Creditors’ and Shareholders’ Reporting Demands in Public Versus Private Firms: Evidence from Europe*

In this study we investigate whether the importance of accounting information in contracting and communication with shareholders and creditors affects earnings timeliness in publicly disclosed general‐purpose financial statements. To operationalize the relationship between timeliness demands and the importance of accounting information to shareholders and creditors, we compare the (asymmetry in) earnings timeliness of public firms with that of private firms. We attribute public versus private firm differences in timeliness to shareholders’ demands when a country’s institutions provide strong investor protection. Similarly, we attribute these differences to creditors’ demands when the institutions provide strong creditor protection. Our analysis of public and private firms in 13 Western European countries suggests that creditors and shareholders have different timeliness demands. In particular, we find that the public versus private firm difference in asymmetric timeliness is not associated with a country’s degree of investor protection but positively associated with a country’s degree of creditor protection. The results further suggest that shareholders demand symmetric rather than asymmetric timeliness. An important implication of our study is that general‐purpose financial statements are responsive to creditors’ reporting demands, which contrasts with the idea that these — primarily private — creditors would use special‐purpose reports.     

The Information Content of Tax Expense for Firms Reporting Losses

We investigate whether management's decision regarding the recognition of the valuation allowance (VA) for deferred tax assets provides incremental information about the persistence of accounting losses. We introduce a classification scheme that assigns loss firm‐years into three categories based on whether management appears to have recognized a material change in the VA, and whether or not the firm has positive taxable income (e.g., a net operating loss). The results of our study show that our tax categories contain information about the persistence of accounting losses over the following three years beyond variables previously identified to predict loss persistence. This incremental information is consistent with management using private information about the firm's future prospects in setting the VA. Finally, we find that investors’ pricing of the VA varies with the saliency of the tax signal and the information environment of the firm.     

Revenue recognition*

Abstract. This paper examines the information content of revenue recognition rules in a series of environments, ranging from an abstract disclosure setting to one of disclosure in the presence of moral hazard and self-reporting by an informed agent. The emphasis is on conceptualization of recognition issues, ranging across financial and labor markets, and the simplification required to force the analysis into a workable and familiar model. In this way, the limitations of both our thinking about recognition issues and our modeling techniques are highlighted. Résumé. Les auteurs examinent le contenu informationnel des règies de constatation des produits dans un éventail de cas, parmi lesquels un cas abstrait de publication d'information, un cas de présentation d'information en situation de risque moral, en passant par la présentation autonome d'information par un mandataire averti. Les auteurs s'intéressent particulièrement à la conceptualisation de questions relatives à la constatation des produits couvrant le marché financier et le marché du travail, et à la simplification qu'il faut opérer pour ramener l'analyse à la dimension d'un modèle maniable et d'utilisation courante. Ainsi les limites que component tant l'opinion au sujet des questions de constatation des produits que les techniques de modélisation sont-elles mises en relief.     

Selection from Many Investments with Managerial Private Information*

We investigate capital investment problems when a manager knows the costs of a set of available projects, while the owner only holds probabilistic beliefs about these costs. With mutually exclusive projects, an optimal policy can be defined by a series of cost targets, one for each of the possible projects. The project with the lowest reported cost relative to the target is chosen, and funded as if the cost were equal to the target. The optimal investment policy can deviate from a traditional policy of selecting the project with the highest, positive net present value (NPV) in a number of ways. First, under-investment arises to limit the manager's ability to capture the economic rents. Second, when investment takes place, it is not always the project with the highest NPV that is implemented. Third, projects with lower cost variability can be favored. We extend the analysis to non-mutually exclusive projects. With two independent projects, batch processing is superior to individual appraisal whenever both optimal individual appraisal cost targets are interior. Individual appraisal ignores the impact of individual targets on incentives to report the costs of other potential projects. Batch processing can improve individual assessment by cost effective switching of investment away from the individual projects and into the batch as a whole. The results suggest that the common practice of analyzing batches of capital requests in an annual capital budgeting cycle provides advantages in the organization's attempt to deal with asymmetric information and incentive problems.     

简化供应链 提升组织绩效

随着过去10年内全球竞争加剧，卓越的供应链绩效已成为众多行业领先企业取得可持续发展优势的重要来源。根据柏亚天对超过500家企业供应链绩效所做的标杆对比，在相同行业领域内，供应链总成本的差距可高达年营业额的5％至6％。     

Cooperation and Status in Organizations

We report the results of experiments designed to test the effect of social status on contributions to a public good, with and without punishment. The experiments are conducted in four‐person groups in a “star” network, where one central player observes and is observed by the others. This imposes a social structure on the game, and gives the central player a leadership role in the group, simply by virtue of being commonly observed. We further manipulate status by allocating the central position to the person who earns the highest, or the lowest, score on a trivia quiz. These high‐status and low‐status treatments are compared, and we find that the effect of organizational structure—the existence of a central position—depends on the status of the central player. Higher status players are attended to and mimicked more systematically. Punishment has differential effects in the two treatments, and is least effective in the high‐status case.     

DOES COPYRIGHT ENFORCEMENT ENCOURAGE PIRACY?*

When copyright enforcement is targeted at high‐value buyers such as corporate and government users, the copyright holder charges super‐monopoly prices, thereby encouraging low‐value buyers to switch to inferior pirated copies. We show that enlarging the copyright holder's captive market through more extensive copyright enforcement reduces prices toward the monopoly level, increases sales of legitimate copies and can increase consumer surplus. Therefore, in contrast with the case of more intensive copyright enforcement, more extensive copyright enforcement over some range can increase the incentive to generate intellectual property while also reducing the loss to consumers from monopoly power.     

The Value of Crowdsourced Earnings Forecasts

Crowdsourcing—when a task normally performed by employees is outsourced to a large network of people via an open call—is making inroads into the investment research industry. We shed light on this new phenomenon by examining the value of crowdsourced earnings forecasts. Our sample includes 51,012 forecasts provided by Estimize, an open platform that solicits and reports forecasts from over 3,000 contributors. We find that Estimize forecasts are incrementally useful in forecasting earnings and measuring the market's expectations of earnings. Our results are stronger when the number of Estimize contributors is larger, consistent with the benefits of crowdsourcing increasing with the size of the crowd. Finally, Estimize consensus revisions generate significant two‐day size‐adjusted returns. The combined evidence suggests that crowdsourced forecasts are a useful supplementary source of information in capital markets.     

Exigences des créanciers et des actionnaires en matière d’information dans les entreprises à capital ouvert par rapport aux entreprises à capital fermé observations européennes

Les auteurs se demandent si l’importance de l’information comptable dans l’établissement de contrats et la communication avec les actionnaires et les créanciers a une incidence sur la rapidité de publication de l’information sur les résultats (c’est‐à‐dire sur l’actualité de cette information), dans les états financiers à vocation générale diffusés dans le public. Pour opérationnaliser la relation entre les exigences relatives à l’actualité de l’information et l’importance de l’information comptable pour les actionnaires et les créanciers, les auteurs comparent l’actualité de l’information sur les résultats (l’asymétrie de cette information) dans les entreprises à capital ouvert par rapport aux entreprises à capital fermé. Ils attribuent les écarts dans l’actualité de l’information entre les entreprises à capital ouvert et les entreprises à capital fermé aux exigences des actionnaires, dans les pays où les institutions assurent une solide protection aux investisseurs. De façon analogue, ils attribuent ces écarts aux exigences des créanciers, dans les pays où les institutions assurent une solide protection aux créanciers. Leur analyse des entreprises à capital ouvert et à capital fermé dans 13 pays de l’Europe occidentale semble indiquer que les créanciers et les actionnaires ont des exigences différentes relativement à l’actualité de l’information. Les auteurs constatent notamment que l’écart entre les entreprises à capital ouvert et les entreprises à capital fermé en ce qui a trait à l’asymétrie de l’actualité de l’information n’est pas associéà la mesure dans laquelle un pays protège les investisseurs, mais qu’il affiche une relation positive avec la mesure dans laquelle un pays protège les créanciers. Les résultats de l’étude tendent également à démontrer que les actionnaires réclament la symétrie plutôt que l’asymétrie de l’actualité de l’information. Ces observations débouchent sur une conclusion importante : les états financiers à vocation générale sont sensibles aux exigences d’information des créanciers, ce qui contraste avec l’hypothèse selon laquelle ces créanciers — essentiellement privés — s’intéresseraient aux rapports à vocation spéciale.