Does financial reporting misconduct pay off even when discovered?

Review of Accounting Studies - Experts and popular belief contend that it pays to engage in financial misconduct. We hand-collect data on three subsamples of severe misconduct cases, between 2003...     

Determinants of consumer demand for circular economy products. A case for reuse and remanufacturing for sustainable development

We investigate determinants of consumer demand for circular (reused and remanufactured) products. Based on exploratory choice-based conjoint experiments with a sample of 800 adults in the United Kingdom, we examine two types of premium segment electronic appliances: a mobile phone and a robot vacuum cleaner. We find that consumers prefer partly circulated products over fully or not at all circulated products and that circular products can likely successfully enter the existing market at the retail price of a new product. Interestingly, circular products compete for market share primarily with new products, leaving the market share of second-hand options less affected. The results show a promising path for firms considering a transition to circular business models.     

The Incidence of Public Spending on Healthcare: Comparative Evidence from Asia

The article compares the incidence of public healthcare across11 Asian countries and provinces, testing the dominance of healthcareconcentration curves against an equal distribution and Lorenzcurves and across countries. The analysis reveals that the distributionof public healthcare is prorich in most developing countries.That distribution is avoidable, but a propoor incidence is easierto realize at higher national incomes. The experiences of Malaysia,Sri Lanka, and Thailand suggest that increasing the incidenceof propoor healthcare requires limiting the use of user fees,or protecting the poor effectively from them, and building awide network of health facilities. Economic growth may not onlyrelax the government budget constraint on propoor policies butalso increase propoor incidence indirectly by raising richerindividuals' demand for private sector alternatives.     

Is silence golden? An empirical analysis of firms that stop giving quarterly earnings guidance

We investigate firms that stop providing earnings guidance (“stoppers”) either by publicly announcing their decision (“announcers”) or doing so quietly (“quiet stoppers”). Relative to firms that continue guiding, stoppers have poorer prior performance, more uncertain operating environments, and fewer informed investors. Announcers commit to non-disclosure because they (i) do not expect to report future good news or (ii) have lower incentives to guide due to the presence of long-term investors. The three-day return around the announcement is negative. Stoppers subsequently experience increases in analyst forecast dispersion and decreases in forecast accuracy but no change in return volatility or analyst following.     

Do the SEC's enforcement preferences affect corporate misconduct?

Recent frauds have questioned the efficacy of the SEC's enforcement program. We hypothesize that differences in firms' information sets about SEC enforcement and constraints facing the SEC affect firms' proclivity to adopt aggressive accounting practices. We find that firms located closer to the SEC and in areas with greater past SEC enforcement activity, both proxies for firms' information about SEC enforcement, are less likely to restate their financial statements. Consistent with the resource-constrained SEC view, the SEC is more likely to investigate firms located closer to its offices. Our results suggest that regulation is most effective when it is local.     

Were Information Intermediaries Sensitive to the Financial Statement‐Based Leading Indicators of Bank Distress Prior to the Financial Crisis?

In this paper, we address two questions that emerged in the aftermath of the 2008 financial/banking crisis. First, did the financial statements of bank holding companies provide an early warning of their impending distress? Second, were the actions of four key financial intermediaries (short sellers, equity analysts, Standard and Poor's credit ratings, and auditors) sensitive to the information in the banks’ financial statements about their increased risk and potential distress? We find a significant cross‐sectional association between banks’ 2006 Q4 financial information and bank failures over 2008–2010, suggesting that the financial statements reflected at least some of the increased risk of bank distress in advance. The mean abnormal short interest in our sample of banks increased from 0.66 percent in March 2005 to 2.4 percent in March 2007 and the association between short interest and leading financial statement indicators also increased. In contrast, we observe neither a meaningful change in analysts’ recommendations, Standard and Poor's credit ratings, and audit fees nor an increased sensitivity of these actions to financial indicators of bank distress over this time period. Our results suggest that actions of short sellers likely provided an early warning of the banks’ upcoming distress prior to the 2008 financial crisis.     

Managing work–life boundaries with information and communication technologies: the case of independent contractors

In the light of the increasing use of information and communication technologies (ICTs), it is important to gain a better understanding of their influence on work–life boundaries. This study examines how individuals manage their work–life boundaries by using ICTs. The findings of a qualitative study with independent contractors show that individuals actively use multiple ICT‐mediated tactics to shape their temporal, spatial and psychological work–life boundaries. Furthermore, findings suggest that individuals cannot simply be classified as ‘integrators’ or ‘segmentors’, as they may have diverse preferences with regard to both the dimension (temporal, spatial or psychological) and direction (work‐to‐life or life‐to‐work) of boundary permeability. A framework that takes account of these aspects is derived based on the empirical results.     

Non-audit services and financial reporting quality: evidence from 1978 to 1980

We provide evidence on the long-standing concern about the potential conflicts of interest of auditors that provide clients with non-audit services using rarely explored non-audit services fee data from 1978 to 1980. In this setting, we find evidence of improved earnings quality when auditors provide non-audit services, especially those related to information services. This is consistent with better audit quality resulting from knowledge spillovers in the joint offering of audit and consulting services. Events related to the 1982 repeal of mandatory non-audit services disclosures are associated with a small positive stock price reaction, suggesting that the disclosure repeal has no adverse economic consequences. Furthermore, following the repeal we find no change in the earnings quality of client firms. In sum, our data suggest that non-audit services offered by audit firms can be associated with improved audit and reporting quality in client firms via auditors’ reputational incentives, synergies, and knowledge transfers.