Accounting

I examine the relationship between environmental regulation stringency and the extent of voluntary environmental disclosures by firms. The study draws on theoretical frameworks including legitimacy theory, stakeholder theory, and information asymmetry, to explore how different mechanisms influence firm behavior in the context of environmental transparency.
My empirical analysis shows a positive relationship between the stringency of environmental regulations and the level of voluntary environmental disclosures. This relationship is weakened by factors such as board independence and institutional ownership. I further confirm the positive effect of national level of environmental regulation stringency on the environmental voluntary disclosure. However, I fail to find supporting evidence on the positive moderating role of national level of environmental regulation stringency and corporate governance. In contrast, I find evidence that external institutional ownership and independent directors, who represent interests of external blockholders, have a preventive and monitoring effect on the main relationship to reduce the threat of misleading voluntary information and proprietary cost.

This study examines whether emerging growth company (EGC) investors respond to the annual required internal control disclosures over financial reporting (ICFR). I develop three hypotheses to test across the EGC lifecycle. Specifically, I investigate whether the first year ICFR disclosure, the remediation of a previously reported material weakness ICFR disclosure and the EGC exit are associated with the firm’s cumulative abnormal return over a three-day event window. Prior literature has observed that ICFR disclosures by management and the ICFR audit opinion can be shown to be informative to investors. However, I am not aware of any study investigating whether the EGC investors respond to this type of information. I find that the reported ICFR disclosures are not associated with cumulative abnormal returns during their initial ICFR report disclosure or upon exit as informative but do respond to the reporting of material weakness remediation.

There has been a strong push for workplace diversity in the United States (U.S.) in recent years. Work teams consisting of employees with diverse backgrounds can augment firms’ competitive advantage. This view is consistent with the cognitive diversity hypothesis, which depicts multiple perspectives generated by cognitive differences among organizational members resulting in creative problem-solving. In this study, I investigate the role of cognitive diversity, measured by differences in a set of seven cultural traits between the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), in shaping firm financial reporting quality. Relying on the upper-echelon theory that executive characteristics affect firm outcomes and the cognitive diversity hypothesis that diversity reduces groupthink, sparks innovation, increases employee retention rate, and builds a positive firm culture, I expect to find a positive relationship between cognitive diversity and financial reporting quality.
In determining firm performance and outcomes, differences in executive demographic characteristics such as age, tenure, gender, and race may have an impact on how executive cognitive perceptions, values, and information sets, shape their decisions and outcomes. Therefore, I then examine the effect of executive demographic diversity on the link between executive cognitive diversity and financial reporting quality. Diversity has received a lot of attention over the last decades, but it is unclear ex ante how different types of diversity interact with each other in shaping firm outcomes. Therefore, I examine but do not hypothesize the direction of the effect of executive demographic diversity on the link between executive cognitive diversity and financial reporting quality.

Since 2005 corporate managers must discuss their firm’s significant risk factors that may materially and unfavorably affect corporate outcomes in the Item 1A Risk Factor Disclosure (RFD) section of their 10-K filings. However, there is limited research on whether firms change the sentiment of their mandatory disclosures after a significant economic event. I use bankruptcy announcements as a unique setting in this study to assess non-announcing firms’ responses to these events as a bankruptcy announcement generates significant concern to non-announcing industry peer firms. I explore whether industry peers change four measures of sentiment (i.e., length, negative tone, specificity, forward-looking statements) of Item 1A RFDs after a rival firm’s bankruptcy filing. Using textual analysis methodology, I find that industry peer firms have shorter, less negative, and less forward-looking RFDs after another firm’s bankruptcy announcement. These results imply that industry peers are likely to adjust their tone of mandatory filings (i.e., Item 1A RFDs) in response to a rival firm’s bankruptcy announcement. I further provide evidence that firms do not use separate subsections to disclose their firm- and industry-specific risks within their Item 1A RFDs. Lastly, the lengths of financial, litigation, other-idiosyncratic, and other-systematic topic disclosures significantly decrease for non-announcing industry peers while the length of tax relevant risk topic does not significantly change after a bankruptcy filing. This study adds to mandatory research by identifying the spillover effect of a bankruptcy announcement on Item 1A RFDs. This research also contributes to accounting literature by providing evidence that non-announcing industry peers significantly adjust the sentiment of their risk factor information. Market participants including investors, shareholders, and financial analysts can improve investment decision accuracy by analyzing the industry peers’ risk factor information.

I examine the impact of real earnings management (REM) and corporate governance on cash holdings. Extant research documents an increase in both cash holdings and REM activity in recent years and shows that agency conflicts influence both the levels and valuations of cash holdings. Motivated by agency problems of REM and Jensen's (1986) arguments concerning the free cash flow problem, I investigate whether opportunistic asset sales and reductions in discretionary expenditures are associated with levels and valuations of cash holdings. Prior research also shows that strong corporate governance mitigates opportunistic earnings management behavior and enhances the valuation of cash holdings. Using empirical models from prior research, I document that REM is positively associated with cash holdings, investors discount cash holdings of high REM firms, and, among high REM firms, valuations of cash holdings of weak corporate governance firms are discounted significantly lower relative to those of strong corporate governance firms. My study unites two lines of research by incorporating agency problems concerning REM with levels and valuations of cash holdings.

Significant changes in climate and their impacts are now visible in various places around the globe and are expected to become more evident in the coming decades. For each increase in temperature, there are environmental and societal consequences. It has important implications for existing water resources systems as well as for future water resources planning and management. Water accounting (identifying, quantifying and reporting information of water flow in a system) is the first step towards formulating productive and sustainable water management strategies in a region. Thus, water balance models could be an empowering tool for water resource managers to prepare for and mitigate the effects of climate change on their local hydrologic resources. This thesis offers an insight into how such a tool can be used to assess and predict future stream flow trends in an effort to mitigate or manage any potential effects.

As a consequence of financial analysts' joint role as information intermediaries and firm monitors, I investigate analysts' responses to opportunistic corporate earnings management as firm mispricing increases. While firms' management have capital markets and executive equity incentives to manage earnings, financial analysts have trading volume, investment banking, and management information incentives which result in analysts' optimism bias. However, prior research also finds that analysts have reputational incentives, which motivate them to provide accurate and profitable outlooks. Using a generalized linear model (GLM), I estimate analysts' stock recommendation (price targets) responses for earnings management firms. I use the residual income model to compute fundamental value and I add proxies for earnings management to my analyst-responses models.... The main implications of my findings are that analysts use corporate earnings management and firm fundamental value in their stock recommendations (price targets) responses. In addition, my results provide evidence that, after controlling for earnings quality, analysts' stock recommendations (price targets) are consistent with strategies based on residual income models. These findings will be of interest to shareholders, regulators, and researchers as well as to finance and accounting practitioners.