Department of Accounting and Information Systems
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Browsing Department of Accounting and Information Systems by Subject "1501 Accounting, Auditing and Accountability"
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- Corporate Social Performance and Managerial Labor MarketDai, Xin; Gao, Feng; Lisic, Ling; Zhang, Ivy (2021-10-13)This paper examines the impact of a firm’s social performance on the CEO’s employment prospects. We find that CEOs are more (less) likely to leave office when there is a significant recent decline (improvement) in social performance. We then track departing CEOs’ subsequent employment records and find that the social performance of their previous employers improves their labor market outcomes. These CEOs are more likely to find a new executive position, move up to a larger public firm, and receive higher compensation from the new public firm. Using a Cox proportional hazard model, we find that the strong social performance of the previous employer helps CEOs find their next executive positions sooner. Overall, our results suggest that corporate social performance enhances CEOs’ labor market potentials.
- Executives’ Legal Records and the Deterrent Effect of Corporate GovernanceDavidson, Robert; Dey, Aiyesha; Smith, Abbie (2019-09-08)We study whether the effectiveness of corporate governance mechanisms varies depending on the characteristics of the executives subject to these mechanisms - namely, their “psychological type”, as proxied by their history of legal infractions. In particular, we examine insider trading, where we can compare the trading behavior of different types of executives in the same firm. We find that “recordholder” executives, i.e., those with prior legal infractions, earn significantly higher profits from purchases and sales than nonrecordholder executives. Further, the profitability of both purchases and sales is significantly increasing in the severity of the infraction. Governance mechanisms, such as blackout policies, lower profits of executives with only traffic infractions; however, profits for executives with serious infractions appear insensitive to blackout policies. Insiders with serious infractions are also more likely to trade during blackout periods and before large information events and are more likely to report their trades to the SEC after the filing deadline. Collectively, our evidence suggests that while governance mechanisms can discipline executives with minor offenses, they appear largely ineffective for those with more serious infractions.
- SEC Comment Letters on Form S-4 and M&A Accounting QualityJohnson, Bret; Lisic, Ling; Moon, Joon; Wang, Mengmeng (2021-10-13)Prior research on SEC comment letters has almost exclusively focused on reviews of periodic filings, such as 10-Ks. Transactional filing reviews, such as those related to mergers and acquisitions (M&A), are a fundamental priority of the SEC and to which it dedicates significant resources. We help fill the void in the literature by examining the influence of SEC comment letters on one type of transactional filing, Form S-4, on the accounting quality of the newly merged entity. We find that S-4s that receive an SEC comment letter are less likely to have a restatement or a goodwill impairment after the M&A deal is completed. Our inferences remain the same using either an entropy-balanced sample or a propensity-score-matched sample based on firm and deal characteristics. These results are stronger for S-4 comment letters with higher intensity and M&A- specific comments. Finally, to explore plausible mechanisms and provide further context, we examine specific disclosure changes in S-4 amendments filed during the filing review process and find evidence that the improved M&A accounting quality is related to revisions to the pro forma financial statements, the total purchase price, and goodwill allocations. Overall, our findings provide evidence on the effectiveness of the SEC’s comment letter process related to M&A deals.