Contents
1.Leaving before bad times: Does the labor market penalize preemptive director resignations?
Ying Dou
School of Banking and Finance, UNSW Business School, Australia
2. Are all analysts created equal? Industry expertise and monitoring effectiveness of financial analysts
Daniel Bradley1；Sinan Gokkaya2；Xi Liub3；Fei Xie4
1.University of South Florida, United States
2.Ohio University, United States
3.Miami University, United States
4.University of Delaware, United States
3.Voluntary disclosure and strategic stock repurchases
Praveen Kumar1；Nisan Langberg1,2；Jacob Oded2；K. Sivaramakrishnan3
1.C.T. Bauer College of Business at the University of Houston, United States
2.Coller School of Management at Tel Aviv University, Israel
3.Rice University, United States
4. Career concerns of banking analysts
Joanne Horton1；George Serafeim2；Shan Wu3
1.University ofExeter Business School, Rennes Drive, Exeter, Devon EX4 4PU, United Kingdom
2.Harvard Business School, 381 Morgan Hall, Boston, MA 02127, United States
3.China Europe International Business School, 699 Hongfeng Road, Pudong Xinqu, Shanghai Shi, China
5. Insider versus outsider CEOs, executive compensation, and accounting manipulation
Prasart Jongjaroenkamol, Volker Laux,
University of Texas at Austin, USA
6.Regulatory oversight and auditor market share
Daniel Aobdia1；Nemit Shroff2
1. Northwestern University, United States
2. Massachusetts Institute of Technology, United States
Abstracts
Leaving before bad times: Does the labor market penalize preemptive director resignations?
Ying Dou
School of Banking and Finance, UNSW Business School, Australia
Abstract：When firms experience negative events such as lawsuits or earnings restatements, their directors also suffer. But what about those who leave shortly before the events? I show that directors who leave prior to negative events experience greater declines in the number of their directorships than directors who stay through the events, but smaller declines than directors who leave after theevents. These declines do not appear to be voluntary or driven by forceddepartures. Instead, they appear to be the results of labor market penalties.The results suggest that resigning pre-emptively does not protect directors from labor market penalties.
Keywords：Director departures; Reputational concerns; Board seats; Labor market settling-up
Are all analysts created equal? Industry expertise andmonitoring effectiveness of financial analysts
Daniel Bradley1；Sinan Gokkaya2；Xi Liu3；Fei Xie4
1.University of South Florida, United States
2.Ohio University, United States
3.Miami University, United States
4.University of Delaware, United States
Abstract：We examine whether analysts’ prior industry experience influences their ability to serveas effective external firm monitors. Our analyses of firms’ financial disclosure quality, executive compensation and CEO turnover decisions portray aconsistent picture that related pre-analyst industry experience is of critical importance for analysts to play an effective monitoring role. Coverage byanalysts with such experience is associated with reduced earnings management, lower probability of committing financial misrepresentation, less CEO excess compensation, and higher performance sensitivity of CEO turnover. We also provide evidence on several plausible mechanisms through which industry expert analysts exert monitoring efforts and limit managerial opportunism.
Keywords：Analyst monitoring; Earnings management; Fraud detection; CEO compensation; Analyst industry expertise
Voluntary disclosure and strategic stock repurchases
Praveen Kumar1；Nisan Langberg1,2；Jacob Oded2；K.Sivaramakrishnan3
1.C.T. Bauer College of Business at the University of Houston, United States
2.Coller School of Management at Tel Aviv University, Israel
3.Rice University, United States
Abstract：We study the choice of disclosure and share repurchase strategies of informed managers usinga model that captures how they differentially impact short and long-term stockvalue. We identify a partial disclosure equilibrium in which firms in the lowest value region neither disclose nor repurchase, firms with intermediate values disclose but do not repurchase, and firms in the highest value region induce undervaluation by not disclosing and buy back shares. In particular, the well known unraveling result when the manager is always informed (and whendisclosure is costless)—the typical upper-tailed disclosure region in classic voluntary disclosure models—need not obtain when informed managers can use repurchases to extract information rents. We offer a new perspective onopen-market share repurchases—the most common form of share repurchases—whenchosen optimally with disclosure. Our analysis indicates that the equilibrium disclosure region shrinks as the firm's stock trading liquidity increases.
Keywords：Voluntary disclosure; Repurchase; Buybacks; Informed trading
Career concerns of banking analysts
Joanne Hortona1；George Serafeim2；Shan Wu3
1.University of Exeter Business School, Rennes Drive, Exeter, Devon EX4 4PU, United Kingdom
2.Harvard Business School, 381 Morgan Hall, Boston, MA 02127, United States
3.China Europe International Business School, 699 Hongfeng Road, Pudong Xinqu, Shanghai Shi,China
Abstract：We study how career concerns influence banking analysts’ forecasts. Banking analysts’ first (last) earnings forecast of the year is relatively more optimistic (pessimistic) for abank that could be their future employer. This pattern is not observed when the same analysts forecast earnings of banks unlikely to be their future employer.We use the Global Settlement as an exogenous shock on career concerns and showthat this forecast pattern is more pronounced after the Settlement. Moreover,we find evidence that analysts benefit from this behavior as analysts that aremore biased in their forecasts of potential future employers are more likely to move to a higher reputation bank.
Keywords：Forecast bias; Career concerns; Sell-side analysts; Investment banks; Labor market; Revolving door
Insider versus outsider CEOs, executive compensation, and accounting manipulation
Prasart Jongjaroenkamol, Volker Laux
University of Texas at Austin, USA
Abstract: This paper examines the role of the financial reporting environment in selecting a new CEO from within versus outside the organization. Weak reporting controls allow the CEO to misreport performance information, which reduces the board's ability to detect and replace poorly-performing CEOs as well as aggravates incentive contracting. We show that these adverse effects are stronger when the CEO is an outsider rather than an insider. Our model predicts that boards are more likely to recruit a CEO from the outside when the performance measures with which the new hire is assessed are harder to manipulate.
Keywords：Insider versusoutsider CEOs; CEO compensation; CEO turnover; Accounting manipulation
Regulatory oversight and auditor market share
Daniel Aobdia1, Nemit Shroff2
1.Northwestern University, United States
2.Massachusetts Institute of Technology, United States
Abstract: We examine whether auditor regulatoryoversight affects the value of financial statement audits. Using the PCAOB international inspection program as a setting to generate within countryvariation in regulatory oversight, we find that non-U.S. auditors inspected bythe PCAOB gain 4% to 6% market share from competing auditors after PCAOBinspection reports are made public. When inspection findings reveal that anauditor has many engagement-level deficiencies, market share gains followinginspection reports are significantly smaller. Our evidence suggests thatregulatory scrutiny increases the assurance value of an audit and highlightsthe role of public regulatory oversight in the audit market.
Keywords: Auditing; PCAOB; Regulation;Assurance; Financial reporting
