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Full-Text Articles in Business
Non-Gaap Earnings And Stock Price Crash Risk, Charles Hsu, Rencheng Wang, Benjamin C. Whipple
Non-Gaap Earnings And Stock Price Crash Risk, Charles Hsu, Rencheng Wang, Benjamin C. Whipple
Research Collection School Of Accountancy
We investigate whether non-GAAP earnings disclosures increase stock price crash risk. Consistent with non-GAAP disclosures allowing managers to inflate investors’ perceptions about firm performance, our results indicate that income increasing non-GAAP reporting increases crash risk. We also find that managers can use non-GAAP reporting as a substitute for earnings management to withhold bad news from investors (the traditional explanation for crashes). Finally, we find a positive association between non-GAAP reporting and the likelihood of subsequent events that can trigger a crash. Overall, our evidence is consistent with some non-GAAP disclosures exposing investors to risks of large and sudden price declines.
Terrorist Attacks, Managerial Sentiment, And Corporate Disclosures, Wen Chen, Haibin Wu, Liandong Zhang
Terrorist Attacks, Managerial Sentiment, And Corporate Disclosures, Wen Chen, Haibin Wu, Liandong Zhang
Research Collection School Of Accountancy
This study investigates the effect of managerial sentiment on corporate disclosure decisions. Using terrorist attacks in the United States as adverse shocks to managerial sentiment, we find that firms located in the metropolitan areas attacked issue more negatively biased earnings forecasts. The effect is stronger for firms with higher operating uncertainty and firms with younger, inexperienced, or less confident executives and it is weaker for firms located in states with increasing violent crime rates. A potential alternative explanation is that managers could strategically bias earnings forecasts downward and attribute the poor performance to terrorist attacks. To address this issue, we …
What Are You Saying? Using Topic To Detect Financial Misreporting, Nerissa C. Brown, Richard M. Crowley, W. Brooke Elliott
What Are You Saying? Using Topic To Detect Financial Misreporting, Nerissa C. Brown, Richard M. Crowley, W. Brooke Elliott
Research Collection School Of Accountancy
We use a machine learning technique to assess whether the thematic content of financial statement disclosures (labeled topic) is incrementally informative in predicting intentional misreporting. Using a Bayesian topic modeling algorithm, we determine and empirically quantify the topic content of a large collection of 10‐K narratives spanning 1994 to 2012. We find that the algorithm produces a valid set of semantically meaningful topics that predict financial misreporting, based on samples of Securities and Exchange Commission (SEC) enforcement actions (Accounting and Auditing Enforcement Releases [AAERs]) and irregularities identified from financial restatements and 10‐K filing amendments. Our out‐of‐sample tests indicate that topic …
Consequences Of Disclosing Clinical Trial Results: Evidence From The Food And Drug Administration Amendments Act, Thomas Borveau, Vedran Capkun, Yin Wang
Consequences Of Disclosing Clinical Trial Results: Evidence From The Food And Drug Administration Amendments Act, Thomas Borveau, Vedran Capkun, Yin Wang
Research Collection School Of Accountancy
We examine how the U.S. Food and Drug Administration Amendments Act (FDAAA) of 2007, which requires additional disclosures regarding clinical trial results, impacts information asymmetry between the disclosing pharmaceutical firm and capital market participants, the general public, academics, and practitioners. We document a reduction in information asymmetry in capital markets. We also document an increase in adverse event and product problem complaint reports filed against the pharmaceutical firms to the FDA and a higher number of drug and medical device recalls for affected firms after the FDAAA enactment. Finally, cross-sectional analyses suggest that the increase in FDA complaint reports and …
(When) Does Transparency Hurt Liquidity?, Karthik Balakrishnan, Aytekin Ertan, Yun Je Lee
(When) Does Transparency Hurt Liquidity?, Karthik Balakrishnan, Aytekin Ertan, Yun Je Lee
Research Collection School Of Accountancy
Conventional wisdom suggests that increases in public information improve market liquidity. However, if greater public information incentivizes only sophisticated investors to produce private information, it could exacerbate information asymmetry among investors and thus reduce liquidity. We explore this argument on a sample of mortgage-backed securities (MBSs) by using a recent European regulation that mandates complex disclosures about the individual loans underlying MBSs. We find that the liquidity of the debt tranches of disclosed MBSs declines by 23% post-regulation. Our inferences are stronger when the securities are harder to value and when the disparity in investor sophistication is higher. In contrast …
Riding The Blockchain Mania: Public Firms’ Speculative 8-K Disclosures, Pengkai Lin
Riding The Blockchain Mania: Public Firms’ Speculative 8-K Disclosures, Pengkai Lin
Research Collection School Of Accountancy
This paper provides evidence on public firms' initial 8-K disclosures that mention Blockchain and investors' response to these disclosures. We categorize the description of Blockchain activities in firms' 8-Ks as Speculative (e.g., a vague future plan that involves Blockchain) or Existing (e.g., a description of Blockchain product). We document a sharp increase in the number of initial 8-K disclosures of Blockchain, particularly by Speculative firms, coinciding with the rise of Bitcoin prices and excitement in Blockchain technology in the last quarter of 2017. Investors react positively to the Blockchain 8-Ks issued by Speculative firms in the initial seven-day event window …
Advertising And Disclosure: Do Firms Time Advertising During Disclosure Periods?, Yin Wang
Advertising And Disclosure: Do Firms Time Advertising During Disclosure Periods?, Yin Wang
Research Collection School Of Accountancy
Using a large sample of monthly advertising data, I examine whether U.S. firms use advertisingstrategically during disclosure periods. I find that firms schedule some advertising to appeararound their SEC 10-K, 10-Q filings and around their earnings announcements, consistent withadvertising being used to increase visibility and attract investor attention during disclosureperiods. This effect is stronger for firms reporting good news, for firms with high individualinvestor ownership, for firms in the retail industry, and for young firms. In addition, firmsincrease their advertising through media with broad target audiences and through business-toconsumer media around their disclosures (i.e. SEC 10-K, 10-Q filings and earningsannouncements). …
Fair Value Hierarchy Measures: Post-Implementation Evidence On Ifrs 7, Pearl Tan
Fair Value Hierarchy Measures: Post-Implementation Evidence On Ifrs 7, Pearl Tan
Research Collection School Of Accountancy
Using a balance sheet valuation model, this study examines if information on the fair value hierarchy of on-balance sheet financial assets and financial liabilities are incorporated in the market’s valuation of companies’ equities in Singapore. The results of the study show significant associations between as-reported Level 1 and Level 2 fair value measures of financial assets and market values. However, the results are not significant for Level 3 fair value measures of financial assets and each of the three levels of fair value measures of financial liabilities. The results also show that returns are more positively associated with as-reported gains …
Price Shocks, News Disclosures, And Asymmetric Drifts, Hai Lu, Kevin Wang, Xiaolu Wang
Price Shocks, News Disclosures, And Asymmetric Drifts, Hai Lu, Kevin Wang, Xiaolu Wang
Research Collection School Of Accountancy
Motivated by investor disagreement and corporate disclosure literatures, we examinehow stock price shocks affect future stock returns. We find that both large short-termprice drops and hikes are followed by negative abnormal returns over the subsequent year,consistent with the conjecture that price shocks are useful indicators of inter-temporalspikes in investor disagreement and investor opinion converges gradually. The asymmetricdrifts, return continuation for negative price shocks versus return reversal for positive ones,are in sharp contrast to the general findings of symmetric drifts in corporate event studies.Moreover, price shocks associated with public news events are followed by significantlyweaker downward drifts, suggesting that news disclosures …
The Effect Of Information Quality On Liquidity Risk, Jeffrey Ng
The Effect Of Information Quality On Liquidity Risk, Jeffrey Ng
Research Collection School Of Accountancy
I investigate whether information quality affects the cost of equity capital through liquidity risk. Liquidity risk is the sensitivity of stock returns to unexpected changes in market liquidity; recent asset pricing literature has emphasized the importance of this systematic risk. I find that higher information quality is associated with lower liquidity risk and that the reduction in cost of capital due to this association is economically significant. I also find that the negative association between information quality and liquidity risk is stronger in times of large shocks to market liquidity.
Bonding To The Improved Disclosure Environment In The Us: Firms Listing Choices And Their Capital Market Consequences, Ole-Kristian Hope, Tony Kang, Yoonseok Zang
Bonding To The Improved Disclosure Environment In The Us: Firms Listing Choices And Their Capital Market Consequences, Ole-Kristian Hope, Tony Kang, Yoonseok Zang
Research Collection School Of Accountancy
This paper examines whether the current reporting and disclosure requirements for foreign registrants in the United States affect foreign firms' decisions to list on a U.S. exchange. We find that while firms from a weak disclosure environment are more likely to cross-list and either trade over-the-counter or be placed privately among institutional investors, they are less likely to list on an exchange in which firms are required to comply with U.S. GAAP. This is consistent with the idea that the decrease in the potential private control benefits accruing to managers discourages them from listing on an organized exchange. We further …