Bin Srinidhi - Academia.edu (original) (raw)

Papers by Bin Srinidhi

Social Science Research Network, 2018

Using an international sample of firms from 28 countries, we document that there exists a negativ... more Using an international sample of firms from 28 countries, we document that there exists a negative relationship between political connections and the informativeness of stock price, as measured by idiosyncratic volatility (IV). This finding is robust to alternative regression specifications, sub-samples analyses, and concerns related to endogeneity. A more detailed analysis shows that out of the different types of possible connections, the connectedness of the owners is the primary driver of this result. Further, the negative association is only significant for firms in countries characterized by low institutional quality (i.e. corrupted countries, countries with low access to external equity markets, and countries with low media penetration). There is no evidence of any relation between political connections and stock price informativeness for firms in countries characterized by high institutional quality. Overall, our results show that although political connections exacerbate rent-seeking that weaken the firms' information environments on average, the negative information consequences are compensated by the countries' institutional quality.

Social Science Research Network, Jan 10, 2015

We investigate the effect of political connections on stock price informativeness, as measured by... more We investigate the effect of political connections on stock price informativeness, as measured by idiosyncratic volatility, in an international sample that consists of firms from 28 countries. We find that politically connected firms exhibit lower stock price informativeness than similar unconnected firms. Further analysis shows that this degradation is significant only for firms in the emerging markets and if the firm is connected to the highest echelons of the country’s leadership and the connected party in the firm is the controlling shareholder. This finding is robust to controlling for alternative measures of institutional infrastructure, earnings quality, analyst coverage, share-turnover, and insider ownership. In conjunction with earlier literature, our findings suggest that political rent-seeking weakens both the public and the private information environments for connected firms in emerging economies with weak political processes and low media penetration.

Contemporary Accounting Research, 2017

The finance literature offers two competing possibilities on how investors respond to the quality... more The finance literature offers two competing possibilities on how investors respond to the quality of public financial statements in their pricing decisions. They could collect either (i) more private information to benefit from lower information collection cost, or (ii) less private information because of lower incremental benefits. In this paper, we use the audit setting to examine which possibility prevails. Using the idiosyncratic return volatility as a proxy for firm‐specific information, we show in a sample of 51,559 firm‐year observations for 8,261 U.S. firms spanning the period of 2000–2010 that firms audited by higher‐quality auditors exhibit lower average idiosyncratic return volatility but a higher concentration of it at the time of earnings announcements. Our findings are consistent with the argument that investors reduce private information collection in response to higher audit quality. Our findings are robust to alternative measures of audit quality and idiosyncratic r...

Handbook of Environmentally Conscious Manufacturing

... and quality initiatives 101 Noellette Conway-Schempf, Lester Lave 6. Environmental cost accou... more ... and quality initiatives 101 Noellette Conway-Schempf, Lester Lave 6. Environmental cost accounting and business strategy 119 Robert JP Gale, Peter K ... Reclamation and recycling of municipal waste 439 Ifeanyi E. Madu 20 Challenging the future 453 Jittta Miiller, Otmar Deubzer ...

Information for Efficient Decision Making, 2020

Using a U.S sample of 2,657 U.S. listed firms (13,951 firm-years) spanning the period from 2004 t... more Using a U.S sample of 2,657 U.S. listed firms (13,951 firm-years) spanning the period from 2004 to 2012, we show that family firms exhibit lower crash risk (all three measures) than similar nonfamily firms. Our results hold after we control for endogeneity in a comparison of family firms with propensity-score-matched nonfamily firms. We interpret this result as showing that the long term perspective in the family firms reduces the proclivity of managers to hide bad news which in turn reduces crash risk. We support our interpretation by showing that our results are driven by cases where family firms demonstrate the long term perspective by not engaging in real earnings management and in restraining the power of the CEO.

Journal of Contemporary Accounting & Economics, 2020

Abstract Stock price crash risk could be lower in family firms because the controlling family inv... more Abstract Stock price crash risk could be lower in family firms because the controlling family investors have a longer-term interest, hold greater decision rights and are better informed than investors in diffusely owned firms (alignment effect). However, the agency costs between family and nonfamily investors (entrenchment effect) could affect crash risk in two opposing ways. Non-controlling investor skepticism about insider entrenchment limits overvaluation and reduces the crash risk. In contrast, entrenched insiders could hide bad news to exploit private benefits, which could increase the crash risk. We show that family firms exhibit a lower crash risk than similar nonfamily firms after controlling for lower overvaluation, which is consistent with the better alignment effect. Moreover, we show that better governance further reduces the crash risk, which indicates that the substitutive relationship between strong governance and family ownership shown in countries with low investor protection rights does not carry over to the U.S. where investor protection rights are strong.

Journal of Accounting, Auditing & Finance, 1994

Auditors make judgments based on their assessment of internal control strengths and weaknesses. A... more Auditors make judgments based on their assessment of internal control strengths and weaknesses. Auditing practice and research have recognized that the segregation of duties plays an important role in this assessment process. However, research on how the segregation of duties affects auditors&amp;#39; judgments has been limited because of the wide variety of duty segregation patterns possible in accounting systems. This paper identifies a scheme for classifying duty combinations and measures its effectiveness. Auditors&amp;#39; judgments in both the presence and the absence of various duty combinations were recorded in a controlled laboratory environment. The responses were then analyzed both directly and after classification according to the scheme. A comparison of the classified responses to the unclassified responses is used to measure the effectiveness of the classification scheme.

Vikalpa: The Journal for Decision Makers, 1991

In the increasingly competitive environment of the nineties, considerable attention has been paid... more In the increasingly competitive environment of the nineties, considerable attention has been paid to cost and quality issues. Though, traditionally, improvement in quality meant increased costs and was associated with reduced productivity, more recent research treats them as complementary characteristics. In this article, K R Balachandran and Bin Srinidhi argue that the target analysis approach which combines cost and quality issues in a complementary manner can help achieve the strategic objectives of the firm. Data from NMMC, a subsidiary of Nissan Motor Corporation located in the US, have been used to describe the process of implementation of this approach.

Journal of Accounting, Auditing & Finance, 2015

In this article, we use an experimental approach to examine the effect of reporting regimes on as... more In this article, we use an experimental approach to examine the effect of reporting regimes on asset prices. We examine four different reporting regimes: the no recognition (NR) regime where no expected future cash flows are recognized; the full recognition (FR) regime where both the expected good news and expected bad news pertaining to the next period cash flows are recognized in current earnings; the good news recognition (GR) regime where only the expected good news pertaining to the next period cash flows are recognized in current earnings; and the bad news recognition (BR) regime where only the expected bad news pertaining to the next period cash flows are recognized in current earnings. We find that the NR, BR, and GR regimes are associated with more intense asset price bubbles than the FR regime. We also find that between the BR and GR regimes, the BR regime is associated with more intense asset price bubbles than the GR regime. Our findings shed insights about how biased (n...

Using a controlled laboratory experiment in a three-period investment setting, we examine the det... more Using a controlled laboratory experiment in a three-period investment setting, we examine the deterrence effect of internal governance on manager's intention to expropriate (IER). We distinguish between managers who survive till the third period (SM) and those who go bankrupt after the first period (NSM). Our examination of their IERs shows that SMs strategically exhibit lower IERs in the rst (and second) period to build reputation but expropriate in the last period whereas NSMs expropriate in the first period. We interpret the lower IERs of SMs in the first two periods as a strategic choice of managers with different time preferences. We also find that internal governance level chosen by the investor has no effect on SMs and NSMs, indicating the lack of deterrence eect of internal governance. The actual expropriation, which combines the intention to expropriate with the detection effect of governance, decreases with the level of internal governance. An important policy implica...

... industry-wise analysis premised on the view that different industries may subject to differen... more ... industry-wise analysis premised on the view that different industries may subject to different level ... environmental events (eg, the Exxon Valdez and BP oil spill) and avoid heavy cash outflows arising ... 16 For example, Nike suffered a loss of revenues and market share during 1997 ...

In this paper we contend that higher audit quality could crowd out private information or encoura... more In this paper we contend that higher audit quality could crowd out private information or encourage its collection. We examine which one of these two effects influences investors’ pricing decision by investigating the relation between audit quality and idiosyncratic return volatility. Using a large sample of 51,559 firm-year observations for 8,261 U.S. firms spanning the period from 2000 to 2010, we find that the firms, audited by higher quality auditors, exhibit lower overall idiosyncratic return volatility and higher concentration of idiosyncratic return volatility at the time of earnings announcements. Our findings support the argument that audit quality improves public financial statement information to an extent that crowds out the private information collection. In further analysis, we show that the effect of audit quality on idiosyncratic return volatility is incremental to the effect of accruals quality. Our findings are robust to alternative measures of audit quality and id...

Though the benefits of information exchange across firms in a value chain have increased and the ... more Though the benefits of information exchange across firms in a value chain have increased and the costs of information processing have gone down, there are only some cases where such systems have been implemented. In this paper, we develop a stylized model of a value chain that consists of a manufacturer and a retailer. We examine the inducement required for the retailer to move to an information exchange regime and the resulting relationship between the resource consumption and revenue for the manufacturer. In the model, the retailer possesses private information on demand. The retailer accepts the information exchange regime if and only if the proportion of the increased benefit that he gets is not less than the information rent he foregoes. The realized demand determines the revenue for the manufacturer. In contrast to resource based pricing, we show that there exist regions where the revenue does not move in consonance with resource usage, because of the extraction of information...

SSRN Electronic Journal

The extant literature on family-controlled firms in the U.S. presents a mixed picture on how fami... more The extant literature on family-controlled firms in the U.S. presents a mixed picture on how family control affects opacity and value creation. In this study, we show that the mixed results arise from the differences among family firms with regard to the presence of founders and the extent of decision rights held by them. Specifically, we find that family firms in which founders are present and have significant decision rights (influence), are more transparent and have higher valuations, compared to similar non-family firms. In further analysis, we show that founders improve the operating efficiency of their firms and this partly explains the additional value creation in founder firms. We find all these effects to be stronger when founders have greater decision rights (influence). In contrast, non-founder family firms are more opaque than their non-family counterparts. Furthermore, we document cross-sectional variations in the impact of Founder-CEOs on opacity and value based on their tenure and horizon. For Founder-CEOs, firm opacity increases (decreases) and value decreases (increases) with founder tenure (founder horizon).

Journal of Contemporary Accounting & Economics

Abstract Prior literature documents that corporate boards with female directors produce better go... more Abstract Prior literature documents that corporate boards with female directors produce better governance outcomes than all-male boards. However, female directors constitute the minority on most boards, which precludes majority voting as the mechanism through which they change board decisions. We identify changing the norms of how the board works as this mechanism. Using the market for norms framework, we explain how female directors are effective even without possessing a board majority or other sources of symbolic power, such as hierarchical authority and social gravitas. Empirically, we show that independent female directors, compared to their male counterparts, are more effective at changing board norms (board processes) and improving governance (board outputs).

Asia-Pacific Journal of Accounting & Economics

ABSTRACTWe examine the puzzling observation of newly emergent Chinese non–state-controlled enterp... more ABSTRACTWe examine the puzzling observation of newly emergent Chinese non–state-controlled enterprises (NSCEs) adapting the long-established practice from state-controlled organizations of inviting state officials for general nontechnical and nonregulatory visits and then publicizing these visits in the media even though such visits impose significant costs on these firms. This context is unique and allows for a natural experiment in which newly emergent organizations that lack inherent legitimacy and cannot undertake substantial identification resort to symbolic compliance to enhance legitimacy. We show that these visits result in better operating and market performance, and reduce the risk in the visited NSCEs. We interpret this result as providing evidence that symbolic compliance is effective to enhance legitimacy.

Abstract This paper provides a model for controlling local economies by the national economy. In ... more Abstract This paper provides a model for controlling local economies by the national economy. In particular, it investigates how imperfections in monitoring a local economy by the national economy can influence the transfer schemes designed to motivate the local economy to be productive and then honestly report its performance. A binary state world in considered. With imperfections only in the high state, the transfer scheme is such that when the local economy reports the high output, monitoring is not useful. With imperfections only in the low state, it is seen that a low transfer occurs when there is an agreement that the low ouput has been realized. When imperfections exist in both the states, it is seen that the results are identical to those with imperfections only in the high state. However, these results do not induce the high productivity from the local economy when the income spread between the two levels is small.

Abstract. We use a controlled laboratory setting to experimentally examine the role of auditing a... more Abstract. We use a controlled laboratory setting to experimentally examine the role of auditing and market-based-governance in restraining managerial expropriation and inaccurate financial reporting. Managerial expropriation is broadly defined as the enabling of all actions that opportunistically transfer wealth from investors to managers through understatement of realizable income. Similarly, auditing is broadly defined as all the auditing and governance systems that increase the likelihood of accurate reporting of realizable income. Market-based governance is operationalized by a device (poison pill) that entrenches managers. The results of the experiment reveal that the market converges to equilibrium even without auditing. However, auditing reduces expropriation, attracts more capital and thereby increases the overall welfare, after accounting for the cost of auditing. Further, we show that poison pill adoption results in a demand for more audit and lower net inflow of capital. ...

We use a controlled laboratory setting to experimentally examine the role of auditing and market-... more We use a controlled laboratory setting to experimentally examine the role of auditing and market-based-governance in restraining managerial expropriation and inaccurate financial reporting. Managerial expropriation is broadly defined as the enabling of all actions that opportunistically transfer wealth from investors to managers through understatement of realizable income. Similarly, auditing is broadly defined as all the auditing and governance systems that increase the likelihood of accurate reporting of realizable income. Market-based governance is operationalized by a device (poison pill) that entrenches managers. The results of the experiment reveal that the market converges to equilibrium even without auditing. However, auditing reduces expropriation, attracts more capital and thereby increases the overall welfare, after accounting for the cost of auditing. Further, we show that poison pill adoption results in a demand for more audit and lower net inflow of capital. The effect...