Accounting - Theses
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ItemDiscriminating accounting signals from noise : an information aggregation perspective(University of Melbourne, 2007)
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ItemAnalyst forecast and firm reporting bias( 2019)This thesis investigates how the presence of an analyst affects the corporate information environment when both the analyst forecast and the manager’s report are endogenously determined. I build two stylized models in which the manager has hidden price incentives in issuing his report to investors, and the analyst has two signals, one about the firm’s fundamental value and the other about the manager’s hidden price incentives. In the first setting, the analyst’s objective is to forecast both reported earnings and firm fundamentals. I find that the analyst’s forecasting strategy depends on the manager’s incentives, even when the analyst does not care about the manager’s report, calling into question Beyer’s (2008) suggestion that the dependence is due to the interaction between the analyst and the manager. Further, I find that the investor’s total information at hand after both the forecast and the report are released is non-monotonic in the quality of the analyst’s information, increases with the manager’s weight on being close to firm fundamentals in his incentives, and decreases with his weight on being close to the analyst forecast. The second setting differs from the first in that the analyst’s objective is to care about the client’s trading profits and forecast accuracy. I find that the properties of the analyst forecast and the manager’s report depend on the analyst’s incentives to boost the client’s trading profits, complementing Beyer’s (2008) finding that the analyst’s forecasting strategy depends on the manager’s incentives due to the interaction between the two. Further, I find that both the forecast distortion and the forecast accuracy are non-monotonic in the quality of the analyst’s value information.
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ItemThree essays on voluntary disclosures( 2018)This thesis consists of three distinct papers that examine different aspects of voluntary disclosure. In addition to contributing to the voluntary disclosure literature, this thesis also contributes to three other research areas: debt contracting, corporate governance and revenue-expense mismatching. Essay 1 tests the effects of voluntary and mandatory disclosure quality on the cost of public debt. Essay 2 tests the effects of audit committee oversight over management guidance. Essay 3 tests different explanations for why managers issue sales guidance.
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ItemOrganizational leaders and management control systems: three essays( 2018)This thesis comprises of three essays which examine how management controls are used by organizational leaders to influence the behaviors of employees. It is grounded in a combination of economic and psychological theories such as reciprocity (Blau, 1964; Akerlof, 1982), relational contracting (Bull, 1987; Gibbons and Henderson, 2012) and theories on organizational culture and work norms (e.g., Ouchi, 1979; Van den Steen, 2010; Graham, Harvey, Popadak and Rajgopal, 2017).
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ItemTwo essays on the effect of short-sellers( 2017)A firm’s information environment develops as a consequence of the interplay among information providers such as management, investors and intermediaries (e.g., analysts) in the capital market. New information from these producers influences stock prices, hence price informativeness – the extent that the information is reflected in price. By exploiting an exogenous shock to short-selling constraints – Reg SHO, I investigate how short-sellers (informed investors) affect the informativeness of firms’ stock price as well as management disclosure decisions. The challenge in examining the effects of short-selling on price informativeness and management decisions is that short-selling activities develop endogenously as a result of many factors, including a firm’s economic performance. Reg SHO provides a useful setting to examine how an exogenous change in short-selling constraints affects the informativeness of stock prices along with firms’ disclosure policies. By exploiting Reg SHO, this dissertation sheds light on these two aspects of a firm’s information environment. The first paper shows that short-sellers are predominantly populated by those who possess private information of upcoming news, supported by evidence that in the presence of short-sellers the informativeness of firms’ stock price increases (decreases) prior to (during) earnings announcements. The second paper argues that being aware that short-sellers partially possess management’s information of upcoming news, managers are encouraged to increase their disclosure of bad news, and in a more timely manner.
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ItemThe influence of formal and informal controls on employee performance: three essays( 2017)This thesis includes three essays and examines how management control mechanisms influence the behaviors of lower-level employees. Drawing on the psychology, management, and economic literature and based on field data from a large Chinese organization, this thesis documents that formal and informal controls in organizations function as an integrated system in motivating employee performance. This thesis not only contributes to the management accounting literature, but also has important implications for managerial practices.
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ItemThe economics of disclosure decisions in equity crowdfunding( 2017)Equity crowdfunding (ECF) has transformed the way many businesses raise capital and how the general public can take part in small and early stage firms. In the ECF market, firms promote their equity offerings to potential investors through the Internet. Regulatory oversight on ECF firm disclosure is relatively relaxed, with a greater focus on lowering compliance costs for small and early stage firms. However, holding ownership in emerging unlisted companies comes with risk. Regulators must balance investor protection against increasing the ability of businesses to raise capital from the public. While earlier research in accounting and finance has mostly focused on regulated markets, the less-regulated environment in the ECF market implies that managers have greater discretion over their disclosure. Using a novel dataset, my thesis, which includes three essays, investigates managerial discretion through use of disclosure and the resulting impacts in the ECF market. The first study examines a disclosure strategy for enhancing ECF success. ECF firm disclosure is subject to lower regulatory oversight. Nevertheless, ECF investors prefer greater requirements on firm disclosure (Cumming and Johan 2013). The market implications of ECF firm disclosure are unclear ex ante. Based upon the contracting role of disclosure, disclosure quality is hypothesized to be positively associated with ECF success. I find that high disclosure quality not only improves funding success but also accelerates speed of capital allocation. I also document a positive, non-linear relation between length of voluntary disclosure and ECF outcomes. The second study investigates the interplay between disclosure and investors’ sophistication. Due to the relatively lower regulatory oversight on ECF firm disclosure, managers may use tone (biased language) to mislead investors, particularly those who have lower levels of financial knowledge. In contrast to the prior findings in regulated markets, results indicate that ECF investors react negatively to use of net positive words in offer documents. I further demonstrate that the use of biased language is associated with poor post-fundraising outcomes, suggesting that tone is misleading. Investors see through use of tone, although the negative response appears to be stronger for investors who are more sophisticated. The last study explores disclosure decisions made by managers of ECF who return to the market to promote new offerings. Unlike in traditional markets, returning ECF firms comprise those with both previously funded and unfunded offerings, and their disclosure and the outcomes of all ECF attempts are observable. This study is the first to examine how ECF firm disclosure evolves over time. Results suggest that the disclosure strategies for subsequent offerings depend on past ECF outcomes. In the second offerings, returning firms with previously funded offerings make more changes in their offer documents, employ costly disclosure, and become increasingly conservative in their disclosure while using less biased language.
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ItemThe influence of cultural and institutional differences on control choices in alliances( 2016)In this study, I investigate the determinants of management controls in cross-border alliances. A key feature of cross-border alliances is the cultural and institutional differences that exist between collaborating firms. I examine the influence of cultural and institutional differences on the use of specific control mechanisms in cross-border alliances. In addition, I examine the influence of cultural and institutional differences on the level of residual risk that collaborating firms are willing to accept when designing management control systems. Drawing on new institutional economics, I argue that cultural and institutional differences influence the use of specific control mechanisms, over and above transaction characteristics. Drawing on transaction cost economics, I argue that collaborating firms are likely to accept higher residual risks in alliances with greater cultural and institutional differences. Survey data are obtained from Australian firms engaged in alliances. I use a multi-country approach to exploit variance in institutional and cultural differences. Based on the variance, 111 alliances are classified into cross-cultural alliances (CCAs) and non-cross-cultural alliances (NCCAs), to capture cultural and institutional differences. I use seemingly unrelated regression to test the differences in the use of outcome controls, behavior controls, and collaborative practices between CCAs and NCCAs, controlling for a set of transaction characteristics. I use a MANOVA to test the differences in the level of residual risks between CCAs and NCCAs. I find support for a higher level of behavior controls and a lower level of collaborative practices in CCAs that in NCCAs. I find no evidence of the differences in the level of outcome controls between CCAs and NCCAs. Further, this study provides preliminary evidence that cultural differences and institutional differences have similar but independent associations with behavior controls (positive) and collaborative practices (negative). Together, these findings indicate that cultural and institutional differences can have incremental effects on control choices, over and above the effects of transaction characteristics. I find no evidence of the differences in the level of residual risks between CCAs and NCCAs. I do find preliminary evidence to suggest that where firms in CCAs underinvest in controls, they are more likely to accept higher residual risks. Together, these findings indicate that firms collaborating in alliances with greater cultural and institutional differences are likely to accept higher residual risks in some circumstances. This study contributes to the literature by providing a better understanding of the determinants of management controls in cross-border alliances and the way in which collaborating firms use control choices to manage cultural and institutional differences.
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ItemInstitutional changes and dividends( 2015)Prior research suggests that dividends can curb agency costs between insiders (managers and/or controlling shareholders) and outside shareholders, and thus are an important corporate governance mechanism to protect outside shareholders’ interests (Jensen 1986; Lang and Litzenberger 1989; Faccio et al. 2001; Kose et al. 2011). In this thesis, I investigate two capital market institutional changes and their implications for firms’ dividend policies. These two institutional changes are: (1) a dividend regulatory change in the Chinese market in 2012; and (2) the surge of credit default swaps (CDSs) in the US market. Specifically, the thesis consists of three standalone essays. In each essay, I investigate firm and/or investor responses to the institutional changes and the extent to which these responses are consistent with the agency cost explanation for dividends.
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ItemAn investigation into the nature and quality of information utilized by the advisers in the stock-broking industry in Victoria( 1973)In our economy stockbrokers and investment advisers are in a position to exert considerable influence on the financial decisions made by investors. However, there has been little effort in Australia to discover, by direct inquiry, the nature and quality of information utilized by them. Therefore, the main thrust of this study was to discover the nature and sources of information used by investment advisers and to discover the quality of that information with particular reference to quality as perceived by investment advisers. The investigation has yielded data relating to these questions, to the competence of advisers to use the sources of information currently available and to the extent to which those sources are actually used. The discussion contains suggestions and formal recommendations directed towards those responsible for the sources of information which could lead to improvements in the quality of information available. There are also suggestions which could lead to more effective use by investment advisers of the information already available. Implementation of either or both of these groups of suggestions would result in better information in the capital market and hence lead to its more efficient operation. In order to reduce it to manageable proportions the study was restricted to the Victorian stock-broking industry. However, for several reasons it is thought that this study is strongly indicative of Australian, as well as Victorian, practice. For example, the institutional investors – the life assurance companies, etc. – tend to take a national view and , within the rules of the Australian Associated Stock Exchanges, brokers compete for business on a national basis. However, it may be that similar research in other states would prove fruitful. As far as can be established from published sources this study is unique in the sense that no section of the Australian stock-broking industry has previously been investigated in this manner. Although the Report of the Senate Select Committee on Securities and Exchange is not yet available it is understood that that investigation related to the operation of the Stock Exchanges rather than to the nature and quality of information. Overseas, several organizations and numerous independent researchers have considered the problem of information in their own capital markets. Few of these studies were directed towards the information-gathering activities of investment advisers; the majority of them examined the informational content of various statements or variables. (From Preface)