This study examines the consequences of tax key audit matters (KAMs) to the valuation of tax attributes and to auditor-provided tax services (APTS). The literature finds that KAM adoption is not associated with investor or audit outcomes, creating an impetus to identify whether specific KAM topics are more consequential. Tax KAMs are an ideal setting because they are prevalent, taxes are economically important, and auditors can provide tax services to their clients. We find that investors discount the tax avoidance and deferred tax assets of tax-KAM companies, suggesting an incentive for managers to avoid tax KAMs. Consistent with self-interest threats to auditor independence, we find that receiving a tax KAM is negatively associated with clients’ concurrent purchases of APTS, but that clients increase their future purchases of these services when they stop receiving tax KAMs. These results reveal novel consequences of tax KAMs to the valuation of companies’ tax attributes and to APTS incentives.

We show that occupational licensing has significant negative effects on labor market fluidity, defined as cross-occupation mobility, and positive effects on wage growth. We find that occupational licensing represents a barrier to entry for both nonemployed workers and employed ones. The effect is more prominent for employed workers than those entering from nonemployment. We also find that average wage growth is higher for licensed workers than nonlicensed workers. We find significant heterogeneity in the licensing effect across different occupation groups. These results hold across various data sources, time spans, and indicators of being licensed.

We study how global changes in information acquisition costs through disclosure technologies affect price informativeness. To explore this issue, we examine worldwide adoptions of centralized electronic disclosure systems, which significantly reduce the cost of and broaden access to financial disclosures. Consistent with theory, we show a significant reduction in private information acquisition around earnings announcements as a result of these adoptions. These effects are most pronounced in countries with the most substantial reductions in information acquisition costs and where we find more significant decreases in informed trade. Overall, we highlight an important, unintended cost of broadening access to financial disclosures through technology adoptions.

We develop a rating system to evaluate the quality of individual non-GAAP exclusions. Our perspective is that high-quality exclusions reflect nonrecurring economic transactions, are transitory accounting adjustments, or have little usefulness in forecasting cash flows. We use four approaches to rate exclusions. We evaluate the serial correlation of the exclusion, survey accounting academics’ views, obtain practitioner ratings from the CFA Institute, and identify the exclusions approved by the Chinese securities regulator. A firm’s exclusion quality score is the weighted average rating of its individual exclusions. For our sample of S&P 500 firms, we document that exclusion quality varies by industry, captures trends in non-GAAP reporting, and is reasonably stable at the firm level. To validate the rating, we show that firms with lower exclusion quality scores receive more SEC comment letters, incur more Regulation G violations, exhibit greater analyst forecast dispersion, and have slower price discovery following earnings announcements.

This study examines whether auditor KAM disclosures about M&A transactions predict future performance outcomes. We find that auditors make more M&A KAM disclosures when M&A transactions are larger, involve targets with greater information asymmetry, and are subject to greater overpayment risk. When auditors disclose M&A KAMs in the acquisition year, we find an increased risk of larger goodwill impairments and that the association between acquired goodwill and changes in companies’ subsequent operating performance are significantly lower compared to when auditors do not issue an M&A KAM. We also find that the likelihood of forced CEO turnover is incrementally higher when subsequent operating performance is poor and auditors issue an M&A KAM compared to when they do not. Collectively, our findings suggest that these auditor disclosures reflect uncertainty that predicts weak post-acquisition performance and forced CEO turnover, incremental to other indicators of failed acquisition strategies.

A firm’s role as lender to its customers (via trade credit) is influenced by the firm’s own lenders. With a novel data set of trade credit between U.S. public companies, I find that firms limit customer credit concentrations, extending less generous trade credit to customers as the firms’ sales dependence on them increases. Evidence points to lenders influencing firms to limit credit concentrations: First, cross-sectional variation shows stronger results with greater lender monitoring intensity. Second, analysis of granular loan contract details reveals that concentration limits in borrowing base formulas are a clear, previously unexplored way banks influence trade credit policies.

I find overlapping institutional ownership (OIO) in a customer and supplier increases the duration of their supply chain relationship. Results are stronger when vertical holdup is more severe. A quasi-natural experiment around mergers of financial institutions provides causal evidence of OIO improving relationship survival rates. Concurrent with longer-lived relationships, valuations and innovation increase, consistent with OIO effects on relationship longevity being beneficial. I find evidence of OIO strengthening relationships via an internalization channel: With more OIO, partners cooperate more, with the supplier extending more trade credit. Overall, results indicate OIO strengthens vertical relationships by alleviating holdup problems.

This article presents a New Keynesian model to capture the linkages between macro fundamentals and the nominal yield curve. The model explains bond yields with a low level of news in expected inflation and plausible term premia. This implies that the slope of the yield curve predicts future bond yields and that risk-adjusted historical bond yields satisfy the expectations hypothesis. The model also explains the spanning puzzle, matches key moments for real bond yields, captures the evolution of the price-dividend ratio, and implies that the slope of the yield curve and the price-dividend ratio forecast excess equity returns.

Against the backdrop of an increasing threat of misinformation on social media, several countries have enacted regulations to curb the spread of misinformation. This study examines how corporate social media strategy responds to misinformation regulations. Using a large cross-country dataset of corporate tweets and a stacked regression analysis, we show that misinformation regulations lead to less corporate social media disclosure. This result suggests that, by deterring misinformation, these regulations reduce firms’ need to use social media to counteract its adverse effects. Additional analyses show that the effect strengthens among countries with higher social media usage and those with stronger investor protection but weakens for firms with stronger information environments. Finally, we provide direct evidence that firms post fewer tweets refuting misinformation about themselves following the enactment of these regulations.

This study presents a methodology for analyzing procyclical systemic risk arising from joint monetary and prudential policy decisions. We analyze the impact of different scenarios of the monetary policy interest rate on the leverage ratio of US commercial banks. The Dynamic Conditional Correlation - Semi-nonparametric model and bivariate spectral analysis are applied to model the dynamics among the variables. The results indicate that high and low interest rates increase leverage while medium rates reduce it. The importance of considering asymmetries and heavy tails of probability distributions in stress tests and the dynamics of the correlation between variables is highlighted when assessing financial stability.