Journal of Business Finance & Accounting最新文献

This study investigates whether an increase in the costs associated with related party transactions (RPTs) for controlling owners affects the volume of such transactions. We exploit the implementation of the Insolvency and Bankruptcy Code (IBC) in India in 2016 as a quasi-natural experiment that likely raised the costs of engaging in RPTs by strengthening creditor rights. Using a difference-in-differences design, we find that the enhanced enforcement environment following the IBC led to a significant decline in RPT activity by controlling shareholders. This decline is primarily driven by a reduction in opportunistic RPTs. Furthermore, the average market reaction to the IBC implementation is more pronounced for firms with higher pre-reform levels of opportunistic RPTs, consistent with investors valuing the curtailment of tunneling behavior.

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.

We investigate the effect of board co-option on workplace safety and find that firms with a higher proportion of co-opted directors on their boards experience higher workplace injury/illness rates. We also explore how board co-option may increase workplace injury/illness rates and attribute that to lower investments in safety measures and heavier workloads. Further analyses reveal that external monitoring through greater institutional ownership and analyst coverage can moderate the negative effect of board co-option on workplace safety. Our results support the argument that the interests of co-opted directors are closely aligned with those of the CEO, who is instrumental in their selection, thereby compromising their monitoring role.

Using the resumes of 200,708 individual auditors from LinkedIn to identify audit personnel turnover in the US Big 4 audit offices, we document a higher probability of financial misstatements among clients of offices with higher auditor turnover. This adverse effect is driven by both busy-season turnover and voluntary turnover. This effect is also more pronounced when the departing auditors are more experienced and skilled as well as when their offices have less industry expertise, suggesting that the loss of knowledge and skills is one driving force behind turnover-induced audit quality deterioration. Workload compression serves as another driving force, as the detrimental role of auditor turnover concentrates on offices with more complex clients and more accelerated filers. More importantly, we find that audit offices respond to high auditor turnover directly through internal and external hiring and indirectly through adjusting compensation and promotion schemes, as lower relative salary, higher wage inequity, and lower likelihood of promotion positively affect auditor turnover. We further show that both direct and indirect responses can effectively improve future audit quality. Overall, our results provide insights into audit personnel turnover and human capital management in the United States and suggest that human capital disclosures can help stakeholders evaluate the quality of audit offices’ services.

Previous empirical studies document a striking cross-firm return predictability among firms connected through economic links. This study reveals that this cross-firm return predictability is attributable to analysts' sticky expectations. Notably, the return predictability is more pronounced for focal firms covered by analysts with stickier expectations, particularly during earnings announcement days. Furthermore, this effect remains robust against alternative explanations and is evident across different sub-samples, alternative measures of expectation stickiness, and various economic linkages. Our findings highlight a novel insight that analysts' sticky expectations serve as an important factor driving investors' underreaction to the valuable information from economically linked firms.