Recent years have witnessed significant growth in corporate sustainability reporting. Yet existing research provides mixed evidence on the information content of these reports for investors. We examine the stock market reaction to the announcement of a sample of US corporate sustainability reports incorporating Sustainability Accounting Standards Board metrics that are intended to provide financially material information to investors. Using standard measures of information content, we cannot find compelling evidence that these reports provide a significant amount of new information to investors. Further analysis of a subset of common metrics indicates that they are either financially immaterial or preempted by traditional financial disclosures. Finally, we show that most firms target their sustainability reports at a broad set of sustainability-oriented stakeholders rather than a narrow set of financially oriented investors.

We examine whether private firm disclosure affects the price that public firms pay for their bank loans. Using global data on syndicated loans, we find that private firm disclosure significantly reduces public firms’ loan spreads. This finding supports a positive information externalities view whereby private firm disclosure helps banks evaluate public borrowers’ credit risk within the industry context and reduces information asymmetry between banks and borrowers. Consistent with this mechanism, we find larger reductions in public firms’ loan spreads when banks have less information about the borrower or lower expected monitoring intensity, when public-firm borrowers are more informationally opaque, when private firms have greater economic importance in the industry, when private and public firms are more economically similar, or when a larger share of private firms in an industry have audited financial statements. We show that private firm disclosure generates positive externalities for the loan market by reducing information asymmetry.

Securities regulators frequently punish firms for their managers’ misreporting. They argue that this would enhance firms’ long-term value by mitigating underinvestment in compliance mechanisms, such as internal controls over financial reporting. Opponents of corporate penalties argue that the penalties would harm the very same investors already harmed by misreporting. We evaluate these arguments in a model with a capital market-oriented misreporting manager and a board of directors that invests in internal control quality. We identify governance transparency and board dependence as key factors that moderate the firm-value effects of corporate penalties. Internal control underinvestment occurs only if the board is severely dependent and if its choice of internal controls is opaque. Then corporate penalties curb internal control underinvestment, but they only improve long-term firm value if, additionally, internal control costs are sufficiently small (e.g., in small and less complex firms). Overall, our differentiated results have implications for regulatory enforcement policies and empirical studies on the firm-value effects of public enforcement.

We examine the role of identity in corporate governance, focusing on an important dyad: audit committee chair and chief financial officer. Drawing on identity theory, which argues that people have lower trust in those they perceive to be different from themselves, we posit that the audit committee chair’s trust in the chief financial officer is lower when the two are different genders. We find that a gender difference between the two is associated with greater monitoring by the chair, consistent with lower trust. This effect is attenuated when a firm has value-based controls that promote diversity tolerance or when a chief financial officer seems more trustworthy. We find no evidence that the increased monitoring improves financial reporting. However, we find evidence that the increased monitoring generates negative externalities by distracting the chief financial officer, as proxied by lower operational performance. Our findings underscore the importance of identity in corporate governance.

We explore the capabilities and dangers of artificial intelligence (AI) usage in accounting research. We focus on mining U.S. securities regulations as an economic shock, testing the causal effect of these shocks on U.S. firms’ voluntary disclosure, and writing a complete academic paper, conditional upon finding statistically significant results. Overall, this research experiment demonstrates the capacity for AI to provide efficiencies in research. AI-generated papers are not ready to be submitted to top accounting journals, but they constitute a useful starting point for accounting researchers and using AI saves valuable time in identifying exogenous shocks that significantly affect an outcome of interest. When we repeat the same experiment to explore the causal effect of non-U.S. securities regulations on U.S. firms’ voluntary disclosure practices, AI writes many professional looking papers with spurious results and unsubstantiated economic arguments, highlighting the potential dangers of AI for accounting scholarship

We study whether mandatory surveys of patient experience affects patient mortality in U.S. hospitals. We exploit two settings where healthcare regulators mandated the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey: the 2003 Maryland pilot study and the 2007 nationwide adoption. Difference-indifferences analyses show increased mortality for hospitals that were subject to the mandate, relative to other comparable hospitals. We observe this effect before hospitals disclose their HCAHPS ratings, which suggests that it is attributable to measurement, rather than to disclosure. An analysis of changes in hospital expenses shows that, after the mandate, affected hospitals experienced a relative increase (decrease) in non-clinical (clinical) expenses. This finding is consistent with theories of multitasking, which predict that more incentives for one task (in this case, patient experience) cause some reallocation of resources from other tasks (clinical care).