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Oligarchy in professional accounting bodies: Challenges for governance and leader‐member relations Contemporary Accounting Research (IF 4.041) Pub Date : 2024-03-13 Conor Clune, Paul Andon
Drawing on Robert Michels's “iron law” of oligarchy, this study examines a governance crisis that unfolded at one of the world's largest professional accounting bodies (PABs)—CPA Australia (CPAA). We leverage Michels's century‐old contribution to the social sciences to explore how this crisis sheds light on the challenges that PAB governance arrangements can pose when PAB leadership and membership
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Shareholder perceptions of external tax advisors in corporate tax planning Contemporary Accounting Research (IF 4.041) Pub Date : 2024-03-10 Michael P. Donohoe, Brian T. Gale, Michael A. Mayberry
We examine shareholders’ perceptions about how external tax advisors contribute to corporate tax planning. As residual claimants of corporate tax planning, shareholders benefit from lower corporate taxes, but also bear financial and reputational costs of subsequent tax enforcement. Despite the influential advisory role of external tax advisors in corporate tax planning, existing research on how shareholders
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Accounting and silence: The unspeakable, the unsaid, and the inaudible Contemporary Accounting Research (IF 4.041) Pub Date : 2024-03-10 Caecilia Drujon d'Astros, Jérémy Morales, Bernard Leca
This paper studies accounting and silence. Building on studies of accounting talk and introducing theories of “silencing,” we highlight the role of accounting silences in the production of engaging organizational conversations. Through a qualitative case study, we identify three forms of silence: the unspeakable, the unsaid, and the inaudible, and their links to accounting. Silences create motivations
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CAR Ad Hoc Reviewers 2023/RCC Réviseurs ad hoc 2023 Contemporary Accounting Research (IF 4.041) Pub Date : 2024-03-06
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Third‐party reporting and cross‐border tax planning Contemporary Accounting Research (IF 4.041) Pub Date : 2024-03-04 Alexander Edwards, Michelle Hutchens, Anh Persson
In 2018, the European Union (EU) introduced a new mandatory reporting requirement for a wide range of cross‐border tax arrangements (EU Directive 2018/822, also known as DAC6). Unlike prior corporate transparency initiatives, which put the reporting responsibility primarily on the taxpayers, this directive puts the initial reporting responsibility on the third‐party intermediaries who are involved
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Data analytics strategy and internal information quality Contemporary Accounting Research (IF 4.041) Pub Date : 2024-03-04 Katie W. Lem
I examine whether a strategic focus on data analytics is associated with improvements in firms’ internal information quality. Using textual analysis of firm disclosures to identify a data analytics strategy, I first document that firm, leadership, and operating environment characteristics are all important determinants of the decision to adopt a data analytics strategy. I next use operating and financial
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Can artificial intelligence reduce the effect of independence conflicts on audit firm liability? Contemporary Accounting Research (IF 4.041) Pub Date : 2024-02-26 Robert Libby, Patrick D. Witz
In this study, we examine whether the use of artificial intelligence (AI) can reduce the effect of independence conflicts on audit firm liability. In two experiments, we manipulate (1) whether procedures are performed by a human auditor or with AI and (2) whether the audit firm was careful in maintaining the appearance of independence from the audit client. Results of both experiments indicate that
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A comparison of direct listings and IPOs Contemporary Accounting Research (IF 4.041) Pub Date : 2024-02-26 Anna Bergman Brown, Donal Byard, Jangwon Suh
IPOs and direct listings (DLs) offer two different mechanisms for firms to go public. In contrast to IPOs, DLs do not employ an underwriter or raise new capital. Using a sample of IPOs and DLs on major stock markets in the European Union, we document that firms that choose to go public via DLs are larger, more profitable, and less levered, on average, than IPO firms. These pre‐listing differences suggest
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Local information advantage and stock returns: Evidence from social media Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-30 Yuqin Huang, Feng Li, Tong Li, Tse-Chun Lin
We examine the information asymmetry between local and nonlocal investors with a large dataset of stock message board postings. We document that abnormal relative postings of a firm, that is, unusual changes in the volume of postings from local versus nonlocal investors, capture locals' information advantage. This measure positively predicts firms' short-term stock returns as well as those of peer
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Audit firm tenure disclosure and nonprofessional investors’ perceptions of auditor independence: The mitigating effect of partner rotation disclosure Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-24 Sarah Judge, Brian M. Goodson, Chad M. Stefaniak
In 2017 the PCAOB began requiring audit firm tenure disclosure within the audit report for SEC registrant clients. Many commenters raised the concern that prominent disclosure of firm tenure would lead investors to inappropriately infer a negative relation between audit quality and long tenure. This is particularly troubling given that empirical evidence generally does not support this concern. In
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Voluntary disclosures regarding open market repurchase programs Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-24 Leonce Bargeron, Alice Bonaimé, William Docimo, Mei Feng, Shawn Thomas
This paper studies voluntary disclosures that firms have suspended, resumed, or completed their open market repurchase programs. Voluntary disclosures of repurchase status updates are common and value-relevant. They also inform subsequent repurchase activities: voluntary disclosers are more likely to complete their repurchase programs and to initiate new repurchase programs than firms with undisclosed
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Auditor communication on critical audit matters: Timing, inspection likelihood, and the audit committee Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-24 Aubrey R. Whitfield, Yoon Ju Kang, Ken T. Trotman
In response to the extended audit report regulations implemented in the United States and internationally, both audit firms and regulators have increased scrutiny over critical audit matters/key audit matters (collectively referred to as CAMs) through internal and external inspections. At the same time, auditors and audit committees (ACs) have altered the content and timing of CAM-related discussions
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Information aggregation to form earnings expectations: Evidence from CEO networks and management forecast accuracy Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-22 Sam (Sunghan) Lee, Steven R. Matsunaga, Peter (Seung Hwan) Oh, Hyun A. Hong
We investigate whether a larger CEO employment network provides access to information that improves firms' earnings forecasts and find a significantly positive relation between CEO employment network size and management earnings forecast accuracy. Our results suggest that firms use information obtained from CEO contacts to increase the accuracy of their earnings forecasts. Our conclusion is further
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Segment disaggregation and equity-based pay contracts Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-15 Young Jun Cho, Hojun Seo
We study the role of segment disaggregation in equity-based pay contracts in diversified firms. Disaggregated segment disclosures can improve the observability of managerial actions in internal capital markets and thus increase implicit incentives for managers to allocate resources as desired by shareholders, substituting for explicit incentives provided to CEOs. We use the adoption of SFAS 131 as
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Navigating through the noise: The effect of color-coded performance feedback on decision-making Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-15 Eddy Cardinaels, Stephan Kramer, Victor S. Maas
Many companies use color codes in their internal performance reports to highlight how current performance compares to performance in a previous period. We examine whether the use of color coding affects managers' decision-making in a resource allocation task. We argue that managers' decision accuracy will be lower if they receive noisier feedback, but that this detrimental effect of noise can be mitigated
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The role of target difficulty and career tournaments in retaining creative R&D employees Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-15 Isabella Grabner, Mischa Seiter, Markus Wabnegg, Henning Wirth
We explore the turnover intentions of creative R&D employees and the role of performance management practices in shaping these considerations. Since the success of a firm's R&D efforts hinges on the innovative ideas of its employees, it is crucial to retain particularly creative individuals. At the same time, however, we argue that this is especially difficult because both the higher outside options
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Following the crowd? Peer influence on voluntary bank audits Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-13 Matthew J. Beck, Nathan G. Lundstrom, Sarah B. Stuber
We examine whether peer audit choices influence a bank's decision to obtain an audit voluntarily. We find that the likelihood of a bank voluntarily obtaining an audit is significantly associated with the audit decisions of peers. The relation is stronger when the peers are more salient due to closer geographic proximity, similarity in loan portfolio, and similarity in size. In addition, we find that
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Are firms as liquid as they appear in annual reports? Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-11 Abdul-Rahman Khokhar, Jiaping Qiu, Mohammad M. Rahaman
Fiscal-year-end cash holdings are an important indicator in external stakeholders' assessment of a firm's liquidity and credit risk. Do fiscal-year-end cash holdings reflect a firm's intra-year liquidity conditions? We observe that firms report significantly higher cash holdings in the fourth fiscal quarter, followed by a subsequent reversal. This pattern is pervasive across industries, persistent
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Reporting bias and feedback effect Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-05 Hui Chen, Evgeny Petrov
Stock prices often provide firm managers with new information that can be used in real decisions. Studies generally focus on the ex ante disclosure policy and show that the presence of market feedback crowds out firms' disclosure. We instead examine a manager's ex post biasing incentives and find that market feedback amplifies overreporting bias, but not necessarily underreporting bias, due to three
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Foreign labor and audit quality: Evidence from newly hired H-1B visa holders Contemporary Accounting Research (IF 4.041) Pub Date : 2024-01-05 Tracie Frost, Jiao Jing, Longfei Shang, Lixin (Nancy) Su
Foreign workers have been an important part of the labor force in public accounting firms over the past two decades. In this paper, we investigate whether and why foreign workers influence audit quality. We find that audit offices with more newly hired foreign labor have a lower mean absolute value of discretionary accruals and a smaller rate of restatements for their clients. The effect is more pronounced
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Climatic Disasters and Distracted Analysts Contemporary Accounting Research (IF 4.041) Pub Date : 2023-12-07 Yuqi Han, Connie X. Mao, Hongping Tan, Chi Zhang
Using a sample of 30,270 forecasts by 2,280 analysts under a stacked difference-in-differences framework involving 22 major climatic disasters in the United States, we exam the effect of climatic disasters on information production by security analysts, who play a crucial role in the financial market as information intermediaries. We find that earnings forecasts by analysts who experienced a major
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On the informativeness of unexpected exclusions from street earnings Contemporary Accounting Research (IF 4.041) Pub Date : 2023-12-07 Brian Bratten, Stephannie Larocque, Teri Yohn
Exclusions from street earnings can include both expected exclusions, forecasted ex ante by analysts, and unexpected exclusions, revealed after earnings are reported. While prior research largely examines total exclusions from street earnings, unexpected exclusions reflect the news or surprise in exclusions. We investigate the properties and informativeness of unexpected exclusions for future profitability
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Information content of credit rating affirmations Contemporary Accounting Research (IF 4.041) Pub Date : 2023-12-07 Boochun Jung, Asad Kausar, Byungki Kim, You-il Park, Jian Zhou
We examine the economic determinants and informational effects of credit rating affirmations (i.e., the reiteration of past credit ratings) for a sample of US public firms from 1995 to 2020. We find that credit rating affirmations typically follow major corporate events and changes in firm fundamentals that increase information uncertainty about a firm's creditworthiness, suggesting that affirmations
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Auditor changes and management's issuance of earnings forecasts Contemporary Accounting Research (IF 4.041) Pub Date : 2023-12-07 Yonghong Jia, Xinghua Gao
Auditor changes are significant corporate events marking disruptions in the auditor-client relationship. Prior studies have primarily examined the impact of such changes on audit quality and investment decisions of market participants. We study the effect of auditor changes on the voluntary disclosure of forward-looking information. Managers may choose to reduce disclosure due to the possible adverse
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Financial statement adequacy and firms' MD&A disclosures Contemporary Accounting Research (IF 4.041) Pub Date : 2023-11-27 Stephen V. Brown, Lisa A. Hinson, Jennifer Wu Tucker
Firms are required to provide financial information via the financial statements and the management discussion and analysis (MD&A), a narrative explanation of the financial statements. Our study examines how firms use the MD&A channel when their financial statement channel is inadequate. We focus on two textual attributes of the MD&A: non-GAAP disclosure and forward-looking statements. We find that
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Disclosure of tax-related critical audit matters and tax-related outcomes Contemporary Accounting Research (IF 4.041) Pub Date : 2023-11-20 Katharine D. Drake, Nathan C. Goldman, Stephen J. Lusch, Jaime J. Schmidt
Given that tax-related critical audit matters (tax CAMs) were prevalent among accelerated filers (18.5% of observations) during the initial year of CAM disclosures, we examine whether an auditor's disclosure of tax CAMs is associated with variation in tax-related financial reporting quality, tax avoidance, and tax-related earnings management. Finding an association between tax CAMs and one of these
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Demand uncertainty, inventory, and cost structure Contemporary Accounting Research (IF 4.041) Pub Date : 2023-11-14 Xin Chang, Wing Chun Kwok, George Wong
Building on Banker, Byzalov, and Plehn-Dujowich's (2014, The Accounting Review, 89(3), 839–865) congestion cost theory, we model firms' trade-off between a rigid cost structure and a high inventory level to reduce the congestion costs caused by uncertain demand. We demonstrate that firms with a higher inventory level adopt a less rigid cost structure, but the effect of cost structure on inventory is
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Estimating the sensitivity of CEO compensation to gross versus net accounting performance Contemporary Accounting Research (IF 4.041) Pub Date : 2023-11-09 Dirk E. Black, Shane S. Dikolli, Christian Hofmann, Thomas Pfeiffer
In empirically estimating the relation between CEO compensation and accounting-based firm and peer performance, researchers often define the performance variables net of CEO compensation expense. We analytically show that a researcher's use of CEO compensation as a regression's dependent variable and as an expense in defining a regression's independent variables representing accounting-based firm and
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Business unit controllers' credibility and the hardening of local forecasts Contemporary Accounting Research (IF 4.041) Pub Date : 2023-11-02 Leona Wiegmann, Lukas Petrikowski, Lukas Goretzki
Focusing on multidivisional companies, this paper analyzes the hardening of local forecasts at the intersection of business units (BUs) and the corporate finance function. It investigates how BU controllers, accountable to both local management and the corporate finance function, seek to establish themselves as competent and trustworthy forecasters vis-à-vis their functional superiors. Drawing on Goffman's
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Common institutional ownership and stock price crash risk Contemporary Accounting Research (IF 4.041) Pub Date : 2023-10-31 Shenglan Chen, Hui Ma, Qiang Wu, Hao Zhang
This paper presents new evidence on the economic benefits arising from common institutional ownership. We find a negative and significant effect of common institutional ownership on stock price crash risk. This effect is robust to a battery of robustness checks and is causal according to some identification tests, including difference-in-differences analyses on financial institution mergers. We find
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Promoting proactive auditing behaviors Contemporary Accounting Research (IF 4.041) Pub Date : 2023-10-31 Mark E. Peecher, Michael A. Ricci, Yuepin (Daniel) Zhou
In this paper, we introduce the construct of proactive auditing behaviors to the accounting literature and report the first experimental investigation of their antecedents. Regulators and practitioners agree that proactive behaviors are needed to consistently achieve high-quality audit outcomes, but also that these behaviors are scarce. Drawing on theory from management, accounting, and psychology
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The effect of shareholder scrutiny on corporate tax behavior: Evidence from shareholder tax litigation Contemporary Accounting Research (IF 4.041) Pub Date : 2023-10-20 Dain C. Donelson, Jennifer L. Glenn, Sean T. McGuire, Christopher G. Yust
This study examines the effect of shareholder scrutiny of corporate tax avoidance behavior and its related financial reporting. Specifically, we explore the factors associated with shareholder tax litigation and its effect on the future tax behavior of the sued firm and its peers. We find that sued firms have lower cash and GAAP effective tax rates (ETRs) and engage in extreme tax avoidance before
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How do lead auditor instructions influence component auditors' evidence collection decisions? The joint influence of construal interpretations and responsibility Contemporary Accounting Research (IF 4.041) Pub Date : 2023-10-14 Skye Zhu, Soon-Yeow Phang
Regulators have raised concerns about the quality of component auditors' work. Of particular concern is that component auditors often do not adequately perform procedures and gather enough quality evidence. This failure is likely caused by component auditors' different interpretations of lead auditor instructions and by their lack of responsibility. Our interview findings suggest that component auditors
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The predictive ability of tax contingencies for future income tax cash outflows Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-27 William A. Ciconte, Michael P. Donohoe, Petro Lisowsky, Michael A. Mayberry
Prior research shows that contingent liabilities do not accurately predict future cash payments due to the managerial discretion afforded by accounting standards. We examine the extent to which current accounting guidance for a material contingent liability—the reserve for unrecognized tax benefits (UTBs) under Financial Interpretation No. 48 (FIN 48)—generates accruals that are predictive of future
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How workplace identities and team management practices affect distributed team auditors' willingness to speak up Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-26 Chad A. Proell, Michael A. Ricci, Ken T. Trotman, Yuepin (Daniel) Zhou
Distributed, rather than co-located, teams increasingly perform audit work, raising regulator concerns that distributed team communication issues may affect audit quality. We investigate upward communication (i.e., raising issues to supervisors), a key communication dimension related to audit quality. In Study 1, we survey 69 senior auditors to establish that distributed team upward communication suffers
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The bullwhip effect, demand uncertainty, and cost structure Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-21 Clara Xiaoling Chen, Jing Liang, Shilei Yang, Jing Zhu
The firm-level bullwhip effect is the amplification of demand uncertainty along a supply chain—that is, fluctuations in production (for manufacturing firms) or purchases from suppliers (for retailers or wholesalers) in a firm tend to be greater than its demand fluctuations. We predict that the bullwhip ratio (a proxy for the bullwhip effect) amplifies the relation between demand uncertainty and cost
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The merits of securities litigation and corporate reputation Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-20 Dain C. Donelson, Antonis Kartapanis, Christopher G. Yust
We explore how securities litigation affects corporate reputation. Experts remain concerned that nonmeritorious securities class actions—those that will be dismissed or settled for nuisance amounts—cause reputational damage. Although several prior studies show reputational costs for nonmeritorious cases, they generally use indirect measures based on returns or total market losses, which are mechanically
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Managerial extraversion and corporate voluntary disclosure Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-15 Florian Eugster, Jenni Kallunki, Juha-Pekka Kallunki, Henrik Nilsson
This article examines the effect of managers' personality trait of extraversion on the voluntary disclosure of their firms. Our results from analyzing archival data from Sweden show that the extraversion scores of CEOs and CFOs obtained from psychological tests are positively associated with the voluntary disclosure scores of their firms. The effect of managerial extraversion on disclosure is, moreover
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IRS scrutiny and corporate innovation Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-13 Nathan Goldman, Niklas Lampenius, Suresh Radhakrishnan, Arthur Stenzel, Jose Elias Feres de Almeida
The IRS administers tax laws enacted by Congress. As part of the IRS's duties, they often consider taxpayers' financial statements to help ensure accurate tax reporting and payments. We posit that enhanced financial statement disclosures of tax information under FASB Interpretation Number 48 (FIN 48) lead to more IRS scrutiny and alter the incentives for corporate innovation. Using patent applications
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The relative importance of information events: An ex ante perspective Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-09 Michael Iselin, Andrew Van Buskirk
We build on recent advances in options pricing research to propose a novel measure of the ex ante relative importance of information events. Our firm-level measure captures the extent to which investors view an event as important, independent of its realized outcome. We first validate the measure and then demonstrate how it can be used to (1) study heterogeneity across firms in the relative importance
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The real effects of transparency in crowdfunding Contemporary Accounting Research (IF 4.041) Pub Date : 2023-09-08 Lin Nan, Chao Tang, Xin Wang, Gaoqing Zhang
In this paper, we investigate the real effects of information transparency in crowdfunding markets. Our analysis shows that the crowdfunding market features an under-implementation inefficiency, driven by two types of uncertainty that consumers face: fundamental uncertainty about the entrepreneur's implementation cost, and strategic uncertainty due to potential coordination failures among consumers
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It's a matter of style: The role of audit firms and audit partners in key audit matter reporting Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-26 Linette M. Rousseau, Karla M. Zehms
We examine the relative importance of audit firm versus partner decision styles in key audit matter (KAM) reporting. Standard setters intended KAMs to increase the usefulness of the audit report by requiring the partner-led engagement team to disclose engagement-specific information about the most significant judgments they made during the audit. However, stakeholders expressed widespread concern that
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Auditor judgment in the fourth industrial revolution Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-25 Rita Samiolo, Crawford Spence, Dorothy Toh
Discourse proclaiming the advent of a fourth industrial revolution predicts significant disruption to various work domains in the near future. Auditing is one of the domains where bold claims about the potential of technology are being made, with technology expected to augment auditors' judgments and, in time, possibly automate them. Drawing on 44 in-depth interviews with auditors, regulators, and
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Earnings guidance stoppage and the value of financial analysts' research Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-18 Dan Palmon, Xuan Peng, Ari Yezegel
We examine the relation between voluntary disclosure and the value of analysts' research by studying the change in the informativeness of analysts' research after managers stop providing quarterly guidance to investors. We find that the market reaction to analysts' recommendation revisions increases significantly after guidance stoppage, controlling for confounding factors as well as for firm and time
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Does tax enforcement disparately affect domestic versus multinational corporations around the world? Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-18 Lisa De Simone, Bridget Stomberg, Brian Williams
Global tax enforcement policies have received increased attention since the financial crisis, with much stated focus on curbing perceived harmful tax practices of multinational corporations. Yet there is a dearth of evidence on possible differential effects of home-country tax enforcement on multinationals. We take a step toward filling this void in the tax policy discussion by examining whether there
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To read or to listen? Does disclosure delivery mode impact investors' reactions to managers' tone language? Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-18 W. Brooke Elliott, Serena Loftus, Amanda Winn
We examine how disclosure delivery mode—oral versus written—influences investors' reactions to managers' tone language. We hypothesize that listening to disclosures, relative to reading them, causes managers' qualitative word choices to have a greater impact on investors' judgments. We theorize that this effect occurs because oral delivery mode promotes heuristic processing and qualitative tone language
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Do consumers pay the corporate tax? Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-18 Martin Jacob, Maximilian A. Müller, Thorben Wulff
Using granular gas price data and rich variation in corporate tax rates, we find that corporate taxes increase consumer prices. About 64% of the corporate tax is borne by consumers. The effect is stronger when firms have limited access to tax planning opportunities, face stricter tax enforcement, or when consumer demand is less elastic. Taxes also reduce the number of firms and their scale, consistent
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The importance of audit partners' risk tolerance to audit quality Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-16 Jeffrey Pittman, Sarah E. Stein, Delia F. Valentine
Relying on their history of legal infractions to measure individuals' risk tolerance, we examine the association between engagement partners' risk appetites and audit quality in the United States. Criminology and economics research links infraction activity with enduring personality traits that capture an individual's risk tolerance. Our evidence supports the prediction that partners known to engage
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Auditing with data and analytics: External reviewers' judgments of audit quality and effort Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-07 Scott A. Emett, Steven E. Kaplan, Elaine G. Mauldin, Jeffrey S. Pickerd
Audit firms hesitate to take full advantage of data and analytics (D&A) audit approaches because they lack certainty about how external reviewers evaluate those approaches. We propose that external reviewers use an effort heuristic when evaluating audit quality, judging less effortful audit procedures as lower quality, which could shape how external reviewers evaluate D&A audit procedures. We conduct
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CEO power and the strategic selection of accounting financial experts to the audit committee Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-02 Anna Bedford, Samir Ghannam, Matthew Grosse, Nelson Ma
We examine the role of CEO power in the appointment of accounting financial experts (AFEs) to firm audit committees. Our results show that firms with powerful CEOs have a lower likelihood of appointing AFEs to their audit committees. In addition, effective AFEs—those characterized by experience, high status, and social independence from the CEO—are less likely to be appointed in firms with powerful
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How does depletion interact with auditors' skeptical dispositions to affect auditors' challenging of managers in negotiations? Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-01 Lori Shefchik Bhaskar, Tracie M. Majors, Adam Vitalis
We use multiple methods to examine how depletion and auditors' skeptical dispositions interact to affect auditors' challenging of managers in negotiations over financial statement amounts. We expect auditors are likely depleted from effortfully exercising self-regulation during the busy times when these negotiations occur. Individuals in a depleted state tilt toward natural, less effortful behaviors
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Cost uniqueness and information uncertainty Contemporary Accounting Research (IF 4.041) Pub Date : 2023-08-01 Mark Anderson, Raj Mashruwala, Ye Wang, Rong Zhao
Prior literature has studied firm uniqueness and its implications for capital market participants by investigating earnings uniqueness. We recognize that cost and revenue uniqueness provide separate insights about firm uniqueness because different forces drive firm-specific revenues and costs. Cost uniqueness is of special interest because costs are opaque to investors and more complex than revenues
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Navigating knowledge and ignorance in the boardroom: A study of audit committee members' oversight styles Contemporary Accounting Research (IF 4.041) Pub Date : 2023-07-25 Oriane Couchoux
Using data collected from 21 interviews with audit committee members (ACMs) of Canadian reporting issuers, this study examines the ways in which ACMs understand and enact the additional responsibilities placed on them by regulators in the post–Sarbanes-Oxley Act era. Adopting a social constructivist approach to knowledge and expertise, the study shows that despite the financial literacy requirements
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Mutual funds' reporting frequency and firms' responses to undervaluation: The role of share repurchases Contemporary Accounting Research (IF 4.041) Pub Date : 2023-07-16 Thomas Bourveau, Xinlei Li, Daniele Macciocchi, Chengzhu Sun
We examine a regulatory change that increased the reporting frequency of mutual funds' portfolios. Using a difference-in-differences design, we find that firms with greater ownership by mutual funds increase share repurchases following the regulatory change. We show that these share repurchases are a firm's rational response to undervaluation, which occurs because fund managers become shortsighted
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Asymmetric adjustment of control Contemporary Accounting Research (IF 4.041) Pub Date : 2023-07-10 Victor van Pelt
This study examines how principals adjust their control over agents based on their prior controlling experience. According to standard economic theory, principals should be equally willing to decrease their control as they are to increase it. However, I use psychological theory to predict that prior experience with exercising tight control reinforces a principal's belief that agents are self-interested
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Machine learning and the prediction of changes in profitability Contemporary Accounting Research (IF 4.041) Pub Date : 2023-07-10 Stewart Jones, William J. Moser, Matthew M. Wieland
This study uses machine-learning methods to predict next-period change in profitability based on a model proposed by Penman and Zhang (2004, Working paper, Columbia University and University of California, Berkeley; “PZ”). We find that new machine-learning methods predict out of sample substantially better than traditional regression methods and provide richer interpretations about the role and impact
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Financial statement similarity Contemporary Accounting Research (IF 4.041) Pub Date : 2023-07-10 Stephen V. Brown, Guang Ma, Jennifer Wu Tucker
We propose financial statement similarity as a measure of financial reporting comparability. The firm-pair version of our measure reflects the degree to which two firms report similar relations within their financial statement items; this version can help managers and market participants identify peer firms. The firm-year version of our measure reflects the degree to which a firm reports financial
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The deterrent effect of the SEC Whistleblower Program on financial reporting securities violations Contemporary Accounting Research (IF 4.041) Pub Date : 2023-06-26 Christine Wiedman, Chunmei Zhu
The stated goal of the SEC Whistleblower Program introduced as part of the Dodd-Frank Act was to deter securities violations and thereby to strengthen investor protection. We document significant reductions in the likelihood of financial reporting fraud by US firms following the introduction of this program. The reductions are robust to controlling for other regulatory changes in the Dodd-Frank Act
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The implications of firms' derivative usage on the frequency and usefulness of management earnings forecasts Contemporary Accounting Research (IF 4.041) Pub Date : 2023-06-19 John L. Campbell, Sean Shun Cao, Hye Sun Chang, Raluca Chiorean
We investigate how firms' use of derivatives impacts voluntary disclosure and offer four main findings. First, we find that when firms begin using derivative instruments, they increase the frequency of management earnings forecasts. Second, using path analysis, we find a direct link between derivative usage and forecast frequency, as well as an indirect link through reduced earnings volatility. Third