Knowledge that Transforms

Companies have widely adopted a system of work‐product reviews whereby the work of one individual is subsequently reviewed by another to ensure its quality. We examine how managers can effectively implement a review of employee work to improve performance. Organizations review employees' work to identify mistakes and improve work quality. However, reviews may also reduce employees' effort and initiative if they expect reviewers to identify and correct their errors for them. We use an experiment to examine how employee performance depends on who conducts the review and how feedback is provided. Specifically, participants' work was reviewed by either a superior or a peer, and the reviewer provided either general, high‐level guidance (autonomy‐oriented) or specific corrective information about errors (dependency‐oriented). Employees performed best when superiors provided high‐level guidance or when peers provided specific corrective feedback, with these benefits emerging over time. Guidance from a superior increased employees' sense of responsibility, whereas corrective help from a peer strengthened feelings of teamwork and cohesion. Review approaches that did not fit these combinations offered no clear performance benefit relative to having no review. The findings show that review effectiveness depends on matching the feedback approach to the reviewer's organizational rank. These results have important implications for managers, accountants responsible for internal controls, and audit professionals involved in designing and implementing the review process.

This paper highlights racial and ethnic preferences in corporate director elections. Using a comprehensive dataset of mutual fund voting records, we discover that mutual fund managers are more likely to vote for director nominees who share their racial or ethnic identity. Funds managed by White-dominated teams exhibit the strongest same-race preferences, particularly those in fund families with scarce minority representation. Same-race voting preferences have detrimental implications for the career outcomes of minority director candidates, and are associated with worse fund performance primarily when fund managers operate under weaker accountability. We investigate various potential mechanisms—including statistical discrimination, value maximization, conflicts of interest, social networks, and taste-based biases—and find that the evidence aligns most closely with a taste-based explanation for same-race preferential voting.

We show that a structural model incorporating firms’ real options and financial leverage decisions can generate forward-looking equity distributions of various shapes, resulting in highly flexible implied volatility surfaces. In contrast, exogenously specified models with stochastic volatility and jumps can only generate smiles and downward-sloping curves. We explain the observed negative relationship between downward sloping implied volatility surfaces and the value of real options: real options contribute positively to equity skewness, and more so the more convex their payoff, which is the case when the real option is “at-the-money” and has the lowest value.

Experimental asset markets provide a controlled approach to studying financial markets. We attempt to replicate 17 key results from four prominent studies, collecting new data from 166 markets with 1,544 participants. Only three of the 14 original results reported as statistically significant were successfully replicated. We fail to replicate findings on emotions, self‐control, and gender differences in bubble formation but confirm that experience reduces bubbles and cognitive skills explain trading success. Our study demonstrates the importance of replications in enhancing the credibility of scientific results in this field.

I explore the nature of analysts’ climate-related discussion in their reports. Focusing on industries most exposed to climate change, I find very few reports (less than 2 percent) and a minority of analysts (less than 11 percent) discuss climate-related topics. Analysts concentrate climate-related discussion among utilities, mostly discussing renewable energy and regulatory issues. These discussions exhibit no significant association with short-term earnings forecasts and a weak association with more pessimistic long-term growth forecast revisions. Climate-related discussion is also associated with more optimistic target prices when analysts do not issue long-term growth forecasts, suggesting the development of a long-term perspective correlates with views on climate-related issues. Discussions of solar-, emissions-, and automotive-related topics are associated with this greater target price optimism. These findings highlight how analysts’ climate-related discussion relates to long-term expectations and concentrates among highly exposed firms. Data Availability: Data are available from the public sources cited in the text. A detailed listing of how each large language model (LLM) classified each climate-related report, a document describing the details of this listing, a firm-year summary of climate-related discussion and subtopical classifications, and a description document of this firm-year summary are available upon request.

We examine whether audit partners’ ownership stakes in affiliated non-audit businesses are related to audit quality. We argue that non-audit ownership is a relatively sharp measure of auditor-client economic bonding, which can impair auditor independence. Using a unique setting in China where we observe partners’ equity stakes in both audit and non-audit businesses, we find that audit adjustments are significantly smaller when engagement partners hold larger ownership stakes in non-audit businesses. Audit adjustments are further reduced when the entire audit partnership holds greater ownership in affiliated non-audit businesses, suggesting that non-audit ownership matters at the audit firm level as well. Additional analyses suggest that these results are driven by impaired independence, rather than partner distraction or endogenous partner-client matching. Our study informs ongoing policy debates on the structuring of audit and non-audit businesses as well as the investments of non-audit entities in accounting practices. Data Availability: The authors have nondisclosure and confidentiality agreements for their use of proprietary data, which were provided to the authors for independent academic research only. Nonproprietary data are available from sources identified in the text.