/tar-2021-0631","DOIUrl":"https://doi.org/10.2308/tar-2021-0631","url":null,"abstract":"ABSTRACT We examine how disclosure and manager reputation influence capital raised when there is no commercial substance underlying the investment. Special Purpose Acquisition Companies (SPACs or “blank check” companies) do not have operations or substantive assets at the IPO but promise to use the funds raised to acquire a private firm, generally within two years. Given the lack of commercial substance and historically poor ex post performance, it is unclear what SPACs disclose at the IPO and why investors invest. Although disclosure is important in traditional IPOs, the underlying information available differs for SPACs. Nonetheless, our evidence suggests disclosures are useful to SPAC investors, although differently than for traditional IPO investors. We also examine manager reputation and find prior SPAC or CEO experience and celebrity status are associated with funds raised. Even when an investment lacks commercial substance, disclosure and reputation are important for investing decisions. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G24; G34; M41; M50.","PeriodicalId":22240,"journal":{"name":"The Accounting Review","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136023802","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}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：