Forward‐looking information, often used by auditors to evaluate complex estimates and form conclusions about going‐concern audit report modifications, is commonly disclosed voluntarily by U.S. public companies. We experimentally examine how this disclosure behavior affects auditors’ skepticism toward such information. Prior research has shown that investors and analysts frequently interpret voluntarily disclosed forward‐looking information as credible. We demonstrate that auditors, in contrast, exhibit greater skepticism toward forecasted information that has been voluntarily disclosed (vs. mandatorily disclosed or held privately) because of their reduced trust in management, even when the forecasts align with prior year trends (vs. being more optimistic). Our results suggest that a manager's decision to disclose, rather than the disclosure content itself, leads to increased auditor skepticism. Our findings have implications not only for audit outcomes, but also for manager disclosure behavior, as increased auditor scrutiny could discourage future voluntary disclosure.

Reclassification risk is a major concern in health insurance where contracts are typically 1 year in length but health shocks often persist for much longer. While most health systems with private insurers pair short-run contracts with substantial pricing regulations to reduce reclassification risk, long-term contracts with one-sided insurer commitment have significant potential to reduce reclassification risk without the negative side effects of price regulation, such as adverse selection. We theoretically characterize optimal long-term insurance contracts with one-sided commitment, extending the literature in directions necessary for studying health insurance markets. We leverage this characterization to provide a simple algorithm for computing optimal contracts from primitives. We estimate key market fundamentals using data on all under-65 privately insured consumers in Utah. We find that dynamic contracts are very effective at reducing reclassification risk for consumers who arrive at the market in good health, but they are ineffective for consumers who come to the market in bad health, demonstrating that there is a role for the government insurance of pre-market health risks. Individuals with steeply rising income profiles find front-loading costly, and thus relatively prefer ACA-type exchanges. Switching costs enhance, while myopia moderately compromises, the performance of dynamic contracts.

Using Michigan Panel Study of Income Dynamics data, we study selection bias and the gender wage gap. Employing several methods, we find large declines in the total and unexplained gender gaps in wage offers between 1981 and 2015. Under our preferred selection correction method, the median total and unexplained gaps fell by 0.378 and 0.204 log points, respectively. These are larger declines than if we had not corrected for selection and simply measured convergence in observed wage gaps. However, substantial selectivity-corrected median gender wage gaps remain in 2015: 0.242 log points (total gap) and 0.206 log points (unexplained gap).

Theory suggests that increasing idiosyncratic, uninsurable labor income risk may cause individuals to reduce the risk in their financial assets. This relationship is confounded empirically by the tendency of risk tolerant people to choose riskier careers and hold riskier portfolios, leading to an upward-biased estimate of the effect of earnings risk on risky assets holdings. We overcome this identification problem by exploiting a discontinuity built into the Danish national university admissions system, which provides quasi-random assignment of similar applicants to programs with different earnings volatility profiles. Our methodology allows us to measure the causal impact of enrolling in a high-volatility program, holding fixed the average program earnings and human capital betas. We show that entering a program whose enrollees subsequently experience volatile earnings causes students to have more volatile earnings and, ceteris paribus, to hold fewer risky assets and be less likely to participate in the stock market. We calibrate our empirical results to a portfolio choice model with risky labor income that fits our empirical findings well with modest participation costs, myopic behavior, and reasonable levels of risk aversion.

Investment managers connected to plans sponsors are more likely to be hired than not-connected managers. The magnitude of the selection effect is comparable to that of prior performance. Ex post, connections do not result in higher post-hiring returns. Relationships are thus conducive to asset gathering by investment managers but do not generate commensurate pecuniary benefits for plan sponsors.