Journal of Business Finance & Accounting最新文献

We examine the impact of media coverage on firm-level productivity and find that firms with higher media coverage are associated with higher productivity. Using the launch of Barron's Online as a quasi-shock to media coverage, we document that this relationship is causal. Further exploration shows that the positive media–productivity relationship is stronger for firms with weaker governance mechanisms and for those with higher levels of information asymmetry. We also identify an increase in reputational and career concerns and a reduction in managerial shirking as channels through which media coverage affects firm-level productivity. The results are robust to alternative explanations and endogeneity concerns. Overall, our findings suggest that media coverage reduces managerial opportunism, and thus enhances resource deployment decisions.

This study investigates the relationship between Confucianism and auditor judgment. Using a sample of Chinese listed firms from 2006 to 2019, we find that the Confucian atmosphere in auditors’ hometowns is positively associated with their audit adjustments. The mechanism analyses show that Confucianism in auditors’ hometowns can influence auditor morality and further affect their judgment. We also find that the positive relationship between Confucianism in auditors’ hometowns and audit adjustments is reinforced by auditor exposure to strong Confucian atmospheres in their places of education and workplaces but weakened by Western culture diffusion. Moreover, auditors who are more influenced by Confucianism are associated with more improvements in client financial reporting quality, more upward and downward adjustments, more small and large adjustments and more audit effort but not higher audit fees. Overall, this study provides evidence that supports the imprinting effect of traditional Confucianism on auditors.

We investigate the role of financial reporting quality in reducing a firm's over- and underleverage problems. While the prior literature examining reporting quality and capital structure has focused on observed capital structure, research suggests that financing frictions arising from adverse selection concerns can result in differences between observed and optimal capital structures. Using the deviation from a predicted model of optimal capital structure, we find that approximately a third of firms that have more leverage than their industry's median firm are in fact underlevered and more than 15% of firms that have less leverage than their industry's median firm are in fact overlevered. Building off a large literature that provides evidence that financial reporting quality can mitigate adverse selection concerns and reduce financing frictions, we find that a firm's deviation from the predicted model of optimal capital structure is decreasing in financial reporting quality, and these results are larger in magnitude for firms that are overlevered.

We study the effects of the Dodd–Frank Act (“Dodd–Frank”) on determinants of credit ratings. We predict that the increase in regulatory oversight and litigation risk prompted by Dodd–Frank, as well as requirements for improved disclosures and governance, motivated credit rating agencies (CRAs) to increase the reliance on verifiable quantitative fundamental information in determining ratings. We find that the power of firm fundamentals in explaining credit ratings increases significantly after Dodd–Frank. Furthermore, we find that the greater reliance on quantitative firm fundamentals at least partially drives the improvement in credit ratings’ ability to predict future defaults. Collectively, our evidence suggests that Dodd–Frank incentivizes CRAs to use more quantitative information in making rating decisions, which improves credit rating quality.

This paper examines the impact of trust on informal financial development. We isolate the inherited component of trust for 19 countries using US census data and relate it to firms’ access to trade credit. We discover that trust disproportionately elevates the use of trade credit by companies that face obstacles to obtaining funds from formal channels. Further analyses show that the effect is more pronounced in finance-dependent industries and that better access to trade credit promotes sales growth. Our results are robust to alternative samples, different estimations of inherited trust and various model specifications.

This paper examines the credit risk implications of a firm's reliance on skilled labor and provides an empirical analysis of the effect of skilled labor on loan contracting outcomes. Using a sample of listed US firms from 1998 to 2017, we predict and find that banks charge higher interest rates to firms relying on high-skill workers than low-skill workers. This effect is stronger for firms with higher asset-based operating leverage, higher probabilities of employee turnover and severer conflicts of interest between equity holders and debt holders. In addition, consistent with the idea that banks consider the specific costs and benefits associated with skilled labor, we show that a firm's reliance on skilled labor is positively (negatively) associated with the relative usage of capital (performance) covenants. Our results hold when applying different matching methods, fixed-effect models or exogenous shocks from two quasi-natural experiments. Overall, our study demonstrates the impact of skilled labor, an important labor-force heterogeneity, on debt contract design and contributes to the understanding of the interaction between labor and capital, that is, the two primary inputs of a firm.

Anecdotally, not all investors are able to read and understand the financial report. I consider a strategic reporting game where investors are bounded rational and only pay attention to randomly sampled parts of the financial report and then extrapolate the value of the firm based on this. The manager can both obfuscate and bias the financial report. Obfuscation works by disaggregating the report into any number of line items, modeled as nonnegative signals, whose mean is constrained to be equal to the biased profitability of the firm. There can be synergies between biasing and obfuscation, causing financial statements to be both less transparent and more biased when investors are extrapolative.

This study examines the relationship between CEOs’ general ability and the quality of internal control over financial reporting (ICFR). Using a sample of S&P 1500 firms in the United States from 2004 to 2015, I find that firms with generalist (specialist) CEOs are more (less) likely to report internal control weaknesses under Section 404 of Sarbanes-Oxley Act of 2002 (ICW404). The positive relationship between generalist CEOs and ICW404 is weaker when the management risk is lower (longer CEO tenure). These results are robust to alternative models and approaches to address potential endogeneity issues. Additional analyses suggest that this positive relationship is attributed to generalist CEOs’ excessive risk taking. Furthermore, CEO type is related to company-wide ICW404, ICW404 due to staffing, complexity and general issues, rather than account-specific ICW404 or ICW404 due to revenue recognition issues. Drawing from the Upper Echelons Theory, this study contributes to the research on ICFR quality by documenting CEO type as an additional determinant of ICW404. It highlights the importance of investors, auditors and regulators considering the CEO's career experience and operating style when assessing a firm's internal control environment. It also adds to the literature on general managerial ability by documenting the cost of hiring generalist CEOs regarding ICFR quality.

Due to their covert and often dubious nature, corporate political activities may encourage or facilitate opportunistic behaviors. Yet, they also subject firms to heightened visibility, which brings greater public and regulatory scrutiny. Using a hand-collected data set of politically connected US initial public offerings (IPOs), we investigate how this tension shapes the financial reporting incentives of firms going public and the accompanying direct compliance costs. Consistent with the agency view of corporate political activism (CPA), politically active IPO issuers have worse financial reporting quality, more litigation risk and eventually pay 28% more accounting fees than their peers. Additional analysis exploiting the US Supreme Court's landmark ruling on Citizens United versus Federal Election Commission suggests that the link between CPA and IPO accounting fees is likely to be causal. Finally, our evidence indicates that the involvement of specialized financial intermediaries in the political process has implications for the IPO financial reporting quality.

Recent surveys indicate that America's chief executive officers (CEOs) are getting older. While aging is often associated with greater experience, improved skill sets and higher job performance, prior research warns that aging can also lead to a significant decrease in cognitive function, energy, ambition and, consequently, the ability of CEOs to manage their firms. We examine this issue and find that older CEOs display significantly lower managerial ability as compared to younger CEOs. Exploring differences in firm factors, we further find that older CEOs exhibit significantly lower managerial ability when managing high-technology firms and significantly higher managerial ability when managing more mature, highly regulated firms. Collectively, our study provides new evidence that while managerial ability decreases with age, firm characteristics significantly moderate this relationship.