How important is equal access to mandatory disclosures? We exploit the postal strike of 1970 that caused a delay in the delivery of annual reports via mail. This strike created unequal access because certain investors (e.g., institutions) had both the incentives and ability to obtain the annual reports by other means. Theory predicts that, when differential access exists, adverse selection problems intensify, causing a decline in stock trading. Our findings support this prediction: stock trading volume decreased by approximately 28% for firms unable to deliver the annual reports to shareholders during the strike, and this trading decline gradually dissipated afterward. Further tests confirm adverse selection as the primary mechanism. Overall, our paper underscores the importance of equal access to annual reports—a key mandated disclosure—and demonstrates the value of these reports to shareholders, as evidenced by their reluctance to trade absent this information.

Could real‐time big data help unravel material firm events? How would it compare with firm disclosure and traditional media in terms of timeliness and completeness? Could big data provide incremental value‐relevant information for investors? With these questions in mind, we use a novel data set of cell phone “pings” (i.e., geolocation signals from mobile devices) to track production disruptions (outages)––material events for U.S. oil refineries. We first validate the construct by examining the effects of outages on local gas prices and firms’ accounting performance. Our main analyses show that (1) refining firms do not voluntarily disclose refinery outages identified by cell phone pings; (2) traditional media cover only a small portion of ping‐based outages; (3) the stock market finds ping‐based outages to be value relevant but incorporates the information with delay. Further analysis suggests that given the incomplete media coverage and lack of firm disclosure, investors appear to learn the financial impact of such outages through subsequent earnings announcements. Our evidence has implications for regulators such as the U.S. Energy Information Administration and the Securities and Exchange Commission as they continue to evaluate both the compliance and usefulness of disclosures for material firm events such as production disruptions.

This paper investigates the role of corporate financial reports in the Environmental Protection Agency's (EPA) regulatory activities. By tracking the EPA's direct retrieval of SEC filings, we identify three key findings. First, the EPA retrieves a large volume of financial reports, especially from firms in high‐pollution industries. Second, the EPA is more likely to access financial reports during enforcement investigations and significant rule proposals, but less so during compliance monitoring, with patterns varying predictably across firms. Third, the EPA's reliance on financial reports is potentially driven by its demand for information on firm liquidity, solvency, and profitability. Overall, our study highlights the usefulness of financial reports for the EPA as an environmental regulator.

This paper evaluates the real effects of the new lease standard, ASC 842, on firms’ investment and operational outcomes. Using a sample of airline companies, we find that, subsequent to the promulgation of ASC 842 (2016–2018), public airlines reduce operating lease usage by about seven to ten percentage points relative to private airlines. The reduced lease usage is replaced by increased ownership, suggesting an equilibrium shift in firms’ investment due to changes in the cost-benefit tradeoffs associated with the operating lease classification. We also find evidence that the decline in lease usage hinders public airlines’ operational flexibility, as we observe more idle capacity in flights post-ASC 842. Facing excess capacity, public airlines seem to deploy their aircraft to shorter flying routes, raising the possibility of more wear and tear on the fleet. Overall, our evidence suggests that the new lease standard has intended and unintended real effects. Data Availability: Data are available from the public sources cited in the text.

We examine whether customer-base concentration has a differential impact on profitability for firms contracting with major government customers versus firms contracting with major corporate customers. We document that firm profitability increases with the concentration of major government customers, but decreases with the concentration of major corporate customers. We attribute the contrasting results to the differential impact of major government and corporate customers on demand uncertainty. Specifically, firms contracting with major government customers face lower demand uncertainty that enables them to realize more efficiency gains from customer-specific investments, whereas firms contracting with major corporate customers are exposed to higher demand uncertainty that reduces the efficiency of customer-specific investments. Overall, our study suggests that major government customers are unique and important in the composition of customer base, and they impact firm outcomes in a significantly different way than major corporate customers.

Over the past three decades, academic research has sought to understand how cash shortfalls impact a firm's ability to take all available value‐increasing investment projects. We investigate whether firms facing greater financing constraints turn to tax strategies that generate lower cash effective tax rates (ETRs) to mitigate the adverse effect of these financing constraints. We use the Pension Protection Act of 2006 (PPA 2006) as an exogenous shock to financing constraints for pension firms, but not for other firms. Using a difference‐in‐differences research design, we predict and find that pension firms experience a decrease in their cash ETRs by 1.8%–2.4% after the PPA 2006, relative to other firms. These cash tax savings mitigate the investment shortfall brought about by financing constraints by 19%. We also predict and find that the decline in cash ETRs is greater among firms more adversely affected by the PPA 2006. Our paper sheds light on the direction, causality, and economic magnitude of the association between financing constraints and tax planning activities. We also provide insight into the role of tax planning activities within firms' broader corporate business strategies in responding to financing constraints.

We examine the performance of several types of the consumption-based CAPM (C-CAPM) models to explore if consumption factors matter for determining excess returns across 17 MSCI country indexes. While the classic world C-CAPM does exhibit some power in explaining cross-sectional variations of expected excess returns, the model seems to require an implausibly large coefficient of risk aversion. The more sophisticated models including the heterogeneous C-CAPM, the world surplus consumption and the habit-formation models provide more reasonable estimates and add substantial explanatory power for the variation in the cross section of excess stock returns. Our results suggest that country-specific consumption risk is not fully diversified thus implying that stock returns are related to idiosyncratic consumption risk.

A growing literature investigates the association between stock return variation and several aspects of information and governance structures, in both a cross-country setting and a cross-firm setting within the U.S. Papers use either idiosyncratic stock return volatility or R2 as interchangeable measures of firm-specific return variation but report inconsistent results. An important reason for the differing interpretations is the assumption about whether lower R2 (or higher ) captures firm-specific news or noise. We document that higher (or equivalently, lower R2) resembles noise. In addition, we show, analytically and empirically, that different results obtain when using R2 or because the systematic risk inherent in the R2 metric is also correlated with the independent variable of interest. Therefore, we recommend that when assessing the association between R2 (or ) and some independent variable, researchers (1) control for elements of systematic risk and (2) triangulate their findings with other measures of information environment. Data Availability: The data in this study are available from commercial providers, e.g., WRDS, Compustat, CRSP, I/B/E/S.

This study adopts a two‐step approach to highlight the disclosure quality channel that drives economic consequences of IFRS adoption. This approach helps address the identification challenge noted by prior research and offers direct evidence on the role of disclosure quality. In the first step, we document the impact of the IFRS mandate on changes in disclosure quality proxied by the granularity of line item disclosure in financial statements. We find that IFRS‐adopting firms provide more disaggregated information upon IFRS adoption, such as more granular disclosure of intangible assets and long‐term investments on the balance sheet and greater disaggregation of depreciation, amortization, and nonoperating income items on the income statement. In the second step, we link the observed disclosure changes to the benefits and costs of IFRS adoption. We show that greater disaggregated information due to IFRS adoption enhances market liquidity and decreases information asymmetry, but does not affect audit fees differentially. Our evidence has implications for standard setters as they evaluate cost‐benefit trade‐offs when considering disclosure changes in the future.