ABSTRACT We investigate the effects of financial reporting on current employee job search, that is, whether firms' public reports cause their employees to reevaluate jobs and consider leaving. develop theory for why use earnings announcements (EAs) inform search decisions, empirically based employees' activity a popular market website. find by increases significantly during EA weeks, especially when are more mobile information frictions greater. also EAs update expectations about employers'...

ABSTRACT Can culture explain regional differences in minority shareholder expropriation? Examining variation China, we document that the influence of historical Confucian values persists, despite decades political movements clamping down on these values, and reduce expropriation local public firms. The effect expropriation, part, operates through establishment oversight mechanisms (i.e., greater financial reporting quality dividend payouts) constrain expropriation. findings have important...

This paper examines whether investor learning about profitability (i.e., the mean of earnings distribution) leads to persistence in disclosure decisions. A repeated single-period model shows that persistent beliefs lead Using forecast data, I structurally estimate and perform several counterfactual analyses. find that, when investors are assumed know profitability, management decisions significantly declines by 17%–27%. About 24% firms would have disclosed differently, resulting 3.9% net...

ABSTRACT This paper examines how credit rating levels affect municipal debt issuers’ disclosure decisions. Using exogenous upgrades in caused by the recalibration of Moody's ratings scale 2010, we find that upgraded municipalities significantly reduce their required continuing financial information, relative to unaffected municipalities. Consistent with a reduction debtholders’ demand for information driving these results, is greater when bonds are held investors who relied more on ex ante....

ABSTRACT Theory posits that investors can rationally infer the implications of strategic nondisclosure for firm value, pressuring managers to disclose information voluntarily. This study documents lack an earnings guidance predicts abnormal return −41 basis points around subsequent quarterly announcement, suggesting do not fully incorporate nonguidance. Further analyses demonstrate limitations in price efficiency, driven by investors' limited attention and short‐selling constraints, explain...

ABSTRACT We present theory and empirical evidence that greater financial reporting quality can incentivize myopic investments. In the model, increases investor response to earnings, elevating manager’s incentive invest myopically improve earnings. Using setting of Big N auditors’ acquisitions non-Big Ns, which increased earnings for acquired client firms, we find supporting Specifically, clients decrease intangible investments, particularly when (1) increase in is larger (2) horizon...

We examine two distinct channels through which going concern opinions can be associated with the likelihood of bankruptcy: auditors have better access to information about their clients' bankruptcy risk and directly induce bankruptcies. Using a bivariate probit model that addresses omitted variable bias arising from auditors' additional information, we find support for both inducement channels. The direct effect receiving opinion is 1.5 percentage point increase in probability bankruptcy....

We estimate an infinite-horizon dynamic oligopoly model of audit firm tenure and misstatements evaluate a policy counterfactual involving mandatory rotation. Longer lowers the cost producing audits, increasing quality reducing fees. Thus clients are less likely to misstate more keep incumbent as increases. By value retaining firms, rotation leads large increases in auditor switches, even before term limit, implying switching costs borne by clients. Misstatement rates increase because firms...

ABSTRACT Using misstatement data, we find that the distribution of detected fraud features a heavy tail. We propose theoretical mechanism explains such relatively high frequency extreme frauds. In our dynamic model, manager manipulates earnings for personal gain. A monitor uncertain quality can detect and punish manager. As fails to fraud, manager's posterior belief about monitor's effectiveness decreases. Over time, learning leads slippery slope, in which size frauds grows steeply, power...

Abstract We study how financial certifier competition influences loan contracting in the context of auditing. Exploiting unexpected demise Arthur Andersen that exogenously decreased auditor competition, we find a greater decrease spread for borrowers markets which declined more. Additional analyses suggest result stems from enhanced audit quality and reduced credit risk. The effect is stronger with weaker external monitoring those generating significant revenue their auditors. Our evidence...

This paper examines whether investor learning about profitability (i.e., the mean of earnings distribution) leads to persistence in disclosure decisions. A repeated single-period model shows that persistent beliefs lead Using forecast data, I structurally estimate and perform several counterfactual analyses. find that, when investors are assumed know profitability, management decisions significantly declines by 17% 27%, 24% firms would have disclosed differently, resulting 3.9% net change...

We examine two distinct channels through which going concern opinions can be associated with the likelihood of bankruptcy: auditors have better access to information about their clients' bankruptcy risk and directly induce bankruptcies. Using a bivariate probit model that addresses omitted variable bias arising from auditors' additional information, we find support for both inducement channels. The direct effect receiving opinion is 0.84 percentage point increase in probability firms do not...

This paper documents a dual role for disclosure. In addition to the traditional of alleviating information asymmetry, firms are motivated disclose attract limited investor resources and order flow away from other (Fishman Hagerty, 1989). Higher competition investors increases incentive disclose, but resulting excessive disclosure implies diminishing marginal returns Consistent with this investor-seeking disclosure, we find that when compete more investors, they issue guidance, especially...

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We investigate a 2012 pay-or-explain regulation implemented by China's Shanghai Stock Exchange. The mandates that eligible firms must either pay 30% of their current-year profits as cash dividends or explain the reasons for nonpayment through public conference call. Using listed on Shenzhen Exchange control group, our difference-in-differences estimates suggest subject to decreased tunneling, irrespective whether they comply paying disclosing. Further analyses indicate disclosures in calls...

This study investigates the relation between refinancing risk, an important form of risk stemming from debt financing, and firms' decisions to issue capital expenditure forecasts. We find that increase in is associated with both a lower probability disclosing frequency Cross-sectional tests show firms more exposed less able mitigate this are likely reduce forecasts, following risk. Our results suggest structure can influence firm information environment through managers' disclosure...

Several recent empirical papers assert that the decision to disclose an earnings forecast shortly before actual announcement reveals only short-term information and is therefore unlikely entail proprietary costs. Using a simple dynamic model of voluntary disclosure, we show managers’ private about long-term future performance. We test predictions empirically find predicts three years beyond forecasted period, predictive ability incremental itself. Consistent with our model, for performance...

Theory posits that investors can rationally infer the implications of strategic nondisclosure for firm value, pressuring managers to voluntarily disclose information. This study documents lack an earnings guidance predicts abnormal return -41 basis points around subsequent quarterly announcement, suggesting do not fully incorporate nonguidance. Further analyses demonstrate limitations in price efficiency, driven by investors' limited attention and short-selling constraints, explain...