16 Other accounting issues (OTHER)

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    Reviewing the Review Process: Comparing Submit-to-Accept Delays in Accounting Journals to Other Business Disciplines
    ( 2022) Gal-Or, Ronen ; Hurley, Patrick ; Knechel, W. Robert ; Pesch, Heather
    We use hand-collected data to analyze submission-to-acceptance (STA) times in the top-tier accounting journals relative to other top-tier business journals from 1993 through 2019. We find that before 2008, top-tier accounting journals had shorter average STA times relative to other business disciplines. After 2008, top-tier accounting journals’ STA times steadily grew each year (from 18 to 23 months, on average), while STA times in other disciplines slightly declined (from 20 to 19 months). While we hypothesize that STA times in all business disciplines would be relatively shorter for papers with authors from more highly ranked universities (i.e., “elite” coauthor teams), we find that STA times are only shorter for “elite” co-author teams in top-tier accounting journals. This disparity between “elites” and “non-elites” is not present in other business disciplines. Moreover, the increase in STA times in accounting after 2008 was greater for “non-elite” relative to “elite” co-author teams. Finally, we examine whether longer STA times in top-tier accounting journal impacted the likelihood of tenure for accounting Ph.D. graduates from 2002 to 2014. We predict and find that assistant professors are less likely to be tenured at their first institution if journal articles published towards the end of their probationary period have relatively longer STA times. However, we find that longer STA times only impact tenure outcomes for assistant professors initially placed at lower-ranked “non-elite” schools. Our results should be of interest to journal editors, reviewers, provosts, deans, tenure and promotion committees, and department chairs in business schools.
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    What Shapes My Style? The Effects of Journalists’ Home Bias on Media Sentiment of Misconduct Firms
    ( 2022) You, Jiaxing ; Qin, Libin ; Xia, Jingjing
    This paper explores the behavioral factors that affect journalists’ idiosyncratic reporting styles by examining the effects of home bias on the sentiment of the news articles they write about firms under misconduct investigation. Using a generalized difference-in-difference design, we find that home journalists, defined as those whose hometown is in the same city as the misconduct firm’s registration address, have significantly more positive reporting sentiment about the firm in the investigation period than non-home-journalists. Their more positive sentiment is not correlated with better contemporaneous firm performance, suggesting that it is unlikely to be attributed to information advantage. The effects of home bias are attenuated by journalist expertise about the misconduct firm and its industry. However, other factors that have been commonly shown to reduce behavioral bias, such as journalist age and firm information environment proxies, are not associated with lower home bias. Stock investors do not seem to account for journalist home bias when reacting to news article sentiment in the investigation period, and there is evidence that home journalists’ coverage of the misconduct firm impedes the market’s price discovery about future investigation outcome. These findings provide an initial step to open the black box of the determinants of individual journalists' reporting styles.
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    The Missing G in the ESG Collection - The Impact of Governance Criteria in the Supplier Selection Process of German DAX and MDAX Companies
    ( 2022) Koester, Christoph
    Supplier selection is one of the key challenges in supply chain management and can be considered a multi-criteria decision-making (MCDM) problem. In the 1960s, it evolved from considering only economic criteria, such as price, quality, and performance, to including environmental and social criteria nowadays. Although receiving considerable attention from scholars and practitioners over the past decades, existing research has not considered governance criteria so far. This is, however, surprising, as ESG (environmental, social, and governance) criteria have gained considerable attention. In order to complement ESG criteria in the supplier selection process, this study investigates German DAX and MDAX companies and evaluates the impact of governance criteria along their supplier selection process. Moreover, it proposes a set of criteria for the respective process steps. Specifically, eleven criteria for the first process step and five criteria for the second process step are identified. This paper contributes to a better understanding of the supplier selection process by elucidating the relevance of governance criteria in the supplier selection process and providing a set of empirically developed governance criteria. These results can be applied by practitioners to complement the criteria set in the supplier selection process and thus balance economic, environmental, social, and governance targets.
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    Corporate Liquidity under Basel III: The Credit Line Channel
    ( 2022) Muthukrishnan, Pradeep
    The Basel III Liquidity Coverage Ratio (LCR) rule imposed unprecedented liquidity requirements on banks. I show that the regulation curtails banks’ ability to originate credit lines, with banks seeking to pass on increased maintenance costs to borrowers. I introduce novel metrics drawn from a machine learning analysis of contractual agreements and demonstrate that banks retain greater control in credit lines. The result is a decline in credit line origination and a market that is unfavorable to borrowers. Financially unconstrained firms drive borrowing declines and turn to debt-financed cash for corporate liquidity, rendering them riskier. My results are novel in revealing changes to corporate liquidity preferences and risk profiles when intermediation is costly.
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    Is fraud normal? The impact of informal norms on asset diversion at nonprofit organizations
    ( 2022) Negangard, Eric ; Roberts, Andrea ; Winchel, Jennifer
    Informal norms set expectations and guide behavior in meaningful ways in a variety of social settings. To investigate how behavioral norms shape the propensity for employees to engage in deviant workplace behavior, we use an extensive repository of nonprofit organizations that reported a significant diversion of assets (i.e., theft) and compare them to similar organizations that did not. Controlling for formal governance mechanisms, we find that executives who establish an ethical “Tone at the Top”—e.g., rule-followers without criminal infractions or negative financial judgments—decrease the likelihood of diversion. We find the norms and values a nonprofit conveys by committing to its philanthropic mission can inhibit fraud, but drifting from that mission helps employees rationalize misappropriation. Finally, we provide some evidence that the cultural tightness of the community in which an organization operates can impact the likelihood of asset diversion. Collectively, our evidence provides new insights on broader contextual factors—namely, executive, organizational, and societal norms—that can complement formal governance mechanisms to reduce the likelihood of fraud. Such findings can help inform academics, regulators, and practitioners concerned about the determinants of fraud.
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    Riding the Tide of Urbanization: Corporate Investment in Bigger Cities
    ( 2022) Yang, Zhiyi
    Urbanization has powered China’s economic growth in recent decades. Local investment opportunities arise with profound social and economic impacts of rapid urban expansion. In this study, I explore the real effects of cities’ spatial expansion on corporate investment decisions and the economic consequences. I find that corporate investment expenditures are responsive to local investment opportunities changes catalyzed by urban expansion. This result is robust to the use of instrumental variable based on geographical characteristics. Leveraging the enriched investment environment, firms also improve their investment efficiency and experience increases in future sales, employment, and firm value. A channel analysis shows that urban expansion influences corporate investment decisions through supplying labor and promoting industry agglomeration. In addition, pursuing urban-expansion investment opportunities should be supported by strong and well-developed market institutions. Collectively, the evidence supports the narrative that firms can grab opportunities for growth when investment environment changes during urbanization.
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    Does Inventory Adjustment Indicate Future GDP Restatements?
    ( 2022) Lyu, Yuanzhen
    Inventory growth aggregated from manufacturers' accounting disclosures reveals information about future GDP restatements. When regressing restatements of quarter-ahead real and nominal GDP growth on explanatory variables from the prior literature, I obtain adjusted R-squares of 12.8% and 17.5%, respectively. After I add the aggregate inventory growth rates, split between positive and negative growth firms, into the set of explanatory variables, the adjusted R-squares increase to 30.6% and 33.3%. Moreover, the inventory growth of the upward (downward) group negatively (positively) predicts the future restatements. I use a heterogeneous firm model with news shocks to show that the inventory measures' explanatory power is consistent with firms having private information about future economic conditions that government statistical agencies fail to incorporate. When firms learn about future production cost reduction, they shift production into the future and consume inventories for current sales. Thus more firms have decreases in inventories, especially firms with high inventory levels. Further empirical evidence supports this mechanism.