1,720,974 research outputs found
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Audit Committee Voluntary Disclosures of External Auditor Oversight and SEC Monitoring Intensity
No full textI examine whether voluntary disclosures by a firm’s audit committee about their oversight of the external auditor are associated with SEC monitoring intensity during SEC’s annual review process. Drawing on the importance of AC charters, reports and proxy statements, and based on disclosures by audit committees in proxy statements of S&P 1500 firms covering the 2015-2021 proxy seasons, I find that such voluntary disclosures overall are not associated with SEC monitoring intensity. I find some evidence that disclosures of evaluation criteria of the external auditor are negatively associated with some proxies of monitoring intensity. I also find some evidence that this association persists in the cross-section of firms that increase their percentage of non-audit services from the prior year. This study contributes to the growing stream of literature on the consequences of voluntary disclosures by audit committees and helps investors and AC members better understand the determinants of the monitoring decisions made by the SEC during its annual review process
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Auditor Industry Specialization and Revenue Manipulation
No full textWhile the effect of auditor industry specialization is well documented in prior literature, it is unclear under what conditions or for which type of firms an auditor's industry expertise matters. I hypothesize that industry specialist auditors will provide higher quality audits in settings where the likelihood of revenue manipulation is greater. I use a firm's manipulation of revenues to measure audit quality because the revenue account is significant, requires in-depth industry specific knowledge, and is subject to frequent manipulation. The results suggest that the impact of industry specialists is concentrated among firms with complex revenue recognition standards, high growth, and low institutional monitoring. Overall, my findings highlight the importance for regulators, auditors, clients, and investors to consider the circumstances in which industry expertise improves the quality of an audit
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Workplace Disruptions Impact on Financial Reporting Quality
No full textThis study provides evidence that workplace disruptions impact financial reporting quality. I use the novel setting of company headquarter relocation to study workplace disruptions. I find that workplace disruptions are negatively associated with financial reporting quality. Additionally, I find limited evidence that external auditors with more expertise and auditor selection (a closer office within the same audit firm) can partially mitigate the negative effects of workplace disruptions on financial reporting quality. Both mitigating effects are present in companies that relocate headquarters by a distance of 100 kilometers or greater. This study is relevant to financial reporting research, given the increasing frequency of workplace disruptions
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Peer Accounting Information and the Use of Peer-based Multiples for IPO Valuation
No full textInitial public offerings (IPOs) are primarily valued using the comparable firms approach, whereby underwriters rely heavily on multiples based on the accounting information of peer firms. Effective use of the comparable firms approach depends significantly on the underwriter's ability to estimate the expected future growth and profitability of the IPO firm and its peers and make appropriate adjustments to the multiples to arrive at a final offer price for the IPO shares. I find evidence that, in general, IPO valuations are decreasing relative to peers in the similarity of the peer group to the IPO firm, but this effect is moderated by the peer group's accruals quality. These findings suggest that when peers are similar to the IPO firm, underwriters make less adjustments to the final offer price, however, higher peer accruals quality may ease the assessment of differences in growth and profitability, facilitating further adjustments
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The Impact of Managerial Overconfidence and Ability on Auditor Going-Concern Decisions and Auditor Termination
No full textI examine the influence of managerial overconfidence and ability on 1) auditors' decision to issue a going concern opinion and 2) auditor dismissal rates after issuing a going concern opinion. When there is substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, auditing standards prescribe that auditors obtain and evaluate information about client management's remedy plans. I find that clients with overconfident managers are more likely to receive a going concern opinion. I also show that managerial ability mitigates the positive association between managerial overconfidence and the likelihood of a going concern opinion. Additionally, I examine how these managerial attributes influence auditor retention decisions, and find that auditors are more likely to be dismissed after issuance of a going concern opinion when the client company has overconfident management. Finally, I find that the association between managerial overconfidence and auditor dismissal is stronger when management is more powerful than the company's audit committee
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The Role of Market Forces and Regulation in Disclosure: Evidence from Cyber Risk Factors
No full textEconomic theory generally argues that market forces induce managers to disclose their private information and yet disclosure regulation is pervasive in practice. Using the setting of cyber risk disclosures, I speak to the debate regarding the effectiveness of both market forces and regulation in eliciting disclosure. I find that market forces (specifically, investor demand for managers’ private information) and disclosure regulation have contrasting effects: market forces are associated with higher disclosure quality (i.e., specificity and uniqueness) while regulation is associated with higher disclosure quantity (i.e., amount). These results are robust to a battery of sensitivity analyses, including controlling for the potentially confounding effect of enforcement. I also find that disclosure quality, rather than quantity, is informative to investors. Although subject to important caveats, my collective evidence provides a potential rationale for the pervasiveness of disclosure regulation (i.e., an increase in disclosure quantity) but is also consistent with the narrative that disclosure regulation can be counterproductive.Release after 12/18/202
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Market Response to News Sharing: Evidence from the Level and Speed of Social Media Engagements
No full textI investigate the market response to network dissemination of earnings news resulting from news sharing on social media. To disentangle the effects of network dissemination of news from user-generated opinions, I focus on dissemination of earnings news published by news outlets. Using a proprietary dataset of social media engagements with earnings news reports (likes, forwards, and comments on Facebook), I find that news sharing is associated with improved price discovery, earnings response, and stock liquidity. The positive effects are stronger for sharing of reports originating from more professional news outlets. However, faster news sharing slows down the speed of price discovery, especially for news from less-professional sources. To address potential endogeneity concerns, I use Facebook’s newsfeed algorithm update as an exogenous increase in social media engagements. The findings are robust to a battery of sensitivity tests and additional tests rule out alternative explanations such as, increased awareness of news, news informativeness or news salience, for the documented effects of news sharing. In summary, my study provides new evidence of how network dissemination of news fosters efficient and informative stock markets
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The Role of Additional Non-EPS Forecasts: Evidence Using Pre-Tax Forecasts
No full textIn this study, I examine whether and how analysts' pre-tax earnings forecasts are informative to investors. Specifically, I first examine the determinants of pre-tax forecast coverage and whether pre-tax forecasts are incrementally informative to investors in evaluating firm performance. Next, I examine whether pre-tax forecasts decrease the transparency of tax-related earnings management. Lastly, I examine how pre-tax earnings forecasts influence management's incentives to avoid taxes. Using I/B/E/S data from 2002-2011, I find pre-tax forecast coverage is associated with firm-level tax characteristics. In addition, I find investors utilize pre-tax earnings forecasts in evaluating firm performance, after controlling for after-tax earnings forecasts. In addition, the results of this study indicate investors more significantly discount earnings which have been managed through the tax account when pre-tax earnings forecasts are available, consistent with increased transparency resulting from detailed forecasting. Lastly, I find some evidence that increases in pre-tax forecast coverage are associated with a decrease in tax avoidance. This result is consistent with a change in management's incentives resulting from the existence of additional performance benchmarks. Collectively, this study provides evidence that pre-tax earnings forecasts are informative in multiple settings. These findings have important implications for academics and practitioners in understanding the role of additional non-EPS income statement forecasts.Release after 08-Apr-201
Going Beyond Counting First Authors in Author Co-citation Analysis
Get PDFThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
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