Cost of Capital Free-Riders

2016 ◽  
Vol 91 (5) ◽  
pp. 1291-1313 ◽  
Author(s):  
Stephen P. Baginski ◽  
Lisa A. Hinson
Keyword(s):  
Information Transfer ◽  
Cost Of Capital ◽  
Information Loss ◽  
Data Availability ◽  
Policy Decisions ◽  
Analyst Following ◽  
Disclosure Policy ◽  
Free Riders ◽  
Management Forecast ◽  
Jel Classifications

ABSTRACTWe document the interrelationship of disclosure policy decisions among firms by providing evidence that the cessation of quarterly management forecast guidance by 656 firms (“stoppers”) during 2004–2009 is associated with a pursuant increase in quarterly forecasts by previously non-forecasting firms in the same industries (“free-riders”). Increased forecasting by free-riders is positively associated with the information loss in the industry (proxied by the number of stoppers in the industry, the strength of previously existing information transfer relations between stoppers and free-riders, and whether stoppers and free-riders are peer firms) and the importance of the information loss to the free-riders (proxied by analyst following and the existence of new share issues). Following the cessation event, free-riders' cost of capital decreases as a function of the extent to which free-riders immediately initiate quarterly forecasting.JEL Classifications: M41.Data Availability: Data are available from the sources indicated in the text.

How the Interplay between Financial and Nonfinancial Measures Affects Management Forecasting Behavior

2019 ◽  
Vol 31 (3) ◽  
pp. 41-63 ◽  
Author(s):  
Joseph F. Brazel ◽  
Bradley E. Lail
Keyword(s):  
Earnings Forecasts ◽  
Data Availability ◽  
Forecast Errors ◽  
Earnings Growth ◽  
Management Forecast ◽  
Nonfinancial Measures ◽  
External Stakeholders ◽  
Jel Classifications ◽  
Future Management

ABSTRACT This study examines how the interplay between financial and nonfinancial measures (NFMs) affects management forecasting behavior. Building on the knowledge that NFMs are typically aligned with actual earnings and are likely incorporated into earnings forecasts, we investigate if the level of divergence between changes in NFMs and contemporaneous changes in earnings influences management forecasting behavior. We hand collect company-specific NFMs disclosed in 10-K filings and describe how a greater divergence between NFMs and earnings (i.e., NFM changes substantially outpacing earnings growth, or vice versa) is associated with greater uncertainty about the underlying business. As such, in more divergent settings, we observe that management is less likely to issue guidance. Consistent with our theory, for managers that do provide guidance in more divergent settings, management forecast errors increase. Last, we provide evidence that external stakeholders can use the level of divergence to predict future management forecasting behavior. JEL Classifications: G14; M40; M41. Data Availability: The data used in this study are publicly available from the sources indicated in the text.

scholarly journals The Role of Analysts in Intra-Industry Information Transfer

2013 ◽  
Vol 88 (4) ◽  
pp. 1265-1287 ◽  
Author(s):  
Gilles Hilary ◽  
Rui Shen
Keyword(s):  
Information Transfer ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Forecast Revisions ◽  
Management Forecast

ABSTRACT When a firm issues a management forecast, analysts who have observed more forecasts from this firm since covering it (i.e., have more MF-Experience) subsequently improve their own accuracy more and provide timelier earnings forecasts for other (non-issuing) firms in the same industry. We also find that, subsequent to a management forecast, investors are more responsive to forecast revisions for non-issuing firms made by analysts with more MF-Experience. Further tests suggest that our results are not explained by endogeneity in firm coverage. Data Availability: Data are commercially available.

Interim Reporting Frequency and the Mispricing of Accruals

2018 ◽  
Vol 32 (3) ◽  
pp. 29-47
Author(s):  
Shou-Min Tsao ◽  
Hsueh-Tien Lu ◽  
Edmund C. Keung
Keyword(s):  
Financial Reporting ◽  
Stock Prices ◽  
Data Availability ◽  
Financial Reports ◽  
Regulatory Changes ◽  
Sample Composition ◽  
Reporting Frequency ◽  
Over Time ◽  
Jel Classifications ◽  
Accrual Mispricing

SYNOPSIS This study examines the association between mandatory financial reporting frequency and the accrual anomaly. Based on regulatory changes in reporting frequency requirements in Taiwan, we divide our sample period into three reporting regimes: a semiannual reporting regime from 1982 to 1985, a quarterly reporting regime from 1986 to 1987, and a monthly reporting regime (both quarterly financial reports and monthly revenue disclosure) from 1988 to 1993. We find that although both switches (from the semiannual reporting regime to the quarterly reporting regime and from the quarterly reporting regime to the monthly reporting regime) hasten the dissemination of the information contained in annual accruals into stock prices and reduce annual accrual mispricing, the switch to monthly reporting has a lesser effect. Our results are robust to controlling for risk factors, transaction costs, and potential changes in accrual, cash flow persistence, and sample composition over time. These results imply that more frequent reporting is one possible mechanism to reduce accrual mispricing. JEL Classifications: G14; L51; M41; M48. Data Availability: Data are available from sources identified in the paper.

Tax-Advantaged Trust Use Among IPO Executives: Determinants and Implications for Valuation and Future Performance

2019 ◽  
Vol 95 (3) ◽  
pp. 145-175 ◽  
Author(s):  
Michael J. Dambra ◽  
Matthew Gustafson ◽  
Phillip J. Quinn
Keyword(s):  
Stock Price ◽  
Relevant Information ◽  
Data Availability ◽  
Market Prices ◽  
The Public ◽  
Future Performance ◽  
Estate Taxes ◽  
Price Appreciation ◽  
One Year ◽  
Jel Classifications

ABSTRACT We examine the prevalence and determinants of CEOs' use of tax-advantaged trusts prior to their firm's IPO. Twenty-three percent of CEOs use tax-advantaged pre-IPO trusts, and share transfers into tax-advantaged trusts are positively associated with CEO equity wealth, estate taxes, and dynastic preferences. We project that pre-IPO trust use increases CEOs' dynastic wealth by approximately $830,000, on average. We next examine a simple model's prediction that trust use will be positively related to IPO-period stock price appreciation. We find that trust use is associated with 12 percent higher one-year post-IPO returns, but is not significantly related to the IPO's valuation, filing price revision, or underpricing. This evidence is consistent with CEOs' personal finance decisions prior to the IPO containing value-relevant information that is not immediately incorporated into market prices. JEL Classifications: D14; G12; G32; M21; M41. Data Availability: Data are available from the public sources cited in the text.

Concurrent Earnings Announcements and Analysts' Information Production

2019 ◽  
Vol 95 (1) ◽  
pp. 165-189 ◽  
Author(s):  
Matthew Driskill ◽  
Marcus P. Kirk ◽  
Jennifer Wu Tucker
Keyword(s):  
Earnings Announcements ◽  
Financial Analysts ◽  
Earnings Forecasts ◽  
Data Availability ◽  
Limited Attention ◽  
Conference Calls ◽  
Stock Recommendations ◽  
Rich Information ◽  
Sample Firm ◽  
Jel Classifications

ABSTRACT We examine whether financial analysts are subject to limited attention. We find that when analysts have another firm in their coverage portfolio announcing earnings on the same day as the sample firm (a “concurrent announcement”), they are less likely to issue timely earnings forecasts for the sample firm's subsequent quarter than analysts without a concurrent announcement. Among the analysts who issue timely earnings forecasts, the thoroughness of their work decreases as their number of concurrent announcements increases. In addition, analysts are more sluggish in providing stock recommendations and less likely to ask questions in earnings conference calls as their number of concurrent announcements increases. Moreover, when analysts face concurrent announcements, they tend to allocate their limited attention to firms that already have rich information environments, leaving behind firms in need of attention. Overall, our evidence suggests that even financial analysts, who serve as information specialists, are subject to limited attention. JEL Classifications: G10; G11; G17; G14. Data Availability: Data are publicly available from the sources identified in the paper.

Come on Over: Analyst/Investor Days as a Disclosure Medium

2016 ◽  
Vol 91 (6) ◽  
pp. 1725-1750 ◽  
Author(s):  
Marcus P. Kirk ◽  
Stanimir Markov
Keyword(s):  
Information Content ◽  
Short Duration ◽  
Price Impact ◽  
Senior Management ◽  
Data Availability ◽  
Market Participants ◽  
Temporal Proximity ◽  
Conference Presentations ◽  
Close Temporal Proximity ◽  
Jel Classifications

ABSTRACT Our study introduces analyst/investor days, a new disclosure medium that allows for private interactions with influential market participants. We also highlight interdependencies in the choice and information content of analyst/investor days and conference presentations, a well-researched disclosure medium that similarly allows for private interactions. Analyst/investor days are less frequent, but with longer duration and greater price impact than conference presentations. They are mostly hosted by firms that already have opportunities to interact with investors at conferences, but whose complex and diverse activities make the short duration and rigid format of a conference presentation an imperfect solution to these firms' information problems. Analyst/investor days and conference presentations tend to occur in different quarters, consistent with their competing for the time and attention of senior management. When these two mediums are scheduled in close temporal proximity to each other, analyst/investor days diminish the information content of conference presentations, but not vice versa, consistent with managers' favoring analyst/investor days over conference presentations as a disclosure medium. JEL Classifications: D82; M41; G11; G12; G14. Data Availability: Data are publicly available from the sources identified in the paper.

Auditors and the Principal-Principal Agency Conflict in Family Controlled Firms

2020 ◽  
Vol 39 (4) ◽  
pp. 31-55
Author(s):  
Chiraz Ben Ali ◽  
Sabri Boubaker ◽  
Michel Magnan
Keyword(s):  
Risk Assessment ◽  
Negative Relationship ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Risk ◽  
Controlling Shareholder ◽  
Voting Power ◽  
The Public ◽  
Agency Conflict ◽  
Jel Classifications

SUMMARY This paper examines whether multiple large shareholders (MLS) affect audit fees in firms where the largest controlling shareholder (LCS) is a family. Results show that there is a negative relationship between audit fees and the presence, number, and voting power of MLS. This is consistent with the view that auditors consider MLS as playing a monitoring role over the LCS, mitigating the potential for expropriation by the LCS. Therefore, our evidence suggests that auditors reduce their audit risk assessment and audit effort and ultimately audit fees in family controlled firms with MLS. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G32; G34; M42; D86.

The Association between Audit Manager and Auditor-In-Charge Experience, Effort, and Risk Responsiveness

2018 ◽  
Vol 38 (3) ◽  
pp. 121-147 ◽  
Author(s):  
Christine Contessotto ◽  
W. Robert Knechel ◽  
Robyn A. Moroney
Keyword(s):  
Audit Quality ◽  
Data Availability ◽  
The Core ◽  
Specific Experience ◽  
Primary Core ◽  
Using Data ◽  
Audit Team ◽  
Industry Experience ◽  
Jel Classifications ◽  
Core Role

SUMMARY Audit quality is dependent on the experience and effort of the audit team to identify and respond to client risks (risk responsiveness). Central to each team are the core role holders who plan and execute the audit. While many studies treat the partner as the primary core role holder, the manager and auditor-in-charge (AIC) are also important. Using data for engagements from two midtier firms, we analyze the association between the experience and relative effort of the manager and AIC and risk responsiveness. We find a manager's client-specific experience is associated with risk responsiveness for non-listed clients but find no evidence that the general or industry experience of a manager, or the experience of the AIC, is associated with risk responsiveness. The client-specific experience and relative effort of the partner is associated with risk responsiveness. These results suggests that managers can provide an important, albeit limited, contribution to the audit. JEL Classifications: M2. Data Availability: The data were made available to the researchers on the understanding that they will remain confidential.

scholarly journals Completeness of the operating room to intensive care unit handover: a matter of time?

2021 ◽  
Vol 21 (1) ◽  
Author(s):  
Fabian Dusse ◽  
Johanna Pütz ◽  
Andreas Böhmer ◽  
Mark Schieren ◽  
Robin Joppich ◽  
...  
Keyword(s):  
Intensive Care Unit ◽  
Intensive Care ◽  
Information Transfer ◽  
Time Pressure ◽  
Intraoperative Complications ◽  
Patient Characteristics ◽  
Information Loss ◽  
Ensure Patient Safety ◽  
Underlying Diseases

Abstract Background Handovers of post-anesthesia patients to the intensive care unit (ICU) are often unstructured and performed under time pressure. Hence, they bear a high risk of poor communication, loss of information and potential patient harm. The aim of this study was to investigate the completeness of information transfer and the quantity of information loss during post anesthesia handovers of critical care patients. Methods Using a self-developed checklist, including 55 peri-operative items, patient handovers from the operation room or post anesthesia care unit to the ICU staff were observed and documented in real time. Observations were analyzed for the amount of correct and completely transferred patient data in relation to the written documentation within the anesthesia record and the patient’s chart. Results During a ten-week study period, 97 handovers were included. The mean duration of a handover was 146 seconds, interruptions occurred in 34% of all cases. While some items were transferred frequently (basic patient characteristics [72%], surgical procedure [83%], intraoperative complications [93.8%]) others were commonly missed (underlying diseases [23%], long-term medication [6%]). The completeness of information transfer is associated with the handover’s duration [B coefficient (95% CI): 0.118 (0.084-0.152), p<0.001] and increases significantly in handovers exceeding a duration of 2 minutes (24% ± 11.7 vs. 40% ± 18.04, p<0.001). Conclusions Handover completeness is affected by time pressure, interruptions, and inappropriate surroundings, which increase the risk of information loss. To improve completeness and ensure patient safety, an adequate time span for handover, and the implementation of communication tools are required.

Social Media and Voluntary Nonfinancial Disclosure: Evidence from Twitter Presence and Corporate Political Disclosure

2018 ◽  
Vol 33 (2) ◽  
pp. 99-128 ◽  
Author(s):  
Lijun (Gillian) Lei ◽  
Yutao Li ◽  
Yan Luo
Keyword(s):  
Social Media ◽  
Econometric Model ◽  
Data Availability ◽  
Political Contributions ◽  
Cross Sectional ◽  
Political Activities ◽  
Social Media Platforms ◽  
Sectional Analysis ◽  
Jel Classifications ◽  
Nonfinancial Disclosure

ABSTRACT This study uses a sample of 1,316 firm-year observations of S&P 500 companies (2012–2016) to investigate whether and how social media (i.e., Twitter) affects firms' voluntary nonfinancial disclosure (i.e., corporate political disclosure). Our results show that Twitter-adopting firms are generally more transparent in their disclosure of corporate political contributions and of related policies and board oversight. Moreover, firms with more Twitter followers and firms whose corporate political activities are targeted in more Twitter messages are more transparent in such disclosures. Our cross-sectional analysis suggests that this effect is stronger for firms whose stakeholders are more active on Twitter and firms that are less visible or more reputable. Our results remain robust to different econometric model specifications and controlling for alternative social media platforms. Taken together, our findings suggest that social media (i.e., Twitter) presence exerts pressure on firms' voluntary nonfinancial disclosure practices (i.e., corporate political disclosure). JEL Classifications: G38; M41; M48. Data Availability: Data are available from the sources indicated in the text.

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