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The effect of corporate reputation on accounting conservatism Advances in Accounting Pub Date : 2024-02-21 Kourosh Amirkhani, Jenny Brown, Jeffrey Gramlich
This study examines the impact of corporate reputation on accounting conservatism. We argue that firms with valuable reputations are likely to select conservative accounting practices as a form of insurance to protect their reputations. We document strong evidence that companies with high reputations—those included on 's “Most Admired Companies” list—employ more conservative accounting than firms not
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Financial reporting timeliness and its determinants in UK charities Advances in Accounting Pub Date : 2024-02-13 Arung Gihna Mayapada, Pallab Kumar Biswas, Helen Roberts
This study empirically examines the timeliness of financial reporting as an important qualitative characteristic of useful financial information within the context of United Kingdom (UK) charities. Using 8490 UK charitable companies (67,014 observations) during 2007–2018, we find that charities relying more on donation income take a shorter time to file accounts. Moreover, we observe that charities
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Managerial accounting practices, HR metrics, and firm performance Advances in Accounting Pub Date : 2024-02-08 Rene Arseneault, Jacqueline Gagnon
This research explores how accounting and HR employees perceive the value of managerial accounting and HR practices in their organizations. Our study was restricted to participants employed in publicly listed organizations allowing us to explore how their perceptions equate with objectively measured firm performance. In total, 186 employees completed a series of measures exploring their perceptions
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The interactive effects of performance evaluation leniency and performance measurement precision on employee effort and performance Advances in Accounting Pub Date : 2024-01-28 Yelin Li, Bernhard E. Reichert, Alex Woods
Research shows that in practice, supervisors without any constraints to their compensation setting behavior often tend to provide lenient performance evaluations to employees. Economic theory criticizes this outcome because leniency is thought to provide lower motivation to exert effort for low and medium as well as high performers. To provide incentives for employees to exert effort, economic theory
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Do analysts provide information about other comprehensive income in book value forecasts for financial firms? Advances in Accounting Pub Date : 2024-01-13 Dirk Black, Thaddeus Neururer
Analysts' earnings forecasts exclude other comprehensive income (OCI). However, OCI affects firm value on a dollar-for-dollar basis and can enhance investors' assessments of the riskiness of firms' equity capital. Focusing on financial firms and using analysts' book value per share (BVPS) forecasts as a proxy for forward-looking information about OCI, we examine whether analysts provide information
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Privileged information access, analyst consensus building, and stock return volatility: Evidence from the JOBS Act Advances in Accounting Pub Date : 2024-01-10 Shunyao Jin, Michael D. Kimbrough, Isabel Yanyan Wang
This study examines whether allowing select analysts private access to management before an IPO affects analyst consensus building and subsequently post-IPO stock return volatility. The 2012 Jumpstart Our Business Startups (JOBS) Act creates many exemptions to reduce the cost of going public for smaller issuers that qualify as an Emerging Growth Company (EGC). One set of provisions allows analysts
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Discussion of “Impact of Audit Committee Social Capital on the Adoption of COSO 2013” Advances in Accounting Pub Date : 2024-01-06 Kathleen Rupley
I organize my discussion of “Impact of Audit Committee Social Capital on the Adoption of COSO 2013” by Farah, Islam, Tadesse & McCumber (2023) around the following themes: the use of board interlocks vs. comprehensive board social connectiveness ties in prior literature, the use of other methodologies (i.e. survey, interviews) to augment findings and provide a source of issues where audit committee
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Financial analysts' information discovery: A study of manager-analyst interactions in conference calls Advances in Accounting Pub Date : 2024-01-04 Chuong Do
This paper analyzes analysts' questions in conference calls to make inferences about how analysts acquire information. Using two complementary techniques, I develop several measures of the specificity of analysts' questions. I predict and find that analysts ask more specific questions if they enter the call with poor information. The firm's information environment improves after a call in which most
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The effect of audit committee financial expertise on earnings management tactics in the post-SOX era Advances in Accounting Pub Date : 2023-12-30 Hui Xia, Shu Lin, Shuo Li, Indranil Bardhan
To restore investor confidence and promote the integrity of financial accounting information provided to investors, following the passage of the Sarbanes-Oxley Act (SOX), the SEC adopted two new rules for public firms in early 2003, requiring the disclosure of audit committee financial expertise (ACFE) per SOX 407 and the reconciliation of non-GAAP financial measures to those most comparable in GAAP
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Does Islamic religiosity influence professional accountants' judgments? Evidence from global convergence of IFRS Advances in Accounting Pub Date : 2023-12-26 A.F.M. Mainul Ahsan, Sudipta Bose, Muhammad Jahangir Ali
We examine the influence of religiosity on professional accountants' judgments towards global convergence of financial reporting using, as an example, the Islamic religiosity context of Bangladesh. Professional accountants' judgments, in relation to the global convergence of the International Financial Reporting Standards (IFRS), is measured using Gray's (1988) accounting values (professionalism vs
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Tone of narrative disclosures and earnings management: UK evidence Advances in Accounting Pub Date : 2023-11-25 Tamer Elshandidy, Hany Kamel
This paper investigates whether a relationship exists between the tone of narrative disclosures and engagement in earnings management activities. Using FTSE all-share nonfinancial firms, our estimates show a significant association between the tone of narrative disclosure (measured by the percentage of positive words, negative words, and net tone) and the prevalence of earnings management. The results
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Do competitive markets encourage tax aggressiveness? Advances in Accounting Pub Date : 2023-10-25 Carolyn M. Callahan, James M. Plečnik, Jiwoo Ryou
We investigate whether industry-level product market competition and firm-level market leadership affect firms' tax aggressiveness. Studying competition from both current market participants and potential entrants, and using a market share-based measure of market leadership, we find that firms facing higher competition from current market participants engage in more tax aggressiveness. We further find
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Auditor's financial stress: An inconspicuous determinant of audit outcomes Advances in Accounting Pub Date : 2023-09-27 Robert Felix, Amanda L. Wilford
The relation between personnel-related factors and office-level audit quality has not received much attention in the audit literature. To examine this further, we investigate the relationship between an auditor's financial stress and audit quality. We proxy financial stress with negative equity, when a home's market value is less than its mortgage, which is gathered from the real estate website Zillow
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Independent analyst research: Does it matter who pays? Advances in Accounting Pub Date : 2023-09-25 William L. Buslepp, Ryan J. Casey, G. Ryan Huston
On April 28, 2003, ten of the largest investment banks reached an agreement with the Securities and Exchange Commission and other regulatory bodies regarding alleged misconduct of security analysts. This agreement, called the Global Research Analyst Settlement, allocated $460 million to source independent analyst research. Unlike other forms of analyst research, this research was not financed through
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Discussion of the impact of online tax community advice on individual taxpayer decision-making Advances in Accounting Pub Date : 2023-09-23 Govind S. Iyer
Abstract not available
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Financial reporting consequences of CEOs' early-life exposure to disasters and violent crime Advances in Accounting Pub Date : 2023-09-20 Joanna Golden, Mark Kohlbeck
Understanding the behavior of chief executive officers (CEOs) enables investors, regulators, and others to better appreciate CEOs' corporate decisions. Among the many aspects that determine CEO behavior are early-life experiences, we examine whether a CEO's exposure to two important events—fatal natural disasters and violent crime—during the individual's formative years is associated with the firm's
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The BP oil spill and income classification shifting of oil and gas companies Advances in Accounting Pub Date : 2023-09-20 Michael Lacina, Shanshan Pan, Steve Garner
Literature has documented income classification shifting to increase core earnings. There has been little research on whether firms reduce income increasing classification shifting or classification shift to reduce core earnings - classify non-core items as core expenses. Also, research on classification shifting under non-market incentives is limited. We fill these gaps by examining the shifting behavior
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Discussion of the BP oil spill and income classification shifting of oil and gas companies Advances in Accounting Pub Date : 2023-09-20 Jennifer Echols Edmonds
Abstract not available
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The concerns of linking IRS tax disclosures to financial statements on analysts' effective tax rate forecasts Advances in Accounting Pub Date : 2023-09-14 Russell Barber, Dana Hollie, Norman Massel
This study examines the effect of uncertain tax position (UTP) disclosures on analysts' effective tax rate (ETR) forecasts. The Internal Revenue Service (IRS) requires that firms provide detailed information about UTPs reported in their annual 10-K filings on their Schedule UTP form. Schedule UTP applies to federal tax positions for which a corresponding tax reserve has been created for financial reporting
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Does external auditor coordination influence internal auditor effort? Advances in Accounting Pub Date : 2023-08-31 Porschia Nkansa
The purpose of this study is to investigate how the level of controls testing coordination with the external auditor affects internal auditors' effort. The internal auditor's planned substantive testing audit hours are the measure of effort in this study. Regulators and stakeholder organizations have encouraged more collaboration between external and internal auditors to improve audit efficiency. The
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Differential responses to tax regulation: The case of Schedule UTP Advances in Accounting Pub Date : 2023-08-31 David Tree, Dilin Wang, Peter J. Frischmann
Schedule UTP was instituted by the Internal Revenue Service to obtain more detailed information about firms' uncertain tax benefits (UTBs) that are required to be reported on a firm's financial statements. We document that the reaction of firms was not uniform. We provide evidence that post Schedule UTP, firms with higher political costs lower their UTBs more than average firms but do not increase
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Conditional conservatism in GAAP earnings and the implications for the disclosure of non-GAAP earnings Advances in Accounting Pub Date : 2023-08-18 Brandon D. Ater, Emre Kilic, Christian K. Sobngwi
We examine whether and how the degree of conditional conservatism in GAAP earnings influences managers' decisions to disclose non-GAAP earnings. Conditional conservatism imposes a downward bias and may negatively affect the information content of GAAP earnings. However, prior research documents that non-GAAP earnings exhibit higher persistence, predictive ability, and information content than GAAP
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Impact of audit committee social capital on the adoption of COSO 2013 Advances in Accounting Pub Date : 2023-08-04 Nusrat Farah, Md Shariful Islam, Amanuel Tadesse, William McCumber
This study aims to examine the effect of audit committee social capital, measured using network centrality from social network theory, on the adoption of the COSO 2013 updated internal control framework (COSO 2013). Drawing on social capital literature, we argue that well-connected audit committees have informational advantages and reputational concerns which prompt them to learn more about best industry
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The association between ethical leadership and environmental activity management: The mediating role of employee environmental empowerment Advances in Accounting Pub Date : 2023-08-04 Sophia Su, Kevin Baird, Thanh Phan
This study examines the association between ethical leadership and environmental activity management (EAM) [environmental activity analysis (EAA), environmental activity cost analysis (EACA) and environmental activity-based costing (EABC)] and the mediating role of employee environmental empowerment in such an association. Data was collected using an online survey questionnaire from 400 middle and
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Generalist CEOs and the readability of the 10-K report Advances in Accounting Pub Date : 2023-08-04 Rachana Kalelkar, Hongkang Xu, Duong Nguyen, Zheng Chen
In this paper, we investigate the association between the general managerial ability of CEOs and the readability of 10-K reports. We find that the readability of 10-K reports is lower for firms managed by CEOs with general managerial ability. Our result is robust to change analysis, an alternate readability measure, various fixed effects, an instrumental variable approach, a propensity score approach
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The licensing and certification roles of the CPA license in the gig economy Advances in Accounting Pub Date : 2023-07-28 Nicholas Krupa
U.S. employers, including the Big Four accounting firms, are increasingly using gig economy platforms to hire accounting labor. One factor that employers may consider when hiring accountants in the gig economy is the CPA license. The CPA license has two potential roles: 1) a licensing role, which enables the license holder to perform exclusive jobs; and 2) a certification role, which signals that the
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Managerial ability and cost of equity capital Advances in Accounting Pub Date : 2023-07-21 Soomi Jang, Heeick Choi, Hyungtae Kim
This study examines whether more capable managers affect the cost of equity capital. After controlling for standard risk factors and firm characteristics, we find that higher managerial ability is associated with a lower implied cost of equity. Moreover, our results show that the negative association between managerial ability and the cost of equity capital is more pronounced for firms with high information
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The governance role of lender monitoring: Evidence from Borrowers' tax planning Advances in Accounting Pub Date : 2023-07-05 Fuzhao Zhou, Pei Shao, Feixue Xie, Jianning Huang
We posit that lender monitoring increases the general outcomes of borrowers' tax avoidance while reducing opportunistic tax aggressive behaviors. We identify four lender related monitoring measures that could affect borrowers' tax planning. We find firms with a larger portion of loan shares held by lead lenders, with loans led by reputable lenders, and with a single lending relationship to have more
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Local competition and auditors' provision of non-audit services Advances in Accounting Pub Date : 2023-06-28 Nam Ho
Non-audit services (NAS) provide auditors a platform to market their unique expertise and provide services surpassing the necessities of a financial statement audit. In this paper I study the effect of local competition on auditors' use of NAS within their product mix. My findings show that auditors respond to intensifying competition by increasing their selling of NAS. This response is especially
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The impact of online tax community advice on individual taxpayer decision making Advances in Accounting Pub Date : 2023-06-29 Gregory Stone, Stephanie Walton, Yibo (James) Zhang
In this study, we examine the impact of advice shared on an online tax community and taxpayer decision making. Online tax communities are linked to major tax preparation software and provide a way for taxpayers to ask unique questions and receive responses. While online communities are intended to facilitate the transmission of unbiased advice between individual taxpayers, the quality, content, and
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Do social networks improve the chance of obtaining challenging assignments? Evidence from black accounting professionals Advances in Accounting Pub Date : 2023-06-29 R. Mithu Dey, Lucy Lim
Racial disparities in career advancement continue to be a challenge for employers and minority workers in the accounting profession. We examine how social networks may influence the likelihood of Black professionals being placed on challenging assignments, which contributes to career advancement. Using a survey of 381 Black accounting professionals, we find that the key factors to obtaining challenging
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The role of adverse outcomes in municipal debt costs Advances in Accounting Pub Date : 2023-06-23 Christopher T. Edmonds, Ryan D. Leece, Beth Y. Vermeer, Thomas E. Vermeer
This study investigates whether municipal bond prices reflect adverse outcomes (i.e., material noncompliance with laws and regulations and questioned costs) and the interactive effect of adverse outcomes and internal control weaknesses. Using hand-collected data from 866 official registration statements, our results suggest that adverse outcomes are an important determinant of initial bond yields and
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The effects of time pressure on audit fees Advances in Accounting Pub Date : 2023-06-21 Kristyn Calabrese
This study investigates whether time pressure on the audit increases the cost of professional audit services. From 2003 to 2006, filing deadlines were shortened for accelerated filers (AFs) and large accelerated filers (LAFs) by 15 and 30 days, respectively, under the SEC's accelerated filing regulation. Time-pressure engagements are identified as those whose audit report dates in the year prior to
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The relationship between R&D intensity, conservatism, and management earnings forecast issuance Advances in Accounting Pub Date : 2023-06-02 Yezen Kannan, Ashraf Khallaf, Kimberly Gleason, Ibrahim Bostan
R&D-intensive firms suffer from high information asymmetry and high proprietary costs and are prone to exhibit bottom-line losses given the unconditional conservative accounting treatment of R&D expenses. We examine how R&D intensity influences the issuance of management earnings forecasts (MEFs) across levels of accounting conservatism, controlling for proprietary costs and other earnings guidance
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Clawback policy enforcement: To disclose or not to disclose Advances in Accounting Pub Date : 2023-05-13 Yunshil Cha, Susan Gill, Bernard Wong-On-Wing
The SEC proposed in 2015 to require the disclosure of incentive compensation recovery efforts by companies' boards of directors. While such disclosure of enforcement can signal the effectiveness of corporate governance as the SEC suggested, firms have argued that the proposed enforcement disclosure may harm executives' reputation regardless of their involvement in misstatement because the clawback
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The effect of client gender and negotiation style on auditors' proposed audit adjustments Advances in Accounting Pub Date : 2023-04-29 Jennifer Hamrick, Jennifer Schafer, Todd DeZoort
This study examines whether client gender affects the efficacy of two common negotiation strategies used by management when disputing a proposed audit adjustment. Eighty-two experienced auditors participated in an experiment in which CFO gender (female or male) and negotiation style (concessionary or contentious) were manipulated randomly between subjects. The results provide evidence of a gender-by-negotiation
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Is there a dark side of competition? Product market competition and auditor-client contracting Advances in Accounting Pub Date : 2023-04-03 Tianpei (Constance) Li, Stephanie Walton
This study establishes the informational value of a company's product market competition, derived from qualitative nonfinancial disclosures, in the audit contracting process. Greater product market competition could either serve as means of mitigating agency costs between managers and shareholders or heightening managerial rent-seeking activities and the incentive to distort disclosures. Consequently
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Discussion of “Is there a dark side of competition? Product market competition and auditor-client contracting” Advances in Accounting Pub Date : 2023-04-03 M. Kathleen Harris, Cathy S. Jun
Abstract not available
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Gold and tax capitalization: A natural experiment Advances in Accounting Pub Date : 2023-03-23 Steven Smith, Ron Singleton
This research examines whether U.S. income taxes are capitalized into gold coin prices. For years, the American Eagle (Eagle) was the sole gold coin to be IRA eligible. The Taxpayer Relief Act of 1997 expanded eligibility to include all other gold coins beginning on January 1, 1998, except the South African Krugerrand (Rand). In this natural quasi-experiment, we examine whether gold coin prices reacted
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Discussion of “CEO discretionary power, unconstrained stock ownership, and stock trading: Theory and evidence” Advances in Accounting Pub Date : 2023-03-21 Dirk E. Black
Hong (2023) provides both an analytical model and empirical archival evidence to explain why CEOs hold vested own-firm shares when doing so comes at the cost of reduced CEO portfolio wealth diversification. I discuss Hong (2023) in terms of the intuition provided by its analytical model and the inferences one can draw from its empirical results. Moreover, I briefly discuss (the lack of) multi-methods
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CEO discretionary power, unconstrained stock ownership, and stock trading: Theory and evidence Advances in Accounting Pub Date : 2023-03-20 Duanping Hong
This paper examines CEOs' holding and trading of unconstrained firm stock they own, i.e., vested and sellable firm shares. I first develop a theoretical model of why CEOs hold sellable shares in their own firm when doing so is riskier than holding a more diversified portfolio. In this model, greater stock ownership allows the CEO to exercise discretionary power more easily and extract rents from the
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Work-life balance in public accounting: An experimental inquiry into supervisor support for subordinate career progression Advances in Accounting Pub Date : 2023-03-15 Mary Sasmaz, Timothy J. Fogarty
Work-Life Balance (WLB) continues to be a concern of audit professionals because the long work-hours environment can have negative effects for both individuals and organizations. Audit firms have continuously committed to helping employees with the creation of work-life balance and well-being programs. The purpose of this study is to determine whether the firm's official commitment to work-life balance
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The role of founder decision rights and operating and disclosure mechanisms in firm value creation Advances in Accounting Pub Date : 2023-02-26 Wei Hsu, Yvonne Lee, Nandu J. Nagarajan, Bin Srinidhi
We find that founder firms use operating performance and transparency as mechanisms more effectively than non-founder firms for creating value. The greater effectiveness comes from the founders choosing their inputs strategically. Specifically, they increase the gross margin in differentiated firms that demand organizational agility and they increase asset usage efficiency in cost‑leadership firms
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Corporate giving and the case of tax avoidance Advances in Accounting Pub Date : 2023-02-16 Qianhua Ling, Linxiao Liu
Prior studies suggest that the association between corporate social responsibility (CSR) and tax avoidance is nuanced. Corporate giving, a CSR strength, is a discretionary activity primarily driven by management values. We propose that corporate giving promotes community-mindedness. Paying a fair share of tax is consistent with this value. We hypothesize that corporate giving and tax avoidance are
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Cost stickiness and bank loan contracting Advances in Accounting Pub Date : 2023-02-08 Jeong-Bon Kim, Jie Zhou
This study examines whether and, if so, how borrowers' asymmetric cost behavior (i.e., cost stickiness) is factored into the price and non-price terms of bank loan contracts. We provide strong and reliable evidence that ex-ante, the loan spread increases with cost stickiness after controlling for other known determinants of loan contract terms. Moreover, we find that the effect is more pronounced for
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Accruals and firm life cycle: Improving regulatory earnings management detection Advances in Accounting Pub Date : 2023-01-27 Andrew Almand, Brett Cantrell, Victoria Dickinson
Regulators have invested considerable energy into developing analytical tools to better detect earnings management. We propose that firms in similar life cycle stages (LCSs) face similar strategic concerns, managerial pressures, growth prospects, etc., and that the commonality in these factors contribute to the “normal” accruals generating process. Consistent with this prediction, we simulate various
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Costs and benefits of auditors' disclosure of critical audit matters: Initial evidence from the United States Advances in Accounting Pub Date : 2023-01-16 Valerie Li, Yan Luo
In an effort to make audit reports more informative to financial statement users, the Public Company Accounting Oversight Board (PCAOB) requires an expanded audit report in which auditors are required to disclose critical audit matters (CAMs). The new standard (AS 3101) became effective for audits of financial statements of large accelerated filers for fiscal years ending on or after June 30, 2019
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Corporate culture and financial statement comparability Advances in Accounting Pub Date : 2022-12-22 Mansoor Afzali
In this paper, I empirically examine the influence of corporate culture on the comparability of financial statements. I predict that firms with strong corporate cultures have less-opportunistic managers, who make homogenous decisions when faced with similar economic events, resulting in greater accounting comparability. For a sample of U.S. companies, I find empirical evidence consistent with this
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When it pays to be a friend: Investigating nonprofessional investors' judgments toward CSR companies following an accounting restatement Advances in Accounting Pub Date : 2022-12-06 Erik S. Boyle, Natalia Mintchik, Rick C. Warne
Prior literature suggests that engagement in corporate social responsibility (CSR) creates an insurance effect that shields companies from the negative consequences of corporate missteps. We experimentally examine whether this protection extends to an accounting restatement and whether investors' attributions of the underlying reasons for this restatement affect their judgments. Results indicate that
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Aggregate earnings and market expectations in United States presidential election prediction markets Advances in Accounting Pub Date : 2022-11-25 Taylor Wiesen
This study uses election futures market data to provide the first empirical evidence that aggregate earnings conveys timely “election-relevant” information effecting betting market participants' expectations about the likely outcomes of United States presidential election campaigns. I document that aggregate earnings news is associated with multiple facets of U.S. economic health affecting voter utility
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Consequences of state-level regulations in accounting, finance, and corporate governance: A review Advances in Accounting Pub Date : 2022-09-28 Ahmed Al-Hadi, Ahsan Habib
We review the literature on the consequences of U.S. state-level local regulations for various corporate outcomes in the accounting, finance, and corporate governance domain. We argue that state-level regulations might affect corporate outcomes through at least two channels. First, the state intervention channel that includes state regulations pertinent to auditor liability, director-liability, and
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The heterogeneous impact of industry concentration on analyst performance Advances in Accounting Pub Date : 2022-09-21 Lan Thi Mai Nguyen, Chee Seng Cheong, Ralf Zurbruegg
We examine the impact that industry concentration has on superior and inferior analysts' performance by utilizing a Herfindahl-Hirschman index of analyst specialization. Using broker M&As as a plausibly exogenous shock to analyst workloads, we find that superior analysts' forecast accuracy improves when their coverage is more concentrated within a few industries. However, there is no evidence of an
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Do stock options and stock awards provide managers different incentives for corporate disclosure? Advances in Accounting Pub Date : 2022-09-08 Emrah Ekici, Marina Y. Ruseva
We examine the relation between executive equity compensation and corporate disclosure. Specifically, we propose that options and stock awards provide executives with distinct incentives to disclose forecasts to market participants. Since options are risker than stock awards, executives receiving more options will have greater incentives to guide investors and influence the stock price to maximize
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Accounting estimation intensity, analyst following, and earnings forecast properties Advances in Accounting Pub Date : 2022-09-02 Jeff P. Boone, Inder K. Khurana, K.K. Raman
We specify two measures of accounting estimation intensity (AEI) based on the textual analysis of the qualitative disclosures in the critical accounting policies (CAP) section of firms' MD&A. We then examine how these measures relate to financial analyst following and earnings forecast properties. Using a narrow dictionary definition of accounting estimates, we find AEI is positively associated with
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Suppliers' relationship-specific investments and customers' management forecasts Advances in Accounting Pub Date : 2022-08-26 Kai Chen
In this research, I examine the effect of relationship-specific investments (RSI) made by suppliers on customers' decisions to issue management forecasts. Suppliers' RSI have a low value outside of the customer-supplier relationship. Anticipating that their RSI may provide their customers more bargaining power (i.e., the “hold up” problem), suppliers may be reluctant to make RSI in the first place
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Are voluntary internal control weakness disclosures in initial public offerings associated with managerial ability and subsequent financial reporting quality? Advances in Accounting Pub Date : 2022-08-25 Tiffany J. Westfall, Mark Myring
This study examines whether voluntary disclosure of internal control weaknesses (ICWs) in IPO registration statements is associated with managerial ability and subsequent SOX 404 adverse audit opinions. Using a sample of IPO registrants that voluntarily disclosed ICWs in their registration statements, we examine the relationship between ICW disclosure, managerial ability, and subsequent material weaknesses
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Market response to stock exchange listing deficiency notices: Evidence from Nasdaq Advances in Accounting Pub Date : 2022-08-09 Binod Guragai
The Securities and Exchange Commission (SEC) requires Form 8-K filings of quantitative deficiency notices. This study examines whether investors use these 8-K filings in a way that influences their investment decisions. Using abnormal returns, I show that investors react negatively to these 8-K filings. Reactions to filings are less negative for firms with more institutional investors. I also find
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Client importance and unconditional conservatism in complex accounting estimates Advances in Accounting Pub Date : 2022-07-25 Kenneth W. Shaw, James D. Whitworth
In this paper, we examine the relation between client importance to Big 4 audit firm local offices and unconditional conservatism in complex accounting estimates; specifically, stock option volatility, pension expected asset rates of return, and pension discount rates. Changes in these estimates, which can appear small, can have material financial statement effects, have been used in earnings management
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Auditor interventions that reduce auditor liability judgments Advances in Accounting Pub Date : 2022-07-02 Valerie A. Chambers, Philip M.J. Reckers
Prior research documents jurors do not always respond consistently, or favorably, to auditors' quality-intended efforts. Counterintuitively, in some instances, doing more has led to greater liability, not less (Reffett, 2010). We hypothesize (and find) that proactive engagement of the corporate audit committee will reduce counterfactual thinking, and the proactive use of a forensic specialist at the