We study executive equity contributions to nonqualified deferred compensation plans, which consist of the election to defer part or all of the executive's annual base salary and other cash pay into the company's stock. These transactions provide executives with an alternative channel to purchase shares in the firm while benefiting from an affirmative defense against illegal insider‐trading allegations. Using a large sample of executive equity deferrals over 2000–2014, we find evidence that executives use these transactions as a means to acquire the company's stock during blackout windows. Consistent with the conjecture that deferrals can benefit from lower litigation costs that inhibit insider trades before the release of corporate news, we also find that the deferred amounts are significantly higher (lower) before the disclosure of good (bad) earnings news. These results suggest that executives can use equity deferrals to circumvent Rule 10b5 trading restrictions and generate significant returns through the timing and content of corporate disclosures around these transactions. Together, our evidence supports the recent concerns that executives might be engaging in strategic information releases around Rule 10b5 transactions.

Using a large sample of executive performance equity grants over 2006–2019, we provide a comprehensive representation of the single- and multi-metric vesting schemes used by U.S. public firms and investigate the incentives provided by alternative functional forms of vesting formulas that combine earnings with stock returns and other nonearnings targets. Our results indicate that, compared to earnings-vesting single- and multi-metric summative grants, binding schemes that require the contemporaneous achievement of both earnings and nonearnings targets for grant vesting limit executive fixation on earnings and the associated incentives to maximize grant payouts by managing earnings around the targets. The findings confirm the expectation of different incentive effects from alternative (linear versus nonlinear) aggregations of multiple performance targets in the grant vesting formulas, with binding schemes being more effective in mitigating the risk of executives prioritizing earnings relative to other targets in multi-metric grants.

We propose two explanations for the previously documented relation between aggregate earnings growth and future inflation: one based on firms changing their investment in response to earnings growth, and the other based on consumers varying their consumption in response to wealth effects of profitability growth. As the supply of goods and services is relatively inelastic in the short run, our arguments imply that changes to near-term demand for investment (consumption) will affect the prices of investment (consumption) goods and services. Consistent with the investment-based argument, we find that profitability changes predict investment and Producer Price Index (PPI) shifts in subsequent quarters. Our analyses also reveal that aggregate earnings growth predicts future investment and PPI forecast errors. We find, at best, weak evidence for the consumption-based link between aggregate earnings growth and future inflation.

Prior studies on the relation between corporate taxes and future macroeconomic growth present contradictory evidence. We argue this mixed evidence is at least partly due to the use of statutory corporate tax rates which ignore the complexity of tax exemptions, tax deductions, tax enforcement and firms’ tax planning. We propose an alternative tax rate measure that aggregates cash effective tax rates of listed firms, which reflect not only statutory tax rates, but also other features of the tax code, enforcement, and firms' tax planning. We find a strong robust negative relation between country-level effective tax rates and future macroeconomic growth.

We explore the capabilities and dangers of artificial intelligence (AI) usage in accounting research. We focus on mining U.S. securities regulations as an economic shock, testing the causal effect of these shocks on U.S. firms’ voluntary disclosure, and writing a complete academic paper, conditional upon finding statistically significant results. Overall, this research experiment demonstrates the capacity for AI to provide efficiencies in research. AI-generated papers are not ready to be submitted to top accounting journals, but they constitute a useful starting point for accounting researchers and using AI saves valuable time in identifying exogenous shocks that significantly affect an outcome of interest. When we repeat the same experiment to explore the causal effect of non-U.S. securities regulations on U.S. firms’ voluntary disclosure practices, AI writes many professional looking papers with spurious results and unsubstantiated economic arguments, highlighting the potential dangers of AI for accounting scholarship.

The Securities and Exchange Commission permits companies to redact proprietary information from material contract filings, so long as the redacted information (1) would cause competitive harm if disclosed, and (2) the information is legally immaterial. Because these joint criteria are inherently contradictory, we examine whether legally immaterial redacted information is economically material to investors. We find that firms’ stock price discovery process is significantly slower and insider trading is significantly greater after companies file redacted contracts compared to nonredacted contracts. We then examine the impact of the 2019 FAST Act, which reduced the SEC’s oversight of redacted contracts. Companies redact more frequently and insider trading (but not speed of stock price discovery) is more pronounced after the FAST Act. Taken together, these findings suggest that at least some redacted information is economically material to investors and that reducing SEC oversight of redacted information may not be in investors’ best interests.