Hollis Skaife | University of California, Davis (original) (raw)

Papers by Hollis Skaife

Journal of International Accounting Research, Nov 1, 2015

ABSTRACTFirms engaged in agriculture generate revenue from biological assets that manifest in the... more ABSTRACTFirms engaged in agriculture generate revenue from biological assets that manifest in the cultivation of bearer fruits and nuts, the tilling of crops, and the production of livestock and forestry. We investigate whether firms' cost of debt is associated with the measurement method they use to account for their biological assets. We find that the cost of debt is higher for firms using the fair value method of accounting for their biological assets relative to firms using historical cost. However, the positive association between the cost of debt and fair value is driven by firms that transform bearer plants, i.e., living plants that ultimately bear produce for more than one year. We also document that fair value combined with auditor attested IFRS use results in a lower cost of debt for firms transforming other types of biological assets. Our cross-country study focuses on a class of assets previously unexplored, and contributes to the literature that examines the consequences of fair value accounting for financial statement users.JEL Classifications: G39; H25; M41.

Contemporary Accounting Research, Nov 27, 2012

This study investigates the role of financial reporting quality in merger and acquisition (M&A) d... more This study investigates the role of financial reporting quality in merger and acquisition (M&A) deals that are ultimately terminated, i.e., go bust. If a target is a U.S. publicly-traded company, an acquirer's initial assessment of the potential benefits associated with the acquisition of the company is based on publicly available information. Generally, the acquirer obtains limited private information from the target prior to announcing the deal, but engages in transactional due diligence after signing the acquisition agreement to affirm that the financial reporting warranties made by the target are accurate. We construct a low quality financial reporting score based on measures prior research identifies as being associated with less-reliable, less-relevant, and less-precise financial reporting. We find that acquirers offer higher premiums for targets with low quality financial reporting. However, we also find that low quality financial reporting increases the likelihood of deal renegotiation, and contributes to the probability of deals going bust. We document that failed targets are more likely to restate their financial statements after the announcement of the deal, supporting our conjecture that low quality financial reporting contributes to deals being terminated. Our research provides new insights into the capital market consequences of financial reporting quality and identifies a new determinant of financial statement restatements.

Social Science Research Network, 2006

We use internal control deficiency (ICD) disclosures prior to mandated internal control audits to... more We use internal control deficiency (ICD) disclosures prior to mandated internal control audits to investigate economic factors that expose firms to control failures and managements' incentives to discover and report control problems. We find that, relative to non-disclosers, firms disclosing ICDs have more complex operations, recent organizational changes, greater accounting risk, more auditor resignations and have fewer resources available for internal control. Regarding incentives to discover and report internal control problems, ICD firms have more prior SEC enforcement actions and financial restatements, are more likely to use a dominant audit firm, and have more concentrated institutional ownership.

Social Science Research Network, 2007

We examine the relation between earnings smoothing, governance and liquidity for a sample of non-... more We examine the relation between earnings smoothing, governance and liquidity for a sample of non-U.S. firms. We divide smoothing into innate and discretionary components, and find that discretionary smoothing is increasing in incentives to smooth (greater tax-book conformity, concentrated ownership, related party transactions and weak overall governance) and decreasing in oversight (investor protection, analyst following and ADR listing). Given the potential for smoothing to affect transparency, we examine the relation between smoothing and investors' willingness to transact in the stock as reflected in liquidity. After controlling for other liquidity determinants, we find that firms with greater levels of discretionary smoothing experience lower liquidity as evidenced by greater frequency of zero returns days, lower trading volume and higher bid-ask spreads. In contrast, results for innate smoothing suggest that innate smoothing is positively correlated with liquidity. Taken together, our results suggest that investors differentiate between innate and discretionary smoothing, and discretionary smoothing reduces their willingness to transact in the stock.

Journal of Business Ethics, Jun 11, 2019

We use the U.S. Supreme Court's decision in Citizens United v. Federal Election Commission to ass... more We use the U.S. Supreme Court's decision in Citizens United v. Federal Election Commission to assess the reputational risks created by political investment opportunities that allow managers to spend unlimited and potentially undisclosed firm resources on independent political expenditures. This new opportunity raises important ethical questions, as it is difficult, and perhaps impossible, under current law for shareholders to hold managers accountable for this investment choice and the reputational risks it entails. Using firms' known political activity as a proxy for managers' likely future use of independent political expenditures, we examine how market participants reacted to Citizens United, conditional on this prior activity and corporate governance attributes related to the concentration of decision rights in senior management and blockholders. The results of our analyses document that firms with both a high level of known political activity and CEO-chairperson of the board duality experienced negative abnormal returns in reaction to Citizens United. In contrast, firms with concentrated ownership experienced positive abnormal returns; however, as known political activity increased, investors discounted the benefits of concentrated ownership. These findings suggest that investors expect this expansion of firms' political investment opportunities to amplify principal-agent problems inherent in corporate political activity. Additionally, our findings provide evidence for those deliberating the mandatory disclosure of firms' investments in politics as a means of increasing managerial accountability to both shareholders and the public.

Journal of Accounting and Public Policy, Mar 1, 2019

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting t... more We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice ''strategic R&D classification". We find a one standard deviation increase in strategic R&D classification leads, on average, to a 1.7% (1.5%) reduction in GAAP (cash) effective tax rates, suggesting this practice provides significant tax savings. However, we also find strategic R&D classification is related to both the level and changes in uncertain tax benefit liabilities required to be recognized under FIN 48, suggesting this practice comes with financial reporting costs. Our study contributes to the literature by documenting some of the costs and benefits associated with a previously unexplored tax strategy, and highlights the limitations faced by tax authorities in monitoring firms' R&D tax credit.

Journal of Accounting and Public Policy, Jul 1, 2014

The mandatory reporting of firms' internal control effectiveness continues to be debated by equit... more The mandatory reporting of firms' internal control effectiveness continues to be debated by equity market participants, U.S. regulatory agencies and oversight committees. We investigate the implications of material weaknesses in internal control and SOX 404 required reporting of such for financial analysts because analysts are important intermediaries in the U.S. capital market and it is not known whether analysts' forecasts or coverage decisions are affected by firms' internal control problems or reporting, respectively. Results of our empirical tests indicate that analysts provide less accurate forecasts and there is greater forecast dispersion for firms with ineffective internal control. We also find that firms that disclose internal control problems have less analyst coverage and that analyst following declines after the material weakness in internal control is disclosed. The results are robust to controlling for potential self-selection bias and management earnings guidance. Our study documents the consequences of ineffective internal control for an important class of financial statement users and suggests the required reporting on the effectiveness of internal control is beneficial to understanding the properties of analysts' forecasts.

Social Science Research Network, Oct 4, 2006

The use of the Internet for financial reporting creates unique opportunities and challenges for t... more The use of the Internet for financial reporting creates unique opportunities and challenges for the auditing profession. This exploratory study identifies the key audit implications of Internet financial reporting through a comprehensive review of the academic and professional literature. Further, the study analyses the contents of all listed company Websites in New Zealand to assess the nature and extent of current audit-related Web practices. The relatively high degree of similarity between New Zealand's auditing standards and those of other jurisdictions (e.g. International Standards of Auditing and auditing standards in countries such as the UK, Australia and the USA) contributes towards the international generalisability of the content analysis. The literature review highlighted issues relating to the auditor's role and responsibilities, the audit report, and audit procedures. The results of the content analysis of auditor Web-related practices reveal several significant concerns for the auditing profession in relation to the presentation, context, and content of the audit report in a Web-based environment.

Social Science Research Network, Jun 28, 2000

ABSTRACT Presented in this manuscript is a series of three cases that require students to researc... more ABSTRACT Presented in this manuscript is a series of three cases that require students to research, analyze, and write about emerging financial accounting issues or extensions of existing technical pronouncements. Specifically, the cases focus on accounts receivable valuation, environmental liabilities reporting, and the accounting for purchased in-process research and development. Throughout the three-case sequence, the complexity of the technical accounting issues and the research, analytical, and written communication requirements are gradually increased in order to facilitate the development of students' technical knowledge and professional skills.

Social Science Research Network, Dec 10, 2018

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting t... more We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice ''strategic R&D classification". We find a one standard deviation increase in strategic R&D classification leads, on average, to a 1.7% (1.5%) reduction in GAAP (cash) effective tax rates, suggesting this practice provides significant tax savings. However, we also find strategic R&D classification is related to both the level and changes in uncertain tax benefit liabilities required to be recognized under FIN 48, suggesting this practice comes with financial reporting costs. Our study contributes to the literature by documenting some of the costs and benefits associated with a previously unexplored tax strategy, and highlights the limitations faced by tax authorities in monitoring firms' R&D tax credit.

Social Science Research Network, 2012

Meeting featured the panel discussion ''Results, Challenges, and Opportunities in CrossCountry Ac... more Meeting featured the panel discussion ''Results, Challenges, and Opportunities in CrossCountry Accounting Research.'' The panelists summarized major contributions from prior research in international settings, factors a researcher should consider when motivating and designing crosscountry studies, and topical areas that could potentially contribute to future international accounting research. This paper summarizes the panelists' prepared remarks, develops a framework for designing crosscountry research projects, and provides illustrations of the framework.

Social Science Research Network, 2014

This paper shows that measures of stock price synchronicity based on market model 2 s are predict... more This paper shows that measures of stock price synchronicity based on market model 2 s are predictably biased downwards as a result of stock illiquidity, and that previously-employed remedies to correct market model betas for measurement bias do not fix 2. Using a large international sample of firm-years, we empirically demonstrate strong negative and nonlinear relations between illiquidity and 2 across countries, across firms, and over time. Because variables of interest also frequently relate to illiquidity, we illustrate the consequences of not controlling for illiquidity in synchronicity research. More generally, we demonstrate the importance of using nonlinear control variable methods. Overall, we conclude that the illiquiditydriven measurement bias in 2 provides an explanation for why prior research finds low-2 firms to have weak information environments, and suggest future research carefully evaluate the sensitivity of its results to nonlinear controls for illiquidity.

Social Science Research Network, Oct 4, 2006

This study aims to show the effectiveness of a writing skill improvement initiative adopted in a ... more This study aims to show the effectiveness of a writing skill improvement initiative adopted in a Managerial Communication course. The sample included all students who enrolled in the Master of Business Administration program. Pre-post measurement format was adopted to assess the outcome of the course. The paper also discusses the outline of the course, delivery, assessment and feedback process. The results showed that the initiative was successful in improving the writing skills of the students. The study also offers suggestions to tackle the challenges faced by business schools, faculty, and students with regard to improving the writing skills of business graduates.

Social Science Research Network, 2013

This study examines the agency costs of corporate lobbying by exploring the relation between lobb... more This study examines the agency costs of corporate lobbying by exploring the relation between lobbying and excess CEO compensation. We show that CEOs of firms engaged in lobbying earn significantly greater compensation levels compared to CEOs in non-lobbying firms, after controlling for standard economic determinants of pay. The relation between lobbying and CEO pay increases with the intensity of firms’ lobbying. Although lobbying is positively associated future sales growth, we find no evidence suggesting it culminates in shareholder wealth creation. Additional tests reveal that for a subset of firms with available data, governance attributes mediate the relation between lobbying and firms’ decision to lobby. Lastly, a difference-in-difference, propensity-score matched analysis suggests significant increases in CEO pay levels around firms’ initial lobbying engagements. Overall, we conclude that corporate lobbying introduces agency costs borne by shareholders.

Social Science Research Network, 2005

ABSTRACT Prior research asserts that stock price synchronicity, defined as the R2 from asset pric... more ABSTRACT Prior research asserts that stock price synchronicity, defined as the R2 from asset pricing regressions, is a useful measure of the relative amount of firm-specific information reflected in stock prices. This paper investigates the validity of the information-based interpretation of stock price synchronicity in international markets. The results of our analyses provide little support for using stock price synchronicity as a measure of firm-specific information internationally. We develop an alternative measure of firm-specific information based on the percentage of zero return weeks, and repeat the analyses. The results suggest that the zero-return metric better captures differences in the amount of firm-specific information reflected in stock prices in international markets.

Social Science Research Network, 2008

Social Science Research Network, 2012

... We appreciate the comments of the Associate Editor Dan Segal, an anonymous reviewer, Xia Chen... more ... We appreciate the comments of the Associate Editor Dan Segal, an anonymous reviewer, Xia Chen, Jeremiah Green, Antonio Macias, David Veenman, Terry Warfield, and participants at the 2010 AAA annual meeting, and workshop participants at the University of Amsterdam ...

Accounting Horizons, 1999

In this paper, we examine firms' use of the Internet to enhance the relevance of their financ... more In this paper, we examine firms' use of the Internet to enhance the relevance of their financial reporting. We define a firm as practicing Internet Financial Reporting (IFR) when it provides in its web site either (1) a comprehensive set of financial statements (including footnotes and the auditors' report), (2) a link to its annual report elsewhere on the Internet or (3) a link to the U.S. Security and Exchange Commission's (SEC) Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. While 70 percent of the firms in our sample engage in IFR, we find substantial variation in the quality of firms' IFR practices. Specifically, the variations in quality pertain to the timeliness and therefore, the usefulness of firms' financial reporting on the Internet. We find that some firms provide more timely financial disclosures via the Internet (e.g., monthly sales) while other firms report outdated financial data (e.g., two-year old annual reports). We also obser...

Journal of Accounting and Public Policy, 2019

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting t... more We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice ''strategic R&D classification". We find a one standard deviation increase in strategic R&D classification leads, on average, to a 1.7% (1.5%) reduction in GAAP (cash) effective tax rates, suggesting this practice provides significant tax savings. However, we also find strategic R&D classification is related to both the level and changes in uncertain tax benefit liabilities required to be recognized under FIN 48, suggesting this practice comes with financial reporting costs. Our study contributes to the literature by documenting some of the costs and benefits associated with a previously unexplored tax strategy, and highlights the limitations faced by tax authorities in monitoring firms' R&D tax credit.

Journal of Accounting Research, 2001

We investigate (1) whether the variation in accounting standards across n ational boundaries rela... more We investigate (1) whether the variation in accounting standards across n ational boundaries relative to International Accounting Standards (IAS) has an impact on the ability of financial analysts to forecast non-US firms' earnings accurately, and (2) whether analyst forecast accuracy changes after firms adopt IAS. IAS are a set of financial reporting policies that typically require increased disclosure and restrict management's choices of measurement methods relative to the accounting standards of our sample firms' countries of domicile. We develop indexes of differences in countries' accounting disclosure and measurement policies relative to IAS, and document that greater differences in accounting standards relative to IAS are significantly and positively associated with the absolute value of analyst earnings forecast errors. Further, we show that analyst forecast accuracy improves after firms adopt IAS. More specifically, after controlling for changes in the market value of equity, changes in analyst following, and changes in the number of news reports, we find that the convergence in firms' accounting policies brought about by adopting IAS is positively associated with the reduction in analyst forecast errors.

Journal of International Accounting Research, Nov 1, 2015

ABSTRACTFirms engaged in agriculture generate revenue from biological assets that manifest in the... more ABSTRACTFirms engaged in agriculture generate revenue from biological assets that manifest in the cultivation of bearer fruits and nuts, the tilling of crops, and the production of livestock and forestry. We investigate whether firms' cost of debt is associated with the measurement method they use to account for their biological assets. We find that the cost of debt is higher for firms using the fair value method of accounting for their biological assets relative to firms using historical cost. However, the positive association between the cost of debt and fair value is driven by firms that transform bearer plants, i.e., living plants that ultimately bear produce for more than one year. We also document that fair value combined with auditor attested IFRS use results in a lower cost of debt for firms transforming other types of biological assets. Our cross-country study focuses on a class of assets previously unexplored, and contributes to the literature that examines the consequences of fair value accounting for financial statement users.JEL Classifications: G39; H25; M41.

Contemporary Accounting Research, Nov 27, 2012

This study investigates the role of financial reporting quality in merger and acquisition (M&A) d... more This study investigates the role of financial reporting quality in merger and acquisition (M&A) deals that are ultimately terminated, i.e., go bust. If a target is a U.S. publicly-traded company, an acquirer's initial assessment of the potential benefits associated with the acquisition of the company is based on publicly available information. Generally, the acquirer obtains limited private information from the target prior to announcing the deal, but engages in transactional due diligence after signing the acquisition agreement to affirm that the financial reporting warranties made by the target are accurate. We construct a low quality financial reporting score based on measures prior research identifies as being associated with less-reliable, less-relevant, and less-precise financial reporting. We find that acquirers offer higher premiums for targets with low quality financial reporting. However, we also find that low quality financial reporting increases the likelihood of deal renegotiation, and contributes to the probability of deals going bust. We document that failed targets are more likely to restate their financial statements after the announcement of the deal, supporting our conjecture that low quality financial reporting contributes to deals being terminated. Our research provides new insights into the capital market consequences of financial reporting quality and identifies a new determinant of financial statement restatements.

Social Science Research Network, 2006

We use internal control deficiency (ICD) disclosures prior to mandated internal control audits to... more We use internal control deficiency (ICD) disclosures prior to mandated internal control audits to investigate economic factors that expose firms to control failures and managements' incentives to discover and report control problems. We find that, relative to non-disclosers, firms disclosing ICDs have more complex operations, recent organizational changes, greater accounting risk, more auditor resignations and have fewer resources available for internal control. Regarding incentives to discover and report internal control problems, ICD firms have more prior SEC enforcement actions and financial restatements, are more likely to use a dominant audit firm, and have more concentrated institutional ownership.

Social Science Research Network, 2007

We examine the relation between earnings smoothing, governance and liquidity for a sample of non-... more We examine the relation between earnings smoothing, governance and liquidity for a sample of non-U.S. firms. We divide smoothing into innate and discretionary components, and find that discretionary smoothing is increasing in incentives to smooth (greater tax-book conformity, concentrated ownership, related party transactions and weak overall governance) and decreasing in oversight (investor protection, analyst following and ADR listing). Given the potential for smoothing to affect transparency, we examine the relation between smoothing and investors' willingness to transact in the stock as reflected in liquidity. After controlling for other liquidity determinants, we find that firms with greater levels of discretionary smoothing experience lower liquidity as evidenced by greater frequency of zero returns days, lower trading volume and higher bid-ask spreads. In contrast, results for innate smoothing suggest that innate smoothing is positively correlated with liquidity. Taken together, our results suggest that investors differentiate between innate and discretionary smoothing, and discretionary smoothing reduces their willingness to transact in the stock.

Journal of Business Ethics, Jun 11, 2019

We use the U.S. Supreme Court's decision in Citizens United v. Federal Election Commission to ass... more We use the U.S. Supreme Court's decision in Citizens United v. Federal Election Commission to assess the reputational risks created by political investment opportunities that allow managers to spend unlimited and potentially undisclosed firm resources on independent political expenditures. This new opportunity raises important ethical questions, as it is difficult, and perhaps impossible, under current law for shareholders to hold managers accountable for this investment choice and the reputational risks it entails. Using firms' known political activity as a proxy for managers' likely future use of independent political expenditures, we examine how market participants reacted to Citizens United, conditional on this prior activity and corporate governance attributes related to the concentration of decision rights in senior management and blockholders. The results of our analyses document that firms with both a high level of known political activity and CEO-chairperson of the board duality experienced negative abnormal returns in reaction to Citizens United. In contrast, firms with concentrated ownership experienced positive abnormal returns; however, as known political activity increased, investors discounted the benefits of concentrated ownership. These findings suggest that investors expect this expansion of firms' political investment opportunities to amplify principal-agent problems inherent in corporate political activity. Additionally, our findings provide evidence for those deliberating the mandatory disclosure of firms' investments in politics as a means of increasing managerial accountability to both shareholders and the public.

Journal of Accounting and Public Policy, Mar 1, 2019

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting t... more We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice ''strategic R&D classification". We find a one standard deviation increase in strategic R&D classification leads, on average, to a 1.7% (1.5%) reduction in GAAP (cash) effective tax rates, suggesting this practice provides significant tax savings. However, we also find strategic R&D classification is related to both the level and changes in uncertain tax benefit liabilities required to be recognized under FIN 48, suggesting this practice comes with financial reporting costs. Our study contributes to the literature by documenting some of the costs and benefits associated with a previously unexplored tax strategy, and highlights the limitations faced by tax authorities in monitoring firms' R&D tax credit.

Journal of Accounting and Public Policy, Jul 1, 2014

The mandatory reporting of firms' internal control effectiveness continues to be debated by equit... more The mandatory reporting of firms' internal control effectiveness continues to be debated by equity market participants, U.S. regulatory agencies and oversight committees. We investigate the implications of material weaknesses in internal control and SOX 404 required reporting of such for financial analysts because analysts are important intermediaries in the U.S. capital market and it is not known whether analysts' forecasts or coverage decisions are affected by firms' internal control problems or reporting, respectively. Results of our empirical tests indicate that analysts provide less accurate forecasts and there is greater forecast dispersion for firms with ineffective internal control. We also find that firms that disclose internal control problems have less analyst coverage and that analyst following declines after the material weakness in internal control is disclosed. The results are robust to controlling for potential self-selection bias and management earnings guidance. Our study documents the consequences of ineffective internal control for an important class of financial statement users and suggests the required reporting on the effectiveness of internal control is beneficial to understanding the properties of analysts' forecasts.

Social Science Research Network, Oct 4, 2006

The use of the Internet for financial reporting creates unique opportunities and challenges for t... more The use of the Internet for financial reporting creates unique opportunities and challenges for the auditing profession. This exploratory study identifies the key audit implications of Internet financial reporting through a comprehensive review of the academic and professional literature. Further, the study analyses the contents of all listed company Websites in New Zealand to assess the nature and extent of current audit-related Web practices. The relatively high degree of similarity between New Zealand's auditing standards and those of other jurisdictions (e.g. International Standards of Auditing and auditing standards in countries such as the UK, Australia and the USA) contributes towards the international generalisability of the content analysis. The literature review highlighted issues relating to the auditor's role and responsibilities, the audit report, and audit procedures. The results of the content analysis of auditor Web-related practices reveal several significant concerns for the auditing profession in relation to the presentation, context, and content of the audit report in a Web-based environment.

Social Science Research Network, Jun 28, 2000

ABSTRACT Presented in this manuscript is a series of three cases that require students to researc... more ABSTRACT Presented in this manuscript is a series of three cases that require students to research, analyze, and write about emerging financial accounting issues or extensions of existing technical pronouncements. Specifically, the cases focus on accounts receivable valuation, environmental liabilities reporting, and the accounting for purchased in-process research and development. Throughout the three-case sequence, the complexity of the technical accounting issues and the research, analytical, and written communication requirements are gradually increased in order to facilitate the development of students' technical knowledge and professional skills.

Social Science Research Network, Dec 10, 2018

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting t... more We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice ''strategic R&D classification". We find a one standard deviation increase in strategic R&D classification leads, on average, to a 1.7% (1.5%) reduction in GAAP (cash) effective tax rates, suggesting this practice provides significant tax savings. However, we also find strategic R&D classification is related to both the level and changes in uncertain tax benefit liabilities required to be recognized under FIN 48, suggesting this practice comes with financial reporting costs. Our study contributes to the literature by documenting some of the costs and benefits associated with a previously unexplored tax strategy, and highlights the limitations faced by tax authorities in monitoring firms' R&D tax credit.

Social Science Research Network, 2012

Meeting featured the panel discussion ''Results, Challenges, and Opportunities in CrossCountry Ac... more Meeting featured the panel discussion ''Results, Challenges, and Opportunities in CrossCountry Accounting Research.'' The panelists summarized major contributions from prior research in international settings, factors a researcher should consider when motivating and designing crosscountry studies, and topical areas that could potentially contribute to future international accounting research. This paper summarizes the panelists' prepared remarks, develops a framework for designing crosscountry research projects, and provides illustrations of the framework.

Social Science Research Network, 2014

This paper shows that measures of stock price synchronicity based on market model 2 s are predict... more This paper shows that measures of stock price synchronicity based on market model 2 s are predictably biased downwards as a result of stock illiquidity, and that previously-employed remedies to correct market model betas for measurement bias do not fix 2. Using a large international sample of firm-years, we empirically demonstrate strong negative and nonlinear relations between illiquidity and 2 across countries, across firms, and over time. Because variables of interest also frequently relate to illiquidity, we illustrate the consequences of not controlling for illiquidity in synchronicity research. More generally, we demonstrate the importance of using nonlinear control variable methods. Overall, we conclude that the illiquiditydriven measurement bias in 2 provides an explanation for why prior research finds low-2 firms to have weak information environments, and suggest future research carefully evaluate the sensitivity of its results to nonlinear controls for illiquidity.

Social Science Research Network, Oct 4, 2006

This study aims to show the effectiveness of a writing skill improvement initiative adopted in a ... more This study aims to show the effectiveness of a writing skill improvement initiative adopted in a Managerial Communication course. The sample included all students who enrolled in the Master of Business Administration program. Pre-post measurement format was adopted to assess the outcome of the course. The paper also discusses the outline of the course, delivery, assessment and feedback process. The results showed that the initiative was successful in improving the writing skills of the students. The study also offers suggestions to tackle the challenges faced by business schools, faculty, and students with regard to improving the writing skills of business graduates.

Social Science Research Network, 2013

This study examines the agency costs of corporate lobbying by exploring the relation between lobb... more This study examines the agency costs of corporate lobbying by exploring the relation between lobbying and excess CEO compensation. We show that CEOs of firms engaged in lobbying earn significantly greater compensation levels compared to CEOs in non-lobbying firms, after controlling for standard economic determinants of pay. The relation between lobbying and CEO pay increases with the intensity of firms’ lobbying. Although lobbying is positively associated future sales growth, we find no evidence suggesting it culminates in shareholder wealth creation. Additional tests reveal that for a subset of firms with available data, governance attributes mediate the relation between lobbying and firms’ decision to lobby. Lastly, a difference-in-difference, propensity-score matched analysis suggests significant increases in CEO pay levels around firms’ initial lobbying engagements. Overall, we conclude that corporate lobbying introduces agency costs borne by shareholders.

Social Science Research Network, 2005

ABSTRACT Prior research asserts that stock price synchronicity, defined as the R2 from asset pric... more ABSTRACT Prior research asserts that stock price synchronicity, defined as the R2 from asset pricing regressions, is a useful measure of the relative amount of firm-specific information reflected in stock prices. This paper investigates the validity of the information-based interpretation of stock price synchronicity in international markets. The results of our analyses provide little support for using stock price synchronicity as a measure of firm-specific information internationally. We develop an alternative measure of firm-specific information based on the percentage of zero return weeks, and repeat the analyses. The results suggest that the zero-return metric better captures differences in the amount of firm-specific information reflected in stock prices in international markets.

Social Science Research Network, 2008

Social Science Research Network, 2012

... We appreciate the comments of the Associate Editor Dan Segal, an anonymous reviewer, Xia Chen... more ... We appreciate the comments of the Associate Editor Dan Segal, an anonymous reviewer, Xia Chen, Jeremiah Green, Antonio Macias, David Veenman, Terry Warfield, and participants at the 2010 AAA annual meeting, and workshop participants at the University of Amsterdam ...

Accounting Horizons, 1999

In this paper, we examine firms' use of the Internet to enhance the relevance of their financ... more In this paper, we examine firms' use of the Internet to enhance the relevance of their financial reporting. We define a firm as practicing Internet Financial Reporting (IFR) when it provides in its web site either (1) a comprehensive set of financial statements (including footnotes and the auditors' report), (2) a link to its annual report elsewhere on the Internet or (3) a link to the U.S. Security and Exchange Commission's (SEC) Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. While 70 percent of the firms in our sample engage in IFR, we find substantial variation in the quality of firms' IFR practices. Specifically, the variations in quality pertain to the timeliness and therefore, the usefulness of firms' financial reporting on the Internet. We find that some firms provide more timely financial disclosures via the Internet (e.g., monthly sales) while other firms report outdated financial data (e.g., two-year old annual reports). We also obser...

Journal of Accounting and Public Policy, 2019

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting t... more We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice ''strategic R&D classification". We find a one standard deviation increase in strategic R&D classification leads, on average, to a 1.7% (1.5%) reduction in GAAP (cash) effective tax rates, suggesting this practice provides significant tax savings. However, we also find strategic R&D classification is related to both the level and changes in uncertain tax benefit liabilities required to be recognized under FIN 48, suggesting this practice comes with financial reporting costs. Our study contributes to the literature by documenting some of the costs and benefits associated with a previously unexplored tax strategy, and highlights the limitations faced by tax authorities in monitoring firms' R&D tax credit.

Journal of Accounting Research, 2001

We investigate (1) whether the variation in accounting standards across n ational boundaries rela... more We investigate (1) whether the variation in accounting standards across n ational boundaries relative to International Accounting Standards (IAS) has an impact on the ability of financial analysts to forecast non-US firms' earnings accurately, and (2) whether analyst forecast accuracy changes after firms adopt IAS. IAS are a set of financial reporting policies that typically require increased disclosure and restrict management's choices of measurement methods relative to the accounting standards of our sample firms' countries of domicile. We develop indexes of differences in countries' accounting disclosure and measurement policies relative to IAS, and document that greater differences in accounting standards relative to IAS are significantly and positively associated with the absolute value of analyst earnings forecast errors. Further, we show that analyst forecast accuracy improves after firms adopt IAS. More specifically, after controlling for changes in the market value of equity, changes in analyst following, and changes in the number of news reports, we find that the convergence in firms' accounting policies brought about by adopting IAS is positively associated with the reduction in analyst forecast errors.