Journal of Business Finance & Accounting最新文献

We investigate how investor sentiment influences investor demand for financial information. Using two separate settings—earnings announcements and acquisition announcements—we find that as sentiment decreases, investor demand increases for SEC-regulated information that is highly detailed and relatively complicated to process. This result is consistent with psychology theory suggesting that during times of negative sentiment (i.e., pessimism), individuals are more likely to make decisions based on detailed information that requires high processing costs. Furthermore, consistent with our expectations, we find that the effects of sentiment on information demand are affected by other factors conveyed in the earnings announcement setting that can signal the need for more detailed information, such as the magnitude of the earnings surprise and firm distress. We also find that as sentiment increases, investor demand increases for higher level (summary) information that is obtained from Google ticker searches. Combined with our primary results on SEC information, these results are consistent with the notion that during times of optimism, investors rely less on complex information and are more likely to use simple heuristics that require less cognitive effort to process. Our study provides new insights on how sentiment influences investor demand for information, which has significant implications for price discovery.

We investigate investor perceptions of the US CEO pay ratio disclosure rule by studying market reactions to its implementation. Our findings reveal an overall negative market reaction, suggesting that investors anticipated the disclosure rule to be detrimental on average across firms. The negative reaction is more pronounced for firms that investors expected to disclose high pay ratios. That is, investors anticipated stronger disadvantages for firms that are required to disclose high pay ratios. This finding suggests investors expected mandatory disclosures to raise public attention to pay ratios, causing some stakeholders to penalize firms disclosing high pay ratios. Finally, the negative reaction is less pronounced for firms with weakly performance-related CEO compensation, that is, investors expected the disclosure mandate to be less detrimental to firms with inefficient CEO compensation design. This finding suggests that investors believe public pressure resulting from mandatory pay ratio disclosures can influence the compensation-setting process. Together, our findings have implications for policymakers and corporate boards, highlighting investors’ perceptions of the potential consequences of mandatory transparency on within-firm pay inequality.

How sophisticated are retail investors in monitoring their holdings? We answer this question by examining Robinhood investors’ trades around the US Securities and Exchange Commission (SEC) comment letter (CL) disclosures. We focus on CLs because, compared to periodic filings, CL disclosures are unscheduled (high search cost) and unstandardized with a significant variation in their content (high processing cost). We find that CLs attract Robinhood investors’ attention, as evidenced by a significant abnormal Google search volume index around CLs disclosure, particularly around more severe CLs. The number of Robinhood investors holding a stock reduces after a firm receives more severe CLs in anticipation of the future decline in stock prices. Our results are (i) robust to addressing the endogeneity concern; (ii) robust to controlling for concurrent information from insider sales, short-selling activity, Twitter, press, analysts, and other concurrent CLs; and (iii) do not reflect Robinhood investors relying on heuristics in analyzing CLs’ content. Our evidence suggests that retail investors are sophisticated in processing CL disclosures as part of their portfolio monitoring activities.

Using a firm-level database covering 52 countries during the period 2004–2021, I investigate how legal institutions and characteristics of banking systems affect the provision of trade credit for private firms. The results show that there is more reliance on trade credit versus short-term bank financing in environments characterized by higher legal enforcement while protection of creditors’ rights has no effect on the relative use of trade credit. As for the influence of the structure of the banking system, the relative use of trade credit, compared to short-term debt, increases with the weight of bank financing in the country and the existence of restrictions on banks owning and controlling nonfinancial firms. During the global financial crisis, the relative use of trade credit increased, compared to short-term debt, while it decreased during the COVID-19 pandemic.

The COVID-19 pandemic provides a novel setting to explore whether an Islamic label benefits firms during a crisis. The existing literature mostly explores the differential performance between Islamic and conventional equity markets at the aggregate level without controlling for idiosyncratic firm characteristics. Using the cross-sectional and difference-in-differences (DiD) regressions, we provide novel evidence at the firm level on how market segmentation based on investors’ religious or ethical preferences significantly affects how firms withstand a crisis. Segregating S&P1500 companies into Islamic and non-Islamic, we show that an Islamic label has a significantly positive (negative) impact on abnormal returns and operating performance (volatility). Specifically, S&P1500 Islamic firms generate an extra daily return of 0.64% and exhibit 1.2% lower daily volatility than their non-Islamic counterparts. Although researchers report firms’ environmental and social (ES) performance as a resilience factor during the COVID-19 crisis, we observe that the ES score does not offer explanatory power when we control firm-level financial variables. In contrast, the Islamic label remains a statistically and economically significant positive determinant of pandemic period returns and operating performance. Our key findings are robust in (i) the cross-sectional and DiD regressions; (ii) alternative definitions of abnormal returns, volatility, and operating performance; (iii) the propensity score-matched samples; and (iv) S&P500 Islamic and non-Islamic subsamples.