Journal of Business Finance & Accounting最新文献

Investors are increasingly placing reliance on alternative performance measures (APMs). Key performance indicators (KPIs) are a subset of these APMs that illustrate industry-specific firm financial and operational performance. In this study, we investigate analysts’ demand for KPI-related information in earnings conference calls and whether managers adjust their decisions about voluntary KPI disclosure in subsequent earnings calls. Using 51 KPIs for six industries, we find that after analysts request KPI-related information, managers increase both the likelihood and intensity of their KPI disclosure in subsequent earnings conference calls. This effect is more pronounced when the firm has less relevant earnings and lower proprietary costs, and when analysts are connected to management. Analyst KPI demand leads to a higher coverage of KPIs in subsequent news and generates benefits in analyst forecast dispersion, cost of capital and stock liquidity. Our study highlights the role that analysts play in voluntary KPI disclosure when there is an absence of mandatory integrated reporting.

Using the enforcement of the General Data Protection Regulation (GDPR) as our empirical setting, we examine how stricter data privacy and data protection requirements affect shareholder wealth, firms’ investment decisions, and data breaches. Consistent with consumer privacy negatively affecting firms, we find that U.S. firms exposed to the GDPR lose 0.7%–1.1% in market value relative to unexposed firms in the week in which the regulation became enforceable. We find that the decrease in market value is partially attributable to a decrease in sales growth. GDPR-exposed firms increase their investment above that of control firms and become less likely to report a data breach post-regulation. The decrease in data breach likelihood is statistically and economically significant, resulting in up to 34 million records not being leaked, which costs between $205 million and $561 million to firms in breach mitigation expenses per year. The results of this study should be of interest to academics and regulators worldwide by examining the costs and benefits of regulating data.

The Public Company Accounting Oversight Board's Rule 3211 mandates firms to disclose the types of component auditors employed and their contribution to the overall audit. Using a difference-in-differences approach, we examine the effect of the disclosure of component auditor usage on shareholder dissatisfaction. We find that multinational companies (MNCs) reporting higher use of large component auditors (LCAs), defined as component auditors contributing materially to the audit, experience a 17% decrease in shareholder votes against (or abstaining from) auditor ratification compared to MNCs with lower usage. This effect is more pronounced for firms with high institutional shareholding. We fail to find evidence of any effect on firms with the higher usage of small component auditors (SCAs). Our findings are robust to various definitions for treated and control firms. Our results support the view that, on average, LCAs offer higher “local” benefits and impose lower coordination costs compared to SCAs.

This paper investigates the value and corporate governance consequences of government awards for a sample of French CEOs appointed to the national Order of the Legion of Honor (Légion d'honneur). Short-term market reactions surrounding award announcements are significantly positive, whereas the valuation of firms with awarded CEOs is greater than that of (matched) firms with nonawarded CEOs. We explore the channels through which government awards create value and find evidence that they provide awarded CEOs and their firms with increased political access. We also observe that government awards are associated with better corporate governance in that awarded CEOs are more likely to be fired for poor performance. The negative effects that have been documented for media awards and are associated with CEOs’ superstar status do not seem to apply to state awards.

This study investigates whether the attribute of integrity culture (derived from target firms’ annual reports) influences merger and acquisition (M&A) performance. We find that a target firm's integrity culture, measured from its 10-K reports, has a positive and significant effect on market reaction to the bidder firm's M&A announcement. Our study's analysis is found to be robust to sample selection bias by utilising the entropy balancing technique and to endogeneity concerns by employing an instrumental variable approach. Our results are also robust to alternative measures of integrity culture and when controlling for a target firm's religiosity and corporate social responsibility, an acquirer firm's fixed effects, chief executive officer's fixed effects, governance for corporate control and advisor quality. We identify the retention of a target firm's directors and of its customers as channels that underlie our main findings. Furthermore, we find that acquisition synergies improve, with decreased time taken to complete the deal, for acquisitions of target firms with a higher integrity culture.

In a quasi-natural experimental setting in which Bond Connect allows foreign investors to trade in the Chinese interbank bond market, we predict and find that firms subject to the program increase their accounting conservatism. Further analyses suggest that the increase is concentrated among firms with higher litigation risk, more corporate site visits and greater media attention from overseas, suggesting that foreign bond investors affect firms through the channel of bondholder litigation and monitoring. Additionally, we document that improvement in conservatism is more pronounced when foreign investors participate more and for firms with looser issuance criteria. We also find that enhanced conservatism results in a lower cost of debt for bonds in the liberalized market and those of the same issuers in the nonliberalized market, as well as lower overinvestments and fewer dividends. In addition, firms show greater conservatism in other forms of public disclosure. Together, these findings suggest that firms enhance accounting conservatism to facilitate foreign bond investors’ assessment of credit risk.

Chinese stock exchanges have launched two investor interactive exchange platforms (IIEPs) to facilitate communication between retail investors and listed companies. Using retail investor posts on the IIEPs as a proxy for monitoring by minority shareholders, we show that minority shareholders can play an active monitoring role in corporate governance and improve earnings quality. We identify coordination among minority shareholders and increased regulatory scrutiny as key mechanisms through which IIEPs exert their influence. This form of monitoring proves critical, especially in the absence or ineffectiveness of traditional oversight bodies like institutional investors, auditors and government regulators. Our findings underscore the constructive role of minority shareholders in corporate governance, challenging the notion of them as passive free riders. Implementing IIEPs could be a valuable model for other nations looking to bolster minority shareholder rights.

We use earnings call transcripts to examine whether managers strategically change their disclosure behaviors before an actual share repurchase. Our findings suggest that managers use tone management to strategically portray a more negative outlook for the firm in the earnings call before an actual repurchase. In addition, we find that managers of repurchasing firms “cast” the call with more unfavorable analysts even when more favorable analysts are available. These disclosure strategies aim to influence the information flows to the market and allow repurchasing firms to repurchase their shares at a discounted price. We further show that insiders of repurchasing firms adjust their subsequent stock trading accordingly. Following more negative conference calls, insiders exhibit a tendency to increase share repurchases or reduce sales of company shares. Our findings underscore the increasingly sophisticated disclosure strategies employed by managers to wield influence over information dynamics in the market leading up to share repurchases.

This paper provides evidence on the role of multiple large shareholders (MLSs) in the determination of audit pricing from a new demand-side perspective, rather than the typical supply-side perspective. We find that for Chinese A-share listed firms, the presence of MLS is associated with significantly higher audit fees. The results are robust after we address endogeneity concerns and use auditor choice as an alternative proxy to capture demand for auditing. Further tests show that audit fees increase with the number and relative power of noncontrolling large shareholders. The positive impact of MLS on audit fees is more pronounced for state-owned enterprises (SOE) than in family-owned enterprises. Moreover, this positive impact of MLS is more pronounced for SOEs with foreign blockholders and non-SOEs with independent institutional blockholders. This positive impact is also more pronounced for firms with higher information asymmetry, severe agency problems and higher litigation risk. Overall, our results provide consistent evidence that firms with MLS are likely to demand high-quality auditing, leading to higher audit fees.

Using Regulation SHO as a controlled experiment, we examine the impact of short-selling threats on credit rating performance and credit rating usage in debt contracts. We find that when short-selling constraints are removed for pilot firms, rating accuracy increases, but rating stability decreases for these firms relative to non-pilot firms. This result suggests that short-selling threats push rating agencies to enhance rating accuracy at the cost of rating stability. We also find less rating usage in debt contracts for pilot firms than for non-pilot firms when short-selling constraints are removed for pilot firms, suggesting that in the presence of short-selling threats, debt contracting parties emphasize rating stability over rating accuracy. Overall, our study informs academics, practitioners and regulators about short sellers’ disciplining effect on rating agencies and provides novel evidence on the rating property trade-off and its implication for rating usage.