Prior research provides mixed evidence on whether corporate lobbying activities increase or decrease shareholder value. In this study we use detailed data on corporate lobbying expenditures to investigate which factors influence the returns to corporate lobbying activities. Specifically, we examine whether the returns vary by lobbying issue (e.g., tax-, defense-, or healthcare-related), by the severity of agency problems, by the lobbying approach employed, and by the potential benefits to be gained lobbying. Our results suggest that although the association between abnormal stock returns and total lobbying expenditures is generally positive and significant, the returns to lobbying vary substantially depending on the issue being lobbied. While investors expect lobbying on tax-, defense-, trade-, and federal budget-related issues to generate significant economic benefits for firms, they expect the returns to environment-related lobbying to actually decrease shareholder value. We also provide evidence that the returns to lobbying are more positive for firms with low free cash flows, for firms that adopt a relational approach to lobbying, and for firms with the largest potential benefits to be gained from lobbying. Overall, our research suggests that corporate lobbying activities represent strategic political investments that generate future economic benefits, not agency problems as asserted by some prior studies.
{"title":"Influencing Profits: The Differential Impact of Lobbying on Corporate Stock Returns","authors":"Michelle Hutchens, S. Rego, Amy Sheneman","doi":"10.2139/ssrn.2779697","DOIUrl":"https://doi.org/10.2139/ssrn.2779697","url":null,"abstract":"Prior research provides mixed evidence on whether corporate lobbying activities increase or decrease shareholder value. In this study we use detailed data on corporate lobbying expenditures to investigate which factors influence the returns to corporate lobbying activities. Specifically, we examine whether the returns vary by lobbying issue (e.g., tax-, defense-, or healthcare-related), by the severity of agency problems, by the lobbying approach employed, and by the potential benefits to be gained lobbying. Our results suggest that although the association between abnormal stock returns and total lobbying expenditures is generally positive and significant, the returns to lobbying vary substantially depending on the issue being lobbied. While investors expect lobbying on tax-, defense-, trade-, and federal budget-related issues to generate significant economic benefits for firms, they expect the returns to environment-related lobbying to actually decrease shareholder value. We also provide evidence that the returns to lobbying are more positive for firms with low free cash flows, for firms that adopt a relational approach to lobbying, and for firms with the largest potential benefits to be gained from lobbying. Overall, our research suggests that corporate lobbying activities represent strategic political investments that generate future economic benefits, not agency problems as asserted by some prior studies.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115755506","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}
Kristian D. Allee, Dan Lynch, K. Petroni, Joseph H. Schroeder
This study investigates the effect of property taxes on real business decisions. Consistent with tax avoidance, we posit that personal property tax rates are associated with decreases (increases) in inventory prior to (following) assessment dates. We empirically test this prediction using both United States and Canadian monthly crude oil inventory data. We find that in locations where raw materials inventory is subject to taxation, total and refinery-level crude oil inventories are reduced prior to assessment dates and increased in the following period, when compared to locations with no (or lower) tax rates. The results provide empirical evidence that property taxes play a role in the operating decisions of firms. We also examine the pricing implications of these tax driven changes in crude oil inventory and find that the market seemingly adjusts crude oil prices around assessment dates demonstrating that the market acts as if it understands these changes in crude oil inventory are not simply due to supply/demand effects.
{"title":"Do Property Taxes Affect Real Operating Decisions and Market Prices for Crude Oil?","authors":"Kristian D. Allee, Dan Lynch, K. Petroni, Joseph H. Schroeder","doi":"10.2139/ssrn.2097935","DOIUrl":"https://doi.org/10.2139/ssrn.2097935","url":null,"abstract":"This study investigates the effect of property taxes on real business decisions. Consistent with tax avoidance, we posit that personal property tax rates are associated with decreases (increases) in inventory prior to (following) assessment dates. We empirically test this prediction using both United States and Canadian monthly crude oil inventory data. We find that in locations where raw materials inventory is subject to taxation, total and refinery-level crude oil inventories are reduced prior to assessment dates and increased in the following period, when compared to locations with no (or lower) tax rates. The results provide empirical evidence that property taxes play a role in the operating decisions of firms. We also examine the pricing implications of these tax driven changes in crude oil inventory and find that the market seemingly adjusts crude oil prices around assessment dates demonstrating that the market acts as if it understands these changes in crude oil inventory are not simply due to supply/demand effects.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123787849","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}
Audit committee independence rules reduce potential firm-specific information for audit committees and self-interest may bias manager-provided information. Given these considerable limitations, it is important to understand how audit committee members (ACMs) obtain information for their monitoring activities. I investigate how a firm’s (focal firm) financial reporting monitoring outcomes are affected by its ACMs’ contextual experiences, either as managers or monitors, with other firms (interlocks). Specifically, I estimate whether contextual experiences with goodwill impairment decisions, measured as interlocks with firms that likely performed extensive impairment analyses in the prior year, affect the likelihood of focal firm goodwill write-off, other things equal. Overall results suggest that ACM contextual experiences increase the likelihood of goodwill write-off and are most influential when contextual experience is obtained as a manager, rather than a monitor. However, for large firms, contextual experience does not affect reporting when managerial equity-based incentives are strong.
{"title":"Audit Committee Member Contextual Experiences and Financial Reporting Outcomes","authors":"Marcy L. Shepardson","doi":"10.2139/ssrn.2221366","DOIUrl":"https://doi.org/10.2139/ssrn.2221366","url":null,"abstract":"Audit committee independence rules reduce potential firm-specific information for audit committees and self-interest may bias manager-provided information. Given these considerable limitations, it is important to understand how audit committee members (ACMs) obtain information for their monitoring activities. I investigate how a firm’s (focal firm) financial reporting monitoring outcomes are affected by its ACMs’ contextual experiences, either as managers or monitors, with other firms (interlocks). Specifically, I estimate whether contextual experiences with goodwill impairment decisions, measured as interlocks with firms that likely performed extensive impairment analyses in the prior year, affect the likelihood of focal firm goodwill write-off, other things equal. Overall results suggest that ACM contextual experiences increase the likelihood of goodwill write-off and are most influential when contextual experience is obtained as a manager, rather than a monitor. However, for large firms, contextual experience does not affect reporting when managerial equity-based incentives are strong.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"148 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132025389","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 The Sarbanes‐Oxley Act (SOX) of 2002 is the most important legislation affecting corporate financial reporting enacted in the United States since the 1930s. Its purpose is to improve the accuracy and reliability of accounting information that is reported to investors. We examine stock price reactions to legislative events surrounding SOX and focus on whether such stock price effects are related cross‐sectionally to the extent firms had managed their earnings. Our univariate results suggest that significantly positive abnormal stock returns are associated with SOX events, and our primary analyses reveal considerable evidence of a positive relationship between SOX event stock returns and the extent of earnings management. These results are consistent with investors anticipating that the more extensively firms had managed their earnings, the more SOX would constrain earnings management and enhance the quality of financial statement information.
{"title":"Market Reaction to Events Surrounding the Sarbanes-Oxley Act of 2002 and Earnings Management","authors":"Haidan Li, Morton Pincus, S. Rego","doi":"10.2139/ssrn.475163","DOIUrl":"https://doi.org/10.2139/ssrn.475163","url":null,"abstract":"Abstract The Sarbanes‐Oxley Act (SOX) of 2002 is the most important legislation affecting corporate financial reporting enacted in the United States since the 1930s. Its purpose is to improve the accuracy and reliability of accounting information that is reported to investors. We examine stock price reactions to legislative events surrounding SOX and focus on whether such stock price effects are related cross‐sectionally to the extent firms had managed their earnings. Our univariate results suggest that significantly positive abnormal stock returns are associated with SOX events, and our primary analyses reveal considerable evidence of a positive relationship between SOX event stock returns and the extent of earnings management. These results are consistent with investors anticipating that the more extensively firms had managed their earnings, the more SOX would constrain earnings management and enhance the quality of financial statement information.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"75 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126096567","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}
Pub Date : 2006-03-01DOI: 10.2308/ACCR.2006.81.2.337
Leslie D. Hodder, P. Hopkins, James M. Wahlen
We investigate the risk relevance of the standard deviation of three performance measures: net income, comprehensive income, and a constructed measure of full‐fair‐value income for a sample of 202 U.S. commercial banks from 1996 to 2004. We find that, for the average sample bank, the volatility of full‐fair‐value income is more than three times that of comprehensive income and more than five times that of net income. We find that the incremental volatility in full‐fair‐value income (beyond the volatility of net income and comprehensive income) is positively related to marketmodel beta, the standard deviation in stock returns, and long‐term interest‐rate beta. Further, we predict and find that the incremental volatility in full‐fair‐value income (1) negatively moderates the relation between abnormal earnings and banks' share prices and (2) positively affects the expected return implicit in bank share prices. Our findings suggest full‐fair‐value income volatility reflects elements of risk that are not captu...
{"title":"Risk-Relevance of Fair Value Income Measures for Commercial Banks","authors":"Leslie D. Hodder, P. Hopkins, James M. Wahlen","doi":"10.2308/ACCR.2006.81.2.337","DOIUrl":"https://doi.org/10.2308/ACCR.2006.81.2.337","url":null,"abstract":"We investigate the risk relevance of the standard deviation of three performance measures: net income, comprehensive income, and a constructed measure of full‐fair‐value income for a sample of 202 U.S. commercial banks from 1996 to 2004. We find that, for the average sample bank, the volatility of full‐fair‐value income is more than three times that of comprehensive income and more than five times that of net income. We find that the incremental volatility in full‐fair‐value income (beyond the volatility of net income and comprehensive income) is positively related to marketmodel beta, the standard deviation in stock returns, and long‐term interest‐rate beta. Further, we predict and find that the incremental volatility in full‐fair‐value income (1) negatively moderates the relation between abnormal earnings and banks' share prices and (2) positively affects the expected return implicit in bank share prices. Our findings suggest full‐fair‐value income volatility reflects elements of risk that are not captu...","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126846294","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}
Craig Nichols, James M. Wahlen, Matthew M. Wieland
Public and private banks differ along dimensions of control structure and capital market access. We develop and test predictions about the effects that these differences have on banks' profitability, growth, risk, and financial reporting. Our empirical results are generally consistent with our predictions. We predict and find that public banks have lower profitability but faster growth in assets and equity than private banks, after controlling for size. We find no reliable differences in accounting-based risk metrics across public and private banks. We predict and find results that suggest that stakeholders in public banks demand greater degrees of accounting conservatism relative to private banks. For example, we find that public banks recognize more timely earnings declines but less timely earnings increases than private banks. We also find that public banks exhibit more conservative accounting for loan losses. Loan loss provisions are larger and more timely, relative to exogenous indicators of probable credit losses, for public banks than for private banks. Our results inform accounting and finance academics, as well as bank managers, auditors, and regulators, about the effects of ownership structure on bank profitability, growth, risk, and accounting conservatism. The results highlight the implications of public and private banks' tradeoffs of potential agency costs associated with greater separation of ownership and control against the benefits of capital market access.
{"title":"Publicly-Traded Versus Privately-Held: Implications for Bank Profitability, Growth, Risk, and Accounting Conservatism*","authors":"Craig Nichols, James M. Wahlen, Matthew M. Wieland","doi":"10.2139/ssrn.591663","DOIUrl":"https://doi.org/10.2139/ssrn.591663","url":null,"abstract":"Public and private banks differ along dimensions of control structure and capital market access. We develop and test predictions about the effects that these differences have on banks' profitability, growth, risk, and financial reporting. Our empirical results are generally consistent with our predictions. We predict and find that public banks have lower profitability but faster growth in assets and equity than private banks, after controlling for size. We find no reliable differences in accounting-based risk metrics across public and private banks. We predict and find results that suggest that stakeholders in public banks demand greater degrees of accounting conservatism relative to private banks. For example, we find that public banks recognize more timely earnings declines but less timely earnings increases than private banks. We also find that public banks exhibit more conservative accounting for loan losses. Loan loss provisions are larger and more timely, relative to exogenous indicators of probable credit losses, for public banks than for private banks. Our results inform accounting and finance academics, as well as bank managers, auditors, and regulators, about the effects of ownership structure on bank profitability, growth, risk, and accounting conservatism. The results highlight the implications of public and private banks' tradeoffs of potential agency costs associated with greater separation of ownership and control against the benefits of capital market access.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132723368","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}
Protection of outside investors depends on the detection and punishment of resource diversion by corporate insiders, including managers and controlling shareholders. We focus on the role played in investor protection by self‐interested auditors operating in a competitive audit market. In our setting, auditors represent the mechanism whereby detection of diversion occurs. We show that markets with relatively greater auditor penalties for audit failures and greater insider penalties for detected resource diversion have larger total investment levels, a higher proportion of the firm held by outsiders, higher audit resource investment, higher audit fees, and higher expected investment returns.
{"title":"The Role of Auditing in Investor Protection","authors":"P. Newman, Evelyn R. Patterson, Reed Smith","doi":"10.2139/ssrn.421660","DOIUrl":"https://doi.org/10.2139/ssrn.421660","url":null,"abstract":"Protection of outside investors depends on the detection and punishment of resource diversion by corporate insiders, including managers and controlling shareholders. We focus on the role played in investor protection by self‐interested auditors operating in a competitive audit market. In our setting, auditors represent the mechanism whereby detection of diversion occurs. We show that markets with relatively greater auditor penalties for audit failures and greater insider penalties for detected resource diversion have larger total investment levels, a higher proportion of the firm held by outsiders, higher audit resource investment, higher audit fees, and higher expected investment returns.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115783393","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}
Restating 10-Ks has become an increasingly common phenomenon in financial reporting. Restatements clearly signal that the firm's prior financial statements were not credible and were of relatively lower "quality". In this study, we examine the effect of restatements on investors' and dealers' perceptions of the firm. First, we examine the market returns and the bid-ask spread effects at the announcement of the accounting problem that leads to restatement. We find negative market returns for accounting problem announcements, and we find that the negative reaction is most pronounced for firms with revenue recognition issues. We also find an increase in spreads surrounding the announcement of revenue recognition problems. Second we examine returns and spreads from the announcement of the restatement to the filing of the restated financial statements. We find a significant negative market reaction and a larger negative reaction for firms with revenue recognition problems. We find no change in spreads from before the announcement of the accounting problem to after the restatement is filed. Finally, we examine the effect of the restatement on earnings response coefficients, and find that the market reacts less to earnings after a restatement than to earnings prior to a restatement. In general, these results indicate that investors and dealers react negatively to restatements and are more concerned with revenue recognition problems than with other financial reporting errors.
{"title":"The Effect of 10k Restatements on Firm Value, Information Asymmetries, and Investors' Reliance on Earnings","authors":"Kirsten L. Anderson, T. Yohn","doi":"10.2139/ssrn.332380","DOIUrl":"https://doi.org/10.2139/ssrn.332380","url":null,"abstract":"Restating 10-Ks has become an increasingly common phenomenon in financial reporting. Restatements clearly signal that the firm's prior financial statements were not credible and were of relatively lower \"quality\". In this study, we examine the effect of restatements on investors' and dealers' perceptions of the firm. First, we examine the market returns and the bid-ask spread effects at the announcement of the accounting problem that leads to restatement. We find negative market returns for accounting problem announcements, and we find that the negative reaction is most pronounced for firms with revenue recognition issues. We also find an increase in spreads surrounding the announcement of revenue recognition problems. Second we examine returns and spreads from the announcement of the restatement to the filing of the restated financial statements. We find a significant negative market reaction and a larger negative reaction for firms with revenue recognition problems. We find no change in spreads from before the announcement of the accounting problem to after the restatement is filed. Finally, we examine the effect of the restatement on earnings response coefficients, and find that the market reacts less to earnings after a restatement than to earnings prior to a restatement. In general, these results indicate that investors and dealers react negatively to restatements and are more concerned with revenue recognition problems than with other financial reporting errors.","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"43 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":"122197083","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 compare First Call analyst forecasts to unofficial forecasts of quarterly earnings per share commonly referred to as whisper forecasts. Our analysis yields the following results. First, we find that whispers are, on average, more accurate than First Call forecasts and are better proxies for market expectations of earnings than are First Call forecasts, consistent with the claim in the professional press that whispers are increasingly becoming the true market expectation of earnings. Second, we show that trading strategies based on the relationship between whisper and First Call forecasts earn abnormal returns. Our results, when considered collectively, suggest that whispers contain information not contained in First Call analyst forecasts and that they appear to be widely enough disseminated so that at least part of this information is incorporated in stock prices prior to the earnings release. Formally titled "Whispers and Shouts: Forecasts of Quarterly Earnings Per Share"
{"title":"Whisper Forecasts of Quarterly Earnings Per Share","authors":"M. Bagnoli, M. Beneish, Susan G. Watts","doi":"10.2139/ssrn.74369","DOIUrl":"https://doi.org/10.2139/ssrn.74369","url":null,"abstract":"In this paper, we compare First Call analyst forecasts to unofficial forecasts of quarterly earnings per share commonly referred to as whisper forecasts. Our analysis yields the following results. First, we find that whispers are, on average, more accurate than First Call forecasts and are better proxies for market expectations of earnings than are First Call forecasts, consistent with the claim in the professional press that whispers are increasingly becoming the true market expectation of earnings. Second, we show that trading strategies based on the relationship between whisper and First Call forecasts earn abnormal returns. Our results, when considered collectively, suggest that whispers contain information not contained in First Call analyst forecasts and that they appear to be widely enough disseminated so that at least part of this information is incorporated in stock prices prior to the earnings release. Formally titled \"Whispers and Shouts: Forecasts of Quarterly Earnings Per Share\"","PeriodicalId":409231,"journal":{"name":"Kelley: Accounting (Topic)","volume":"230 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122151240","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：