Pub Date : 2023-07-24DOI: 10.1007/s11142-023-09778-5
Stefan F. Schantl, Alfred Wagenhofer
Empirical studies on the relationship between shareholder litigation and corporate disclosure obtain mixed results. We develop an economic model to capture the endogeneity between disclosure and litigation. Equilibrium disclosure is determined by two countervailing effects of litigation, a deterrence effect and an insurance effect. We derive four key results. (i) Decreasing litigation risk leads to less disclosure of very bad news, due to a weakening of the deterrence effect, but to more disclosure of weakly bad news, due to a weakening of the insurance effect. (ii) Given a sufficiently large information asymmetry, litigation risk dampens (boosts) overall disclosure of bad news for low (high) litigation risk firms. (iii) Capital markets respond more to the disclosure of bad news than of good news if the deterrence effect is strong, which arises if both insiders’ penalties and litigation risk are high. (iv) In an extension, we highlight real effects of litigation on corporate innovation and establish that innovation first decreases and then increases (strictly decreases) with litigation risk if insiders’ penalties are small (large). We reconcile our findings with results from a large set of U.S.-based empirical studies and make several novel predictions.
{"title":"Economic effects of litigation risk on corporate disclosure and innovation","authors":"Stefan F. Schantl, Alfred Wagenhofer","doi":"10.1007/s11142-023-09778-5","DOIUrl":"https://doi.org/10.1007/s11142-023-09778-5","url":null,"abstract":"<p>Empirical studies on the relationship between shareholder litigation and corporate disclosure obtain mixed results. We develop an economic model to capture the endogeneity between disclosure and litigation. Equilibrium disclosure is determined by two countervailing effects of litigation, a deterrence effect and an insurance effect. We derive four key results. (i) Decreasing litigation risk leads to less disclosure of very bad news, due to a weakening of the deterrence effect, but to more disclosure of weakly bad news, due to a weakening of the insurance effect. (ii) Given a sufficiently large information asymmetry, litigation risk dampens (boosts) overall disclosure of bad news for low (high) litigation risk firms. (iii) Capital markets respond more to the disclosure of bad news than of good news if the deterrence effect is strong, which arises if both insiders’ penalties and litigation risk are high. (iv) In an extension, we highlight real effects of litigation on corporate innovation and establish that innovation first decreases and then increases (strictly decreases) with litigation risk if insiders’ penalties are small (large). We reconcile our findings with results from a large set of U.S.-based empirical studies and make several novel predictions.</p>","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"28 13","pages":""},"PeriodicalIF":4.2,"publicationDate":"2023-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138527015","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-18DOI: 10.1007/s11142-023-09793-6
J. Gong, S. Young, Aner Zhou
{"title":"Real earnings management and the strategic release of new products: evidence from the motion picture industry","authors":"J. Gong, S. Young, Aner Zhou","doi":"10.1007/s11142-023-09793-6","DOIUrl":"https://doi.org/10.1007/s11142-023-09793-6","url":null,"abstract":"","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"28 1","pages":"1209 - 1249"},"PeriodicalIF":4.2,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44322510","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-17DOI: 10.1007/s11142-023-09800-w
Erik Johannesson, James A. Ohlson, Sophia Weihuan Zhai
{"title":"Correction: The explanatory power of explanatory variables","authors":"Erik Johannesson, James A. Ohlson, Sophia Weihuan Zhai","doi":"10.1007/s11142-023-09800-w","DOIUrl":"https://doi.org/10.1007/s11142-023-09800-w","url":null,"abstract":"","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":" ","pages":""},"PeriodicalIF":4.2,"publicationDate":"2023-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46073658","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-15DOI: 10.1007/s11142-023-09785-6
N. Fargher, Lijuan Zhang
{"title":"Investor protection, aggregate changes in profit margins and forecasts of growth in GDP: international evidence","authors":"N. Fargher, Lijuan Zhang","doi":"10.1007/s11142-023-09785-6","DOIUrl":"https://doi.org/10.1007/s11142-023-09785-6","url":null,"abstract":"","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":" ","pages":""},"PeriodicalIF":4.2,"publicationDate":"2023-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48091871","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-12DOI: 10.1007/s11142-023-09767-8
Ian D. Gow, Sa-Pyung Sean Shin, Suraj Srinivasan
This paper examines determinants and consequences of hedge fund activism, focusing on activist directors, i.e., directors appointed in response to activist demands. Using a sample of 3,259 activism events from 2004 to 2016, we identify 1,623 activist directors. Compared to other newly appointed directors, these activist directors tend to be younger, more likely to have finance and accounting skills, and less likely to be female. We find that the likelihood of acquiring board representation is associated with weaker market performance or lower payout ratios. Following the appointment of an activist director, we find evidence of increased divestiture, decreased acquisition activity, higher CEO turnover, increased leverage, higher payouts, and reduced investment. Our analysis of data on activists’ stated demands also shows that activist directors are effective in helping activists achieve their goals, consistent with the notion that board representation is an important mechanism for activists to bring about desired changes. Finally, we find positive abnormal returns of 1% when an activist director is appointed and a 3.2%-point increase in return on assets over the subsequent five years with an activist-affiliated director.
{"title":"Activist directors: determinants and consequences","authors":"Ian D. Gow, Sa-Pyung Sean Shin, Suraj Srinivasan","doi":"10.1007/s11142-023-09767-8","DOIUrl":"https://doi.org/10.1007/s11142-023-09767-8","url":null,"abstract":"<p>This paper examines determinants and consequences of hedge fund activism, focusing on activist directors, i.e., directors appointed in response to activist demands. Using a sample of 3,259 activism events from 2004 to 2016, we identify 1,623 activist directors. Compared to other newly appointed directors, these activist directors tend to be younger, more likely to have finance and accounting skills, and less likely to be female. We find that the likelihood of acquiring board representation is associated with weaker market performance or lower payout ratios. Following the appointment of an activist director, we find evidence of increased divestiture, decreased acquisition activity, higher CEO turnover, increased leverage, higher payouts, and reduced investment. Our analysis of data on activists’ stated demands also shows that activist directors are effective in helping activists achieve their goals, consistent with the notion that board representation is an important mechanism for activists to bring about desired changes. Finally, we find positive abnormal returns of 1% when an activist director is appointed and a 3.2%-point increase in return on assets over the subsequent five years with an activist-affiliated director.</p>","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"76 3","pages":""},"PeriodicalIF":4.2,"publicationDate":"2023-07-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138527025","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-01DOI: 10.1007/s11142-023-09781-w
Erik Johannesson, James A. Ohlson, Sophia Weihuan Zhai
Abstract This paper examines the current empirical accounting research paradigm. We ask: In general, do the estimated regressions support the promoted narratives? We focus on a regression model’s main variable of interest and consider the extent to which it contributes to the explanation of the dependent variable. We replicate 10 recently published accounting studies, all of which rely on significant t-statistics, per conventional levels, to claim rejection of the null hypothesis. Our examination shows that in eight studies, the incremental explanatory power contributed by the main variable of interest is effectively zero. For the remaining two, the incremental contribution is at best marginal. These findings highlight the apparent overreliance on t-statistics as the primary evaluation metric. A closer examination of the data shows that the t-statistics produced reject the null hypothesis primarily due to a large number of observations (N). Empirical accounting studies often require N > 10,000 to reject the null hypothesis. To avoid the drawback of t-statistics’ connection with N, we consider the implications of using Standardized Regressions (SR). The magnitude of SR coefficients indicates variables’ relevance directly. Empirical analyses establish a strong correlation between a variable’s estimated SR coefficient magnitude and its incremental explanatory power, without reference to N or t-statistics.
{"title":"The explanatory power of explanatory variables","authors":"Erik Johannesson, James A. Ohlson, Sophia Weihuan Zhai","doi":"10.1007/s11142-023-09781-w","DOIUrl":"https://doi.org/10.1007/s11142-023-09781-w","url":null,"abstract":"Abstract This paper examines the current empirical accounting research paradigm. We ask: In general, do the estimated regressions support the promoted narratives? We focus on a regression model’s main variable of interest and consider the extent to which it contributes to the explanation of the dependent variable. We replicate 10 recently published accounting studies, all of which rely on significant t-statistics, per conventional levels, to claim rejection of the null hypothesis. Our examination shows that in eight studies, the incremental explanatory power contributed by the main variable of interest is effectively zero. For the remaining two, the incremental contribution is at best marginal. These findings highlight the apparent overreliance on t-statistics as the primary evaluation metric. A closer examination of the data shows that the t-statistics produced reject the null hypothesis primarily due to a large number of observations (N). Empirical accounting studies often require N > 10,000 to reject the null hypothesis. To avoid the drawback of t-statistics’ connection with N, we consider the implications of using Standardized Regressions (SR). The magnitude of SR coefficients indicates variables’ relevance directly. Empirical analyses establish a strong correlation between a variable’s estimated SR coefficient magnitude and its incremental explanatory power, without reference to N or t-statistics.","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136184902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-30DOI: 10.1007/s11142-023-09775-8
Ofir Gefen, David Reeb, Johan Sulaeman
Abstract We conduct a randomized field experiment (RFE) to assess whether startup firms perceive accounting expertise as an important investor credential. We send 13,358 unsolicited and unique emails to active startup firms across the US, showing an interest in them with a proposition to meet a bogus investor. The experiment has high response rates, with 4,535 (33.94%) opened emails and 828 (6.19%) website visits, reflecting investors’ proliferating practice of outbound origination to contact new startups. Our RFE compares startup reactions to fictitious investors with certified public accountant (CPA) designations versus two control groups: investors without credentials and those with other professional licenses. Startup firms are 48% likelier to read unsolicited emails from CPA-bearing investors and 47% likelier to visit their websites, relative to investors with a medical license. We document an analogous preference for CPA-bearing investors even when we separately analyze startups in medical-related industries. This gap persists when investors pose as angels, venture capitalists (VCs), or without professional licenses. The relatively low percentage (2.5%) of email bounces and spam reports makes it unlikely that spam algorithms drive the findings. Further tests reveal that the response rates differ by firm age, which is inconsistent with spam filter explanations but congruent with startup firms’ demand for accounting expertise. Finally, we undertake a follow-up experiment with 3,443 new startups to distinguish between accounting and general business expertise using a master’s in business administration (MBA). Startups are 13.8% likelier to read emails from a CPA-bearing investor than from an MBA-credentialed investor and 22.6% more likely to visit the CPA-bearing investor’s website.
{"title":"Startups’ demand for accounting expertise: evidence from a randomized field experiment","authors":"Ofir Gefen, David Reeb, Johan Sulaeman","doi":"10.1007/s11142-023-09775-8","DOIUrl":"https://doi.org/10.1007/s11142-023-09775-8","url":null,"abstract":"Abstract We conduct a randomized field experiment (RFE) to assess whether startup firms perceive accounting expertise as an important investor credential. We send 13,358 unsolicited and unique emails to active startup firms across the US, showing an interest in them with a proposition to meet a bogus investor. The experiment has high response rates, with 4,535 (33.94%) opened emails and 828 (6.19%) website visits, reflecting investors’ proliferating practice of outbound origination to contact new startups. Our RFE compares startup reactions to fictitious investors with certified public accountant (CPA) designations versus two control groups: investors without credentials and those with other professional licenses. Startup firms are 48% likelier to read unsolicited emails from CPA-bearing investors and 47% likelier to visit their websites, relative to investors with a medical license. We document an analogous preference for CPA-bearing investors even when we separately analyze startups in medical-related industries. This gap persists when investors pose as angels, venture capitalists (VCs), or without professional licenses. The relatively low percentage (2.5%) of email bounces and spam reports makes it unlikely that spam algorithms drive the findings. Further tests reveal that the response rates differ by firm age, which is inconsistent with spam filter explanations but congruent with startup firms’ demand for accounting expertise. Finally, we undertake a follow-up experiment with 3,443 new startups to distinguish between accounting and general business expertise using a master’s in business administration (MBA). Startups are 13.8% likelier to read emails from a CPA-bearing investor than from an MBA-credentialed investor and 22.6% more likely to visit the CPA-bearing investor’s website.","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"176 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136065218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-23DOI: 10.1007/s11142-023-09784-7
W. Brooke Elliott, Jessen L. Hobson, Ben W. Van Landuyt, Brian J. White
{"title":"Asymmetric motivated reasoning in investor judgment","authors":"W. Brooke Elliott, Jessen L. Hobson, Ben W. Van Landuyt, Brian J. White","doi":"10.1007/s11142-023-09784-7","DOIUrl":"https://doi.org/10.1007/s11142-023-09784-7","url":null,"abstract":"","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"124 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135904721","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-21DOI: 10.1007/s11142-023-09768-7
Matthew Shaffer
Abstract This paper provides an overview of valuation multiples in mergers and acquisitions advisory. I review the literature and legal controversies and the theoretical basis for their role. I then standardize all the advisor multiples available in SDC Platinum along four dimensions and report rich descriptive statistics on each dimension over time and across industries. I highlight eight findings that are notable in light of current knowledge and debates. This paper answers the call from Gow et al. (Journal of Accounting Research 54(2):477–523, 2016) for thorough descriptive research, to provide a foundation and prompts for future hypothesis development. It includes an explicit guide for using this data, an overview of the key institutional details, and a discussion of tractable and open research questions.
摘要本文对并购咨询中的估值倍数进行了概述。我回顾了文献和法律争议及其作用的理论基础。然后，我将SDC Platinum中可用的所有顾问倍数沿着四个维度进行标准化，并报告每个维度随时间和跨行业的丰富描述性统计数据。根据目前的知识和辩论，我强调了八个值得注意的发现。本文响应Gow等人(Journal of Accounting Research 54(2): 477-523, 2016)的呼吁，进行深入的描述性研究，为未来的假设发展提供基础和提示。它包括使用这些数据的明确指南，对关键机构细节的概述，以及对可处理和开放的研究问题的讨论。
{"title":"Which multiples matter in M &A? An overview","authors":"Matthew Shaffer","doi":"10.1007/s11142-023-09768-7","DOIUrl":"https://doi.org/10.1007/s11142-023-09768-7","url":null,"abstract":"Abstract This paper provides an overview of valuation multiples in mergers and acquisitions advisory. I review the literature and legal controversies and the theoretical basis for their role. I then standardize all the advisor multiples available in SDC Platinum along four dimensions and report rich descriptive statistics on each dimension over time and across industries. I highlight eight findings that are notable in light of current knowledge and debates. This paper answers the call from Gow et al. (Journal of Accounting Research 54(2):477–523, 2016) for thorough descriptive research, to provide a foundation and prompts for future hypothesis development. It includes an explicit guide for using this data, an overview of the key institutional details, and a discussion of tractable and open research questions.","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"59 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136296005","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-21DOI: 10.1007/s11142-023-09780-x
Matthew Cedergren, Valerie Li
Abstract We find irregular patterns in the distribution of firms’ reported quarterly gross margin percentages. Specifically, there is significant bunching around percentage integers that are highly round (e.g., multiples of 10, such as 30%, 40%, etc.) or are neatly divisible (e.g., 25%, 75%), compared to what is predicted by counterfactual distributions. Further investigation reveals that highly round gross margin firms are smaller, exert higher effort, achieve higher productivity, have more difficult goals, and pay their CEOs with a higher portion of fixed income. We also find that highly round gross margins are associated with superior performance. Additionally, we do not find consistent evidence that highly round gross margin reference points are linked to external rewards. Collectively, our evidence is consistent with reference-dependent preferences for highly round gross margins likely being driven by intrinsic (rather than extrinsic) motivations.
{"title":"Round number reference points and irregular patterns in reported gross margins","authors":"Matthew Cedergren, Valerie Li","doi":"10.1007/s11142-023-09780-x","DOIUrl":"https://doi.org/10.1007/s11142-023-09780-x","url":null,"abstract":"Abstract We find irregular patterns in the distribution of firms’ reported quarterly gross margin percentages. Specifically, there is significant bunching around percentage integers that are highly round (e.g., multiples of 10, such as 30%, 40%, etc.) or are neatly divisible (e.g., 25%, 75%), compared to what is predicted by counterfactual distributions. Further investigation reveals that highly round gross margin firms are smaller, exert higher effort, achieve higher productivity, have more difficult goals, and pay their CEOs with a higher portion of fixed income. We also find that highly round gross margins are associated with superior performance. Additionally, we do not find consistent evidence that highly round gross margin reference points are linked to external rewards. Collectively, our evidence is consistent with reference-dependent preferences for highly round gross margins likely being driven by intrinsic (rather than extrinsic) motivations.","PeriodicalId":48120,"journal":{"name":"Review of Accounting Studies","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136355829","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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