Review of Accounting Studies最新文献

We study how the launch of an electronically traded fund (ETF) that holds firms in a specific industry changes the behavior of analysts who follow that firms in that industry. An industry ETF allows investors to trade the firm-specific payoff separately from the industry payoff. This causes significant changes in the value of different types of information. In particular, following an increase in a firm’s industry ETF coverage, the firm’s analyst coverage increases in the following year, and this holds after controlling for changes in institutional investment and other characteristics. We also find that, following an increase in ETF coverage, analyst recommendations are more likely to include an industry recommendation separate from the firm-specific recommendation, and the latter is more likely to be stated in relative terms. Our results strengthen when the new ETF is a better hedge against the industry payoff factor and when we introduce a plausible control for endogeneity.

From 2008 to 2020, 180 of S&P 1500 have disclosed employee diversity targets. We conduct the first analysis of firms’ employee diversity targets and ask three research questions: (i) who announces diversity targets? (ii) do firms deliver on their diversity targets? (iii) what are the implications of disclosure of such targets for employee hiring and investors? We find that firms with a greater willingness (proxied by past ESG penalties, higher CEO-to-median employee pay ratio, more media coverage, and after #MeToo and Black Lives Matter movements) and ability (proxied by financial strength, a blue-collar heavy labor force, and gender and ethnic minorities on boards) to improve employee diversity are more likely to disclose diversity targets. Exploiting the Revelio dataset of 15,639 firm-years for 1,203 distinct firms from 2008 to 2020, we observe that firms that disclosed a diversity target have indeed hired more diverse employees, but such diversity levels had already increased substantially prior to the target disclosure. Firms with numerical, forward-looking, and rank-and-file employee-targeted goals are associated with greater employee diversity relative to firms that announce other types of diversity goals. Moreover, improved diversity performance does not appear to occur at the cost of employee quality, as measured by Revelio. Overall our results have practical implications for how investors and stakeholders might want to interpret corporate diversity targets.

Activist investors in a firm often voluntarily release information about their governance intentions to the public. Voluntary disclosure theory suggests that an activist investor will disclose when she expects other investors to respond positively and support her in upcoming corporate control contests. We find that activists’ disclosures are accompanied by positive abnormal returns, reductions in bid-ask spreads, and increases in future earnings relative to similar targets without voluntary activist disclosures. Disclosures by activists who demand a board seat (the most common demand) have the highest announcement returns, and disclosers also win proxy contests and directorships more frequently than non-disclosers. These findings suggest that the activist’s beliefs about investor response in both pricing and voting are an important driver of her disclosure choice.

Ethnic tension in the United States became more salient after Donald Trump’s election on November 9, 2016. Exploring the variation in management forecasts, we show that after the Trump election, minority CEOs exhibit more pessimism in their earnings forecasts (underestimation of the mean of earnings), compared with their non-minority counterparts. This tendency toward pessimism is observed across CEOs from various minority groups and is particularly pronounced in firms led by less experienced or less confident minority CEOs. Further analyses reveal that minority CEOs make less specific and less precise forecasts. Minority CEO pessimism is not explained by alternative explanations including terrorist attacks and minority CEOs’ political ideology. Collectively, our research provides evidence that the Trump election induces biased beliefs in the form of pessimism in ethnic minority CEOs.

We examine the role of private equity in alleviating earnings myopia induced by public markets. We first construct a measure of earnings myopia and show that this measure varies as predicted with determinants and effects of myopia. Then we show that public firms exhibiting earnings myopia realize an increased likelihood of takeover by private equity buyers. Cross-sectional analyses indicate that this relation is strongest when costs of earnings myopia are likely higher. Following private equity takeovers, firms exhibiting greater measures of earnings myopia realize improvements to R&D investment and productivity. The results add to the understanding of the role of private equity in identifying and alleviating earnings myopia within U.S. capital markets. This is important given the increasing size of private equity assets under management. Takeover premiums paid for myopic firms suggest a cost of earnings myopia at approximately 6.9% of firm value.

ChatGPT frequently appears in the media, with many predicting significant disruptions, especially in the fields of accounting and auditing. Yet research has demonstrated relatively poor performance of ChatGPT on student assessment questions. We extend this research to examine whether more recent ChatGPT models and capabilities can pass major accounting certification exams including the Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Internal Auditor (CIA), and Enrolled Agent (EA) certification exams. We find that the ChatGPT 3.5 model cannot pass any exam (average score across all assessments of 53.1%). However, with additional enhancements, ChatGPT can pass all sections of each tested exam: moving to the ChatGPT 4 model improved scores by an average of 16.5%, providing 10-shot training improved scores an additional 6.6%, and allowing the model to use reasoning and acting (e.g., allow ChatGPT to use a calculator and other resources) improved scores an additional 8.9%. After all these improvements, ChatGPT passed all exams with an average score of 85.1%. This high performance indicates that ChatGPT has sufficient capabilities to disrupt the accounting and auditing industries, which we discuss in detail. This research provides practical insights for accounting professionals, investors, and stakeholders on how to adapt and mitigate the potential harms of this technology in accounting and auditing firms.

Using the market values of audit partners’ houses as a measure of their personal wealth, we find that wealthier U.S. partners provide higher-quality audits, as evidenced by fewer material restatements, fewer material SEC comment letters, and higher audit fees. A battery of falsification tests shows that these findings are not driven by the matching of wealthier partners with clients with higher financial reporting quality. Our additional analyses suggest two explanations: greater personal wealth both incentivizes partners to exert more effort in delivering high-quality audits and reveals partners’ audit competence.

Standard Bayesians’ beliefs converge when they receive the same piece of new information. However, when agents initially disagree and have uncertainty about the precision of a signal, their disagreement might instead increase, despite receiving the same information. We demonstrate that this divergence of beliefs leads to a unimodal effect of the absolute surprise in the signal on trading volume. We show that this prediction is consistent with the empirical evidence using trading volume around earnings announcements of U.S. firms. We find evidence of elevated volume following moderate surprises and depressed volume following more extreme surprises, a pattern that is more pronounced when investors hold more distant prior beliefs and are more uncertain about earnings’ precision. The evidence is consistent with the model where investors disagree about stocks’ expected returns and do not know the precision of earnings as a signal about the firm’s value.

This paper studies a model in which investors’ information acquisition and the manager’s investment choice (hence the moments of the firm’s cash flow) are jointly determined. I show that a lower information acquisition cost alters the information environment in a way that motivates the manager to prioritize reducing the variance of cash flow over improving its mean. I present conditions under which a decrease in the cost of information acquisition reduces stock valuations and investors’ welfare. The analysis highlights the importance of considering the joint determination of firm risk in studying investors’ information acquisition. The model’s predictions are relevant to the growing literature that studies technological advancements and regulatory requirements that lower the cost for investors to acquire and process information.

Merkley et al. (2023) examine how cryptocurrency influencers recommend digital coins on Twitter (X) and the associated price effects. They report that influencers may exploit market investors via potential pump and dump schemes. While plausible, researchers may develop a broader understanding of influencers’ incentives and their influence by considering how investors engage these markets for social identity needs that enhance utility. Social-psychological research indicates that someone’s social identity strongly influences their behavior, even making the behavior maladaptive. This paper discusses how crypto influencers create social identity resonance. It then discusses how influencers can leverage this resonance for potentially lucrative financial opportunities, which might manifest in different expected crypto price patterns. The paper concludes by recommending more research on influencers’ experience, networks, and communication choices; the effects of video relative to text communication; and implications of social identity cohorts that influence prices and undermine regulatory trust in traditional markets.