Journal of Business Finance & Accounting最新文献

This paper investigates how state ownership affects financial reporting practices in China. Using several measures of state (government) ownership, we show that a one-standard-deviation increase in state ownership decreases financial statement comparability by 36.61%, and the impact is more pronounced when the central authority has majority control of the company. Moreover, lower earnings quality and lower levels of accounting conservatism among state-owned enterprises (SOEs) may explain the lower accounting comparability between SOEs and non-SOEs (NSOEs). Additionally, similar (different) managerial objectives converge (diverge) financial statement comparability between SOEs and NSOEs. Last, the geographical locations of firms also contribute to financial statement comparability. We employ a difference-in-differences design, changes regression and entropy balancing to mitigate potential endogeneity bias.

We study the evolution of corporate Twitter usage from 2006 to 2021 using a comprehensive dataset of over 19 million tweets covering publicly listed US firms. Overall, we find that Twitter usage has changed substantially over the past 15 years, with a broader set of firms using Twitter and with more firms using Twitter to communicate financial information. The stock market response to tweets, measured using abnormal returns and trading volume, is positive and significant in all periods but has declined over time. Retweeting and “liking” behavior has increased substantially in recent years, suggesting broader dissemination. In addition, although firms continue to use press releases for the most economically important information, our results suggest that firms are increasingly substituting tweets for press releases. Moreover, we find that firms continue to be strategic with both the content and timing of their Twitter usage. Collectively, our findings provide useful context for the interpretation of prior studies and valuable information for the design of future studies on the corporate use of social media.

We investigate the effect of founder control on firms’ financing costs for seasoned equity offerings (SEOs). Firms issuing SEOs are subject to increased information asymmetry and associated agency conflicts. We hypothesize that founder control has a certification effect that mitigates such problems, and consequently, reduces the cost of issuing SEOs. Consistent with our prediction, firms with founder control enjoy higher abnormal announcement returns and lower SEO gross spreads. We also show that founder firms have better post-SEO operating performance than non-founder firms. Additionally, we document that the founder certification effect is more salient among firms with poorer pre-SEO operating performance and those that do not disclose specific use of the SEO proceeds. Finally, we show that founder firms do not increase the frequency of management earnings forecasts as much as non-founder firms prior to the SEO. Our results are robust to a battery of sensitivity analyses, and our conclusions are consistent with the founder certification effect.

This paper investigates a firm's stock return asynchronicity through the auditor's perspective to distinguish whether this asynchronicity can proxy for the company's firm-specific information or the quality of its information environment. We find a significant and positive association between asynchronicity and audit fees after controlling for auditor quality and other factors that affect audit fees, suggesting that stock return asynchronicity is more likely to capture a company's firm-specific information than its information environment. We also find that asynchronous firms are more likely to receive adverse opinions on their internal controls over financial reporting, but are associated with lower costs of capital and auditor litigation, providing further evidence in support of the firm-specific information argument. Asynchronicity's positive association with audit fees is driven by firms with higher accounting reporting complexity, suggesting stock return asynchronicity captures a firm's complexity, resulting in more significant efforts by the auditor.

We examine the relation between institutional investors’ horizons and bank transparency. The novelty of this research is to consider three important aspects of transparency: disclosure quality, private information gathering and auditor fees. We find strong evidence indicating that banks dominated by long-term (short-term [ST]) institutional shareholders exhibit higher (lower) levels of disclosure quality. However, there is no evidence that investor horizon has a differential effect on private information gathering and audit pricing. The study employs alternative proxies and estimations such as two-stage least squares and propensity score matching to address endogeneity. We also document that banks with higher ST institutional shareholding are associated with lower crash risk. These findings are particularly significant because poor bank transparency has been identified as a contributing factor to the 2007–2009 financial crisis.

This study examines the effect of directors’ and officers’ liability insurance (D&O insurance) on corporate cash holdings in China. We propose a collusion theory in which D&O insurance can exacerbate the conflicts of interest between controlling and minority shareholders by shielding directors and officers from shareholder litigation in emerging countries. Consistent with our expectation, we find that insured firms tend to have high cash holdings that are appropriated by both controlling shareholders and directors/officers rather than being invested or paid to shareholders. Moreover, the positive relationship between D&O insurance and cash holdings is more pronounced in firms with high litigation risks, whereas the effect is attenuated in firms with political connections, strong external monitoring mechanisms and strong controlling shareholder power. Compared with uninsured firms, the market discounts the value of cash holdings for insured firms.

We hypothesize that the demand for auditing in the registered investment management industry arises from the auditor's ability to act as a solvent indemnifier when outside parties incur losses because of financial misrepresentations. Consistent with this insurance demand, we find that, relative to financial companies, registered investment companies are more likely to retain Big 4 auditors. Restricting the sample to the registered investment management industry, we construct three direct tests of the insurance demand hypothesis. We find that (a) the market share of a Big 4 firm is positively associated with the firm's wealth, (b) changes in audit fees are positively associated with changes in the audit firms’ wealth, and (c) net fund flows increase when clients switch from non-Big 4 to Big 4 auditors. Our results highlight an unusually high demand for Big 4 auditors in the registered investment industry, which we attribute to the insurance demand for auditing services.

We empirically capture boardroom backscratching, or cronyism, as when a firm's Chief Executive Officer (CEO) and directors concurrently receive excessive remuneration. We argue that boardroom backscratching can inhibit a board's constructive criticism and monitoring, resulting in a greater likelihood of bad news hoarding. Using 14,104 US firm-year observations spanning 1999–2020, we document a significant positive relationship between boardroom backscratching and stock price crash risk. In additional analyses, we show that boardroom backscratching firms produce less readable annual reports and engage in greater upward real earnings management as channels for concealing bad news. We also find that external monitoring mechanisms weaken the positive association between boardroom backscratching and stock price crash risk. Our main findings withstand several endogeneity tests including propensity score matching, entropy balancing, difference-in-differences analysis using firms’ commencement of boardroom backscratching and CEO turnover event analysis. Our study offers insights to securities regulators and policymakers to revisit the notion of board independence, develop relevant market oversight and revise director and executive remuneration disclosure requirements so as to mitigate adverse stock market performance associated with boardroom backscratching.

In this study, we examine the effect of ex-military Chief Executive Officers (CEO)s on the readability of 10-Ks. Using the Bog Index as a measure of readability, we find that firms run by ex-military CEOs have much more readable financial reports, mainly because of the words used in these financial reports. Ex-military CEOs also have a moderating effect—we find that their leadership lessens the adverse effects of loss and business complexity on the 10-K's readability. These results are consistent with the view that ex-military CEOs resist the temptation to obfuscate negative news and may communicate complexity in operations more clearly. Overall, our findings indicate a possible behavioral explanation for why some firms have more readable annual reports.

Does state fiscal monitoring of local governments impact firms? Exploiting the staggered adoption of state fiscal monitoring policies, our results show that state fiscal monitoring of local governments increases corporate investment. Affected firms increase their investment by increasing capital expenditures as well as research and development expenditures. Additional analyses reveal that firms fund this increase in investment by decreasing share repurchases and issuing debt. We also provide evidence that the increase in corporate investment is driven by a reduction in local corruption.