Accounting - Research Publications
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ItemThe effect of trade secrets protection on disclosure of forward‐looking financial information(Wiley, 2020)Using the recognition of the Inevitable Disclosure Doctrine (IDD) by US state courts as an exogenous shock to the risk of losing trade secrets, this study examines the effects of trade secrets on disclosure of forward‐looking financial information. We find that management earnings forecast frequency and forecast horizon increases after the US state where a firm is headquartered starts to recognize IDD. We also find that the effect of IDD recognition on management forecasts is more pronounced for firms that have larger market shares, higher product market competition, more intensive R&D, shorter distance to their industry rivals, and more employees who possess knowledge of the firms’ trade secrets.
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ItemExplanations as Discourse: Towards Ethical Big Data Analytics Services(Australasian Association for Information Systems and Australian Computer Society, 2020-01-01)Big data analytics uses algorithms for decision-making and targeting of customers. These algorithms process large-scale data sets and create efficiencies in the decision-making process for organizations but are often incomprehensible to customers and inherently opaque in nature. Recent European Union regulations require that organizations communicate meaningful information to customers on the use of algorithms and the reasons behind decisions made about them. In this paper, we explore the use of explanations in big data analytics services. We rely on discourse ethics to argue that explanations can facilitate a balanced communication between organizations and customers, leading to transparency and trust for customers as well as customer engagement and reduced reputation risks for organizations. We conclude the paper by proposing future empirical research directions.
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ItemAsbestos Contamination: Governance and Financial Reporting Issues in the Public, Private and Not-for-profit Sectors(WILEY, 2021-12)Abstract We explore implications of asbestos for the measurement and reporting of liabilities, assets and expenses by diverse entities. We argue that entities in both public and private sectors are failing to recognise or appropriately measure liabilities related to asbestos and that the implications of asbestos for assets and expenses in financial statements are rarely reported. While we focus on recognition and measurement implications for Australian entities, we also examine relevant requirements in other jurisdictions and for sustainability reporting.
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ItemNo Preview AvailableLess Information, More Comparison, and Better Performance: Evidence from a Field Experiment(WILEY, 2021-05)ABSTRACT We use a field experiment in professional sports to compare effects of providing absolute, relative, or both absolute and relative measures in performance reports for employees. Although studies have documented that the provision of these types of measures can benefit performance, theory from economic and accounting literature suggests that it may be optimal for firms to direct employees’ attention to some types of measures by omitting others. In line with this theory, we find that relative performance information alone yields the best performance effects in our setting—that is, that a subset of information (relative performance information) dominates the full information set (absolute and relative performance information together) in boosting performance. In cross‐sectional and survey‐data analyses, we do not find that restricting the number of measures shown per se benefits performance. Rather, we find that restricting the type of measures shown to convey only relative information increases involvement in peer‐performance comparison, benefitting performance. Our findings extend research on weighting of and responses to measures in performance reports.
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ItemThe Prospects for Tobacco Plain Packaging in Asia: No Longer Smoke up in the Air?(Scientific Research Publishing, Inc., 2021)
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ItemNon-Answers During Conference Calls(WILEY, 2021-09)ABSTRACT We construct a novel measure of disclosure choice by firms. Our measure is computed using linguistic analysis of conference calls to identify whether a manager's response to an analyst question is a “non‐answer.” Using our measure, about 11% of analyst questions elicit non‐answers from managers, a rate that is stable over time and similar across industries. A useful feature of our measure is that it enables an examination of disclosure choice within a call. Analyst questions with a negative tone, greater uncertainty, greater complexity, or requests for greater detail are more likely to trigger non‐answers. We find performance‐related questions tend to be associated with non‐answers, and this association is weaker when performance news is favorable. We also find analyst questions about proprietary information are associated with non‐answers, and this association is stronger when firm competition is more intense.
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ItemEnhancing the Interface between Standard-setters and Academic Research(WILEY, 2021-09)Abstract This article points to gaps between academic research and the needs of accounting standard‐setters. In part it attributes those gaps to the academic literature seeming to be inaccessible and oriented to ideas apparently unrelated to the policy‐making issues facing standard‐setters. As a means of partially reducing that perceived inaccessibility, the paper provides a way for standard‐setters to identify and classify the various forms of academic accounting research so that they can evaluate their usefulness. Two prominent strands of research (agency theory/costly contracting and value relevance) are, as illustrations, analysed so that standard‐setters can see how they might approach those strands. The paper suggests a users’ needs/demand driven approach to improving understanding, rather than a supply (by academics) driven approach. Finally, the paper explains how the performance metrics faced by academics can be inconsistent with the readiness expressed by standard‐setters to have academics assist them. The paper provides a suggestion as to how there could be some alignment of academic performance metrics and standard‐setters’ needs.
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ItemGambling preferences and stock price crash risk: Evidence from China(Elsevier, 2021-07-01)This paper investigates whether attitudes towards gambling help explain the occurrence of stock price crashes in China. By using a province's per capita welfare lottery sales as a proxy for local gambling preference, we find that firms in regions with stronger gambling preference experience greater stock price crash risk. This result is robust to a battery of sensitivity tests after addressing possible endogeneity issues by using an instrumental variable approach and propensity score matching. Furthermore, we find that the impact of local gambling attitudes on stock price crash risk is mitigated by higher quality internal monitoring and more stringent external monitoring. Lastly, we identify two channels through which gambling preferences intensify stock price crash risk: aggressive corporate strategies and speculative accounting practices. Overall, these findings suggest that local gambling preferences influence firms’ stock price crash risk.
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ItemDisclosing Unrecognized Intangibles: The Search for Exemplars(University of Melbourne, 2021)The purpose of this report is to document the results of an investigation into disclosures of unrecognized intangibles by Tier 1 reporting entities in Australia.
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ItemNo Preview AvailableWhen one size does not fit all: Using ex post subjective ratings to provide parity in risk-adjusted compensation(Elsevier, 2020-12-01)Firms typically use a ‘one-size-fits-all’ (OSFA) compensation contract that specifies a common formulaic relation between performance and compensation (i.e., a performance bonus) for non-executive managers in similar jobs. However, a contract that is appropriate on average, may be suboptimal for individual managers if heterogeneity in the operating environment creates varying compensation risk. We use field data from a retail firm that introduced an OSFA bonus compensation plan for its store managers. The common bonus formula is based on a weighted sum of objective measures of performance and a subjective rating made by supervisors. The firm intended the supervisors’ discretionary subjective rating to evaluate performance on dimensions that are difficult to measure (e.g., store appearance). We test and find that supervisors give uniformly higher subjective ratings to managers whose objective measure of sales performance is measured with greater noise, and to managers who face higher performance target difficulty, the latter assessed both prior to (ex ante) and subsequent to (ex post) the evaluation period. These results obtain after controlling for manager ability and performance, and for alternative mechanisms to mitigate differences in compensation risk (e.g., salary changes, sales target changes, and bonus adjustments). The evidence suggests that supervisors use discretion in subjective ratings to provide manager-specific risk premiums for non-executive managers who are subject to an OSFA contract.