Abstract Evaluating organizational effectiveness is a significant challenge for nonprofit donors making donation allocation decisions. Donations may be misallocated if organizational effectiveness is inadequately assessed, and donors, who are often organizational outsiders, rely on nonprofit disclosures on IRS Form 990 to make such assessments. We examine whether donors value volunteer commitment, as measured by the number of volunteers that nonprofits disclose on Form 990, alongside financial and governance disclosures in assessing organizational effectiveness. Donors and volunteers prefer to make respective gifts of money and time to nonprofits that are effective in furthering their missions. Based on the premise that volunteers, as organizational insiders, are better positioned than donors to judge the impact of their contributions, we hypothesize that volunteer commitment provides value‐relevant information to donors for use in assessing imprecise effectiveness signals—namely, the program ratio and corporate governance disclosures. Consistent with this, we find that the value relevance of the program ratio and corporate governance disclosures to donors is increasing with the level of volunteer commitment. These results suggest that donors view volunteer commitment as a signal of effectiveness, useful in interpreting other signals of effectiveness. The evidence is more pronounced among nonprofits that report more credible volunteer disclosures, have a larger proportion of sophisticated donors, and are more complex. These findings have implications for regulators considering nonprofit disclosure policies, as well as nonprofit managers and directors engaging volunteers.

Abstract The United Kingdom mandated expanded audit reports in two waves, starting in 2013 and 2017, respectively. Prior studies of the first wave, which included large and highly regulated companies, concluded that expanded reports have limited incremental value. We focus on the second wave, which included companies listed on the Alternative Investment Market (AIM). The AIM is characterized by emerging companies that are smaller, riskier, and subject to lighter regulatory requirements and to private monitoring. We examine whether investors and other stakeholders benefit from expanded reports in this setting. We document that AIM companies have shorter expanded reports and fewer key audit matters. Next, we demonstrate that these reports have negligible incremental information value for investors or consequences for the quality and cost of audits. Finally, although we find that some variations in the expanded reports' content are associated with investor reactions to the annual report and with audit fees, variations in external monitoring and company size do not play an incremental role. By focusing on a set of companies with weaker information environments, our findings help to extend the conclusions from prior studies about the limited incremental value of expanded reports.

Abstract We examine the association between target firms' public non‐GAAP earnings disclosures and merger and acquisition (M&A) efficiency. This research question is important, given the widespread use of non‐GAAP metrics in M&A valuation and lack of evidence regarding the real effects of non‐GAAP disclosure. Public non‐GAAP disclosure can enhance bidders' ability to assess a target's core earnings and potential synergy, especially in the earlier stages of due diligence, and enable bidders to make better M&A decisions. We find that target firms' non‐GAAP disclosures are associated with greater M&A efficiency, greater synergies, and lower likelihood of post‐acquisition goodwill impairment. We also find some evidence that target firms' non‐GAAP disclosures are positively related to post‐acquisition operating performance. Further, we find modest evidence that the positive relation between non‐GAAP disclosures and M&A efficiency is stronger (1) for targets that are more difficult to value, (2) for targets with weaker information environments, and (3) when targets' non‐GAAP numbers are of higher quality. Overall, our evidence suggests that non‐GAAP disclosures help facilitate efficient resource allocation in M&As and are associated with real effects on corporate investment. Our evidence is potentially relevant to regulators' concerns about the usefulness of non‐GAAP metrics.

Abstract Academic research investigating the economic consequences of tax avoidance is almost always interested in the consequences of intentional, deliberate actions undertaken to reduce taxes relative to income. Therefore, it is crucial that such research distinguishes between intentional and incidental tax avoidance, since failure to do so can create endogeneity concerns and lead to incomplete and incorrect economic inferences. In this paper, we first develop a framework that conceptually defines and distinguishes between intentional and incidental tax avoidance. We highlight that the endogeneity problem arises because intentional tax avoidance is not directly observable. We consider two approaches to mitigating endogeneity concerns and apply these approaches by reexamining two influential studies that investigate the economic consequences of tax avoidance. We show how controlling for past accounting losses eliminates the effect of tax avoidance on credit spreads (Hasan et al. 2014, Journal of Financial Economics, 113 (1), 109–130) and how using an instrumental variables approach changes the sign of the relation between tax sheltering and stock price crash risk (Kim et al., 2011, Journal of Financial Economics, 100 (3), 639–662). Overall, our paper punctuates the importance of both (1) conceptually distinguishing between incidental and intentional tax avoidance and (2) econometrically addressing the challenges that arise when empirical differentiation between incidental and intentional tax avoidance is important to the research question.