Pub Date : 2023-03-01DOI: 10.2308/0888-7993-37.1.i
{"title":"Covers and Front Matter","authors":"","doi":"10.2308/0888-7993-37.1.i","DOIUrl":"https://doi.org/10.2308/0888-7993-37.1.i","url":null,"abstract":"","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":"241 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135185296","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-03-01DOI: 10.2308/horizons-2021-154
Fuzhao Zhou, Yinjie Shen, Terence Pitre
Extant literature demonstrates that whistleblowing is associated with changes in the whistleblowing target’s financial reporting. This paper provides compelling evidence that whistleblowing also affects peer firms’ financial reporting. Specifically, we find that industry peers reduce their financial reporting aggressiveness following a whistleblowing allegation. This peer deterrent effect is stronger when the peer firm is geographically closer to the whistleblowing target, when the peer and whistleblowing target share a board member, when the peer is predicted to have a high probability of misstatement, and when the whistleblowing target is larger. Our findings are robust to an array of estimation methods, industry peer definitions, examining windows, and a placebo test. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D22; G30; M41.
{"title":"The Peer Deterrent Effect of Whistleblowing on Financial Reporting Aggressiveness","authors":"Fuzhao Zhou, Yinjie Shen, Terence Pitre","doi":"10.2308/horizons-2021-154","DOIUrl":"https://doi.org/10.2308/horizons-2021-154","url":null,"abstract":"Extant literature demonstrates that whistleblowing is associated with changes in the whistleblowing target’s financial reporting. This paper provides compelling evidence that whistleblowing also affects peer firms’ financial reporting. Specifically, we find that industry peers reduce their financial reporting aggressiveness following a whistleblowing allegation. This peer deterrent effect is stronger when the peer firm is geographically closer to the whistleblowing target, when the peer and whistleblowing target share a board member, when the peer is predicted to have a high probability of misstatement, and when the whistleblowing target is larger. Our findings are robust to an array of estimation methods, industry peer definitions, examining windows, and a placebo test. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D22; G30; M41.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2023-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47825403","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-11-11DOI: 10.2308/horizons-2021-026
Qunfeng Liao, Bo Ouyang, Yi Tang
This study examines the impact of the ethnic diversity of executives on real earnings management (REM) using 21,217 firm-year observations for 2,209 U.S. public firms between 1993 and 2020. Social identity theory and top management team research suggest executive diversity enhances mutual monitoring and subordinate executives’ independence from the CEO, thus incentivizing subordinate executives to curb CEO’s opportunistic financial reporting. The empirical results indicate a negative relation between executive ethnic diversity and REM. This result holds after controlling for various characteristics of executives and firms, as well as for potential endogeneity using instrumental variable regressions and entropy balancing technique. Cross-sectional tests show that the effect is stronger when each executive has a greater influence on the firm’s operating decisions and when the firm has better internal corporate governance. Collectively, our evidence suggests that executive ethnic diversity strengthens the internal governance of U.S. public firms.
{"title":"The Impact of Executive Ethnic Diversity on Real Earnings Management","authors":"Qunfeng Liao, Bo Ouyang, Yi Tang","doi":"10.2308/horizons-2021-026","DOIUrl":"https://doi.org/10.2308/horizons-2021-026","url":null,"abstract":"This study examines the impact of the ethnic diversity of executives on real earnings management (REM) using 21,217 firm-year observations for 2,209 U.S. public firms between 1993 and 2020. Social identity theory and top management team research suggest executive diversity enhances mutual monitoring and subordinate executives’ independence from the CEO, thus incentivizing subordinate executives to curb CEO’s opportunistic financial reporting. The empirical results indicate a negative relation between executive ethnic diversity and REM. This result holds after controlling for various characteristics of executives and firms, as well as for potential endogeneity using instrumental variable regressions and entropy balancing technique. Cross-sectional tests show that the effect is stronger when each executive has a greater influence on the firm’s operating decisions and when the firm has better internal corporate governance. Collectively, our evidence suggests that executive ethnic diversity strengthens the internal governance of U.S. public firms.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43742689","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-12DOI: 10.2308/horizons-2020-197
Stephanie Hairston, Joseph Johnston, Joseph H. Zhang
Auditing financial derivatives is complex and contentious. Our study examines the impact of derivative use on the risk premium charged by auditors of bank holding companies (BHCs). We find that audit fees are higher regardless of whether derivative instruments are used for hedging and trading. This implies that auditors charge BHCs that use derivatives a risk premium to compensate for additional risk related to these instruments. We also find that trading derivatives tend to have a higher risk premium than hedging derivatives. Our results suggest that auditors price risks related to derivatives and trading derivatives are perceived to be higher risk relative to hedging derivatives.
{"title":"Auditing the Derivative Usage of Bank-Holding Companies","authors":"Stephanie Hairston, Joseph Johnston, Joseph H. Zhang","doi":"10.2308/horizons-2020-197","DOIUrl":"https://doi.org/10.2308/horizons-2020-197","url":null,"abstract":"Auditing financial derivatives is complex and contentious. Our study examines the impact of derivative use on the risk premium charged by auditors of bank holding companies (BHCs). We find that audit fees are higher regardless of whether derivative instruments are used for hedging and trading. This implies that auditors charge BHCs that use derivatives a risk premium to compensate for additional risk related to these instruments. We also find that trading derivatives tend to have a higher risk premium than hedging derivatives. Our results suggest that auditors price risks related to derivatives and trading derivatives are perceived to be higher risk relative to hedging derivatives.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-10-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43923642","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-04DOI: 10.2308/horizons-2021-069
G. R. Huston, Yangmei Wang, Tiankai Wang
The Medical Device Excise Tax (MDET) enacted a 2.3 percent tax on domestic sales of certain medical devices. Medical device firms suggested the tax would reduce profitability, leading to cuts in employees, research and development, and capital expenditures. However, we find that medical device firms engaged in more income tax avoidance in response to the MDET. Furthermore, medical device firms with high income tax avoidance made no significant cuts to investment spending or employees, whereas firms with low income tax avoidance significantly decreased investment spending and employees. Our findings suggest that some medical device firms used income tax avoidance as a substitute for reducing investment spending. Our results serve to inform both researchers and policymakers regarding the interplay between non-income taxes and income tax avoidance.
{"title":"How do Firms Respond to a Non-Income Tax? The Interplay between Non-Income Taxes and Income Tax Avoidance","authors":"G. R. Huston, Yangmei Wang, Tiankai Wang","doi":"10.2308/horizons-2021-069","DOIUrl":"https://doi.org/10.2308/horizons-2021-069","url":null,"abstract":"The Medical Device Excise Tax (MDET) enacted a 2.3 percent tax on domestic sales of certain medical devices. Medical device firms suggested the tax would reduce profitability, leading to cuts in employees, research and development, and capital expenditures. However, we find that medical device firms engaged in more income tax avoidance in response to the MDET. Furthermore, medical device firms with high income tax avoidance made no significant cuts to investment spending or employees, whereas firms with low income tax avoidance significantly decreased investment spending and employees. Our findings suggest that some medical device firms used income tax avoidance as a substitute for reducing investment spending. Our results serve to inform both researchers and policymakers regarding the interplay between non-income taxes and income tax avoidance.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-10-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43844518","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-09-19DOI: 10.2308/horizons-2021-097
Michelle A. Draeger, Eric Lohwasser
We examine how internal control effectiveness influences the audit completeness of earnings announcements and the consequences on earnings reliability. One of the intentions of the Sarbanes Oxley Act of 2002 (SOX) was for internal controls to improve financial reporting. While we show that effective internal controls directly reduce earnings announcement revisions as SOX would intend, we also find evidence that it provides management with the confidence to release their earnings disclosure earlier (with a less complete audit), indirectly increasing the likelihood of earnings announcement revisions. As a result, the beneficial impact of internal control effectiveness on earnings reliability is significantly undermined in a regulatory environment where companies are permitted to disclose preliminary earnings to the public. Our study provides important insights for regulatory policymaking and for accounting practitioners who are responsible for producing reliable financial disclosure.
{"title":"The Effects of Internal Controls on the Audit Completeness and Reliability of Earnings Announcements","authors":"Michelle A. Draeger, Eric Lohwasser","doi":"10.2308/horizons-2021-097","DOIUrl":"https://doi.org/10.2308/horizons-2021-097","url":null,"abstract":"We examine how internal control effectiveness influences the audit completeness of earnings announcements and the consequences on earnings reliability. One of the intentions of the Sarbanes Oxley Act of 2002 (SOX) was for internal controls to improve financial reporting. While we show that effective internal controls directly reduce earnings announcement revisions as SOX would intend, we also find evidence that it provides management with the confidence to release their earnings disclosure earlier (with a less complete audit), indirectly increasing the likelihood of earnings announcement revisions. As a result, the beneficial impact of internal control effectiveness on earnings reliability is significantly undermined in a regulatory environment where companies are permitted to disclose preliminary earnings to the public. Our study provides important insights for regulatory policymaking and for accounting practitioners who are responsible for producing reliable financial disclosure.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45420761","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-29DOI: 10.2308/horizons-2020-166
Hilary Hughes, Thomas Joseph Smith, S. Walton
Material contract redactions are designed to protect firms’ temporary proprietary information until contracts can come to fruition. Protecting confidential and proprietary information from potential public disclosure is important for a firm’s future. Redactions provide confidential treatment for up to ten years before the contract information must become public. However, the nondisclosure nature of redacting material contract information could nonetheless signal potential value to external stakeholders and attract cybersecurity breaches. In this study, we investigate whether redactions are associated with a greater likelihood of future breaches. We find that redactions are associated with greater probability of a breach in the three years immediately following a redaction. Further, the relationship appears driven by certain contracts and the actual act of redacting. Our results suggest that the act of redacting material contract information provides a signal about a firm’s disclosure behavior, increasing cybersecurity risks.
{"title":"Material Contract Redactions and Cybersecurity Breaches","authors":"Hilary Hughes, Thomas Joseph Smith, S. Walton","doi":"10.2308/horizons-2020-166","DOIUrl":"https://doi.org/10.2308/horizons-2020-166","url":null,"abstract":"Material contract redactions are designed to protect firms’ temporary proprietary information until contracts can come to fruition. Protecting confidential and proprietary information from potential public disclosure is important for a firm’s future. Redactions provide confidential treatment for up to ten years before the contract information must become public. However, the nondisclosure nature of redacting material contract information could nonetheless signal potential value to external stakeholders and attract cybersecurity breaches. In this study, we investigate whether redactions are associated with a greater likelihood of future breaches. We find that redactions are associated with greater probability of a breach in the three years immediately following a redaction. Further, the relationship appears driven by certain contracts and the actual act of redacting. Our results suggest that the act of redacting material contract information provides a signal about a firm’s disclosure behavior, increasing cybersecurity risks.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42448804","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-08-17DOI: 10.2308/horizons-17-055rrr
Z. Feng, D. Sharma, Mai Dao, H. Huang
Using a large sample across 58 countries, we examine (1) the link between global level and joint global, national, and city level auditor industry specialization and audit clients’ cost of equity capital, and (2) how the strength of the national investor protection environment impacts the preceding association. First, our results indicate a negative and significant association between the cost of equity capital and global level and joint global, national, and city level auditor industry specialization. Second, this relation is incrementally more negative when the client’s auditor is a joint global, national, and city level industry specialist than when the auditor is not a global level industry specialist. Third, we find that the negative relation between the cost of equity capital and a joint global, national, and city industry specialist auditor holds only in countries with strong investor protection. Our results are robust to a large battery of additional analyses.
{"title":"Global Level Auditor Industry Specialization and the Cost of Equity Capital","authors":"Z. Feng, D. Sharma, Mai Dao, H. Huang","doi":"10.2308/horizons-17-055rrr","DOIUrl":"https://doi.org/10.2308/horizons-17-055rrr","url":null,"abstract":"Using a large sample across 58 countries, we examine (1) the link between global level and joint global, national, and city level auditor industry specialization and audit clients’ cost of equity capital, and (2) how the strength of the national investor protection environment impacts the preceding association. First, our results indicate a negative and significant association between the cost of equity capital and global level and joint global, national, and city level auditor industry specialization. Second, this relation is incrementally more negative when the client’s auditor is a joint global, national, and city level industry specialist than when the auditor is not a global level industry specialist. Third, we find that the negative relation between the cost of equity capital and a joint global, national, and city industry specialist auditor holds only in countries with strong investor protection. Our results are robust to a large battery of additional analyses.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-08-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44525382","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-19DOI: 10.2308/horizons-18-164r
Yan Han, H. Huang, Wu-Po Liu, Yu-Lin Hsu
Extant accounting research based on data from the U.S., Europe, and Australia finds that increases in carbon emissions are associated with lower firm value. However, recent research indicates that investors' perspectives on corporate social responsibility (CSR) in other parts of the world differ from those of Western investors. This study investigates whether increases in carbon emissions, as one indicator of poor CSR performance, are also associated with lower firm value in Taiwan. Using carbon disclosure data from Taiwanese listed companies between 2012 and 2016, we find that firm value is positively associated with carbon emissions, which contrasts with the findings of extant research. Likewise, firm value is not associated with a combined measure of financial information and carbon emissions in Taiwan. Our findings suggest that international generalizations of the findings of the extant research on the relationship between carbon emissions and firm value should be undertaken with caution.
{"title":"Firm-Value Effects of Carbon Emissions and Carbon Disclosures Evidence from Taiwan","authors":"Yan Han, H. Huang, Wu-Po Liu, Yu-Lin Hsu","doi":"10.2308/horizons-18-164r","DOIUrl":"https://doi.org/10.2308/horizons-18-164r","url":null,"abstract":"Extant accounting research based on data from the U.S., Europe, and Australia finds that increases in carbon emissions are associated with lower firm value. However, recent research indicates that investors' perspectives on corporate social responsibility (CSR) in other parts of the world differ from those of Western investors. This study investigates whether increases in carbon emissions, as one indicator of poor CSR performance, are also associated with lower firm value in Taiwan. Using carbon disclosure data from Taiwanese listed companies between 2012 and 2016, we find that firm value is positively associated with carbon emissions, which contrasts with the findings of extant research. Likewise, firm value is not associated with a combined measure of financial information and carbon emissions in Taiwan. Our findings suggest that international generalizations of the findings of the extant research on the relationship between carbon emissions and firm value should be undertaken with caution.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49256840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-19DOI: 10.2308/horizons-2021-010
Gilberto Marquez Illescas, Linying Zhou
Using a sample of S&P 500 companies, this study constructs a measure of CEO narcissism and examines whether and how it impacts the accuracy and dispersion of analysts’ forecasts. Empirical evidence suggests that firms with narcissistic CEOs have higher accuracy and lower dispersion of such forecasts. In investigating the mechanism through which CEO narcissism impacts these properties, we find that firms with narcissistic CEOs are more likely to issue management earnings guidance, albeit less accurate, which results in significant differences in accuracy and dispersion of analysts’ forecasts. This study concludes that through more management voluntary disclosure, CEO narcissism has a positive impact on the accuracy and negative impact on the dispersion of financial analysts’ forecasts. While several studies have explored the effect of CEO narcissism on corporate financial reporting, this is the first study to expand such inquiry into the sector of financial analysts.
{"title":"CEO Narcissism and Properties of Analysts’ Forecasts","authors":"Gilberto Marquez Illescas, Linying Zhou","doi":"10.2308/horizons-2021-010","DOIUrl":"https://doi.org/10.2308/horizons-2021-010","url":null,"abstract":"Using a sample of S&P 500 companies, this study constructs a measure of CEO narcissism and examines whether and how it impacts the accuracy and dispersion of analysts’ forecasts. Empirical evidence suggests that firms with narcissistic CEOs have higher accuracy and lower dispersion of such forecasts. In investigating the mechanism through which CEO narcissism impacts these properties, we find that firms with narcissistic CEOs are more likely to issue management earnings guidance, albeit less accurate, which results in significant differences in accuracy and dispersion of analysts’ forecasts. This study concludes that through more management voluntary disclosure, CEO narcissism has a positive impact on the accuracy and negative impact on the dispersion of financial analysts’ forecasts. While several studies have explored the effect of CEO narcissism on corporate financial reporting, this is the first study to expand such inquiry into the sector of financial analysts.","PeriodicalId":51419,"journal":{"name":"Accounting Horizons","volume":" ","pages":""},"PeriodicalIF":2.5,"publicationDate":"2022-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47745582","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"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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