Knowledge that Transforms

I use downloads of regulatory filings by SEC employees as a measure of SEC attention and find that SEC employees are disproportionately less likely to review the filings of firms with names later in the alphabet. Additional tests show that alphabetical order determines a firm's priority when the SEC follows up on common shocks among peer firms and that the strength of the SEC's alphabetical bias does not vary with the intensity of resource constraints. Further, the SEC appears to be more surprised by the restatements of end‐of‐the‐alphabet firms. These results are consistent with a cognitive bias that leads SEC employees to pay more attention to firms at the top of alphabetically sorted lists. Last, using shocks to alphabetical order caused by firm name changes, I find that alphabetically induced increases in SEC attention are linked with lower future noncompliance, suggesting that the regulatory effects of alphabetical order are material. Overall, this study highlights the “human” element of regulatory attention.

We use theory from identity economics, which synthesizes research characterizing how personal identity shapes decisions in domains such as education and career selection, to predict that the process by which people sort into accounting careers produces a population of accountants with a distinctive set of values. Specifically, we hypothesize that two kinds of personal values, called conservation values and self‐enhancement values, are overrepresented among accountants because they are associated with the decision to work as an accountant. Using data from 38 countries in the European Social Survey, we find support for both hypotheses. Given this evidence that accountants' values prioritize stability over change and concern for self over concern for others, we further hypothesize that, motivated by these values, accountants will be relatively skeptical about contemporary targets of social reforms, including those pursued by prominent accounting organizations. We test this prediction using attitudes about climate change and tolerance for minorities and find support for it. Based on our findings, we derive recommendations for an effective design of social reforms in the accounting profession. Our findings are relevant for accounting elites tasked with leading the profession into a dynamic future and contribute to the new and growing literature on accounting's human capital.

We use individual-level credit data to study how recent declines in Appalachian coal mining affected household finances between 2011 and 2018. Using exogenous variation in electricity sector demand for coal, we find declines in coal demand decreased credit scores and increased financial distress within two years of coal shocks. These effects cannot be explained solely by job losses in coal mine worker households. Credit score declines and financial distress were largest among older individuals and people with lower-middle credit scores. Our results suggest the transition away from fossil fuels may impose meaningful costs on other fossil fuel extraction communities.

To safeguard its technological leadership, the U.S. has restricted domestic suppliers from exporting cutting-edge technologies to selected Chinese firms. Domestic firms affected by these export controls halt sales to Chinese customers, as intended, but struggle to establish new relations with alternative customers domestically or in politically aligned regions. Consequently, domestic suppliers experience sizable losses in market capitalization, along with reductions in profitability, employment, and bank lending. Chinese firms are more proactive in reconfiguring supply chains, though not without costs. Overall, export controls impose larger costs on U.S. firms developing the very technologies these policies aim to protect.

We document implicit extrapolation in investment decision-making that exceeds the extrapolation inferable from stated expectations. Locally experienced returns predict individual real-estate investment decisions even conditional on an investor’s forecasted home-price growth and risk aversion. Moreover, estimates of this experience effect on investment are larger than implied by the combined effect of past returns on stated expectations and stated expectations on investment. We demonstrate that heterogeneous forecast confidence helps explain why many investors rely on past returns over their survey-elicited forecasts. As their rationale, such survey respondents frequently cite intentional extrapolation or a lack of confidence in other belief factors.