We examine the relationship between analyst research and corporate earnings announcements to explore the relative importance of information discovery versus interpretation of previously released information. Using equity market reaction to capture information content, we find that information discovery (interpretation) dominates in the week before (after) firms announce their earnings. In addition, we find that the interpretation role increases in importance with the difficulty of financial accounting information. Analysis of all weeks surrounding earnings announcements shows that the information discovery role is overall more important. We are able to reconcile this result with the opposite finding in Francis et al. (2002).

\We examine whether family owners exploit internal control weaknesses for entrenchment purposes and whether the public disclosure requirement under SOX 404 helps alleviate this entrenchment. We find supportive evidence for both questions. In the initial years of SOX 404 implementation (2004 and 2005), ineffective internal control in family CEO firms is more conducive to entrenchment – measured by the occurrence of misstatements, frauds, and related party transactions – than ineffective internal control in nonfamily firms is. With the public disclosure requirement of SOX 404 in place, family CEO firms are more likely to remediate internal control weaknesses, and the resulting improvement in internal control in family CEO firms has significantly reduced family entrenchment. Our findings provide new evidence on the dynamics of family entrenchment in the U.S. and shed light on a key benefit of public disclosure of internal control quality.

We examine whether recent regulatory reforms requiring majority board independence reduce the extent of earnings management. Firms that did not have a majority of independent directors before the reforms (referred to as noncompliant firms) are required to increase their board independence. We find that, while noncompliant firms on average do not experience a significant decrease in earnings management after the reforms compared to other firms, noncompliant firms with low information acquisition cost experience a significant reduction in earnings management. The results are similar when we examine audit committee independence and when we use alternative proxies for information acquisition cost and earnings management. These findings indicate that independent directors’ monitoring is more effective in a richer information environment.

Using the data of Chinese industrial enterprises, we examine how the incentive to reach GDP growth targets affects the local firms' capacity utilization. We find that Chinese economic growth targets exhibit a persistent pattern of top-down amplification along different jurisdiction levels, which is associated with a decline in local firms' capacity utilization. Moreover, the effect of amplified targets on overcapacity is more pronounced (1) when officials utilize hard-constraint vocabulary in setting the economic growth target, (2) during the National Congress of Communist Party, and (3) when the age of prefecture-level officials is close to 55. We also find officials intervene local firms' capacity decisions by increasing private communication with local entities and loosening public policies for local firms within their jurisdictions. Further results show that the amplification of economic targets is detrimental to future development of both regional economy and local firms.

Using data from China, we examine whether and how the incentive to boost GDP growth at the government level affects earnings management at the firm level. We find that firms in provinces with GDP growth lower than the national level or the average of the adjacent provinces are more likely to engage in earnings management than firms in other provinces. Specifically, they are more likely to inflate revenues, overproduce, and delay asset impairment losses. The aggregate earnings management induced by GDP growth incentives accounts for about 0.5% of GDP. The results are stronger for local state-owned enterprises, in provinces with a lower level of marketization, for firms in provinces with younger governors, and in the years immediately prior to the turnover of provincial officials. Overall, this paper provides systematic evidence on how firms engage in earnings management to boost the GDP growth in their provinces.

Given the importance of research resource allocation within brokerage firms, we examine key factors that influence the issuance of individual versus team analyst reports. Using a comprehensive sample of analyst reports from China for the 2008–2021 period, we find that this decision is influenced by (1) the brokerage firm's client interests, whereby firms held by the brokerage firm's mutual fund clients and firms that are the brokerage firm's underwriting clients receive more team than individual reports from the brokerage firm, and (2) the nature of corporate events, whereby routine events receive more team reports and nonroutine events receive more individual reports. Additional analyses suggest that analysts' personal traits and analyst team characteristics also affect the decision. Our findings further the understanding of the factors that affect the organization and resource allocation of sell‐side equity research.

We investigate whether short interest affects supply chain partners' investments. This investigation is important for understanding the real effect of short sellers in facilitating stakeholders' investment decisions. Prior research suggests that short interest conveys negative news in a timely manner, which predicts future deterioration in firm fundamentals. We predict and find that a supplier's future investments decrease with its major customers' short interest. Consistent with predictions, this result is more pronounced when customers' short interest is more informative about their future performance, when customers have a more opaque information environment, and when suppliers incur lower customer switching costs. The results are robust when we use various approaches to address endogeneity concerns and establish causality. Our findings suggest that short sellers provide valuable information to supply chain partners when making investment decisions.

This paper investigates the impact of the founding family’s presence on CEO turnover decisions. We find that family firms managed by CEOs outside the founding family (i.e., professional CEO family firms) have higher CEO turnover-performance sensitivity than family firms managed by family members (i.e., family CEO firms) or non-family firms. These results are robust to alternative performance measures and CEO turnover definitions. Additional analyses indicate that higher family ownership leads to even higher (lower) turnover-performance sensitivity in professional CEO family firms (family CEO firms). These results indicate that, with regard to CEO turnover decisions, better monitoring of CEOs by family owners leads to the alleviation of agency conflicts, but the power of family CEOs leads to potential family entrenchment.

We examine the voluntary disclosure practices of family firms. We find that, compared to nonfamily firms, family firms provide fewer earnings forecasts and conference calls, but more earnings warnings. Whereas the former is consistent with family owners having a longer investment horizon, better monitoring of management, and lower information asymmetry between owners and managers, the higher likelihood of earnings warnings is consistent with family owners having greater litigation and reputation cost concerns. We also document that family ownership dominates nonfamily insider ownership and concentrated institutional ownership in explaining the likelihood of voluntary disclosure. Using alternative proxies for the founding family's presence in the firm leads to similar results.

There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external financing choices. We find that for firms that obtain external financing after restatements, they rely more on debt financing, especially private debt financing, and less on equity financing. The increase in debt financing is more pronounced for firms with more severe information problems and less pronounced for firms with prompt CEO or CFO turnover and auditor dismissal. Our evidence indicates that accounting information quality affects capital providers’ resource allocation and that debt holders help alleviate information problems after accounting restatements.