10 Financial Accounting 4: Accounting issues related to labor, politics, and environments (FAR4)

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    Do Local Newspapers Contribute to Geographic Commonalities?
    ( 2021) Feng, Ivy ; Kimbrough, Michael ; Yan, Lu
    Prior research documents that firms in close geographic proximity tend to share commonalities in various outcomes and practices. Because local newspapers are important channels for discovering and sharing information about local conditions that is likely to be relevant for various firm decisions, we examine whether local newspapers contribute to geographic commonalities. We find that firms in metropolitan statistical areas (MSAs) with more local newspapers have more similar (i.e. less disperse) stock returns and stock market betas, indicating that local newspapers contribute to commonalities in overall fundamentals among co-located firms. We also find that the level of investment – a key driver of firm fundamentals - is more similar among firms in MSAs with more local newspapers, suggesting that local newspapers contribute to a shared understanding of investment opportunities available to co-located firms. The effect of local newspapers on geographic commonalities is more pronounced for newspapers with smaller circulations, which have been shown to be more dedicated to covering local news than larger newspapers. The effect is also more pronounced in communities that have adopted the inevitable disclosure doctrine, which limits labor market mobility – an alternative channel for information sharing. In addition, we find that the impact of local newspapers is most significant in promoting commonalities among local industry clusters. Using a difference-in-difference design to bolster causal inferences, we find that same-industry firms exhibit less similarities after local newspaper closures, which are exogenous shocks to local news coverage. Collectively, the results show that local media is an important driver of previously documented geographic commonalities.
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    Shadow Union in Local Labor Markets and Capital Structure
    ( 2021) Cho, Duckki ; Choi, Lyungmae
    This paper identifies an externality of a firm’s unionization that affects the capital structure decisions of non-unionized firms within a local labor market. We find that a union victory leads non-unionized firms to increase market leverage ratios by 0.9 to 1.3 percentage points. This "shadow union" effect is more pronounced when the probability of unionization rises in a larger margin and firms face higher union rents conditional on being unionized. The threat is credible enough to shape corporate financing decisions: shadow unions raise the wages of employees and increase the likelihood of subsequent union victories in the relevant labor market.
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    Do Local Newspapers Contribute to Geographic Commonalities?
    ( 2021) Feng, Ivy ; Kimbrough, Michael ; Yan, Lu
    Prior research documents that firms in close geographic proximity tend to share commonalities in various outcomes and practices. Because local newspapers are important channels for discovering and sharing information about local conditions that is likely to be relevant for various firm decisions, we examine whether local newspapers contribute to geographic commonalities. We find that firms in metropolitan statistical areas (MSAs) with more local newspapers have more similar (i.e. less disperse) stock returns and stock market betas, indicating that local newspapers contribute to commonalities in overall fundamentals among co-located firms. We also find that the level of investment – a key driver of firm fundamentals - is more similar among firms in MSAs with more local newspapers, suggesting that local newspapers contribute to a shared understanding of investment opportunities available to co-located firms. The effect of local newspapers on geographic commonalities is more pronounced for newspapers with smaller circulations, which have been shown to be more dedicated to covering local news than larger newspapers. The effect is also more pronounced in communities that have adopted the inevitable disclosure doctrine, which limits labor market mobility – an alternative channel for information sharing. In addition, we find that the impact of local newspapers is most significant in promoting commonalities among local industry clusters. Using a difference-in-difference design to bolster causal inferences, we find that same-industry firms exhibit less similarities after local newspaper closures, which are exogenous shocks to local news coverage. Collectively, the results show that local media is an important driver of previously documented geographic commonalities.
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    Information Exposure and Corporate Citizenship
    ( 2021) Liu, Lisa ; Lu, Shirley
    We explore how information exposure, specifically information transmission within organizations, facilitates companies’ roles as corporate citizens. We study whether US firms’ business networks with China and Italy become their information advantage, and examine whether firms use relevant information to mitigate the negative shocks of COVID-19. We start by validating our measurement of information exposure. Next, we find that a higher number of work-from-home (“WFH”) policies, as evidenced by a higher stay-at-home ratio, are implemented in areas with more information-exposure companies, even before local governments impose a lockdown. To further demonstrate corporate citizenship, we document firms’ positive social externalities—lower COVID-19 growth and an influence on other firms’ WFH policies—and show suggestive evidence on firms’ social motives.
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    A Few More Good Men: Social Performance and Whistleblowing
    ( 2021) Chen, Yifei ; Gao, Feng ; Xin, Hua
    Whistleblowers provide valuable information to regulators in helping them uncover corporate financial misconduct. We examine the role of social performance in the decision of employees to become whistleblowers. Our results suggest that employees from firms with better social performance are more likely to step forward and report fraud, consistent with social performance fostering a corporate culture of “doing the right thing.” We also find that allegations made by these employees are more likely to lead to class action lawsuits. These lawsuits are associated with lower announcement returns and higher court-approved penalties.