Accounting Review

ABSTRACT In an extended capital asset pricing model (CAPM) setting, I examine how the quality of accounting standards affects real investment and welfare through its impact on investment hurdle rates. In this model, cash flow uncertainty arises from two fundamental sources relating, respectively, to economic performance and accounting measurement errors, but they combine into a single market factor for asset pricing. Accounting standards matter to real investment not only because information quality affects the required risk premiums on individual projects relative to a given market factor, but also because information quality affects the aggregate investment level and, hence, the market factor itself. I show that improving accounting standards causes both an expansion of the real economy and a shift in capital allocation across firms. While welfare increases as a result, firms in certain risk classes end up with higher costs of capital and lower values, some of which are crowded out from the economy. The study also lends insights into how the real and financial impacts of accounting standards depend on a firm's accounting and economic characteristics.

Guochang Zhang

The Accounting Review

Accounting Standards, Cost of Capital, Resource Allocation, and Welfare in a Large Economy

大型经济体中的会计准则、资本成本、资源配置与福利

ABSTRACT We show that financial reporting influences consumer behavior by drawing consumer attention to announcing firms. Analyzing global positioning system (GPS) data, we document upticks in foot traffic to firms’ commercial locations immediately following their earnings announcements. This increase is more pronounced for announcements with substantial media attention, fewer concurrent announcements, heightened internet search volume, and extreme stock price jumps and earnings surprises—indicating that announcement coverage impacts consumer behavior by capturing attention. Furthermore, foot traffic increases with positive earnings for firms offering durable goods, suggesting consumers respond to news about firms’ financial prospects. Consumer attention patterns increase revenues and advertising effectiveness, ultimately suggesting that financial reporting serves a marketing function. Data Availability: All other data are available from the public sources cited in the text. JEL Classifications: G10; G11; G12; G14; G40; G41.

Suzie Noh

Eric C. So

Christina Zhu

Financial Reporting and Consumer Behavior

财务报告与消费者行为

ABSTRACT I examine how and why current-period performance shapes investors' evaluations of future-oriented disclosures. Three experiments provide evidence that a firm's current-period performance shapes investors' beliefs about the appropriateness of managerial optimism, which, in turn, affects investors' evaluation of firms that focus on either challenges or opportunities in future-oriented disclosures. When a firm is performing poorly, investors believe that managers can best achieve success by being optimistic about the future and, therefore, invest more when the firm focuses on opportunities rather than challenges in future-oriented disclosures. When a firm is performing well, on the other hand, investors believe that managers can best achieve success by being realistic about the future and, therefore, invest more when the firm focuses on challenges rather than opportunities.

Scott A. Emett

Investor Reaction to Disclosure of Past Performance and Future Plans

投资者对过往业绩及未来计划披露的反应

ABSTRACT Many countries have converged their domestic auditing standards with International Standards on Auditing (ISA). This study provides global empirical evidence on first-order determinants of audit quality by examining whether and how convergence affects audit quality through utilizing data on 41 jurisdictions and using a staggered difference-in-differences approach. We find that ISA convergence leads to higher audit quality on average. The positive effect is stronger for clients of domestic audit firms, in jurisdictions with stronger enforcement, and when the ISA convergence level is higher. Insights from textual features suggest that changes in principle-orientation, comparability, readability, and size (or length) of auditing standards are positively related to audit quality. Exploratory analyses of textual content using machine learning reveal that the emphases of ISA on going-concern assessment and legal compliance, fraud risk assessment and internal control evaluation, and related-party transactions and subsequent events contribute to enhanced audit quality. JEL Classifications: M40; M42; M48.

Ole-Kristian Hope

Cyndia Wang

Yaqian Wu

Min Zhang

Does Convergence with International Standards on Auditing Improve Audit Quality?

国际审计准则趋同是否能提高审计质量？

This paper examines the classification of items within the income statement as an earnings management tool. Evidence is consistent with managers opportunistically shifting expenses from core expenses (cost of goods sold and selling, general, and administrative expenses) to special items. This vertical movement of expenses does not change bottom-line earnings, but overstates “core” earnings. In addition, it appears that managers use this earnings management tool to meet the analyst forecast earnings benchmark, as special items tend to be excluded from both pro forma and analyst earnings definitions.

Sarah Elizabeth McVay

Earnings Management Using Classification Shifting: An Examination of Core Earnings and Special Items

利用分类转移进行盈余管理：核心收益与特殊项目的研究

ABSTRACT Companies are offering managers compensation incentives to increase promotions of under-represented employees to higher level organizational positions (hereafter, “diversity incentives”). This study uses an experiment to examine how diversity incentives affect managers’ promotion decisions and employees’ effort choices before and after those decisions. The results suggest that managers’ diversity incentives do not affect employees’ pre-promotion effort choices. Additional analyses indicate that both over- and under-represented employees expect managers to promote them based on effort instead of group membership. Consistent with predictions, diversity incentives increase the likelihood that managers promote under-represented employees whose pre-promotion efforts are comparable to their over-represented colleagues’ efforts. After the promotion decision, nonpromoted employees whose managers receive diversity incentives choose the lowest effort, regardless of group membership. Collectively, these results inform companies about the potential costs and benefits of using diversity incentives by demonstrating that diversity incentives can increase diversity in promotions but reduce nonpromoted employees’ efforts. Data Availability: Data are available from the author upon request.

Bret Sheeley

Paying to Reduce Disparity: Financially Incentivizing Workforce Diversity and Its Effects on Managers’ Promotion Decisions and Employees’ Effort

支付以减少差距：经济激励劳动力多样性及其对管理者晋升决策和员工努力的影响

ABSTRACT Despite private access to managers, issuer-paid credit rating agencies (CRAs) are often criticized for failing to promptly reflect material negative private information in their ratings and being ineffective corporate watchdogs. We utilize a novel dataset of private SEC investigations to examine the timeliness and informativeness of CRAs’ rating adjustments in response to material negative private information. Our evidence suggests that CRAs adjust ratings downward within a quarter following the opening of an SEC investigation. Moreover, these adjustments are over three times larger for those investigations that ultimately yield an enforcement action than for those that do not, suggesting that CRAs quickly form sophisticated expectations about the materiality of the private information. Additionally, rating downgrades during the investigations are more informative to the stock market than other rating downgrades. Overall, our evidence suggests that CRAs reduce information asymmetry in the capital markets by timely incorporating material private information in their ratings. Data Availability: All data are available from the sources cited in the text. JEL Classifications: D82; G24; G30; M40; M41.

Samuel B. Bonsall

John B. Donovan

Eric R. Holzman

Xue Wang

Daniel G. Yang

Do Credit Ratings Reflect Private Information about SEC Investigations?

信用评级是否反映了关于SEC调查的私人信息？

ABSTRACT We examine the impact of reducing information processing costs on U.S. state regulators who supervise mortgage companies. State regulators traditionally disclosed enforcement actions only on their individual websites. A centralized repository, introduced in 2012, assembled enforcement records across states in one place, reducing a regulator’s cost to learn about enforcements in other states. Using a difference-in-differences design, we find that enforcement records posted on the centralized repository significantly increase the probability of subsequent enforcement actions against the same firm in other states. This suggests that reducing information processing costs helps state regulators identify companies engaging in misconduct. This effect is stronger for records from state websites where information is harder to process and for state regulators with more limited resources. Last, we observe that sanctioned lenders reduce the credit supply in other states after their enforcement records in one state are posted on the centralized repository. JEL Classifications: G21; G18; K2; M4.

Omri Even-Tov

Andy Su

K. Philip Wang

Do Information Processing Costs Matter to Regulators? Evidence from U.S. Mortgage Companies’ Supervision

信息处理成本对监管机构重要吗？来自美国抵押贷款公司监管的证据

ABSTRACT We use hand-collected data to analyze submission-to-acceptance (STA) times in the top-tier accounting journals relative to other top-tier business journals from 1993 through 2021. We find that, vis-à-vis other business disciplines, STA times at top-tier accounting journals were shorter in the first half of our sample period and significantly longer thereafter. We also observe shorter STA times for articles with authors from more highly ranked institutions; this effect exists only in top-tier accounting journals and has increased over time. In additional analyses, we find that our primary inferences are unchanged when considering maturity of initial journal submissions, journal-level democratization, and review process improvements related to paper quality. Our results should be of interest to researchers, journal editors, reviewers, provosts, deans, and tenure and promotion committees. Data Availability: The data used in this study are available from the sources indicated herein.

Patrick J. Hurley

Ronen Gal-Or

W. Robert Knechel

Heather L. Pesch

Submit-to-Accept Times in Accounting: Determinants and Comparisons to Other Business Disciplines

会计中的提交到接受时间：决定因素及与其他商科领域的比较

ABSTRACT This paper presents a costly voluntary disclosure model in which the information quality of a signal about a firm’s future cash flow is unknown, where the information quality, also called signal quality, refers to signal precision. Disclosure plays a dual role in firm valuation, providing information about both the cash flow and signal quality. We identify a necessary and sufficient condition under which the firm price under disclosure is a nonmonotonic and bounded function of the signal. Under this condition, as the disclosure cost increases, the equilibrium changes from an intermediate pool of undisclosed signals to a low-end pool of undisclosed signals, to two disjoint pools of undisclosed signals, and finally to no disclosure. Our results remain qualitatively unchanged when the firm may or may not have private information. Overall, this study offers alternative explanations for the empirical findings of why some firms disclose (withhold) seemingly bad (good) news. JEL Classifications: D61; G14; M41.

Eunhee Kim

Suil Pae

Voluntary Disclosure When Information Quality Is Unknown

信息质量未知时的自愿披露

短名
Journal Impact	4.32
国际分区	BUSINESS, FINANCE(Q1)
期刊索引	SCI Q2中科院 3 区

ISSN	0001-4826, 1558-7967
h-index	192
国内分区	管理学(3区)管理学商业财政与金融(2区)

涉及主题	业务经济会计财务政治学法学计算机科学管理数学哲学微观经济学物理地理收益市场经济历史考古货币经济学认识论生物工程类心理学审计统计
出版信息	出版商: American Accounting Association，出版周期: ，期刊类型: journal，开源期刊: 否
基本数据	创刊年份: 1996，原创研究文献占比: 98.82%，自引率:6.80%， Gold OA占比: 0.00%

Accounting Review

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