Review of Quantitative Finance and Accounting最新文献

This study diverges from mixed findings in the literature on political uncertainty and earnings management by reporting a significant positive association between the firm-level political risk (FLPR) measure proposed by Hassan et al. (Q J Econ 134(4):2135–2202, 2019) and both accrual-based and real earnings management. This aligns with the predictions of agency theory and the political cost hypothesis, indicating that firms exposed to higher political risk are more prone to heightened earnings manipulation. Additionally, we find that in the face of increased political risk, firms tend to substitute accrual-based earnings management with real earnings management, which is relatively harder to detect. This study further identifies a non-linear ‘U’-shaped association between FLPR and both accrual-based and real earnings management, suggesting significant manipulation at both low and high political risk levels, with the least manipulation at a moderate level. This non-linear association is primarily observed in firms that are smaller in size, pay lower abnormal compensation to their CEOs and are less likely to be monitored by lenders. Thus, emphasising the role of external monitoring mechanisms in driving the non-linear association between FLPR and earnings management.

This study investigated the effects of corporate social responsibility (CSR) on the accumulation of knowledge capital, investment in research and development (R&D), and financial performance. The empirical results revealed that CSR engagement can enhance the accumulation of knowledge capital and R&D investment. Nonetheless, engaging in external CSR, disclosing CSR-related information, and having third-parties authenticate CSR reports is important to avoid agency problems and greenwashing. It is also important that firms establish internal CSR-related policies and measures governing environmental protection and employee and supplier rights to ensure innovative development, the accumulation of knowledge capital, and R&D investment. The resources invested in knowledge capital, R&D, or CSR promotion can negatively impact profitability; however, these effects were shown not to dampen investors’ optimism about future competitive advantage or financial performance.

This paper investigates whether CEO–board age similarity has an impact on firms’ earnings management in M&A contexts. We argue that CEO–board age similarity may have an impact on earnings management through two main roles of the board in M&A, i.e., monitoring and advising roles. On the one hand, board–CEO age similarity may improve the quality of the board’s advice on M&A and thus reduce the CEO’s need to manipulate earnings. On the other hand, board–CEO age similarity may trigger friendship, therefore weaken the monitoring function of the board. Using the sample of all share-financed M&A deals in the UK from 2001 to 2018, we find a lower level of earnings management in firms with higher board–CEO age similarity. The evidence thus highlights the importance of the advisory role of the board in M&A. Our findings have an important contribution to the corporate governance literature and also have implications for practice.

We investigate the effect of customers’ credit default swap (CDS) referencing on suppliers’ issuance of management forecasts. We argue that customers’ CDS referencing increases the suppliers’ business volatility, making forecasting more difficult. At the same time, the information from customers’ CDS market reduces investors’ demand for the suppliers’ disclosure and induces the suppliers to scale back their own disclosure. By using a difference-in-differences design, we find consistent evidence that firms tend to reduce their frequency of forecast issuance after the initiation of sales to CDS-referenced customers, compared to firms without CDS-referenced customers. This relationship is stronger when the supplier’s business relies more on CDS-referenced customers (thus strengthening the effect of customer CDS referencing on suppliers’ forecasting difficulty). In comparison, the relationship is weaker when customers have more analyst following (thus resulting in less incremental information produced by customer CDS referencing). Further analysis shows that the information channel seems to be the main mechanism for our findings. Finally, we find the negative relationship between the supplier’s management forecast issuance and its exposure to CDS-referenced customer firms is driven by good news forecasts, possibly due to the higher litigation risk associated with disclosing good news and withholding bad news. Our findings add to the literature examining the spillover effects of CDSs on entities outside those directly referenced by CDSs.

We estimate the term structure of corporate bond liquidity premiums using a dual estimation technique. Our estimates reveal that the term structures of the liquidity premiums were positively sloped and concave for each category of creditworthiness and in three economic epochs. As the macroeconomy transitioned from a pre-crisis to a crisis period, liquidity premiums elevated across time to maturity for both investment grade and speculative grade bonds. With the migration of the financial system from stress to relative calm, the premiums on both grades of debt declined for all maturities.

We examine the return dynamics of cash-based operating profitability (CBOP)–sorted portfolios and evaluate whether the associated abnormal returns are sensitive to investor sophistication and investor sentiment. We show that the interaction between CBOP and firm size provides incremental information about expected stock returns as portfolios with small size and high CBOP earn higher abnormal returns than portfolios based on size or CBOP alone. The CBOP-size-sorted portfolio corresponding to high investor sophistication generates statistically significant abnormal returns, but the presence of investor sophistication do not weaken the net effect of CBOP. We find that while investor sophistication does not provide a potential explanation for the size-and-CBOP-interaction effect, investor sentiment captures mispricing attributed to firm size and CBOP. The CBOP mispricing for small (large) stocks is positively (negatively) related to investor sentiment. The finding that investors misinterpret the financial accounting information related to CBOP lends support for the limited-attention effect.

We investigate the effect of non-executive employee ownership (EO) on the efficiency of investment decisions for a sample of non-financial European firms over the period 2006–2017. We find a positive (negative) association between EO and investment for firms that are more likely to underinvest (overinvest). In addition, we find the impact of EO on underinvestment and overinvestment to be more pronounced for firms with lower analyst following and lower blockholding ownership. Overall, our findings suggest that employee ownership increases firm-level investment efficiency through two channels: reduced information asymmetry and improved monitoring of management. The results hold after using an alternative specification of investment efficiency, Heckman's two-stage procedure, instrumental variable regressions, and alternative proxies for information asymmetry and monitoring of management both at the firm and the country level.

This study investigates the impact of air pollution on analyst information production using corporate earnings announcements as experimental events. By analyzing a dataset of 47,406 firm-quarter-analyst observations from 2014 to 2020, we find that air pollution between firms’ earnings announcements and analyst forecasts decreases the firm-specific information in analyst reports, as reflected by higher stock price synchronicity after analyst reports. We identify three manifestations of the detrimental effect of air pollution on analyst information supply: shorter reports, reduced forecast accuracy, and less precision for EPS forecasts. The effect is heterogeneously observed across groups, showing a mitigated impact when analyst teams are larger, workloads are lower, analysts operate in non-heating areas or non-heating seasons, or firms exhibit higher levels of information transparency.

In this study, we extend the existing literature around dividend signaling theory and calendar anomalies by addressing the question of whether calendar anomalies, including Halloween, Turn-of-the-Month (TOM), January, Monday, and Friday effects, have any influence on the relationship between stock returns and dividend announcements. Previous studies have primarily focused on demonstrating the impact of calendar anomalies on overall stock market returns. Our main aim is to investigate whether the Cumulative Abnormal Returns (CARs) associated with dividend announcements made by firms listed in the FTSE 350 index exhibit deviations from the norm due to these calendar anomalies. Our findings reveal a notable asymmetry in the reactions to dividend increase and decrease announcements. Specifically, the timing of dividend increase announcements appears to have no significant effect on their associated CARs. However, dividend decrease announcements made during periods characterized by seasonality exhibit CARs that differ significantly from those observed during normal times. Importantly, these findings remain robust across various alternative economic model specifications, including interaction models, binary models, and GMM estimations. Consequently, our results suggest that calendar anomalies, such as Halloween, January, and Friday effects, play a key role in shaping the association between stock returns and dividend announcements.

Barth et al. (J Account Res 37:387–413, 1999. https://doi.org/10.2307/2491414) find that the market rewards firms showing increasing earnings patterns with larger price-earnings multiples from 1982 to 1992. This paper examines whether the rewards for increasing earnings patterns have changed since then. The declining relevance of accounting earnings for equity valuation or accounting scandals in the early 2000s would predict a lower valuation for earnings numbers. On the other hand, earnings-related disclosures and post-scandal regulatory efforts, such as the Sarbanes–Oxley Act (SOX), may boost earnings relevance and restore investor confidence in the accounting system, predicting increased rewards for increasing earnings patterns. We find that the earnings multiples for firms with increasing earnings patterns decrease temporarily in the years with major accounting scandals, but the market boosts its rewards to firms showing increasing earnings patterns in the reshaped reporting environment after 1993, and SOX is associated with this boost.