Pub Date : 2024-08-06DOI: 10.1016/j.bar.2024.101454
We investigate the effect of Third-Party Auditor Liability (TPAL) risk on firms' trade credit policies. Exploiting the staggered state-level changes to TPAL in the US as a quasi-natural experiment, we find that firms in states with a higher risk of TPAL increase their use of trade credit. This relationship is more pronounced for firms with a more enhanced information environment, those with greater financial constraints, and those whose auditors are more exposed to litigation risk. Overall, our findings provide evidence of how TPAL affects firms’ short-term financing needs.
{"title":"Third-party auditor liability risk and trade credit policies","authors":"","doi":"10.1016/j.bar.2024.101454","DOIUrl":"10.1016/j.bar.2024.101454","url":null,"abstract":"<div><div>We investigate the effect of Third-Party Auditor Liability (TPAL) risk on firms' trade credit policies. Exploiting the staggered state-level changes to TPAL in the US as a quasi-natural experiment, we find that firms in states with a higher risk of TPAL increase their use of trade credit. This relationship is more pronounced for firms with a more enhanced information environment, those with greater financial constraints, and those whose auditors are more exposed to litigation risk. Overall, our findings provide evidence of how TPAL affects firms’ short-term financing needs.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S089083892400218X/pdfft?md5=ec945019dfccd526e008507c980584e8&pid=1-s2.0-S089083892400218X-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141910570","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-08-02DOI: 10.1016/j.bar.2024.101447
This study investigates the influence of bank interventions following breaches of debt covenants on workplace safety. Using a regression discontinuity design, we find robust evidence indicating a substantial decrease in employee injuries after covenant violations. Our channel analysis reveals that the impact of bank interventions is more pronounced when banks perform well in ESG-related employee relationships and take on less risk. Furthermore, the influence of bank interventions is stronger when banks have considerable control over firms and when employees have strong bargaining power. Our findings demonstrate that creditors play an active role in enhancing workplace safety, leading to improved employee welfare. The implications of our research highlight the potential for financial institutions to contribute to socially responsible practices and promote sustainable and safe working environments.
{"title":"From debt breaches to employee safety: The hidden power of banking interventions","authors":"","doi":"10.1016/j.bar.2024.101447","DOIUrl":"10.1016/j.bar.2024.101447","url":null,"abstract":"<div><div>This study investigates the influence of bank interventions following breaches of debt covenants on workplace safety. Using a regression discontinuity design, we find robust evidence indicating a substantial decrease in employee injuries after covenant violations. Our channel analysis reveals that the impact of bank interventions is more pronounced when banks perform well in ESG-related employee relationships and take on less risk. Furthermore, the influence of bank interventions is stronger when banks have considerable control over firms and when employees have strong bargaining power. Our findings demonstrate that creditors play an active role in enhancing workplace safety, leading to improved employee welfare. The implications of our research highlight the potential for financial institutions to contribute to socially responsible practices and promote sustainable and safe working environments.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-08-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0890838924002117/pdfft?md5=aa14440f6822b1f6a10beb7bd007699b&pid=1-s2.0-S0890838924002117-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141910571","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-08-02DOI: 10.1016/j.bar.2024.101448
This paper investigates the extent to which the regional credit market structures, characterized by the presence and lending capacity of traditional banks, shape the growth of online lending marketplaces using peer-to-peer (P2P) lending data. Using an instrumental variables (IV) approach, our study suggests that areas underserved by traditional banks witness more significant growth in P2P lending. This impact is more pronounced in regions with a lower presence of small bank outreach. Furthermore, we find that an increase in P2P lending is associated with a reduced risk of borrower default. Our findings also show that the expansion of online lending marketplaces positively impacts borrowers’ financial well-being by improving their credit scores.
{"title":"Bridging the credit gap: The influence of regional bank structure on the expansion of peer-to-peer lending","authors":"","doi":"10.1016/j.bar.2024.101448","DOIUrl":"10.1016/j.bar.2024.101448","url":null,"abstract":"<div><div>This paper investigates the extent to which the regional credit market structures, characterized by the presence and lending capacity of traditional banks, shape the growth of online lending marketplaces using peer-to-peer (P2P) lending data. Using an instrumental variables (IV) approach, our study suggests that areas underserved by traditional banks witness more significant growth in P2P lending. This impact is more pronounced in regions with a lower presence of small bank outreach. Furthermore, we find that an increase in P2P lending is associated with a reduced risk of borrower default. Our findings also show that the expansion of online lending marketplaces positively impacts borrowers’ financial well-being by improving their credit scores.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-08-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0890838924002129/pdfft?md5=7cddf0669daf895d5b826fd7029eae29&pid=1-s2.0-S0890838924002129-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142179144","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-07-31DOI: 10.1016/j.bar.2024.101449
We investigate the effect of cross-border regulatory cooperation on the cash holdings of firms cross-listed on US stock exchanges. The staggered adoption of the Multilateral Memorandum of Understanding (MMoU) facilitates cooperation among securities regulators around the world and expands their enforcement capabilities against foreign firms. Using a difference-in-differences design, we find that US-listed foreign firms significantly reduce their cash holdings after their home countries sign the MMoU, suggesting that the threat of increased SEC enforcement induced by regulatory cooperation disciplines corporate insiders from stockpiling cash holdings to enjoy private benefits of control. Information opacity and the cost of capital are two of the channels through which the threat of increased SEC enforcement affects cash holdings. The reduction in cash holdings is more pronounced for foreign firms from countries with weaker governance. After the MMoU, foreign firms make faster cash adjustments toward target levels, they reduce cash by making payouts, and their cash is valued more by investors.
{"title":"Cross-border regulatory cooperation and cash holdings: Evidence from US-listed foreign firms","authors":"","doi":"10.1016/j.bar.2024.101449","DOIUrl":"10.1016/j.bar.2024.101449","url":null,"abstract":"<div><div>We investigate the effect of cross-border regulatory cooperation on the cash holdings of firms cross-listed on US stock exchanges. The staggered adoption of the Multilateral Memorandum of Understanding (MMoU) facilitates cooperation among securities regulators around the world and expands their enforcement capabilities against foreign firms. Using a difference-in-differences design, we find that US-listed foreign firms significantly reduce their cash holdings after their home countries sign the MMoU, suggesting that the threat of increased SEC enforcement induced by regulatory cooperation disciplines corporate insiders from stockpiling cash holdings to enjoy private benefits of control. Information opacity and the cost of capital are two of the channels through which the threat of increased SEC enforcement affects cash holdings. The reduction in cash holdings is more pronounced for foreign firms from countries with weaker governance. After the MMoU, foreign firms make faster cash adjustments toward target levels, they reduce cash by making payouts, and their cash is valued more by investors.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0890838924002130/pdfft?md5=262a29094433d1caa4271139ca08b0bc&pid=1-s2.0-S0890838924002130-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141891935","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-07-30DOI: 10.1016/j.bar.2024.101452
This study examines whether exposure to dangerous infectious diseases affects how analysts assess risks. We use the outbreaks of the severe acute respiratory syndrome (SARS) at analysts' previous office locations across China as a plausibly exogenous shock in the analysts' life experience. We show that compared to their less-affected counterparts, analysts in provinces with more SARS cases issue more optimistic forecasts for firms. This effect is stronger for affected analysts in provinces perceived as more salient during the SARS epidemic period. Mechanism tests show a high level of unexpected economic growth and positive media reports can motivate optimistic forecast bias induced by SARS exposure. Further heterogeneity tests indicate that our findings are particularly pronounced among busier analysts, those with less industry specialization, and female analysts. Overall, these findings suggest that exposure to the SARS epidemic influences the information intermediaries’ judgment.
{"title":"Epidemic experience, analyst sentiment, and earnings forecasts: Evidence from SARS exposure","authors":"","doi":"10.1016/j.bar.2024.101452","DOIUrl":"10.1016/j.bar.2024.101452","url":null,"abstract":"<div><div>This study examines whether exposure to dangerous infectious diseases affects how analysts assess risks. We use the outbreaks of the severe acute respiratory syndrome (SARS) at analysts' previous office locations across China as a plausibly exogenous shock in the analysts' life experience. We show that compared to their less-affected counterparts, analysts in provinces with more SARS cases issue more optimistic forecasts for firms. This effect is stronger for affected analysts in provinces perceived as more salient during the SARS epidemic period. Mechanism tests show a high level of unexpected economic growth and positive media reports can motivate optimistic forecast bias induced by SARS exposure. Further heterogeneity tests indicate that our findings are particularly pronounced among busier analysts, those with less industry specialization, and female analysts. Overall, these findings suggest that exposure to the SARS epidemic influences the information intermediaries’ judgment.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142312557","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-07-30DOI: 10.1016/j.bar.2024.101445
Over 74% of US banks share common ownership with other banks. Our analysis of a large sample of US banks reveals that those with greater common ownership demonstrate heightened transparency. This manifests as reduced discretion in loan loss provisions, improved financial statement readability, and enhanced comparability. We pinpoint three underlying mechanisms: decreased private information gathering, increased stock liquidity, and diminished managerial incentives for opacity. Furthermore, these commonly owned banks exhibit lower crash risk due to their improved transparency. Our findings hold after using various proxies and two endogeneity-reduction methods: a difference-in-differences analysis based on the 2009 Blackrock–Barclays Global Investors merger and an instrumental variable approach using Russell 2000 index inclusions. Overall, our study underscores the positive impact of common ownership in the banking sector.
{"title":"The bright side of common ownership: Evidence from bank transparency","authors":"","doi":"10.1016/j.bar.2024.101445","DOIUrl":"10.1016/j.bar.2024.101445","url":null,"abstract":"<div><div>Over 74% of US banks share common ownership with other banks. Our analysis of a large sample of US banks reveals that those with greater common ownership demonstrate heightened transparency. This manifests as reduced discretion in loan loss provisions, improved financial statement readability, and enhanced comparability. We pinpoint three underlying mechanisms: decreased private information gathering, increased stock liquidity, and diminished managerial incentives for opacity. Furthermore, these commonly owned banks exhibit lower crash risk due to their improved transparency. Our findings hold after using various proxies and two endogeneity-reduction methods: a difference-in-differences analysis based on the 2009 Blackrock–Barclays Global Investors merger and an instrumental variable approach using Russell 2000 index inclusions. Overall, our study underscores the positive impact of common ownership in the banking sector.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0890838924002099/pdfft?md5=2cde4f380841643213f3a7ddf6732701&pid=1-s2.0-S0890838924002099-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141994712","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-07-15DOI: 10.1016/j.bar.2024.101442
Audit committees in the U.S. oversee risk management within organizations, including oversight of the disclosure of risk factors in periodic filings. Because audit committees have become increasingly over-burdened, we examine the impact of the busyness of audit committee members, measured via members’ service on other boards, on risk factor disclosures. We find firms with busy members issue disclosures that are of lower quality (i.e., less readable and less focused on firm fundamentals). Further, we find that firms with busy members are more likely to issue timely updates to disclosures. However, these updates are more likely to be vague—implying they are inconsequential to the market. We find these results are primarily driven by service in other non-audit committee roles. In additional cross-sectional tests, we find that our results are strongest when there is more uncertainty or complexity in the business environment. Finally, additional specifications and tests show that our results are robust to concerns related to endogeneity. Overall, we find that the busyness of audit committee members has important implications for risk factor disclosures.
{"title":"Audit committee member busyness and risk factor disclosure","authors":"","doi":"10.1016/j.bar.2024.101442","DOIUrl":"10.1016/j.bar.2024.101442","url":null,"abstract":"<div><div>Audit committees in the U.S. oversee risk management within organizations, including oversight of the disclosure of risk factors in periodic filings. Because audit committees have become increasingly over-burdened, we examine the impact of the busyness of audit committee members, measured via members’ service on other boards, on risk factor disclosures. We find firms with busy members issue disclosures that are of lower quality (i.e., less readable and less focused on firm fundamentals). Further, we find that firms with busy members are more likely to issue timely updates to disclosures. However, these updates are more likely to be vague—implying they are inconsequential to the market. We find these results are primarily driven by service in other non-audit committee roles. In additional cross-sectional tests, we find that our results are strongest when there is more uncertainty or complexity in the business environment. Finally, additional specifications and tests show that our results are robust to concerns related to endogeneity. Overall, we find that the busyness of audit committee members has important implications for risk factor disclosures.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141697343","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-07-14DOI: 10.1016/j.bar.2024.101441
{"title":"The use of machine learning algorithms to predict financial statement fraud","authors":"","doi":"10.1016/j.bar.2024.101441","DOIUrl":"10.1016/j.bar.2024.101441","url":null,"abstract":"","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0890838924002051/pdfft?md5=e28e883e01bfc548b2b9674f8c610688&pid=1-s2.0-S0890838924002051-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141705359","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-07-09DOI: 10.1016/j.bar.2024.101440
Corporate social responsibility (CSR) contracting incorporates environmental, social, and governance (ESG) related measures in executive compensation plans. Current research on this practice is limited to a US setting, despite global adoption. We investigate heterogeneity in CSR contracting using data from 59 countries between 2002 and 2019. We find that besides firm-level past ESG performance and the industry-level adoption rate, country-level ESG regulations have significant explanatory power in firms’ tendencies to adopt CSR contracting. Hand-collected data reveal significant cross-country differences in CSR contracting details. Finally, CSR contracting is positively associated with subsequent financial performance only in countries with more stringent ESG regulations and stronger legal enforcement. In contrast, CSR contracting is associated with subsequent ESG performance regardless of country-level factors.
{"title":"Heterogeneity in the integration of ESG measures in executive compensation: Determinants, contracting details and outcomes","authors":"","doi":"10.1016/j.bar.2024.101440","DOIUrl":"10.1016/j.bar.2024.101440","url":null,"abstract":"<div><div>Corporate social responsibility (CSR) contracting incorporates environmental, social, and governance (ESG) related measures in executive compensation plans. Current research on this practice is limited to a US setting, despite global adoption. We investigate heterogeneity in CSR contracting using data from 59 countries between 2002 and 2019. We find that besides firm-level past ESG performance and the industry-level adoption rate, country-level ESG regulations have significant explanatory power in firms’ tendencies to adopt CSR contracting. Hand-collected data reveal significant cross-country differences in CSR contracting details. Finally, CSR contracting is positively associated with subsequent financial performance only in countries with more stringent ESG regulations and stronger legal enforcement. In contrast, CSR contracting is associated with subsequent ESG performance regardless of country-level factors.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-07-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S089083892400204X/pdfft?md5=6595ae5f659b67bb609a312c5d3ffc14&pid=1-s2.0-S089083892400204X-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141615184","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-06-25DOI: 10.1016/j.bar.2024.101437
Given that the aim of corporate social and environmental disclosure mandates is to improve corporate social and environmental performance, this study investigates the impact of such mandates on performance. Using a difference-in-differences analysis, we examine trends in corporate social and environmental performance before and after the introduction of Directive 2014/95/EU (hereafter, the Directive), comparing affected European companies with companies in the United States (US), based on a balanced sample of 358 European companies (excluding United Kingdom (UK) companies, because they were subject to additional regulations that came into effect around the same time) and 470 US companies from 2009 to 2020. We find that European companies' performance has not improved substantially since the Directive came into effect in 2017, nor have they improved compared to US companies. Thus, the evidence suggests that the Directive has not improved European companies’ social and environmental performance. Our study provides broad-based evidence of the (in)effectiveness of mandating corporate social and environmental disclosures to enhance performance. Our findings will be of interest to regulators considering disclosure mandates, as well as stakeholders and investors interested in enhancing social and environmental performance.
{"title":"Does mandating corporate social and environmental disclosure improve social and environmental performance?: Broad-based evidence regarding the effectiveness of directive 2014/95/EU","authors":"","doi":"10.1016/j.bar.2024.101437","DOIUrl":"10.1016/j.bar.2024.101437","url":null,"abstract":"<div><div>Given that the aim of corporate social and environmental <em>disclosure</em> mandates is to improve corporate social and environmental <em>performance</em>, this study investigates the impact of such mandates on performance. Using a difference-in-differences analysis, we examine trends in corporate social and environmental performance before and after the introduction of Directive 2014/95/EU (hereafter, the Directive), comparing affected European companies with companies in the United States (US), based on a balanced sample of 358 European companies (excluding United Kingdom (UK) companies, because they were subject to additional regulations that came into effect around the same time) and 470 US companies from 2009 to 2020. We find that European companies' performance has not improved substantially since the Directive came into effect in 2017, nor have they improved compared to US companies. Thus, the evidence suggests that the Directive has not improved European companies’ social and environmental performance. Our study provides broad-based evidence of the (in)effectiveness of mandating corporate social and environmental disclosures to enhance performance. Our findings will be of interest to regulators considering disclosure mandates, as well as stakeholders and investors interested in enhancing social and environmental performance.</div></div>","PeriodicalId":47996,"journal":{"name":"British Accounting Review","volume":null,"pages":null},"PeriodicalIF":5.5,"publicationDate":"2024-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0890838924002014/pdfft?md5=aa9dcbc7d366f3f39d0f8f308f50a2a2&pid=1-s2.0-S0890838924002014-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142312556","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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