Accounting & Information Assurance Theses and Dissertations

Permanent URI for this collectionhttp://hdl.handle.net/1903/2736

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The Spillover Effect of Environmental Disclosures: Evidence from Customers' Net-zero Pledges
(2024) Castillo, Juan; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This paper investigates the real impact of customers’ voluntary environmental disclosures, specifically, Net-Zero Pledges (NZPs), on the direct greenhouse gas emissions of their suppliers. NZPs represent a growing trend in corporate disclosure, where companies commit to reducing carbon emissions to a minimum level by a specified date, with any remaining emissions being offset by carbon removal actions. Using firms’ connections along the supply chain and a staggered difference-in-differences design, this study provides evidence that suppliers significantly reduce their direct emissions following customers’ NZPs. This effect is more pronounced for NZPs made by customers with greater bargaining power, while suppliers’ reactions are stronger when they have higher carbon intensity and better environmental performance. Furthermore, NZPs of higher quality elicit a stronger response, especially when they limit the use of carbon offsets, set interim targets, and establish public reporting mechanisms. The evidence suggests that this reduction in emissions is achieved by suppliers’ investments in green technologies and innovation, as well as improvements in environmental policies in the years following customers’ NZPs. While these modifications do not seem to change firms’ profitability, they are associated with increased business output and capital investments, though at the expense of additional debt. These findings suggest that customers’ voluntary environmental disclosures can trigger positive spillover effects in upstream suppliers’ real operations, even in the absence of mandatory regulations.
CREDIT RATING AGENCIES AS GATEKEEPERS FOR NON-GAAP DISCLOSURE IN THE DEBT MARKET
(2024) Yan, Lu; Kimbrough, Michael; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
To aid investors in assessing earnings persistence, managers often voluntarily provide non-GAAP disclosure, which excludes certain items they characterize as non-recurring from GAAP earnings. The quality of non-GAAP disclosures and their impact on the equity market have been well studied. By contrast, there is little evidence on the impact of these disclosures in the debt market. Credit rating agencies (CRAs) serve as gatekeepers in the debt market, playing an important role in evaluating creditworthiness by actively incorporating accounting information from corporate disclosure. Like shareholders, CRAs also seek to isolate the transitory component of GAAP earnings. For example, Moody’s (2006) and Standard & Poor’s (2008), the two largest rating agencies, state that they derive their credit ratings from adjusted accounting figures by excluding non-recurring items that do not reflect long-term credit risks. Thus, in this paper, I explore the possibility that managers’ non-GAAP disclosures are relevant to CRAs. Consistent with CRAs’ emphasis on long-horizon corporate performance, I provide evidence that CRAs exhibit stronger responses to non-GAAP earnings than GAAP earnings. Using mediation analysis, I find that bondholders rely on CRAs to incorporate earnings information, and such reliance is notably greater for non-GAAP earnings than GAAP earnings. While CRAs do not specifically emphasize the direction of exclusions (i.e., gains or losses), they are attentive to identifying high-quality non-GAAP disclosure, as evidenced by the more positive associations observed between their credit ratings and high-quality non-GAAP earnings. I further find that non-GAAP earnings outperform GAAP earnings for non-GAAP reporters in their predictive power for long-term bankruptcy and default risks, validating CRAs’ motivations to incorporate non-GAAP earnings when assigning credit ratings. Finally, managers appear to be aware of CRAs’ utilization of their non-GAAP disclosure and are thus inclined to offer high-quality but conservative non-GAAP metrics to either achieve or maintain higher ratings when approaching rating upgrades or downgrades. My findings collectively suggest that CRAs view non-GAAP metrics as more relevant tools when evaluating borrowers’ long-term performance and default risks, serving as key intermediaries between non-GAAP reporters and bondholders.
Are the voices of customers louder when they are seen? Evidence from CFPB complaints
(2022) Mazur, Laurel Celastine; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This paper exploits a unique policy change in the banking sector – the first disclosure of the customer complaints submitted to the Consumer Financial Protection Bureau (CFPB) – to examine whether regulatory scrutiny represents one mechanism through which the disclosure of customer complaints can affect bank behavior. I find that banks with a higher complaint volume on the disclosure date increase mortgage approval rates relative to banks with fewer complaints in the same county, and that this effect is strongest in financially underserved communities. I further find that the disclosure effect is larger for banks under more regulatory scrutiny, namely, those operating in states with stronger consumer financial protection enforcement and those with prior consumer affairs violations. Taken together, the results suggest that the public disclosure of customer complaints, especially when accompanied by regulatory pressure, can serve as a mechanism for customers to influence banks’ consumer lending behavior.
BEYOND RISK: VOLUNTARY DISCLOSURE UNDER AMBIGUITY
(2022) Rava, Ariel; Zur, Emanuel; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
In my dissertation, I examine the impact of ambiguity (Knightian uncertainty), alongside that of risk, on firms’ voluntary disclosure decisions. I confirm the well-known result that an increase in risk—uncertainty over outcomes—is associated with an increase in management guidance (earnings and capital expenditure forecasts). Conversely, I find that an increase in ambiguity—uncertainty over the probabilities of outcomes—is associated with less guidance. Furthermore, I show that ambiguity decreases following voluntary disclosures, consistent with managers being aware of and reacting to heightened ambiguity. Finally, I provide novel empirical evidence showing that guidance under ambiguity has adverse capital market consequences. Even though the ways through which risk impacts managers’ disclosure decisions have been extensively studied in the accounting literature, no extant research has examined whether and how ambiguity impacts these decisions. My findings are consistent with the notion that managers’ take into account the ambiguity in the environment, showing that ambiguity has an important and distinct impact on their voluntary disclosure decisions.
CAUSES AND CONSEQUENCES OF SUPPLY CHAIN TRANSPARENCY: EVIDENCE FROM SUPPLIER IDENTITY DISCLOSURE.
(2021) Choi, Jin Kyung; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This study examines the determinants and consequences of managers’ choices to disclose the identity about their firm’s first-tier suppliers. I find that reputational benefits, informational benefits, and proprietary costs are important determinants in a firm’s voluntary disclosure choices regarding the identity of suppliers. Further analyses reveal that both shareholders and financial intermediaries find supplier identity disclosures useful. I find that shareholder response to supply chain risk events is timelier for firms that disclose supplier identity. Moreover, supplier identity disclosure appears to help analysts improve earnings forecast accuracy. Taken together, my results shed light on the cost-benefit tradeoffs faced by firms in disclosing supplier identity and how capital market participants use the information disclosed.
Does Climate Change Transparency Affect Capital Flows? Evidence from Mandatory Greenhouse Gas Emissions Disclosure
(2021) Zotova, Viktoriya; Hann, Rebecca; Zur, Emanuel; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
In this study, I exploit a quasi-natural experiment—the introduction of the mandatory Greenhouse Gas Emissions Reporting Program (GHGRP) in the United States—to examine the impact of climate change regulations on corporate investments, in particular, the effect of non-financial carbon disclosures on firms’ capital investment location decisions. Using unique project-level data on inter-state and foreign direct investments (FDI) for a sample of U.S. corporations, I document two sets of findings. Within the U.S., firms reacted by increasing investments in more environmentally-oriented jurisdictions, while decreasing investments in less environmentally-oriented jurisdictions, making the domestic profile of investment greener. Outside of the U.S., in contrast, I find that, against a backdrop of declining global FDI, the reduction of U.S. FDI was significantly smaller in less environmentally-oriented jurisdictions, making the international profile of investment less green. These results are driven by firms with lower environmental reputation. I show that a channel for the Program’s effect on investment location decisions is the presence of capital market pressure, which is in alignment with the goals of the Program to raise awareness among stakeholders. Consistent with investment and disclosure theory, the results suggest that firms with lower environmental reputation respond to investor pressures by geographically shifting investments into more eco-friendly locations at home but not abroad. Overall, the study demonstrates that carbon disclosure policies, such as the GHGRP, can have a significant effect on firms’ real decisions as well as potential international spillovers.
Earnings Uncertainty and Nonprofessional Intermediaries
(2021) Hyman, Cody Alyssa; Seybert, Nick; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Prior research is mixed on individual investors’ ability to utilize earnings information and generally credits professional information intermediaries with alleviating processing costs. Over the past decade, individual investors increasingly rely on online social networks to help them process the information they use to trade. This paper investigates the role of earnings uncertainty (persistence, predictability, smoothness, and accrual quality) as a processing cost and the ability of nonprofessional intermediaries to ameliorate this cost. Using comments and trades made on a popular social trading platform as raw and applied information, respectively, I show that raw information is impeded by earnings uncertainty while applied information reduces integration costs to improve the use of earnings information.
ARE INDIVIDUAL INVESTORS INFORMED TRADERS? EVIDENCE FROM THEIR MIMICKING BEHAVIOR
(2020) Polat, M. Fikret; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Evidence from a large stream of research suggests that individual investors are uninformed noise traders, who push equity prices away from fundamentals. Recent studies, however, find that individual investors are sophisticated—their trades contain information about future stock prices. In this study, I shed light on this debate by examining a potential channel through which individual investors become informed: trading disclosures of other market participants. Specifically, I examine whether individual investors exploit the proprietary trading strategies of institutional investors revealed in 13F filings. Using a large sample of retail trades, I find a significant positive association between the order imbalance of retail investors and the first buys of institutional investors around the 13F disclosure deadline, with the positive association concentrated among transient and growth-style institutions. The results suggest that not only do individual investors engage in mimicking trading, but their mimicking behavior is selective. I further find that retail investors’ order imbalance predicts future stock returns, with this predictive ability more pronounced in the week around the 13F disclosure deadline, which suggests that individual investors benefit from their selective mimicking trading. Lastly, I find that mimicking trading accelerates the price discovery of upcoming earnings news. Overall, this study enhances our understanding of how individual investors use public disclosures to become informed and contributes to the debate on whether individual investors are informed traders as well as work on the role of SEC disclosures in leveling the informational playing field.
Analysts Unchained—Expanded Information Processing Capacity and Effort Transfer under Technology Adoption
(2020) Feng, Ruyun; Kimbrough, Michael; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Analysts acquire and disseminate information to assist investors in equity valuation. Despite their expertise in equity valuation, sell-side analysts are economic agents with limited time and cognitive resources. The constraint on an analyst’s information processing capacity is reflected by the previously documented negative association between an analyst’s forecast accuracy for a focal firm and the total number of firms the analyst covers. While prior research focuses on analysts’ attributes and portfolio firm characteristics as factors impinging on analysts’ information processing capacity, I examine whether information technology—an exogenous factor—can alleviate this constraint. Using the recent exogenous shock of XBRL adoption, I find that the widespread adoption of XBRL expands analysts’ information processing capacity. I document two consequences of this expanded capacity. As an analyst’s information processing capacity increases, the analyst either improvs the forecast accuracy for non-adopting firms in the existing portfolio or increases the size of the portfolio. This finding indicates that the adoption of XBRL generates a positive externality from the adopting firms due to the transfer of analyst effort away from those firms. This study provides the first evidence that exogenous factors such as the adoption of new technology can expand analysts’ information processing capacity, thereby allowing analysts to improve the overall quality of existing coverage and allowing more firms to enjoy the benefits of analyst coverage. The paper also provides the new insight that information externalities can exist among firms that are fundamentally unrelated by identifying another channel—the effort channel—as a source of such externalities.
Who is Talking about Whom? Determinants and Consequences
(2020) Ward, Gerald Timothy Crawford; Cheng, Shijun; Zur, Emannuel; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Despite the importance of peer firm information in capital markets, we know little about what peer firms say about each other in financial disclosures. This paper provides evidence on this topic and documents that approximately 17 percent of earnings conference calls contain at least one peer firm mention from managers. I also find that managers are, on average, more likely to mention peer firms with superior performance. This tendency, however, is less pronounced around upward perception events. Finally, I provide evidence that capital market participants find peer firm mentions informative.
Matchmaking or Information Leakage? Disclosure Benefits and Constraints of Corporate Job Advertisement Specificity
(2018) Cao, Yi; Cheng, Shijun; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This study examines the benefits and constraints of a special form of corporate voluntary disclosure—job advertisements. Using a novel dataset of over 8 million recruiting advertisements posted by public companies, I follow taxonomy theories and create a continuous measure of information specificity, based upon the level of descriptive detail of skill requirements in job advertisements. Consistent with the theory that labor market disclosure mitigates search frictions, I find job advertisement specificity positively predicts employee satisfaction, productivity, and corporate accounting performance and negatively predicts employee turnover rate. My results further suggest that job advertisement specificity provides incremental information about human capital intangibles and improves the value-relevance of accounting numbers. I also show that the information specificity is constrained by product market competition. Together, my results suggest job advertisement is an important voluntary disclosure channel and that the content of job advertisements is informative to capital- and product-market participants.
Do State Taxes Play a Role in Corporate Investment Decisions? Evidence from Interstate Investment
(2018) Kim, Heedong; Hann, Rebecca N; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Using a novel data set of state-specific investments at the project level and staggered changes in state corporate income taxes, I examine whether corporate income taxes affect firms’ investment location decisions in the U.S. In contrast to recent studies that document an insignificant effect on firm-level investments, I find that changes in state taxes have a significant effect on project-level investments—firms locate their investment projects in states that cut their corporate taxes. This effect is stronger for projects that are less geographically constrained and for projects that create more jobs. Additional analysis shows that state taxes are particularly relevant for firms’ investment location decisions among competing states. Taken together, this study offers new evidence that state corporate income taxes play an important role in firms’ interstate investment location decisions.
Strategic Shareholders and IPO Disclosure: Evidence from Corporate Venture Capital
(2017) Zheng, Yue; Hann, Rebecca N.; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This paper exploits the recent rise in corporate venture capitalists (CVC) to examine the effect of shareholders’ strategic incentives on firms’ IPO disclosure. CVCs’ investments are often driven by both financial and strategic incentives. I argue that, due to their strategic incentives, CVCs may influence their portfolio firms’ disclosure choices to protect proprietary information and avoid competitive harm not only to the portfolio firm but also to the CVC parent. Using a sample of venture capital (VC)-backed IPO firms from 1996 to 2014, I find that CVC-backed firms are more likely to redact material information in IPO prospectuses through confidential treatment orders than firms not backed by CVCs—the likelihood of redaction is 16% higher when a CVC is present. This result is robust to using propensity score matching and an instrumental variables approach. Furthermore, the disclosure effect is more pronounced for CVCs in the same industry as the portfolio firm, CVCs with a formal strategic partnership with the portfolio firm, and CVCs with fewer portfolio firms. These findings suggest that CVCs’ strategic incentives play an important role in their portfolio firms’ disclosure choices. CVC-backed firms are also more likely to redact information contained in agreements with collaborative partners, customers, or suppliers and in agreements associated with the CVC parents, which tend to contain proprietary information about the CVC. Taken together, this study offers new insights on how a previously unexplored factor—large shareholders’ strategic incentives—affects corporate disclosure decisions.
Non-Investor Stakeholders and Earnings Benchmarks
(2017) Wei, Sijing; Kimbrough, Michael D.; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
ABSTRACT A firm has numerous non-investor stakeholders, such as customers, employees, and potential business partners, who provide needed monetary and nonmonetary support to the firm. In Essay One, I provide empirical evidence on the previously untested theoretical prediction that these stakeholders’ views of a firm depend on its ability to meet relevant earnings benchmarks. Using published and proprietary reputation scores to capture stakeholder perceptions, I find in both levels and changes analyses that non-investor stakeholder perceptions are positively associated with a firm’s ability to beat relevant earnings benchmarks and that the relevant earnings benchmark for each stakeholder group varies based on the nature of its claim. Specifically, customer perceptions are positively associated with a firm’s ability to meet the profit benchmark. Potential business partner perceptions are positively associated with a firm’s ability to meet both the analyst forecast benchmark and the earnings growth benchmark. Employee perceptions are positively associated with a firm’s ability to meet the earnings growth benchmark. These findings highlight broader uses of and broader audiences for accounting information than previously documented. In Essay Two, I examine whether and how firms consider their non-investor stakeholders when prioritizing which earnings benchmarks to meet or beat. Using a sample of publicly traded firms from 1990 to 2015, I identify which non-investor stakeholder group (i.e. consumers, employees, or potential business partners) is most critical to a firm based on a stakeholder dependency score, which measures the extent to which a firm relies on a particular stakeholder group. I find that, regardless of which non-investor stakeholder group is most critical to the firm, firms beat the analyst forecast benchmark several times more frequently than they beat other benchmarks. Because the analyst forecast is the most important benchmark to the capital market, this finding indicates that managers place greater weight on investors’ preferences than on the preferences of their non-investor stakeholders when deciding which earnings benchmarks to meet or beat. Thus, capital market pressure appears to dominate the pressure from non-investor stakeholders. However, I also find that consumer-focused (employee-focused) firms meet or beat the profit benchmark (the increase benchmark) more often than non-consumer-focused firms (non-employee-focused firms) when the profit benchmark (the increase benchmark) is the most difficult to beat or when pre-managed earnings falls short of the associated benchmark. These results indicate that firms are more likely to meet or beat the specific earnings benchmark that is most relevant to a particular non-investor stakeholder group when that non-investor stakeholder group is most critical to the firm. These findings contribute to a better understanding of how managers incorporate non-investor stakeholders’ preferences in their decisions about which earnings benchmarks to meet or beat.
Industry Linkages and Audit Firms' Industry Portfolio Choice: Evidence from Product Language
(2016) Wang, Wenfeng; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Audit firms are organized along industry lines and industry specialization is a prominent feature of the audit market. Yet, we know little about how audit firms make their industry portfolio decisions, i.e., how audit firms decide which set of industries to specialize in. In this study, I examine how the linkages between industries in the product space affect audit firms’ industry portfolio choice. Using text-based product space measures to capture these industry linkages, I find that both Big 4 and small audit firms tend to specialize in industry-pairs that 1) are close to each other in the product space (i.e., have more similar product language) and 2) have a greater number of “between-industries” in the product space (i.e., have a greater number of industries with product language that is similar to both industries in the pair). Consistent with the basic tradeoff between specialization and coordination, these results suggest that specializing in industries that have more similar product language and more linkages to other industries in the product space allow audit firms greater flexibility to transfer industry-specific expertise across industries as well as greater mobility in the product space, hence enhancing its competitive advantage. Additional analysis using the collapse of Arthur Andersen as an exogenous supply shock in the audit market finds consistent results. Taken together, the findings suggest that industry linkages in the product space play an important role in shaping the audit market structure.
NONDISCLOSURE – A GOOD NEWS SIGNAL?
(2016) Lee, Kyungran; Kimbrough, Michael D; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
I examine the implications of nondisclosure in a setting where there is a credible signal as to the proprietary nature of the undisclosed information. Specifically, I investigate the market and analysts' response to firms’ application to the Securities and Exchange Commission (SEC) for a confidential treatment order (CTO), which allows firms to redact required disclosures from SEC filings when the redacted information is proprietary. I find that the market and analysts react favorably to the voluntary nondisclosure of proprietary information using the SEC confidential treatment process. Market and analysts reactions are more favorable to the redaction of information that is more likely to have proprietary value, such as information related to research and development. In addition, I show that the redacting firms experience superior accounting performance compared to their peers in the years following the redaction, consistent with the market and analysts’ response to the redaction. However, I find that analysts engage in more intense private information search in response to a CTO redaction. This finding suggests that, although a CTO redaction can signal the nature of undisclosed information, analysts believe that the signal is not fully revealing of the economic magnitude of the undisclosed information. Overall, this study’s findings indicate that a firm's willingness to submit to the CTO approval process serves as a credible signal of the proprietary nature of the withheld information. The results of this study suggest a possible role for a credible signaling channel to facilitate communication between insiders and outsiders regarding the nature of withheld information.
An Integrated Analysis of the Corporate General Counsel's Impact on Accounting Choices and Legal Risk
(2015) Ham, Charles; Kimbrough, Michael; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Companies are increasingly relying on highly paid corporate general counsels (GCs) to help manage the risks of costly regulatory sanctions and shareholder lawsuits associated with their firms' accounting and overall business practices. While recent research documents the role of the GC on specific decisions in isolation, whether and how GCs fulfill their intended role of managing their firms' expected legal costs remains an open question. I document several ways in which GCs affect the expected legal costs associated with their firms' accounting choices. The analysis is based on the insight that the expected legal costs associated with the firm's accounting choices depend on three factors: (1) the extent to which the firm undertakes legally risky accounting practices, (2) the likelihood that such practices are detected by outsiders, and (3) the severity of penalties outsiders impose on the firm upon detection. Managers can affect the first factor by taking the external legal environment as given and altering their internal decisions accordingly, whereas managers can affect the latter two factors by altering the firm's external legal environment through their influence on the intensity of outside monitoring and enforcement. I provide evidence that the GC decreases the firm's expected legal costs via all three factors. First, firms with an influential GC (GC firms) display a preference for real earnings management relative to accrual earnings management and GC firms accelerate the recognition of losses in earnings, both of which entail less legal risk. Second, firms that make aggressive accounting choices are less likely to be targeted by SEC enforcement actions in the presence of an influential GC. This finding indicates that GCs are able to advise their firms about how to use accounting discretion in a way that avoids unwanted regulatory scrutiny. Third, GC firms are less likely to be sued following a restatement announcement. When their firms are sued, the lawsuits are more likely to be dismissed and the settlement amounts are lower. These findings indicate that the GC's advocacy is associated with a reduction in the severity of penalties outsiders impose on the firm when improper accounting choices are discovered. The analyses culminate with an examination of the GC's effect on the firm's overall corporate risk and the market's assessment of the GC's contribution to the firm. I find that GC firms are associated with lower corporate risk as measured by the volatility of future stock returns and lower levels of future risky investments in the form of capital expenditures and research and development expenditures. Finally, the market responds favorably in years that firms appoint a GC to the top management team, consistent with the market perceiving the net impact of GCs' activities to be value enhancing.
THE HIDDEN FACE OF THE MEDIA: HOW FINANCIAL JOURNALISTS PRODUCE INFORMATION
(2015) Li, Congcong; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This study investigates how the media produces information. Using a sample of 296,497 Wall Street Journal news articles, I find that news articles written by experienced and reputable financial journalists are more informative about future earnings. I then examine the source of such information advantage by studying the detailed quotes from news articles. I further find that these journalists rely more heavily on first-hand access to management, institutional investors, and other external experts, an important channel through which they produce informative news. Interestingly, however, this information advantage is present only when the experienced and reputable journalists remain independent -- for those journalists that repeatedly cover the same firm or rely primarily on information from management, the networking information advantage is completely muted. Further, I perform two additional tests. In the first test, I employ news articles about firm fundamentals, and in the second I use a revised measure of information content by including Dow Jones Business News. I continue to find that the information advantage of experienced and reputable journalists obtains only when these journalists remain independent. These results suggest that the quality of the media as an information intermediary depends critically on individual journalists' ability to access information from industry networks and provide unbiased news.
The more we know about fundamentals the less we agree on price? Evidence from earnings announcements.
(2014) Gallo, Lindsey; Hann, Rebecca; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This study investigates whether an earnings announcement that decreases disagreement about fundamentals can simultaneously increase disagreement about price. Kondor (2012) develops a rational expectations model in which the presence of short-horizon investors can lead to a polarization of higher-order beliefs about price (i.e., beliefs regarding the opinions of other investors), even as a public announcement reduces disagreement about fundamentals. I empirically investigate this theoretical finding using analyst forecast dispersion and implied volatility to proxy for differences of opinion about fundamentals and price, respectively. I predict and find a positive association between the presence of short-horizon traders and both the likelihood and extent of divergence between changes in price disagreement and earnings disagreement around earnings announcements characterized by decreasing forecast dispersion (i.e. earnings announcements that decrease disagreement about fundamentals). Further, I document that the association is stronger following good news announcements than following bad news announcements consistent with more precise public signals triggering higher-order disagreement. In additional analysis, I employ abnormal announcement period volume to measure disagreement about price. Using this alternative measure, I continue to document a positive association between short-horizon ownership and the extent of divergence. Taken together, these findings suggest that higher-order beliefs play an important role in the way market participants react to public announcements.
When do targets' past financial results matter most to acquirers? The role of disruption of targets' existing operations
(2014) Rabier, MaryJane Raffaella; Kimbrough, Michael D; Business and Management: Accounting & Information Assurance; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
A target's past earnings and past earnings quality are informative about the performance of its stand-alone operations while its book value is informative about its adaptation value, which is the potential value from alternative uses of its resources. The information in past earnings and past earnings quality about a target's stand-alone operations is likely to be more important to acquirers that intend to keep the target's operations intact post-merger while the information in book value about its adaptation value is likely to be more important to acquirers that anticipate significant disruption of the target's operations. Using acquirer industry classification and a self-constructed index as alternative approaches to measuring anticipated disruption of target operations, I find evidence consistent with these predictions. Specifically, I find that acquirers assign greater discounts to targets' pre-merger earnings performance and pre-merger earnings quality in setting their bids as anticipated disruption of targets' operations increases. In addition, acquirers place greater weight on targets' pre-merger book values in setting their bids as anticipated disruption increases. These findings provide important insights into the conditions under which particular types of accounting information are most useful in the merger context.

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