ABSTRACT We conduct two experiments to investigate the effects of giving subordinates the possibility to return budget surplus on capital budgeting processes. We predict and find that when subordinates face low uncertainty when submitting their budget request, the possibility to return budget surplus increases budget requests compared to not having this possibility but that this effect is mitigated under high uncertainty. We also predict and find that subordinates return more budget surplus under high than low uncertainty. Together, these results imply that the possibility to return budget surplus can be particularly beneficial for firms operating under high uncertainty. We contribute to the literature by integrating an important feature of budgeting practice into research, i.e., subordinates’ possibility to return budget surplus and by showing that the effects of implementing such an option may strongly depend on the level of uncertainty a subordinate faces. Data Availability: The data and research instrument are available from the authors upon request. JEL Classifications: D91; M10; M40.

ABSTRACT We exploit a one-month period when SEC activity largely stopped during a U.S. government shutdown to examine whether variation in SEC scrutiny affects its ability to enforce insider trading. Difference-in-differences analyses suggest insiders earn abnormal profits during the shutdown, and the findings are robust to using different control periods and groups. We estimate that it takes roughly one week before the abnormally profitable trading begins, consistent with insiders updating their beliefs regarding the duration and disruption of the shutdown. Supporting the claim that SEC regulatory activity drops with the shutdown and does not fully recover afterward, we find a decline in the frequency of insider trading enforcement releases, investigations, and comment letter issuances after the SEC resumes operations. Our study speaks to the SEC insider trading enforcement literature and economic consequences of a regulatory discontinuity in a divisive political climate. Data Availability: All data are available from public sources. JEL Classifications: G14; G30; M41; M48.

ABSTRACT Using a dataset constructed through textual analysis and manual data collection, we show that, prior to ASC 606, firms with principal-versus-agent (PA) exposure face heightened GAAP compliance risk, reflected in a greater likelihood of receiving revenue-related SEC comment letters and higher audit fees. Following the adoption of ASC 606, these differences decline, consistent with the standard’s stated goal of simplifying PA assessments and reducing implementation challenges. Overall, our findings provide the first large-sample evidence on PA considerations and show that ASC 606 mitigates compliance risk, although further analyses suggest additional disclosure may be needed to mitigate information challenges associated with PA assessments. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: L86; M41; M42; M48.

ABSTRACT We examine how the Big 4 responded to evolving partner qualification requirements in China. By 2017, at least 80 percent of the Big 4 partners were required to hold CICPA qualifications, a requirement that did not apply to local firms. Using data from a 14-year window around the reform, we document that the Big 4 expanded their partnership and primarily complied through internal promotion of locally licensed auditors, often into junior signing roles and serving new clients. Our analyses of audit outcomes yield mixed and time-varying evidence: although we observe relative increases in restatements in selected periods, the triangulated evidence does not suggest a pervasive deterioration in audit quality. However, we find a decline in the Big 4’s market share and audit fee premium. Overall, our findings shed light on how regulatory interventions targeting auditor qualifications reshape audit firms and market competition. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M4; M40; M41; M42; M49.

ABSTRACT We examine the impact of the SEC’s Office of Minority and Women Inclusion (OMWI) on the role of employee gender in the Division of Corporation Finance’s filing review process. Gender bias theory suggests that women may work harder to compensate for perceived bias and discrimination. Consistent with this theory, we find that women reviewers issue longer comment letters, raise more issues, ask more accounting-specific questions, reference more authoritative guidance, request more filing amendments, follow up on more issues from prior rounds, and take longer to close the comment letter process. We also find that women are less prevalent in higher paygrades and leadership positions. These gender differences attenuate after the establishment of OMWI in 2011, but significant differences remain. Analyses of SEC employee survey data corroborate our comment letter results. Data Availability: All data are publicly available. JEL Classifications: G18; J16; M48.

In this paper we provide new estimates of the impact of unions on nonunion wage setting. We allow the presence of unions to affect nonunion wages both through the typically discussed channel of nonunion firms emulating union wages in order to fend off the threat of unionisation and through a bargaining channel in which nonunion workers use the presence of union jobs as part of their outside option. We specify these channels in a search and bargaining model that includes union formation and, in our most complete model, the possibility of nonunion firm responses to the threat of unionisation. Our results indicate an important role played by union wage spillovers in lowering wages over the 1980-2010 period. We find de-unionisation can account for 38% of the decline in the mean hourly wage between 1980 and 2010, with two-thirds of that effect being due to spillovers. Both the traditional threat and bargaining channels are operational, with the bargaining channel being more important.

We propose a novel identification strategy to isolate exogenous immigration shocks across US counties, by interacting quasi-random variations in the composition of ancestry across counties with the contemporaneous inflow of migrants from different countries. We show a positive causal impact of immigration on local innovation and wages at the five-year horizon. The positive dynamic impact of immigration on innovation and wages dominates the short-run negative impact of increased labor supply. A structural estimation of a model of endogenous growth and migrations suggests the increased immigration to the United States since 1965 may have increased innovation and wages by 5 percent. (JEL J15, J22, J31, J61, O31, R11, R23)

ABSTRACT This study examines the association between a shared common auditor among suppliers and customers and trade credit. Using hand-collected pairwise trade credit data, we find that a supplier extends more trade credit to a customer audited by a common auditor. This association is robust to alternative design specifications and various sample restrictions to alleviate selection bias. We then interview trade credit managers and executives as a prelude to archival analyses exploring multiple potential mechanisms to explain this association. The collective results are most consistent with the explanation that mutual third parties to a dyadic relationship can foster trust through social connections and increased salience of reputation effects rather than that a common auditor reduces information asymmetry about the rigor of the audit process. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M42.