Knowledge that Transforms

Using analyst-lender affiliation in syndicated loans as a proxy for differential access to private information, we examine how unaffiliated analysts respond to this disadvantage. We find that unaffiliated analysts are more likely to herd toward affiliated analysts following loan origination, leading to improved forecast accuracy but weaker market reactions, consistent with reduced information content. In addition, herding analysts improve their forecast accuracy for other firms in their portfolios relative to nonherding analysts, suggesting a reallocation of effort. To capture information acquisition directly, we analyze IP address data from SEC EDGAR log files and find that unaffiliated analysts increase search activity, driven primarily by those not designated as herding. Although herding behavior wanes after the first year post-loan, elevated EDGAR searches persist for three years. Overall, our study provides novel evidence on how selective access to private information influences analysts’ competitive behavior. Data Availability: Data used in this study are available from public sources identified in the text, subject to the terms and conditions of those sources.

Does going public affect the amount and type of corporate international tax planning? Using a panel of U.S. corporate tax return data from 2004 to 2018, we show that IPO completion is associated with the rapid implementation of multinational foreign tax structures. Specifically, within three years after filing for an IPO, firms (1) expand their presence in low-tax jurisdictions, (2) enter into cross-border agreements that accompany intangible asset transfers to foreign subsidiaries, and (3) increase the likelihood and level of foreign related-party income-shifting payments. Effects are strongest among firms with strong capital market pressure to hit post-IPO earnings targets, firms with high R&D spending pre-IPO, and firms with limited ability to use net operating loss carryforwards. We contribute to the nascent literature studying tax implications of IPOs by documenting the types and timing of specific tax strategies that enable public firms to remain lightly taxed in the post-IPO period.

Mortgage fraud was a leading force behind the 2008 financial crisis. We measure the fraudulent income overstatement at the bank-ZIP Code-year level as the difference in the local growth between reported income in mortgage applications and the income based on IRS data. We find that overstated income is positively associated with banks’ internal control weaknesses over financial reporting and negatively associated with subsequent remediation of such weaknesses. The associations are concentrated among banks that integrate their accounting and operation processes, as proxied by the adoption of an Enterprise Resource Planning system. Finally, using the removal of internal control provisions in the Federal Deposit Insurance Corporation Improvement Act in 2005 as a shock to internal control quality, we find that affected banks experience increased income overstatement on mortgage applications. Data Availability: Data used in this study are available from the public and proprietary sources identified in the article. Access to proprietary data is subject to the relevant providers’ licensing restrictions.

This study examines how tenured BAF experience and navigate institutional structures while advancing their careers. Leveraging a qualitative approach, we find BAF encounter recurring forms of marginalization embedded in organizational structures that lead to social identity threats that destabilize their identities as scholars and teachers. BAF respond to these threats by employing agentic and self-preserving coping responses designed to affirm identity and negotiate career advancement. Although coping responses can be effective on an individual level, they do not transform institutional structures and can provoke pushback that reinscribes marginalization. The findings unsettle common assumptions that effort in conditions marked by objectivity and neutrality drives career advancement and highlight the institutional structures and invisible labor that BAF navigate to achieve career advancement. We fill the void in the literature examining how career advancement unfolds within racialized conditions of academic institutions and advance research on minoritized group status in accounting academia.

Firms typically design incentive systems to motivate employees and advance firm objectives, including productivity (i.e., maximizing output) and efficiency (i.e., minimizing input). However, there remains little empirical research on the potential psychological effects of adopting a productivity versus efficiency focus on employee risk perceptions and decision-making. To address this important gap, we examine how these different incentive foci affect employee target setting under participative budgets. We predict and find that employees perceive efficiency incentives as riskier than productivity incentives, leading to lower target setting. Moreover, consistent with our theory, this effect disappears in the absence of outcome uncertainty. We also find employees are less likely to achieve their target and have higher error rates under efficiency incentives, despite setting easier targets. Overall, our findings suggest that efficiency incentives, relative to productivity incentives, can have detrimental effects on target setting and subsequent performance in participative budgeting settings. Data Availability: Contact the authors.

People’s right to free speech can have profound effects on how firms discharge their social and environmental responsibilities. We examine these effects by analyzing the impact of the staggered enactment of anti-SLAPP free speech laws across U.S. states on firms’ corporate social responsibility (CSR) behavior. We theorize that, following the enactment of anti-SLAPP laws, firms enhance their CSR activities as an economically effective means to counter negative publicity from stakeholders. Supporting this idea, we find that firm CSR activity increases after the enactment of anti-SLAPP laws, accompanied by an increase in stakeholder criticism of firms’ social and environmental practices. Further, we observe an increase in the level of CSR disclosure. The link between anti-SLAPP law enactment and subsequent CSR engagement is stronger in states with more comprehensive anti-SLAPP protections than in those with weaker protections. Data Availability: From public sources identified in the study. Some may require a subscription.

Corporations make substantial progress toward their Zero Routine Flaring commitments globally, particularly in Africa where preexisting environmental standards are weak. Moreover, committers’ flaring reductions on the continent are driven primarily by operational improvements rather than offloading assets and are concentrated among committers facing greater stakeholder pressure. Although flaring is higher for assets continuously operated by, awarded to, or divested to noncommitters, corporate actions to uphold commitments are associated with a conservatively estimated 10 percent net reduction in flaring in Africa without a corresponding reduction in oil production or local economic activity in extraction communities. Our findings suggest that environmental commitments are backed by corporate policies akin to establishing a uniform cost of pollution across the firm’s global operations and therefore may alleviate the problems posed by globally fragmented regulation. Data Availability: All data except for Enverus oil and gas are publicly available. Enverus is available for purchase on a subscription basis.

Audit teams may consult with their firm’s national office to obtain specialized expertise, satisfy regulatory and quality control requirements, and demonstrate due professional care. We describe the consultation process based on PCAOB standards, firm methodologies, and auditor interviews. We explain different types of consultations and highlight differences in the determinants and usefulness of mandatory versus voluntary consultations. Using PCAOB inspection data, we show that formal consultations are largely predictable based on engagement characteristics and, on average, are not associated with audit quality. However, two subsets of formal consultations that focus on accounting issues and occur earlier in the engagement process are associated with greater regulatory compliance and higher audit quality. Hence, an increasing reliance on all types of consultations does not automatically translate into higher audit quality. Collectively, our findings deepen our understanding of auditors’ use of national office consultations and their implications for audit practice. Data Availability: Audit engagement data from the PCAOB are proprietary; other data are from public sources.

This paper asks about the existence, determinants, and implications of toxic content in financial social media. Using machine learning algorithms to measure toxicity in Seeking Alpha articles and comments, we find measurable toxicity concentrated primarily in user-generated comments rather than articles. Comment toxicity is greater for firms with more investor attention or uncertainty. We document three key results about toxicity in capital markets. First, toxicity displays a feedback loop in platform participation: past toxicity is associated with more future toxic contributors for a given firm. Second, firms receiving more toxic comments have greater retail trading volume but less informative retail trades, especially when comments disagree. Third, toxicity is associated with slower price discovery around earnings announcements. Our findings suggest that financial social media toxicity relates to both user behavior and market outcomes and raise important considerations for platform governance in financial markets. Data Availability: The Seeking Alpha articles and comments used in this study were obtained directly from Seeking Alpha under a data-sharing arrangement and are proprietary; we are not permitted to redistribute them. These data may be requested from Seeking Alpha. Compustat, Execucomp, CRSP, and New York Stock Exchange (NYSE) Trade and Quote (TAQ) data are available through Wharton Research Data Services (WRDS) to subscribing institutions.

We assess how firms use spending on reporting infrastructure to improve managerial reporting quality (MRQ) and whether doing so improves investment efficiency. Using the Sarbanes-Oxley Act’s internal control provisions (SOX 404) as a shock to MRQ demand, we find that treated firms increase reporting infrastructure spending, including for information technology and communications. We next examine variation across segments in the benefits and costs of improving reporting infrastructure. Segments increase spending more when facing larger internal moral hazard frictions and when they are less likely to have voluntarily improved MRQ before SOX (including segments insulated from competition, facing difficulty obtaining enterprise resource planning (ERP) systems, or lacking internal control personnel). Finally, we find that treated firms improve investment efficiency post-SOX 404, with larger gains among firms with higher spending on reporting infrastructure. Our findings indicate that regulatory mandates can improve investment efficiency by inducing reporting infrastructure improvements that enhance MRQ.