Angelo Aspris, Ester Félez‐Viñas, Sean Foley, Hamish Malloch, Jiri Svec
This paper analyses forward‐looking estimates of the expected market return in Australian. By utilising option prices, we compute a lower bound for the capital gain and dividend components of the expected return. Over a 17‐year period, the average 1‐month expected return lower bound is found to be 8.6% per annum, compared with an average realised return of 10.9% per annum. Our option‐based estimates demonstrate significant predictive power beyond historical averages and enable direct measurement of the expected return term structure. This approach complements traditional measures of expected returns and offers valuable insights for practitioners, academics, and policymakers in Australia.
{"title":"The market risk premium in Australia: Forward‐looking evidence from the options market","authors":"Angelo Aspris, Ester Félez‐Viñas, Sean Foley, Hamish Malloch, Jiri Svec","doi":"10.1111/acfi.13288","DOIUrl":"https://doi.org/10.1111/acfi.13288","url":null,"abstract":"This paper analyses forward‐looking estimates of the expected market return in Australian. By utilising option prices, we compute a lower bound for the capital gain and dividend components of the expected return. Over a 17‐year period, the average 1‐month expected return lower bound is found to be 8.6% per annum, compared with an average realised return of 10.9% per annum. Our option‐based estimates demonstrate significant predictive power beyond historical averages and enable direct measurement of the expected return term structure. This approach complements traditional measures of expected returns and offers valuable insights for practitioners, academics, and policymakers in Australia.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-06-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141510427","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates whether CEO reputation affects firms' conditional accounting conservatism. We use prestigious CEO awards conferred by authoritative business media as an exogenous shock to increase CEOs' reputations. Based on a difference‐in‐differences empirical design, we find that firms with award‐winning CEOs exhibit significantly lower accounting conservatism after the events compared with firms with non‐award‐winning CEOs. We further show that this effect occurs through the channels of market pressure and CEOs' risk‐taking preferences. We also demonstrate that the baseline result is more significant when the CEO has higher discretion in shaping the firm's accounting policies, when external monitoring is weaker, and when internal control has greater deficiencies. Overall, our results suggest that CEO reputation meaningfully impacts corporate accounting policy.
本研究探讨首席执行官的声誉是否会影响公司的条件会计保守主义。我们利用权威商业媒体授予首席执行官的著名奖项作为外生冲击，以提高首席执行官的声誉。基于差异实证设计，我们发现与未获奖 CEO 的公司相比，获奖 CEO 的公司在获奖事件后表现出显著较低的会计保守主义。我们进一步证明，这种影响是通过市场压力和首席执行官的风险偏好渠道产生的。我们还证明，当首席执行官在制定公司会计政策方面拥有较大的自由裁量权、外部监督较弱以及内部控制存在较大缺陷时，基线结果更为显著。总之，我们的研究结果表明，首席执行官的声誉会对企业会计政策产生有意义的影响。
{"title":"The burden of reputation: Star CEOs and conditional accounting conservatism","authors":"Yuting Qian, Wenhong Ding, Xiaofeng Quan, Wei Guan","doi":"10.1111/acfi.13281","DOIUrl":"https://doi.org/10.1111/acfi.13281","url":null,"abstract":"This study investigates whether CEO reputation affects firms' conditional accounting conservatism. We use prestigious CEO awards conferred by authoritative business media as an exogenous shock to increase CEOs' reputations. Based on a difference‐in‐differences empirical design, we find that firms with award‐winning CEOs exhibit significantly lower accounting conservatism after the events compared with firms with non‐award‐winning CEOs. We further show that this effect occurs through the channels of market pressure and CEOs' risk‐taking preferences. We also demonstrate that the baseline result is more significant when the CEO has higher discretion in shaping the firm's accounting policies, when external monitoring is weaker, and when internal control has greater deficiencies. Overall, our results suggest that CEO reputation meaningfully impacts corporate accounting policy.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141193936","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the impact of the announcements by firms to adopt blockchain technology on stock prices and the different characteristics of stock prices under different types of blockchain technologies. Simultaneously, we propose two impact mechanisms: one is investor sentiment, and the other is the firm's governance of social media. We find that the firm's stock price has shown an increasing trend since the release of the announcement of the adoption of blockchain technology. At the same time, firms engaged in blockchain research, development and investment, and that simultaneously deploy other financial technologies, as well as firms that deploy blockchain technology for non‐speculative purposes, have better stock prices. In addition, the layout of a firm's blockchain may affect its stock price by influencing investor sentiment and public opinion.
{"title":"Blockchain technology, social media sentiment and stock price","authors":"Li Wenyi, Ni Jun, Rong Mengjie","doi":"10.1111/acfi.13273","DOIUrl":"https://doi.org/10.1111/acfi.13273","url":null,"abstract":"We investigate the impact of the announcements by firms to adopt blockchain technology on stock prices and the different characteristics of stock prices under different types of blockchain technologies. Simultaneously, we propose two impact mechanisms: one is investor sentiment, and the other is the firm's governance of social media. We find that the firm's stock price has shown an increasing trend since the release of the announcement of the adoption of blockchain technology. At the same time, firms engaged in blockchain research, development and investment, and that simultaneously deploy other financial technologies, as well as firms that deploy blockchain technology for non‐speculative purposes, have better stock prices. In addition, the layout of a firm's blockchain may affect its stock price by influencing investor sentiment and public opinion.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141062751","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the advantages of aggregate measures of analyst characteristics to researchers and investors interested in explaining differences in analysts' forecasting performance. We show while single‐characteristic and factor‐based measures reflecting attributes such as forecasting experience, access to resources and portfolio complexity vary significantly in the extent to which each explains analyst forecasting performance, equal‐weighted composite measures based on single characteristics or on factors extracted from those characteristics are consistently associated with forecasting bias arising from a range of indicators of reduced earnings quality. These aggregate measures of analyst characteristics require no additional data beyond traditional archival sources and offer a useful method of testing the impact of analyst characteristics on their forecasting performance.
{"title":"Aggregate analyst characteristics and forecasting performance","authors":"Mark Wilson, Yi (Ava) Wu","doi":"10.1111/acfi.13262","DOIUrl":"https://doi.org/10.1111/acfi.13262","url":null,"abstract":"This paper examines the advantages of aggregate measures of analyst characteristics to researchers and investors interested in explaining differences in analysts' forecasting performance. We show while single‐characteristic and factor‐based measures reflecting attributes such as forecasting experience, access to resources and portfolio complexity vary significantly in the extent to which each explains analyst forecasting performance, equal‐weighted composite measures based on single characteristics or on factors extracted from those characteristics are consistently associated with forecasting bias arising from a range of indicators of reduced earnings quality. These aggregate measures of analyst characteristics require no additional data beyond traditional archival sources and offer a useful method of testing the impact of analyst characteristics on their forecasting performance.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-05-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140936809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates the valuation of fair values in extreme market conditions. Using a modified Ohlson model and a large US sample, this study finds that the valuation of fair values in extreme market conditions is consistent with the presence of a positive feedback loop bias. This bias manifests as irrational exuberance in overheated markets and undue panic in depressed markets. The results are robust under several different test designs. Additional tests of moderating factors show that good performance and low risk intensify irrational exuberance in overhead markets, and poor performance and high risk worsen undue panic in depressed markets.
{"title":"Fair values in extreme markets","authors":"Xiaofei Song","doi":"10.1111/acfi.13261","DOIUrl":"https://doi.org/10.1111/acfi.13261","url":null,"abstract":"This study investigates the valuation of fair values in extreme market conditions. Using a modified Ohlson model and a large US sample, this study finds that the valuation of fair values in extreme market conditions is consistent with the presence of a positive feedback loop bias. This bias manifests as irrational exuberance in overheated markets and undue panic in depressed markets. The results are robust under several different test designs. Additional tests of moderating factors show that good performance and low risk intensify irrational exuberance in overhead markets, and poor performance and high risk worsen undue panic in depressed markets.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140840361","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Traditional private equity firms aim to maximise their financial returns when exiting an investment. In contrast, a major consideration for impact private equity firms is to ensure an impactful exit from their investments – increasing the chance of impact continuity in portfolio companies post exit. However, impactful exits may not be realised due to ownership‐, management‐, and operations‐related threats. Drawing on data from 45 impact private equity firms, we identify the control strategies that impact investors use throughout the investment lifecycle to manage impactful exits from investment. We also highlight how control‐related issues differ between traditional and impact private equity firms.
{"title":"Control strategies for impactful exits in impact private equity firms","authors":"Syrus M. Islam, Chris Akroyd","doi":"10.1111/acfi.13258","DOIUrl":"https://doi.org/10.1111/acfi.13258","url":null,"abstract":"Traditional private equity firms aim to maximise their financial returns when exiting an investment. In contrast, a major consideration for impact private equity firms is to ensure an impactful exit from their investments – increasing the chance of impact continuity in portfolio companies post exit. However, impactful exits may not be realised due to ownership‐, management‐, and operations‐related threats. Drawing on data from 45 impact private equity firms, we identify the control strategies that impact investors use throughout the investment lifecycle to manage impactful exits from investment. We also highlight how control‐related issues differ between traditional and impact private equity firms.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140840341","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines the relationship between fund flows and subsequent performance, testing the smart money and price pressure hypotheses within the context of passive and active exchange‐traded funds (ETFs). By differentiating between managerial skill and non‐fundamental demand shocks, we uncover a significant positive flow‐performance relationship, challenging traditional attributions solely to investor skill in identifying superior fund management. We further develop a measure of flow shocks to individual stocks by aggregating daily changes in ETF ownership of 5600 stocks. An event study on ETF constituents further disentangles the effects of price pressure from smart money. Through robust analyses, including Fama–French industry portfolios and propensity score matching, our findings suggest a nuanced interaction between investor behaviour and market dynamics, contributing to the discourse on fund flows' impact on performance. This research highlights the complexity of the flow‐performance relationship and its implications for fund management and investment strategies, offering new insights into the mechanisms driving fund performance in the ETF landscape.
{"title":"The flow‐performance puzzle: Insights from passive and active ETFs","authors":"Hamed Yousefi, Mohammad Najand, Licheng Sun","doi":"10.1111/acfi.13265","DOIUrl":"https://doi.org/10.1111/acfi.13265","url":null,"abstract":"This study examines the relationship between fund flows and subsequent performance, testing the smart money and price pressure hypotheses within the context of passive and active exchange‐traded funds (ETFs). By differentiating between managerial skill and non‐fundamental demand shocks, we uncover a significant positive flow‐performance relationship, challenging traditional attributions solely to investor skill in identifying superior fund management. We further develop a measure of flow shocks to individual stocks by aggregating daily changes in ETF ownership of 5600 stocks. An event study on ETF constituents further disentangles the effects of price pressure from smart money. Through robust analyses, including Fama–French industry portfolios and propensity score matching, our findings suggest a nuanced interaction between investor behaviour and market dynamics, contributing to the discourse on fund flows' impact on performance. This research highlights the complexity of the flow‐performance relationship and its implications for fund management and investment strategies, offering new insights into the mechanisms driving fund performance in the ETF landscape.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140840347","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study investigates how innovation affects cost stickiness. Utilising data on patents of US firms between 1991 and 2022, we find that the extent of cost stickiness is greater with a greater number of forward citations for patents. We also find that the main relationship is more pronounced in high‐tech industries, high labour cost intensity, and market competition. In addition, we find that firms with a higher number of patents and forward citation experience a subsequent increase in sales. Overall, this makes a valuable addition to the extant literature, proposing that patents serve as an alternative driver of cost stickiness.
{"title":"Does innovation matter for asymmetric cost behaviour? Evidence from forward citations to the patents","authors":"Seul Gi Oh, Kyeongheum Ra","doi":"10.1111/acfi.13267","DOIUrl":"https://doi.org/10.1111/acfi.13267","url":null,"abstract":"This study investigates how innovation affects cost stickiness. Utilising data on patents of US firms between 1991 and 2022, we find that the extent of cost stickiness is greater with a greater number of forward citations for patents. We also find that the main relationship is more pronounced in high‐tech industries, high labour cost intensity, and market competition. In addition, we find that firms with a higher number of patents and forward citation experience a subsequent increase in sales. Overall, this makes a valuable addition to the extant literature, proposing that patents serve as an alternative driver of cost stickiness.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140840117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Tiffany Chiu, Victoria Chiu, Aiguo Wang, Tawei Wang, Yunsen Wang
This study examines whether management responds to adverse events and how the press releases after adverse events are associated with analyst recommendation. Using Securities Exchange Act of 1934 Section 10b lawsuits – manipulative and deceptive practices in securities trading – as the proxy for adverse events, we show that companies do not always address the events. However, by issuing a press release within 2 days after the event, the negative effect of the lawsuit on analyst recommendation is smaller. This study advances our understanding in responding to adverse events and provides practical implications for managers.
{"title":"Respond or not? Analyst recommendation and companies' press releases after adverse events","authors":"Tiffany Chiu, Victoria Chiu, Aiguo Wang, Tawei Wang, Yunsen Wang","doi":"10.1111/acfi.13260","DOIUrl":"https://doi.org/10.1111/acfi.13260","url":null,"abstract":"This study examines whether management responds to adverse events and how the press releases after adverse events are associated with analyst recommendation. Using Securities Exchange Act of 1934 Section 10b lawsuits – manipulative and deceptive practices in securities trading – as the proxy for adverse events, we show that companies do not always address the events. However, by issuing a press release within 2 days after the event, the negative effect of the lawsuit on analyst recommendation is smaller. This study advances our understanding in responding to adverse events and provides practical implications for managers.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-04-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140840346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Eli Bartov, Wilson Wai Ho Chan, Hua Cheng, Gang Hu, Jingran Zhao
A line of research documents that corporate executives' compensation convexity relates to earnings management, the issuance of management earnings forecasts and firms' investing and financing decisions. Another stream of research demonstrates that executives manage earnings expectations downward to beatable levels. We bridge these lines of research by investigating how CEO compensation convexity affects expectation management, an important earnings reporting strategy. We hypothesise and find that compensation convexity plays an important role in inducing CEOs to adopt a meet‐or‐just‐beat earnings reporting strategy, which is implemented by downward expectation management.
{"title":"CEO compensation convexity and meeting‐or‐just‐beat earnings forecast","authors":"Eli Bartov, Wilson Wai Ho Chan, Hua Cheng, Gang Hu, Jingran Zhao","doi":"10.1111/acfi.13253","DOIUrl":"https://doi.org/10.1111/acfi.13253","url":null,"abstract":"A line of research documents that corporate executives' compensation convexity relates to earnings management, the issuance of management earnings forecasts and firms' investing and financing decisions. Another stream of research demonstrates that executives manage earnings expectations downward to beatable levels. We bridge these lines of research by investigating how CEO compensation convexity affects expectation management, an important earnings reporting strategy. We hypothesise and find that compensation convexity plays an important role in inducing CEOs to adopt a meet‐or‐just‐beat earnings reporting strategy, which is implemented by downward expectation management.","PeriodicalId":501109,"journal":{"name":"Accounting & Finance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2024-04-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140571364","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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