Journal of Business Finance & Accounting最新文献

Equity trading volume is increasingly moving from stock exchanges to off-exchange dark venues. Theory provides opposing predictions about the association between dark trading and stock price crash risk. Arbitrage cost arguments predict a positive relation, whereas the price efficiency theory predicts a negative relation. Our results support the former: Dark trading significantly increases stock price crash risk. This result is economically meaningful and robust to using an exogenous shock to dark trading to address endogeneity concerns. Further, in the weeks of and after a stock price crash, abnormal trading volume and trade size increase on dark venues, and this effect is greater for stocks with higher institutional ownership and worse earnings news in the crash week. In sum, this study introduces a novel feature, extreme negative stock returns from dark pool trading, and also contributes to a nascent literature on the consequences of stock price crashes. Our results also have potential regulatory implications: By facilitating the separation of informed and uninformed traders, dark markets incentivize managerial withholding of bad news, which increases stock price crash risk.

Based on a dataset of listed Taiwanese firms spanning 2006–2023, this study documents a robust negative association between the presence of top management team members with finance-related education (MFE) and both stock price synchronicity and crash risk. These effects persist after robustness checks and controls for endogeneity. Furthermore, these negative associations are particularly pronounced in firms led by finance-educated executives with undergraduate degrees or elite educational credentials, and in settings with weak external monitoring—specifically, low analyst coverage, sparse media exposure, and minimal institutional ownership. Mediation analysis reveals that high-MFE firms exhibit superior information disclosure quality. The overall findings support the “dual substantive and symbolic functions” hypothesis: Firms with a higher proportion of finance-educated executives—whether driven by substantive intent or symbolic signaling—more effectively direct investor attention toward firm-specific information, thereby improving disclosure quality and reducing stock price synchronicity and crash risk. This study contributes to the literature by identifying MFE’s attention-directing role and its broader implications for information efficiency in capital markets.

This paper examines the impact of local air quality on firms’ acquisition decisions. We find that polluting firms in areas with better air quality are more likely to acquire targets in more polluted areas. We show that regulatory pressure, normative pressure, and organizational legitimacy concerns are three possible channels through which local air quality influences polluting firms’ acquisition decisions. Meanwhile, firms are more inclined to undertake pollution-driven acquisitions when they are financially capable of doing so or when they cannot alleviate the pressure via environmentally responsible ways. Moreover, the presence of foreign institutional investors and the Covid-19 pandemic attenuate the impact of local air quality on polluting firms’ acquisition decisions. In addition, firms conducting pollution-driven acquisitions experience negative short-term market reactions and unfavorable long-term performance in profitability and productivity but receive higher subsidies from the local government after the pollution-driven acquisitions. Our results suggest that polluting firms engage in acquisitions to shift the environmental legitimacy pressure away.

This study examines whether strategic alignment between participants in the same supply chain is associated with supplier audit fees. We hypothesize that strategic alignment between suppliers and customers can mitigate the business and audit risk associated with auditing a supplier firm, which will be associated with lower audit fees. We utilize disclosures about major customers to construct a dataset of supplier–customer dyads and then compare the relative strategies of the two parties. The empirical results support our hypothesis that strategic alignment between suppliers and their major customers is associated with lower audit fees for the supplier. We also find that the negative association between strategic alignment and supplier audit fees is more pronounced when auditors are industry specialists. Our results remain robust when using alternative measures of strategic alignment, testing for functional form misspecification, and addressing potential endogeneity.

We conduct textual analysis on 10-K and 10-Q filings and find that forward-looking statements (FLS) associate with reductions in investor trading costs, driven largely by reductions in market-maker inventory costs. FLS also associate with increases in market depth on both sides of the bid–ask spread and increases in both retail and institutional investor trading activity. Importantly, retail investors are more responsive to FLS than institutional investors. Cross-sectional tests provide additional evidence with the associations being more pronounced during market downturns and in the absence of earnings guidance. The results are robust to instrumental variable regressions using managerial ability as an instrument. Overall, our results suggest that FLS reduce trading frictions mainly by reducing market-maker inventory costs, increasing market-maker competition via increased market depth and increasing investor trading activity, particularly from retail investors. Our results thus highlight the important role FLS play in trading activity, especially for retail investors.

We examine trends in the disclosure quality of the income tax footnote for US firms in annual 10-K filings over the period 1996–2023. In contrast to claims by some practitioners and academics that the income tax footnote has become too complex, we document a marked increase in readability. Specifically, our results suggest that, while the quantity of textual disclosure in the income tax footnote has increased over time, the tax footnote has become more readable across several measures of readability. Changes in firm characteristics do not explain the improved trends in readability. We find some evidence suggesting that higher probabilities of IRS scrutiny and shareholder litigation attenuate, but do not reverse, the trends in readability. We also find that the language used in the income tax footnote has become more similar among industry peers over time. Finally, we show that improved tax footnote readability is associated with reduced dispersion in analyst tax forecasts, consistent with improvements in tax disclosure reaping capital market benefits.

In the workplace, women are less likely than men to hold higher paying positions throughout the entire organization, not just top executive roles. We refer to this phenomenon as the gender position gap. Using novel gender and salary data on employees who hold various positions within firms, we examine the determinants of the gender position gap and its informativeness about future firm performance. We find that the gender position gap is wider for firms with larger female–male differences in human capital characteristics (prior work experience and education), fewer female leaders, and weaker monitoring (proxied by institutional ownership, analyst following, and firm size). Firms with larger gender position gaps have poorer future performance. This negative association is not driven by employees at the top or bottom end of the corporate hierarchy. The negative association is stronger for firms that rely more on human capital. Firms with a larger gender position gap also have lower future stock returns, which suggests that investors do not fully utilize information about gender position gaps. Overall, our findings are consistent with the view that the gender position gap contains information about future firm performance.

In 2012, India's market regulator, the Securities and Exchange Board of India, began mandating (Environmental, Social, and Governance) ESG disclosures for listed firms based on their market capitalization. By 2021, there had been five related announcements. This study employs these five regulatory events from 2012 to 2021 to investigate whether mandatory ESG reporting creates shareholder value. Our event study employs a regression discontinuity design to understand the causal impact of the mandates on shareholder value. We find that over the course of five events, relative to the non-mandated firms, the stock prices for the mandated firms dropped approximately 7%–8%. We then examine cross-sectional variation across polluting, financial, and high rent-seeking industries, where ESG information is material and competitive. We find an approximately 5%–9% increase in stock prices for the mandated firms relative to the non-mandated firms in these industries over the course of five events. Market-wide, we find no evidence of long-term value creation for the mandated firms in the years following the implementation of regulations requiring mandatory ESG reporting. We carry out a battery of robustness tests to validate the results. Our results have important policy implications. Regulations that arbitrarily mandate ESG reporting for firms based on market capitalization destroy the shareholder value of those firms. By contrast, a targeted mandate based on industry materiality can create shareholder value for the firms.