We examine the association between accounting information risk, measured with accruals quality (AQ), and credit spreads, primarily measured with credit default swap (CDS) spreads. Theoretically, AQ measures the precision with which accruals map into cash flows. Better AQ implies a more precise estimate of future cash flows and, we predict, a reduction in credit spreads due to resulting lower uncertainty regarding the ability to meet debt interest and principal payments. In support of this hypothesis, we find a negative relationship between AQ and CDS spreads whereby better AQ is associated with lower CDS spreads. Additionally, we investigate the components of total AQ and find that innate AQ is more strongly associated with CDS spreads than is discretionary AQ. We further show that AQ moderates the market's pricing of earnings: the relationship between earnings and CDS spreads weakens as AQ worsens. Together, our results indicate that accounting information risk is priced in credit spreads and that the CDS market responds not only to the level of earnings, but the quality thereof as well.
{"title":"The Pricing of Accruals Quality in Credit Default Swap Spreads","authors":"Pervaiz Alam, Xiaoling Pu, Barry Hettler, Hai Lin","doi":"10.1111/acfi.12368","DOIUrl":"https://doi.org/10.1111/acfi.12368","url":null,"abstract":"We examine the association between accounting information risk, measured with accruals quality (AQ), and credit spreads, primarily measured with credit default swap (CDS) spreads. Theoretically, AQ measures the precision with which accruals map into cash flows. Better AQ implies a more precise estimate of future cash flows and, we predict, a reduction in credit spreads due to resulting lower uncertainty regarding the ability to meet debt interest and principal payments. In support of this hypothesis, we find a negative relationship between AQ and CDS spreads whereby better AQ is associated with lower CDS spreads. Additionally, we investigate the components of total AQ and find that innate AQ is more strongly associated with CDS spreads than is discretionary AQ. We further show that AQ moderates the market's pricing of earnings: the relationship between earnings and CDS spreads weakens as AQ worsens. Together, our results indicate that accounting information risk is priced in credit spreads and that the CDS market responds not only to the level of earnings, but the quality thereof as well.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"27 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85536439","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}
B. Dean, Stephanie Perkiss, Milica Simic Misic, Karina Luzia
Higher education is fundamental to the accounting profession. However, increased competition, the need to shape responsible global citizens and global influences impacting the profession have highlighted weaknesses in existing accounting curricula with regard to non‐technical skills, professional values and ethics. This paper reports on an approach to improve student learning in a first‐year undergraduate accounting subject through scholarship of teaching and learning and critical participatory action research. The paper highlights the importance of embedding opportunities for integrative learning in accounting curricula to enable students’ developing professional competencies and lifelong learning. It also provides a model for accounting educators to enhance integrative capabilities in their courses through engagement with scholarly research on teaching.
{"title":"Transforming Accounting Curricula to Enhance Integrative Learning","authors":"B. Dean, Stephanie Perkiss, Milica Simic Misic, Karina Luzia","doi":"10.1111/acfi.12363","DOIUrl":"https://doi.org/10.1111/acfi.12363","url":null,"abstract":"Higher education is fundamental to the accounting profession. However, increased competition, the need to shape responsible global citizens and global influences impacting the profession have highlighted weaknesses in existing accounting curricula with regard to non‐technical skills, professional values and ethics. This paper reports on an approach to improve student learning in a first‐year undergraduate accounting subject through scholarship of teaching and learning and critical participatory action research. The paper highlights the importance of embedding opportunities for integrative learning in accounting curricula to enable students’ developing professional competencies and lifelong learning. It also provides a model for accounting educators to enhance integrative capabilities in their courses through engagement with scholarly research on teaching.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83266201","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}
Using data from a new hedge fund database, we examine the impact of social networks on the return comovement of stock hedge funds in China. We use structural holes in the college alumni networks of managers to measure the managers’ social network positions. We perform an empirical analysis on a sample of 3,012 hedge fund products in China from 2010 to 2017. We find that greater structural holes are associated with higher return comovement. The positive impact of the structural holes on return comovement is not affected by market cycles, a manager's major in college, or his or her abilities.
{"title":"Structural Holes and Hedge Fund Return Comovement: Evidence from Network‐Connected Stock Hedge Funds in China","authors":"Lu Li, Yang Li, Xueding Wang, Tusheng Xiao","doi":"10.1111/acfi.12537","DOIUrl":"https://doi.org/10.1111/acfi.12537","url":null,"abstract":"Using data from a new hedge fund database, we examine the impact of social networks on the return comovement of stock hedge funds in China. We use structural holes in the college alumni networks of managers to measure the managers’ social network positions. We perform an empirical analysis on a sample of 3,012 hedge fund products in China from 2010 to 2017. We find that greater structural holes are associated with higher return comovement. The positive impact of the structural holes on return comovement is not affected by market cycles, a manager's major in college, or his or her abilities.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85197519","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 mixed‐method study examines whether and how the International Accounting Standards Board (IASB) was influenced by interest groups during the development of the expected credit loss (ECL) model for IFRS 9 Financial Instruments. Content analysis of 327 comment letters revealed that the IASB was influenced. However, Fisher's exact test and chi‐square goodness‐of‐fit test showed that, to a greater extent, the influence was not significant. Furthermore, qualitative analyses of the arguments put forward by interest groups showed that as a result of interest groups’ inputs, accounting requirements for the ECL model were made more operational, less complex and potentially productive of more comparable financial information.
{"title":"IASB's Independence in the Due Process: An Examination of Interest Groups’ Influence on the Development of IFRS 9","authors":"Samindi Ishara Hewa, Rajni Mala, Jinhua Chen","doi":"10.1111/acfi.12426","DOIUrl":"https://doi.org/10.1111/acfi.12426","url":null,"abstract":"This mixed‐method study examines whether and how the International Accounting Standards Board (IASB) was influenced by interest groups during the development of the expected credit loss (ECL) model for IFRS 9 Financial Instruments. Content analysis of 327 comment letters revealed that the IASB was influenced. However, Fisher's exact test and chi‐square goodness‐of‐fit test showed that, to a greater extent, the influence was not significant. Furthermore, qualitative analyses of the arguments put forward by interest groups showed that as a result of interest groups’ inputs, accounting requirements for the ECL model were made more operational, less complex and potentially productive of more comparable financial information.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"76 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84028440","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}
Luisa A. Unda, Amrinder Khosa, S. Burch, C. Wilkin
This study explores the research supervisory practices of accounting and finance PhD students at Australian and New Zealand universities. Given documented faculty shortages in the accounting and finance disciplines, such investigation is timely and relevant. In the context of student engagement with their community of academic practice and their intrinsic motivation related to individual competence and autonomy, situational adjustments are inevitable and explain some differences between students’ perceptions and supervisors’ expectations. Our findings demonstrate that, despite general satisfaction with the PhD supervision process, students articulated concerns regarding constructive feedback and pastoral care provided by their supervisors, as well as guidance regarding data analysis/statistics.
{"title":"Sustainability of the Accounting and Finance Academic Profession: Students’ and Supervisors’ Views About the Phd Supervision Process","authors":"Luisa A. Unda, Amrinder Khosa, S. Burch, C. Wilkin","doi":"10.1111/acfi.12376","DOIUrl":"https://doi.org/10.1111/acfi.12376","url":null,"abstract":"This study explores the research supervisory practices of accounting and finance PhD students at Australian and New Zealand universities. Given documented faculty shortages in the accounting and finance disciplines, such investigation is timely and relevant. In the context of student engagement with their community of academic practice and their intrinsic motivation related to individual competence and autonomy, situational adjustments are inevitable and explain some differences between students’ perceptions and supervisors’ expectations. Our findings demonstrate that, despite general satisfaction with the PhD supervision process, students articulated concerns regarding constructive feedback and pastoral care provided by their supervisors, as well as guidance regarding data analysis/statistics.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"36 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75131174","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 FASB changed the reporting policy for comprehensive income (CI) by issuing ASU No. 2011‐05, which requires CI be reported in performance statements (i.e., either a single income statement with net income or a separate statement of CI following the income statement) rather than the previously allowed equity statements. We examine whether the change in reporting position of CI led to higher market pricing of CI volatility incremental to NI volatility (“incremental CI volatility”), as measured by the price‐earnings relationship. We find that the market pricing of incremental CI volatility increased from the pre‐ to the post‐ASU period for non‐financial firms forced to change the reporting position of CI from equity to performance statements. The increase is more prominent for firms that switched to the income statement than for firms that switched to a separate statement of CI. Further, we find that the increased market pricing of incremental CI volatility translates into lower valuation weights on other comprehensive income.
{"title":"Does Reporting Position Affect the Pricing of the Volatility of Comprehensive Income?","authors":"Yiting Cao, Qingma Dong","doi":"10.1111/jbfa.12496","DOIUrl":"https://doi.org/10.1111/jbfa.12496","url":null,"abstract":"The FASB changed the reporting policy for comprehensive income (CI) by issuing ASU No. 2011‐05, which requires CI be reported in performance statements (i.e., either a single income statement with net income or a separate statement of CI following the income statement) rather than the previously allowed equity statements. We examine whether the change in reporting position of CI led to higher market pricing of CI volatility incremental to NI volatility (“incremental CI volatility”), as measured by the price‐earnings relationship. We find that the market pricing of incremental CI volatility increased from the pre‐ to the post‐ASU period for non‐financial firms forced to change the reporting position of CI from equity to performance statements. The increase is more prominent for firms that switched to the income statement than for firms that switched to a separate statement of CI. Further, we find that the increased market pricing of incremental CI volatility translates into lower valuation weights on other comprehensive income.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80837330","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}
Valuation heuristics are widely used in industry practice, policy documents, and several academic studies to value traditional time vesting option plans. This paper analyzes to what extent such heuristics also qualify for valuing performance vesting plans. To this end, we examine performance conditions tied to the underlying stock, the stock’s performance relative to a stock index and an earnings measure and derive optimal option exercises in a simulation framework. We investigate the valuation differences between the optimal exercise model, the commonly used adjusted maturity approximation, and the approach proposed by Hull and White (2004). For optimal exercise behavior, the changes in option costs due to the performance conditions we investigate are generally low. Only when the options represent a large fraction of the employee’s wealth do the performance conditions prevent value-diminishing early exercises and thus increase the option cost to the firm. The differences between the optimal and approximated option values are overall smaller with the performance conditions than without them. This can be mainly attributed to the fact that the performance conditions restrict the possible option exercise states and thus limit the effect of the misspecified true exercise boundary within the approximations.
估值启发式被广泛应用于行业实践、政策文件和一些学术研究中，以评估传统的时间授予期权计划。本文分析了这些启发式方法在多大程度上也适用于评估绩效授予计划。为此，我们研究了与标的股票相关的业绩条件，股票相对于股票指数和收益衡量的表现，并在模拟框架中推导出最优期权行使。我们研究了最优操作模型、常用的调整后成熟度近似和Hull and White(2004)提出的方法之间的估值差异。对于最优运动行为，由于我们所研究的性能条件，期权成本的变化通常很低。只有当期权占员工财富的很大一部分时，绩效条件才会阻止价值递减的早期行使，从而增加公司的期权成本。在有性能条件的情况下，最优选项值和近似选项值之间的差异总体上小于没有性能条件的情况。这主要是由于性能条件限制了可能的期权行使状态，从而限制了在近似范围内错误指定的真实行使边界的影响。
{"title":"Employee Stock Options with Performance Conditions: Do Commonly Used Valuation Heuristics Work?","authors":"S. Kanne, M. Uhrig-Homburg","doi":"10.1111/acfi.12326","DOIUrl":"https://doi.org/10.1111/acfi.12326","url":null,"abstract":"Valuation heuristics are widely used in industry practice, policy documents, and several academic studies to value traditional time vesting option plans. This paper analyzes to what extent such heuristics also qualify for valuing performance vesting plans. To this end, we examine performance conditions tied to the underlying stock, the stock’s performance relative to a stock index and an earnings measure and derive optimal option exercises in a simulation framework. We investigate the valuation differences between the optimal exercise model, the commonly used adjusted maturity approximation, and the approach proposed by Hull and White (2004). For optimal exercise behavior, the changes in option costs due to the performance conditions we investigate are generally low. Only when the options represent a large fraction of the employee’s wealth do the performance conditions prevent value-diminishing early exercises and thus increase the option cost to the firm. The differences between the optimal and approximated option values are overall smaller with the performance conditions than without them. This can be mainly attributed to the fact that the performance conditions restrict the possible option exercise states and thus limit the effect of the misspecified true exercise boundary within the approximations.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72933219","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 empirically investigate how greenness information is priced in the green bond market. Our comparison of liquidity‐adjusted yield premiums of green bonds versus synthetic conventional bonds indicates that, on average, there is no robust and significant yield premium or discount on green bonds. However, green bonds certified by an external reviewer enjoy a discount of about 6 bps. Furthermore, green bonds that obtain a Climate Bonds Initiative certificate show a discount of around 15 bps. The findings suggest that a universally accepted greenness measure can benefit the development of the green bond market.
{"title":"The Price of Going Green: The Role of Greenness in Green Bond Markets","authors":"Suk Hyun, Donghyun Park, Shu Tian","doi":"10.1111/acfi.12515","DOIUrl":"https://doi.org/10.1111/acfi.12515","url":null,"abstract":"In this paper, we empirically investigate how greenness information is priced in the green bond market. Our comparison of liquidity‐adjusted yield premiums of green bonds versus synthetic conventional bonds indicates that, on average, there is no robust and significant yield premium or discount on green bonds. However, green bonds certified by an external reviewer enjoy a discount of about 6 bps. Furthermore, green bonds that obtain a Climate Bonds Initiative certificate show a discount of around 15 bps. The findings suggest that a universally accepted greenness measure can benefit the development of the green bond market.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"35 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77682895","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 has two related goals - one very specific and one more general. The specific goal is to constructively engage with Lodhia () on the issue of whether and to what extent 'qualitative cousins' are well served by Faff's () original pitching research (PR) template. Using this 'cousins' focus as a primer, the more general goal is to update the agenda created by Faff () and in so doing, explore the 'extended family' of PR work/resources now available. Accounting and Finance
{"title":"Pitching Research: ‘Qualitative Cousins’ and the ‘Extended Family’","authors":"R. Faff","doi":"10.1111/acfi.12348","DOIUrl":"https://doi.org/10.1111/acfi.12348","url":null,"abstract":"This study has two related goals - one very specific and one more general. The specific goal is to constructively engage with Lodhia () on the issue of whether and to what extent 'qualitative cousins' are well served by Faff's () original pitching research (PR) template. Using this 'cousins' focus as a primer, the more general goal is to update the agenda created by Faff () and in so doing, explore the 'extended family' of PR work/resources now available. Accounting and Finance","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"109 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80874684","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 describe a model that predicts an asymmetric impact of disclosure on investor uncertainty. We show that good news tends to resolve more uncertainty than bad news, and that uncertainty can be revised upwards if the investors' prior belief is sufficiently strong and the signal is sufficiently bad. This result is in contrast to classical disclosure models, where new information always resolves uncertainty and the change in uncertainty depends only on the relative precision of the news. Using option‐implied volatility as a proxy for uncertainty, we find strong support for our predictions. We also show that our results are robust to competing explanations, notably to the leverage effect and volatility feedback, as well as to the jump risk induced in anticipation of the earnings announcements.
{"title":"Asymmetric Impact of Earnings News on Investor Uncertainty","authors":"Zihang Peng, D. Johnstone, Demetris Christodoulou","doi":"10.1111/jbfa.12428","DOIUrl":"https://doi.org/10.1111/jbfa.12428","url":null,"abstract":"We describe a model that predicts an asymmetric impact of disclosure on investor uncertainty. We show that good news tends to resolve more uncertainty than bad news, and that uncertainty can be revised upwards if the investors' prior belief is sufficiently strong and the signal is sufficiently bad. This result is in contrast to classical disclosure models, where new information always resolves uncertainty and the change in uncertainty depends only on the relative precision of the news. Using option‐implied volatility as a proxy for uncertainty, we find strong support for our predictions. We also show that our results are robust to competing explanations, notably to the leverage effect and volatility feedback, as well as to the jump risk induced in anticipation of the earnings announcements.","PeriodicalId":23644,"journal":{"name":"Wiley-Blackwell: Journal of Business Finance & Accounting","volume":"30 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76076223","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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