Review of Accounting Studies最新文献

We define accrual duration as the length of time between an accrual and its associated cash flow. Accrual duration is inextricably linked to accrual discretion and accrual quality by the fundamentals of the accrual process—the recording of longer-duration accruals involves using longer-term estimates, which makes them relatively more discretionary and less reliable, ceteris paribus. We provide the theoretical development of this broad idea and demonstrate several empirical applications linking accrual duration to earnings persistence, Accounting and Auditing Enforcement Releases, asset write-offs, and the observed kink in the earnings distribution. A major advantage of the accrual duration approach is that it is quite general, which allows us to derive a powerful new model of total accruals discretion and quality as well as a novel measure of total accruals duration. Finally, we discuss how the accrual duration approach can illuminate numerous ongoing issues in accounting research.

Using the number of Robinhood users holding a firm’s shares, I examine how novice retail investors respond to earnings announcements and the implications of their responses for the price-earnings relation. I do not find evidence of informed trading among these investors. Changes in their holdings also do not resemble random, uncorrelated noise trading. Instead I find that the number of retail investors holding a firm’s shares increases in response to both more positive and more negative earnings news, consistent with attention-driven trade. While retail trades appear to react to announced earnings, an analysis of intraday trading indicates that these traders respond most consistently to market returns following the earnings announcement, as opposed to only earnings itself. Consistent with this coordinated trading exerting pressure on prices, I find that stock returns drift upward following both the most positive and the most negative earnings surprises when increases in retail holdings are greatest and the firm is relatively small or costly to sell short.

Using the staggered establishment of environmental courts in China, we study the effect of environmental law enforcement on audit fees. We find that companies’ abnormal audit fees increase significantly after the establishment of a specialized environmental court strengthens environmental law enforcement. Our cross-sectional analyses show that the increase in abnormal audit fees is greater for companies with worse environmental performance and for those in heavily polluting industries. We then assess the channels through which environmental courts affect companies’ audit fees and find that the effect of the courts on fees is driven by both audit effort and audit risk and the establishment of a particular type of environmental court (an independent environmental adjudication division). Finally, our results reveal that public concern about environmental protection plays a substitutive role for environmental courts in affecting the increase in audit fees. Our findings suggest that environmental courts aimed at strengthening environmental laws and regulations alter firms’ and auditors’ behaviors and decisions, having unintended spillover effects on audit pricing.

The SEC limits sell-side analysts’ research activities on IPO firms both before and immediately after going public (the IPO quiet period). However, during the IPO quiet period, analysts provide regular coverage of IPO peer firms, which is potentially relevant to investors seeking to glean information about the IPO firm itself. We examine whether, despite the restrictions on analyst research of IPO firms during the quiet period, investors uncover information about the IPO firm indirectly through analyst research of peer firms. We find that, on the IPO date, institutional investors trade on the information in analysts’ recommendation revisions of peer firms that were issued earlier in the quiet period. Institutional investors also trade in the short window around analyst revisions of peer firms that are issued later in the quiet period (after the IPO date) but before analysts initiate coverage of the IPO firm. Retail investors, however, are inattentive to the information available in analyst research of peer firms. Importantly, our findings vary predictably with attributes of the issuing analyst, which helps rule out firm- and industry-level alternative explanations. Lastly, we find that recommendation revisions analysts issue for peer firms predict future IPO-firm performance, suggesting that analyst research of peer firms during the quiet period conveys meaningful information about the IPO firm that results in an information advantage for institutional investors.

Automation—such as machine learning, robotic process automation, and artificial intelligence—is the next major technological leap in accounting and financial reporting, and I empirically study whether public firms’ use of automation technology improves their financial reporting, specifically focusing on the internal control environment. I document two critical inferences. First, I find evidence which suggests that automation improves financial reporting quality. Specifically, firms’ use of automation in the financial reporting process is associated with a reduction in internal control material weaknesses. This association is consistent in a levels analysis with firm and year fixed effects, in a changes analysis, and in a propensity score matched difference-in-differences analysis. Second, I find evidence which suggests that monitoring of the financial reporting process decreases after automation, likely because of a perception that automation reduces the need for monitoring vis-à-vis stronger internal controls. Specifically, automation is associated with higher external audit fees and audit committee meetings in the initial years after a firm implements automation but associated with lower external audit fees and audit committee meetings in subsequent years. I also find evidence which suggests that this decreased monitoring may be costly: when internal control failures do happen for firms with automation, the failures are more material, as proxied by stronger negative market reactions. In aggregate, my evidence provides nuanced insights regarding whether automation technology improves financial reporting.

This study examines the properties of innovation disclosures contained in new product announcements, a form of voluntary, nonfinancial disclosure. We analyze these properties using a novel, text-based measure of the extent of product innovation disclosed in new product announcements. We find that stock prices react more positively to announcements with more extensive innovation disclosure. In our main analyses, we first find that a higher level of innovation disclosure predicts a greater increase in future sales. We further find that this predictive ability falls when managers have stronger incentives to maximize their wealth and when the corporate governance structure and customers’ bargaining power weaken. Our research enhances the understanding of the properties of managerial voluntary, nonfinancial disclosures and contributes a text-based measure of innovation that captures managerial assessment of the extent of product innovation. This new measure is more generalizable and incrementally informative for firm value and future performance than conventional innovation measures that depend on the existence of patents or research and development expenses.

Abstract

Many of America’s top corporate donors share a common feature: the bulk of their giving is in the form of in-kind products, not cash. This phenomenon is not a coincidence but rather closely tied to the tax code creating such a preference due to an enhanced deduction for inventory donations. We examine a model of inventory choice under uncertainty and demonstrate that enhanced tax deductions not only promote giving, they also notably influence inventory planning and accelerate learning of customer demand. The results confirm that enhanced deductions can be used to promote pro-social behaviors such as boosting charitable giving, aligning inventories with consumer needs, and alleviating supply chain shortages. The results also demonstrate the potential risks of excessive tax preferences for inventory donations, including inflated retail prices and additional environmental waste.