Politically Connected Private Equity and Employment

We investigate the employment consequences of private equity buyouts. We find evidence of higher job creation, on average, at the establishments operated by targets of politically connected private equity firms than at those operated by targets of nonconnected private equity firms. Consistent with an exchange of favors story, establishments operated by targets of politically connected private equity firms increase employment more during election years and in states with high levels of corruption. In additional analyses, we provide evidence of specific benefits experienced by target firms from their political connections. Our results are robust to tests designed to mitigate selection concerns.     

Tailored versus Mass Produced: Portfolio Managers Concurrently Managing Separately Managed Accounts and Mutual Funds

Using a matched sample of separately managed accounts (SMAs) and mutual funds (MFs) with the same portfolio manager and investment style, we find that concurrently managed MFs consistently underperform their SMA counterparts and generate more negative return gaps. Fund characteristics and liquidity betas fail to fully explain the underperformance. An event‐study analysis finds that the weights placed into top (bottom)‐performing stocks increase for existing SMAs (MFs) and negative return gaps increase for the MFs after the onset of concurrent management. We find that higher compensation collected by SMA fund managers are associated with more unseen managerial actions which positively contribute to the SMA return gap. Our results suggest that when managers concurrently manage both SMAs and MFs, they favor SMA performance over their MF performance.     

Explaining municipal audit costs in Sweden: Reconsidering the political environment,the municipal organisation and the audit market

With the purpose of explaining professional audit costs in Swedish municipalities, we hypothesised that audit costs are partly driven by various signalling and monitoring incentives in order to manage stakeholder relationships. Our model of the determinants of audit costs was tested on data from Swedish municipalities, thus extending the study of audit costs to political organisations in a Scandinavian institutional context. The test supported to some extent the traditional propositions of organisational complexity, risk and market determinants, as well as the proposition of the political environment. Our results indicate that audit costs are used to signal accountability, thereby suggesting that audit as a signal could be managed without managing professional auditors.     

Accounting Research: A Bibliometric Analysis

Bibliometrics is a fundamental field of information science that studies bibliographic material quantitatively. It is very useful for organising available knowledge within a specific scientific discipline. This study presents a bibliometric overview of accounting research using the Web of Science database, identifying the most relevant research in the field classified by papers, authors, journals, institutions and countries. The results show that the most influential journals are: The Journal of Accounting and Economics, Journal of Accounting Research, The Accounting Review and Accounting, Organizations and Society. It also shows that US institutions are the most influential worldwide. However, it is important to note that some very good research in this area, including a small number of papers and citations, may not show up in this study due to the specific characteristics of different subtopics.     

Can Investors Identify Managerial Discretion in Corporate Social Responsibility Practices? The Moderate Role of Investor Protection

This paper analyses investors’ ability to identify if managers use corporate social responsibility as an entrenchment practice to conceal the risk of dismissal associated with managerial discretion and if this detection is determined by the level of investor protection orientation. Results based on an international database of 1949 companies show that investors and markets do not identify managerial entrenchment based on the promotion of sustainable practices, except when such entrenchment is developed by companies located in countries with strong investor protection. In these countries, investors identify and penalise such companies with lower financial performance.     

Corporate Governance and the Investment Efficiency of Diversified Corporate Asset Buyers

Many corporate assets are bought and sold each year in the U.S. and most scholars believe these transactions improve economic efficiency. But given the reality that the interests of corporate managers may diverge from those of their shareholders and reflect empire‐building or other managerial entrenchment strategies—and that such agency problems tend to be worse in highly diversified, multi‐divisional companies—the authors tested the proposition that diversified corporate asset buyers with more effective governance structures can be expected to allocate capital more efficiently, as reflected in higher rates of return on operating capital and more favorable market reactions to the announcements of their purchases. Using a sample of diversified U.S. companies that announced large asset purchases between 1988 and 2006, the authors report finding that the investment allocation process following such asset purchases was more consistent with value creation in the case of diversified buyers with more effective governance structures, which were identified by their greater board independence, higher‐quality audit committees, and higher levels of stock ownership by institutional ownership, directors, and CEOs.     

Age heaping and numeracy: looking behind the curtain

Age‐heaping‐based numeracy indicators have served as valuable tools to derive basic human capital estimates, especially for periods where other indicators are unavailable. However, the accuracy of individual age statements usually remains unknown, and due to the lack of precise information it can only be assumed that excessive occurrence of multiples of five in age distributions reflects inferior numerical skills. This article addresses this lacuna by identifying 162 individuals in two independent data sources: self‐reported age statements and independently kept records which are based on family heritage books and church registers. This method makes it possible to identify individual misreporting and the degree of accuracy of each individual. Findings show that not everyone who reported a multiple of five was reporting an incorrect age, nor was it the case that everyone who reported an age that was not a multiple of five was reporting an accurate age. The empirical analysis shows that the commonly used binary numeracy indicator is correlated with the observed degree of accuracy in age statements, and that a more sophisticated occupational background reduces this inaccuracy. These results tentatively suggest that the commonly used binary indicator measuring age heaping is a valuable proxy for numerical skills and occupational background in a population.     

Blockholder Exit Threats and Financial Reporting Quality

Recent theoretical and empirical studies suggest that blockholders (shareholders with ownership ≥ 5 percent) exert governance through the threat of exit. Blockholders have strong incentives to gather private information and sell their shares when managers are perceived to underperform. To prevent blockholders from selling their shares and the firm from suffering a stock price decline, managers align their actions with the interests of shareholders. As a result of the greater manager‐shareholder alignment, managers' actions are more likely to be in shareholders' best interest, and consequently there is less need for managers to manipulate earnings. Consistent with these predictions from economic theory, we find evidence that as exit threat increases, firms have higher financial reporting quality. Theory also predicts that the impact of blockholders' exit threat on financial reporting quality (FRQ) should increase as the manager's wealth is tied more closely to the stock price, and this is what we find. Our study contributes to the research on the impact of shareholders on FRQ and to an emerging literature on the impact of blockholders in financial markets. Blockholders play an important role in managers' reporting outcomes through their actions as informed investors.