Journal of Accounting & Economics最新文献

Little is known about how the SEC selects its targets for investigation. We study this subject using a new database of formal SEC investigations. We predict and find that case selection is associated with a firm's (i) likelihood of regulatory noncompliance, (ii) exposure to private sector scrutiny, and (iii) conspicuous public trigger events. The relationship between investigations and regulatory noncompliance and private sector scrutiny preferences is sensitive to SEC constraints, whereas the relationship with triggers is not. We also examine the association between investigation motives and enforcement actions, an important SEC outcome reported to Congress. While regulatory noncompliance-motivated and public trigger-motivated investigations are more likely to result in public charges, specifically when the SEC is constrained, private sector scrutiny-motivated investigations are less likely to result in public charges. Finally, investigation rates of potential targets are associated with the career trajectories of SEC personnel, while investigation outcomes are not.

We examine broad effects of MiFID II, which mandated unbundled pricing of analyst research in the European Union beginning in 2018. We find significant reductions in sell-side analyst following, particularly for firms for which the marginal analyst was less important (larger, older, less volatile firms with greater coverage and more accurate forecasts). High quality analysts (more accurate, experienced, and in positions of seniority) were more likely to leave the sell-side and move to the buy-side, while remaining sell-side analysts increased efforts to make their forecasts more informative (more accurate, more detailed, and more likely to include informative recommendations resulting in larger stock price responses). Firms responded to a loss of sell-side coverage with more frequent, forward-looking, and informative investor relations events, especially for firms that lost the most coverage. Our results support recent theoretical analysis predicting that unbundling had significant implications for sell-side research, buy-side research, and firm responses.

Internal and external parties meaningfully shape corporate tax outcomes. However, we lack a holistic understanding of the major parties involved and their comparative effects. Using proprietary IRS data for public and private firms, we identify the top executives, corporate accountants, external accounting firms, and individual tax preparers and examine the comparative importance of these parties on corporate tax outcomes. We find that external individual tax preparers matter much more than the accounting firms that employ them. Internal actors (top accountants and executives) explain more of the variation in corporate tax outcomes than external actors (individual tax preparers and accounting firms). We also find some evidence that individuals’ characteristics are associated with the tax behavior of the corporations they serve. Overall, we conclude that some of the actors who are unobservable in public data play a greater role in corporate tax outcomes than parties that are a focus of prior research.

We examine how firms respond to requests for enhanced disclosure that we make on an online investor platform. Exploiting variation in firms' customer and supplier disclosures, we ask a randomized set of non-disclosing firms to provide information on their customers' and suppliers' identities. We find that the firms' probability of disclosure depends on the basis we give for the demand—requests appealing to disclosure's usefulness to investors lead to more frequent disclosure, while those appealing to regulators' preference for disclosure lead to less frequent disclosure. The requests we make on the platform lead to more frequent customer- and supplier-related inquiries from other platform users. We also find that the treatment firms' disclosure of customer and supplier information improves in the next period's regulatory filings. The findings suggest that investor platforms can enhance corporate transparency by increasing retail investors' ability to demand information.

Prior literature shows decision fatigue reduces analysts' forecast accuracy. We study whether analysts strategically manage their decision fatigue. Firms within an analyst's research portfolio can differentially affect the analyst's reputation and career, with larger firms with greater trading volumes and institutional ownership being more important. We find that analysts choose to issue forecasts for more important firms when they are less decision fatigued, i.e., when the number of prior forecasts the analyst has issued in the day is lower. Young analysts, analysts in low-status brokerage houses, and analysts who become decision fatigued more easily manage fatigue more, and analysts experience more favorable career outcomes after strategically managing fatigue. Finally, fatigued analysts differentiate between more important and other firms in herding and self-herding.

We provide the first evidence of systematic bias among an emerging type of credit rating agency that relies on subscriptions from institutional clients as its primary source of revenue. Using data from Egan-Jones Ratings Company (EJR), a representative subscriber-paid rating agency, we show that EJR issues more optimistically biased credit ratings, less timely downgrades, and less accurate ratings for firms held by more EJR clients. Our evidence is consistent with EJR optimistically biasing its ratings to bolster subscriber revenue, which allows institutional clients to invest in riskier bonds with higher expected returns. Taken together, our findings suggest that the emergence of subscriber-paid rating agencies as an alternative to more traditional issuer-paid agencies is unlikely to resolve problems arising from conflicts of interest but rather alter the nature of these conflicts in the ratings process.

This paper shows that mandating some firms to disclose more while leaving other firms disclosing voluntarily is less effective in improving and may even harm the overall information environment when firms' disclosures are endogenous. Although the regulated firms' increased disclosure directly reduces all firms' cost of capital, it crowds out the unregulated firms' voluntary disclosure and thus increases all firms’ cost of capital indirectly. Under certain circumstances, the negative indirect effect can outweigh the direct benefit. These results are consistent with the scant evidence on the cost-of-capital effect of mandatory disclosure. The model highlights the importance of the market-wide effects of disclosure regulation and facilitates quantitative cost-benefit analyses for specific regulatory proposals.

While Sani, Shroff and White (2023) examine a plausibly exogenous shock to the information acquisition landscape that arguably changes informed traders’ incentives to generate private information without the focal firm changing its disclosure policy, the causal chain underlying their analyses shares the implicit assumptions employed in the extant empirical literature that tests the Learning Hypothesis. Thus, the focus of our discussion is to make explicit the implicit assumptions and highlight the resulting challenges faced by authors who wish to interpret Investment Sensitivity to Price as evidence of managerial learning. In the end, we suggest future research work to extend our understanding by exploring in greater detail and more directly the What and the How managers learn from outsiders.

We examine whether the potential for costly sabotage is a deterrent to firms' use of relative performance evaluation (“RPE”) in CEO pay plans. We exploit illegal cartel membership as a source of variation in the potential for costly sabotage and document that firms are more likely to use RPE if they are currently cartel members. Moreover, firms frequently drop RPE from their CEOs’ pay plans immediately after their cartels are detected, dissolved and punished. We further provide suggestive evidence that the potential for costly sabotage explains these patterns; cartel membership severs the empirical association between RPE and competitive aggression.