Accounting & Information Assurance Theses and Dissertations
Permanent URI for this collectionhttp://hdl.handle.net/1903/2736
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Item 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.Item 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.Item 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.