Journal of Accounting Research最新文献

This study examines whether mandatory increase in reporting frequency exacerbates agency problems. Utilizing the setting of the 2004 SEC mandate on increased reporting frequency of mutual fund holdings, we show that increased reporting frequency elevates window dressing (buying winners or selling losers shortly before the end of the reporting period). This effect is driven by low-skill fund managers’ incentives to generate mixed signals. Funds managed by low-skill managers experience lower returns, more outflows, and a higher collapse rate when their window dressing is elevated after the 2004 rule change. These results suggest that, although higher reporting frequency on agents’ actions can exacerbate signal manipulations, the related manipulation costs improve sorting among agents in the longer term.

We exploitthe introduction of the Payment Practices Disclosure Regulation in the United Kingdom (UK) to examine the effects of mandating disclosure of customer-supplier payment practices. We find that nondisclosing small and medium-sized enterprises (SMEs) experience a reduction in their accounts receivable by 8.3%, consistent with an acceleration of their trade credit collections. Further, SMEs exhibit fewer financial constraints after the regulation. We survey managers from large firms and SMEs to understand the underlying mechanisms. The required disclosures raise large firms’ reputational concerns and shift the bargaining power between large firms and SMEs. Additionally, the new disclosures compel executives at large firms to scrutinize their own firms’ payment practices, leading to increased accountability and a stronger focus on timely payment among senior managers.

We document significant increases in bond market liquidity around earnings announcements. These increases are attributed to decreased search and bargaining costs, which arise from the over-the-counter (OTC) nature of bond markets and outweigh increases in information asymmetry during these periods. Our evidence traces reductions in search and bargaining costs to two sources around earnings announcements: (1) improved access to dealers and (2) increased participation from institutional investors, who can more easily transact with multiple dealers. Overall, our findings highlight a novel channel through which firm-specific information affects asset prices.

Using misstatement data, we find that the distribution of detected fraud features a heavy tail. We propose a theoretical mechanism that explains such a relatively high frequency of extreme frauds. In our dynamic model, a manager manipulates earnings for personal gain. A monitor of uncertain quality can detect fraud and punish the manager. As the monitor fails to detect fraud, the manager's posterior belief about the monitor's effectiveness decreases. Over time, the manager's learning leads to a slippery slope, in which the size of frauds grows steeply, and to a power law for detected fraud. Empirical analyses corroborate the slippery slope and the learning channel. As a policy implication, we establish that a higher detection intensity can increase fraud by enabling the manager to identify an ineffective monitor more quickly. Further, nondetection of frauds below a materiality threshold, paired with a sufficiently steep punishment scheme, can prevent large frauds.

We examine the staggered adoption of additional educational requirements (“150-hour rule”) for Certified Public Accountants (“CPAs”) to understand the effects of occupational licensing on minority participation in professional labor markets. The 150-hour rule increased the educational requirement for CPAs from 120 to 150 credit hours, effectively adding a fifth year of study. We find a 13% greater entry decline following the requirement's enactment for minority than nonminority CPA candidates. Our analyses of parental income and financial aid availability point to a socioeconomic status channel explaining the differential entry declines. Studying exam passing patterns, professional misconduct, and job postings we find a deterioration, or at best, no change in CPA quality following enactment.

We exploit the staggered state-level adoption of the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) to examine how banking deregulation and the resulting increase in bank competition affect firms’ auditor choices. We find that an exogenous increase in the degree of interstate branch banking deregulation leads to a reduction in firms’ propensity to engage a Big N or industry expert auditor. This main result, when combined with our cross-sectional analyses, offers evidence suggesting that deregulation leads to less demand for higher quality auditors because (1) firms have increased access to credit, which reduces the benefits of higher audit quality; (2) entering banks’ lending expertise substitutes for higher quality financial statements; (3) incumbent banks with less lending expertise seek to protect their rents by preferring that borrowers provide lower quality financial statement information; and (4) external stakeholders delegate their monitoring to banks to a greater degree, resulting in less demand for higher quality financial statements. As such, our study sheds light on how the U.S. credit market's infrastructure shapes firms’ auditor choice decisions.