Journal of Contemporary Accounting & Economics最新文献

We find that promotion-based tournament incentives of executives are positively associated with firms’ media sentiment. This effect is more pronounced among firms with greater need for media favourability, captured by higher information opacity, lower analyst coverage, lower industry homogeneity, lower investment sentiment and lower managerial ability. Furthermore, we identify better financial performance and higher corporate branding as two channels through which tournament incentives can enhance a firm’s positive media sentiment. Our results are also robust to two quasi-natural experiments affecting promotion-based tournaments – (a) an exogenous CEO turnover due to health issues or sudden CEO death, and (b) the implementation of Say-on-Pay (SOP) law. Overall, our findings indicate that tournament-based incentives encourage a firm’s executives to showcase their skills to broader stakeholders, which consequently increases a firm’s media image.

This study examines the effects of expected losses on the income-shifting strategies of multinational corporations (MNCs). Using a set of worldwide MNC affiliates, this study first finds empirical evidence for ex ante adjustments of income-shifting strategies according to reverse incentives for potential losses. The results also support the existence of limited flexibility introduced by Hopland et al. (2018, 2021). Second, the estimates of income shifting measured using expected tax rate differences reveal that the traditional methodology of using statutory tax rate differences is subject to an estimation bias. This estimation bias varies depending on the loss expectation status and tax-rate levels of the affiliates.

We investigate the effect of tax avoidance on the cost of debt for SMEs. Tax avoidance may increase a firm’s cash flows on one hand, but also increase the agency costs, the information risk, and the risk of scrutiny by tax authorities on the other, affecting the cost of debt in opposing ways. Using a sample of Spanish SMEs for the period 2007–2019, our findings show that tax-avoiding SMEs face lower debt costs, suggesting that the positive effects of tax avoidance prevail over the negative ones for SMEs. This finding is consistent with a more favourable assessment of SMEs’ tax avoidance activities by their key finance providers (banks), given SME unique characteristics and their lower agency costs.

While research and development (R&D) activities contribute to economic growth via technological innovations, they impose significant uncertainty and agency costs. In this study, we examine the governance role of R&D specialist auditors in affecting clients’ R&D investment decisions. Using a sample of U.S. firms during 2001–2016, we find that R&D specialist auditors’ clients make more efficient investments in the form of a higher R&D investment-q sensitivity. We also find that the reduction in discretionary adjustments of R&D expenses moderates the results. Further, when clients are audited by R&D specialists, their R&D investments are more closely linked to innovative output in subsequent years. Collectively, our results suggest that an auditor’s specialized knowledge induces clients to make better economic decisions.

In this study we examine the association between CEO Regulatory focus (RF) and likelihood, frequency, and accuracy of management earnings forecasts (MEFs). RF theory suggests that an individual makes decisions and pursues goals through either a promotion focus or prevention focus. A promotion focus individual is regulated towards achievements, success, growth, and advancement while a prevention focus individual is regulated towards vigilance, fulfilling basic duties and avoiding the performance of additional tasks. For the period of 2000 to 2018, we find that a CEO promotion focus is associated with higher likelihood, frequency, and accuracy of MEFs. On the other hand, CEO prevention focus results in a lower likelihood and frequency of MEFs. Additionally, the relationship between CEO prevention focus and MEF likelihood and frequency is negatively moderated by higher-level litigation within certain industries. Furthermore, stock return volatility is found to as mediate the relationship between CEOs RF (promotion focus and prevention focus) and MEFs.

This study examines the association between annual report readability and equity mispricing. Consistent with low annual report readability impeding the efficient and accurate assimilation of information into stock prices, less readable annual reports are associated with greater equity mispricing. This association extends to both equity underpricing and equity overpricing. Cross-sectional analysis indicates that the association between less readable annual reports and equity underpricing is accentuated when individual investors’ share ownership is high, whereas the association between less readable annual reports and equity overpricing is attenuated when more experienced financial analysts follow a firm. Overall, our findings contribute to the literature on readability and equity mispricing and serve to inform managers about the underlying consequences of issuing less readable annual reports and regulators about the need for additional projects that enhance the understandability of financial reporting.

Using a difference-in-differences estimation that relies on China’s anti-corruption campaign as a regulatory shock, we report that an exogenous reduction in firm-level corruption leads to lower future audit fees. Further triple difference analyses reveal that the decrease in future audit fees is more significant for firms operating in regions with weak legal environments, strong government control, and weak property rights protection. Government subsidies and related party transactions are channels through which the anti-corruption campaign affects future audit fees. Compared to previous literature, we conclude the effect of corruption on future audit fees is causal.

Exploiting the mandatory R&D disclosure policy in China, we capitalize on a difference-in-differences framework to examine whether mandatory R&D disclosure matters to analyst forecast accuracy in a sample of technology intensive firms. We find that, after mandatory R&D disclosure, forecast errors decrease significantly more for treatment firms (i.e., firms that chose not to disclose R&D investments before the mandate policy) relative to control firms (i.e., firms that did voluntary disclosure of R&D investments before the mandate policy). Further, we show that the impact of mandatory R&D disclosure is more pronounced when there is high information asymmetry within the firm or an industry as well as when analysts are working under unfavorable conditions. Overall, our findings demonstrate the positive effect of mandatory R&D disclosure on reducing information asymmetry and shed light on the importance of R&D disclosure reform in developing markets.

We investigate the effects of incentive-alignment mechanisms on voluntary disclosure of carbon emissions in Korea, a latecomer in incorporating environmental practices into business operations. We consider in particular the effects of corporate governance and compensation mechanisms. We find that international aspects of governance mechanisms, measured by foreign ownership and foreign subsidiaries, are positively associated with the likelihood that a firm discloses carbon emissions voluntarily as well as with the extent of the details included in such disclosures. Similarly, strong internal governance, measured by board independence and gender diversity, makes voluntary, detailed carbon emissions disclosures more likely. Moreover, firms that employ compensation schemes that explicitly align corporate social responsibility (CSR) with CEO pay and those that set carbon emissions targets, which may be used to define thresholds for CEO bonuses, are more likely to voluntarily disclose carbon emissions information and to do so more extensively. As such, both international influence and internal factors that affect corporate governance and compensation structures, all of which are well-known incentive-alignment mechanisms, play important roles in voluntary carbon emissions disclosure decisions in emerging markets.

We find that pure insider share purchases—which we define as insider purchases over two successive years without any corresponding sales—are a strong predictor of a firm’s patent applications. The predictability increases with the quality of the patent: Applications for the highest-quality, breakthrough patents increase by 21% in the year following pure insider purchases in our sample. These purchases are associated with large abnormal stock returns of 1.1% per month (14% annualized) over the subsequent three-year period. We also document that stock price responds less to the subsequent announcement of the grant of patent if the application for the patent has been preceded by pure insider purchases, consistent with the idea that insider purchases reveal information about future firm innovation. Our evidence has implications for understanding insider trading within technology companies that have become a dominant feature of US stock markets in recent decades.