Journal of Business Finance & Accounting最新文献

We empirically test whether executives’ increases in base salary when promoted to Chief Executive Officer (CEO) result from the wage bids of competing firms (i.e., “market-based tournaments”) or from the strategic choices of the firm's board of directors to elicit optimal executive incentives (i.e., “classic tournaments”). Our test emphasizes the effect of the “importance of luck” (i.e., the variance of luck) on the pay raises that accompany promotion. Specifically, we focus on how that effect differs between the two types of tournaments. An estimated negative relationship between the importance of luck and the executive salary spread supports market-based tournaments, whereas a positive relationship supports classic tournaments. The results are non-monotonic in firm size. Executive tournaments in both the bottom 13% of firms (i.e., total assets below $376 million) and the top 2.5% of firms (i.e., total assets above $112 billion) are more consistent with classic tournaments, whereas the nearly 85% in the middle of the distribution of firm size are more consistent with market-based tournaments. Also, controlling for firm size, highly concentrated product markets are more consistent with market-based tournaments. Extending market-based tournament theory to allow executives to choose the luck variance reveals that executives infuse their tournaments with a high luck variance, which lowers the expected pay differential and depresses incentives.

This study investigates the impact of financial misstatements on audit committee director departures, focusing on anticipatory and reactive actions. By analyzing data from restating and non-restating firms between 2004 and 2020, we categorize the misstatement process into pre-occurrence, occurrence, investigation, and post-announcement periods. Our findings reveal that audit committee directors in restating firms are significantly more likely to depart in all four periods, compared with their counterparts in non-restating firms. We further explore how the likelihood of departure is influenced by directors’ characteristics, including financial expertise, gender, busyness, tenure, and age. The results suggest that financial misstatements are not merely reactionary events that prompt director departures but also serve as anticipatory signals leading to proactive exits before issues become public. This study provides valuable insights for financial statement users, boards of directors, and governance activists.

This study examines how the unexpected earnings of industry leaders influence the discretionary reporting behavior of industry followers. Chinese firms are required to disclose their annual earnings announcement (EA) dates before the fiscal year ends. Leveraging this unique setting, we demonstrate that followers delay their EAs in response to earnings surprises reported by industry leaders. This effect is more pronounced for followers who face lower costs of delaying (i.e., those with weak corporate governance and who face no penalties for delaying EAs) and those who receive greater benefits from delaying (i.e., those in more competitive industries and in industries where leaders meet or beat market expectations). We also find that, compared with other followers, those that delay EAs are more likely to engage in last-minute earnings management by reducing their effective tax rates. Furthermore, our findings suggest that when industry leaders report good news, followers who delay EAs are more likely to do the same. However, we find no positive market reaction to these delayed EAs. Overall, this study provides new evidence that industry leaders’ earnings surprises significantly impact their followers’ decisions about discretionary financial reporting, including the delay of EAs and last-minute earnings management.

We examine whether mandatory data breach disclosure affects insider-selling behavior and find that selling profits are greater after states require firms to disclose data breaches. The effect is more pronounced for firms with weaker corporate governance, higher cybersecurity risk, and without prior investment in material cyber protection programs. However, insiders profit less when they operate in states with stricter laws and face higher litigation risks. The evidence is consistent with managers personally hedging risks in the capital market when mandatory disclosure laws designed to protect customers are weakly enforced. Laws designed to improve transparency in the product markets may have the unintended effect of reducing the integrity of financial markets. However, insider sales also facilitate the incorporation of bad news in stock prices, making idiosyncratic crashes less likely.

While there is increasing investor demand for climate-change disclosures, less is known about how a firm's culture influences its decision to provide these disclosures. In this study, we focus on market-driven or customer-focused culture. We expect that firms with a market-driven culture (MDC) will be more likely to provide climate-change disclosures because such firms are more customer-oriented. Our results are consistent with this expectation. We also find that the level of carbon emissions is negatively associated with MDC, suggesting that the climate-change disclosures are not merely greenwash. Further, we find firm value is higher for MDC firms that provide climate-change disclosures. Overall, we contribute to the literature by identifying MDC as an important determinant of climate-change disclosure.