Does gender diversity on banks' boards matter? Evidence from public bailouts

We are the first to examine the impact of gender diversity on banks' boards on the probability and size of public bailouts. Our findings, based on a sample of listed European banks over the period 2005–2017, suggest that banks with more gender-diverse boards are less likely to receive a public bailout and receive a lower amount of bailout funds as a percentage of total assets than banks with less gender-diverse boards. Specifically, an increase by one standard deviation in gender diversity decreases the probability of a bailout by at least 2.44%, a significant reduction considering that the unconditional probability is 18.7%. Gender diversity is also positively related to bank performance, as proxied by ROA and Tobin's Q and with dividend payout ratios, consistent with the hypothesis that female directors are better monitors than male directors. These results are robust to a variety of econometric approaches and provide support for recent reforms in several EU countries regarding gender quotas.     

Does location matter for disclosure? Evidence from geographic segments

The segment disclosures of multinational companies provide strategic information. We use the location characteristics of geographic segments to identify the reasons for withholding or disclosing segments. We examine segment data from around the adoption of IFRS 8, a reporting standard that requires firms to reveal more disaggregated information. Consistent with a proprietary cost motive for nondisclosure, we find that segments in regions that are deemed better for business tend to be hidden, while higher entry barriers for a segment are positively related to disclosure. These effects appear to be stronger for firms for which proprietary cost motives are more important. Among the previously unrevealed segments, proprietary costs explain the nondisclosure of segment earnings and other relevant financial information for investors.     

Does intellectual capital disclosure in analysts' reports vary by firm characteristics?

In this paper, we explore how Australian sell-side financial analysts contribute to the supply of intellectual capital (IC) information in the capital market. Toward this end, we examine how types and semantic properties of IC disclosures in analyst reports vary by a number of firm-specific characteristics likely to be associated with voluntary corporate disclosure. Consistent with our expectations, we find that the uncertainty associated with forecasting firm's earnings and the IC intensity of the industry in which the firm operates are associated positively with the extent as well as several semantic properties of IC disclosure in analyst reports. Highlighting that IC disclosure in analyst reports is not always a function of the extent of IC disclosed by firm, we find a statistically significant but negative association between firm profitability and the extent and certain semantic properties of IC disclosure in analyst reports. Firm size was significantly and positively associated with only the extent of forward-looking IC disclosure. Of the three categories of IC, only relation capital disclosure varied with any of the explanatory variables. Our findings highlight the importance of analyst reports as an IC communication media that could complement corporate communications of IC not only for firms disclosing less IC information voluntarily but also for those firms known to disclose more.     

Does the mandatory disclosure of audit information affect analysts' information acquisition?

This paper explores the effect of public information on analysts' information acquisition. By introducing the implementation of the Key Audit Matters (KAM) Disclosure Standards for China's firms cross-listed in Hong Kong in 2017, we present evidence that KAM disclosure reduces analysts' firm visits, which is an important channel of information acquisition. The effect is particularly pronounced for firms with audit partner rotation and low institutional ownership. KAM disclosure by industrial leaders has a spillover effect on analyst visits for peer firms. Disclosure also improves the frequency and quality of analysts' forecasts and firms' information environments, indicating that KAMs are informative and audit information is an important determinant of analysts' information acquisition. Our study reveals the real effect of KAM disclosure on analyst decisions, which may be of interest to regulators concerned with the mandatory disclosure of audit information and capital market efficiency.     

Does stock market index adjustment affect environmental information disclosure? Evidence from China

This study empirically investigated the effect of adjustment of the China Securities Index 300 (CSI 300) on environmental information disclosure (EID) by index constituents, based on propensity score matching and difference-in-difference approaches. The results showed that the inclusion in the CSI 300 significantly improved the quality of EID by firms. Moreover, this positive impact was more pronounced among firms with lower agency costs and those located in regions with a stronger legal environment. Further testing of the mediating mechanism revealed that becoming an index constituent served to curb opportunistic behavior by managers arising from shortsightedness. Our results were valid after addressing the potential endogeneity between index adjustment and EID and remained unchanged in various other robustness tests. The findings provide support for the positive impact of stock market index adjustment on non-financial information disclosure and have practical implications for decision-making regarding EID in China and other emerging markets.     

When does analyst reputation matter? Evidence from analysts’ reliance on management guidance

We investigate the joint effects of analyst reputation, uncertainty and guidance news valence on analysts’ reliance on management guidance. We find that, compared to less reputable analysts, reputable analysts rely less on guidance when they issue earnings forecasts. This analyst reputation effect is stronger when earnings and information uncertainty are higher or when the guidance contains good news. Further analysis suggests that both reputable and less reputable analysts sacrifice their forecast accuracy when they rely less on guidance; however, reputable analysts are compensated to a greater extent by the increased informativeness of their forecasts. Finally, we find that analysts’ future career advancement is enhanced when their reliance is low.     

How does investor relations disclosure affect analysts' forecasts?

We study the relationship between investor relations disclosure and analyst forecast properties in Australian firms, a setting dominated by small firms with limited analyst coverage and requiring continuous disclosure of price sensitive information. We find increasing disclosure in the time period investigated is associated with greater accuracy in firms disclosing fewer items. Disclosure was unrelated to forecast dispersion, possibly due to the low analyst following. In periods of uncertainty, the investor relations awards effectively discriminated quality from quantity of disclosure. These findings highlight the importance of active communication with analysts, particularly in firms providing less disclosure and during periods of uncertainty.     

Does the disclosure of internal control deficiency matter for accrual quality? Evidence from China

Using a sample of Chinese listed firms that are required to audit and disclose any internal control deficiency (ICD), this paper examines the effect of mandatory ICD disclosure on accrual quality (AQ) in China. We find that relative to voluntary ICD disclosure, mandatory ICD disclosure is associated with poorer AQ, as proxied by abnormal accruals, suggesting that the mandated disclosure of ICD effectively identifies financial reporting quality in Chinese firms. This relationship is enhanced by government control of firms (especially the central government) and by the intensity of government inspections and is stronger in undeveloped regional markets. The results are robust to the application of the PSM-DID method and use of different measures and samples. Our findings demonstrate the critical role of the mandated disclosure of ICD and improve our understanding of internal control mechanisms in emerging markets.     

Does strategic planning ‘work’ in public organizations? Insights from Flemish municipalities

Strategic planning (SP) is a popular instrument within public organizations. Despite its popularity, it remains unknown whether SP actually ‘works’ in a public sector setting. This article presents insights based on three empirical articles and interviews with five expert stakeholders in Flemish municipalities. These insights suggest that SP is more than a fad and can contribute to positive outcomes. However, this contribution is contingent upon the behaviour underlying the SP process.     

Do board interlocks motivate voluntary disclosure? Evidence from Taiwan

Conference calls have become a widely used medium for voluntary corporate disclosure, especially among firms associated with greater information asymmetry, intangible assets, and external competition. These features are common in high-tech sectors, which dominate the Taiwanese economy and render it a useful research setting for investigating whether board interlock, as a social network, affects corporate decisions to hold conference calls. We show that firms connected to conference-call-making firms through interlocked directors are more likely to hold conference calls and the frequency of holding conference calls increases with interlocking directors’ relevant experience. Moreover, such evidence is more pronounced if the connections are held through independent directors and among firms with greater information asymmetry. These results support the argument that the spread of corporate practices is positively associated with board interlock networks. Our findings have implications for the choice of board of director members, and can be generalized to other emerging economies characterized by weaker corporate information environments.     

Does Macro‐Prudential Regulation Leak? Evidence from a UK Policy Experiment

The regulation of bank capital as a means of smoothing the credit cycle is a central element of forthcoming macro‐prudential regimes internationally. For such regulation to be effective in controlling the aggregate supply of credit it must be the case that: (i) changes in capital requirements affect loan supply by regulated banks, and (ii) unregulated substitute sources of credit are unable to offset changes in credit supply by affected banks. This paper examines micro evidence—lacking to date—on both questions, using a unique data set. In the UK, regulators have imposed time‐varying, bank‐specific minimum capital requirements since Basel I. It is found that regulated banks (UK‐owned banks and resident foreign subsidiaries) reduce lending in response to tighter capital requirements. But unregulated banks (resident foreign branches) increase lending in response to tighter capital requirements on a relevant reference group of regulated banks. This “leakage” is substantial, amounting to about one‐third of the initial impulse from the regulatory change.     

Does emotional intelligence matter to academic work performance? Evidence from business faculties in Australia

Using data collected through survey questionnaire across 15 universities, we examine the effect of emotional intelligence on academic work performance (in research, teaching and service) in Australian business faculties. We find academics’ ability to use emotion enhances performance across research, teaching and service, while ability to regulate emotion enhances performance for teaching and service only. We also find support for a process‐based model of emotional intelligence in which appraisal of emotion is a necessary antecedent to emotion’s use and regulation. The results have implications for management in appointment decisions and professional development programmes in business/accounting faculties.     

Does alternative data reduce stock price crash risk? Evidence from third-party online sales disclosure in China

This study empirically investigates the effect of releasing alternative data on firm-specific price crash risk. Using the public launch of a firm's third-party online sales data in a well-known Chinese financial database as an exogenous shock, we find that stock price crash risk significantly decreases with the disclosure of third-party online sales data. The results are robust to a series of endogeneity corrections and robustness checks. We also find that the reduction of stock price crash risk is due to the decrease in managers' bad news withholdings and the increase in the accuracy of market expectations. In addition, the negative association between third-party online sales disclosure and crash risk is more pronounced for firms with weaker external governance, higher earnings volatility, greater likelihood of sales manipulation, and lower book-to-market ratio. Our findings yield important implications for a comprehensive understanding of the information disclosure effect of online sales data in the capital market and the mechanisms to reduce stock price crash risk.     

Does austerity drive public service innovation? Evidence from shared senior management teams in local government

Shared senior management teams are a recent and radical response to financial austerity. They aim to improve the efficiency of public services without the disruption, controversy and transaction costs associated with full-blown organizational mergers. This paper assesses the adoption of this management innovation by English district councils, identifies enablers and barriers to its effective implementation, offers a preliminary assessment of its impacts, and draws out practical lessons for policy-makers.     

Does institutional activism increase shareholder wealth? Evidence from spillovers on non-target companies

This paper presents evidence of the shareholder wealth effect of institutional activism using its spillovers on non-target companies. The spillovers are instructive because they are a response to an exogenous shock and thus create an environment to conduct a clean event study. In particular, we examine the spillover effects of the first target announcement of the Korea Corporate Governance Fund. As the very first sign of institutional activism in the country, this announcement creates an expectation of similar governance efforts even in non-target companies, especially in those companies whose governance is currently poorer and thus the scope for future activism is greater. Consistent with institutional activism contributing to shareholder wealth, we find that, among non-targets, those firms granting fewer rights to outside shareholders experience a more positive stock price reaction. Further analysis lends additional support to the positive wealth effect of institutional activism.     

Does foreign institutional ownership motivate firms in an emerging market to increase voluntary disclosure? Evidence from Taiwan

This study examines the relationship between foreign institutional ownership and voluntary disclosure in an emerging market. By exploiting a unique dataset of daily foreign investment flow and ownership data from Taiwan, this paper examines whether foreign ownership is associated with the likelihood of holding conference calls and investigates whether conference calls are informative to foreign market participants. After controlling for other characteristics of a firm??s information environment, we find that the decision to hold conference calls is positively associated with foreign institutional ownership. We also provide evidence that the trading turnover by foreign institutional investors immediately increases after the conference calls, indicating that conference calls are informative for foreign institutional investors. Our results are robust, after controlling for endogeneity.     

Do risk management practices work? Evidence from hedge funds

We examine hedge fund risk management practices and their association with left-tail risk during the 2008 financial crisis. Consistent with risk management practices reducing left-tail risk, funds in our sample that use formal risk models performed significantly better in the extreme down months of 2008. We find no evidence that having either position limits or a dedicated head of risk management is associated with reduced left-tail risk. Funds employing value at risk models had more accurate expectations of how they would perform in a short-term equity bear market.     

Do financial analysts' long-term growth forecasts matter? Evidence from stock recommendations and career outcomes

Prior literature portrays long-term growth (LTG) forecasts as nonsensical from a valuation perspective. Instead, we hypothesize that LTG forecasts signal high effort and ability to analyze firms' long-term prospects. We document stronger market response to stock recommendation revisions of analysts who publish accompanying LTG forecasts. We also hypothesize and find that these analysts are less likely to leave the profession or move to smaller brokerage houses. Consistent with Reg. FD's intention to promote fundamental analysis of long-term earnings prospects, post-Reg. FD observations drive our results. Overall, we identify previously undocumented benefits accruing to analysts who publish LTG forecasts.     

Does shareholder coordination matter? Evidence from private placements

We propose a new role for private investments in public equity (PIPEs) as a mechanism to reduce coordination frictions among existing equity holders. We establish a causal link between the coordination ability of incumbent shareholders and PIPE issuance. This result obtains even after controlling for alternative explanations such as information asymmetry and access to public markets. Improved equity coordination following a private placement leads to favorable debt renegotiations within one year of issuance. Mitigating coordination frictions among shareholders ultimately decreases the odds of firm default in half.     

Can third-party online sales disclosure help reduce earnings management? Evidence from China

Alternative data plays an increasingly important role in investment and commodities market analysis. This study empirically investigates the effect on earnings management of disclosure of third-party online sales as a type of alternative data. We show that earnings management is reduced with the public disclosure of a firm’s third-party online sales data in a well-known Chinese financial database. Our results are robust to a series of endogeneity corrections and robustness checks. We also find that the negative association between third-party online sales disclosure and earnings management is more pronounced in firms with an opaque external information environment, weaker corporate governance, a higher proportion of online sales relative to total sales, and when sales are more likely to be the target of manipulation. Our results indicate that third-party online sales disclosure reduces earnings management by decreasing its benefits and increasing the risk of its detection. Our findings yield important implications for regulators and policy makers.