tag:blogger.com,1999:blog-40766429282568141492024-03-22T03:20:11.562+07:00Research and Publicationskenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.comBlogger386125tag:blogger.com,1999:blog-4076642928256814149.post-20782582729034556902019-01-12T22:23:00.002+07:002019-01-12T22:23:31.058+07:00Avoiding China's Capital Market: Evidence from Hong Kong-Listed Red-Chips and P-Chips<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="background-color: white; font-variant-east-asian: normal; font-variant-numeric: normal;"><span style="font-family: Arial, Helvetica, sans-serif;">The purpose of this paper is to explore the puzzle of why so many Chinese firms eschew listings in China. Hundreds of firms founded in China have reorganized themselves as overseas corporations and listed on the Hong Kong Stock Exchange. These firms are called Red-chips if they are state-owned enterprises (SOEs) and P-chips if they are not state-owned (non-SOEs). To examine the rationale behind the listing decisions of P-chips and Red-chips, we compare the characteristics of Red-chips (P-chips) with SOEs (non-SOEs) listed on China stock exchanges. We find that SOEs are more likely to list in China. Moreover, while we do not observe any significant difference between the performance of Hong Kong-listed and mainland-listed SOEs, we find non-SOEs that are listed in Hong Kong are significantly more profitable than those listed in China. We then explore three possible explanations for why Chinese firms, especially non-SOEs, may prefer to be listed in Hong Kong: (1) to facilitate personal wealth transfers out of China, (2) to increase access to debt capital, and (3) to facilitate more efficient stock price formation. We find that all three of these explanations have statistical support.</span></span><br />
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<span style="background-color: white; font-variant-east-asian: normal; font-variant-numeric: normal;"><span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel" style="font-variant-east-asian: normal; font-variant-numeric: normal;">Keywords: </span>IPO<span style="font-variant-east-asian: normal; font-variant-numeric: normal;">, </span>overseas listing<span style="font-variant-east-asian: normal; font-variant-numeric: normal;">, </span>China</span></span><br />
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</span><span class="NLM_string-name" style="font-variant-east-asian: normal; font-variant-numeric: normal;">Weishi Jia</span><span style="background-color: white; font-variant-east-asian: normal; font-variant-numeric: normal;">, </span><span class="NLM_string-name" style="font-variant-east-asian: normal; font-variant-numeric: normal;">Grace Pownall</span><span style="background-color: white; font-variant-east-asian: normal; font-variant-numeric: normal;">, and </span><span class="NLM_string-name" style="font-variant-east-asian: normal; font-variant-numeric: normal;">Jingran Zhao</span><span style="background-color: white; font-variant-east-asian: normal; font-variant-numeric: normal;">
(</span><span style="font-variant-east-asian: normal; font-variant-numeric: normal;">2018</span><span style="background-color: white; font-variant-east-asian: normal; font-variant-numeric: normal;">) Avoiding China's Capital Market: Evidence from Hong Kong-Listed Red-Chips and P-Chips. Journal of International Accounting Research: Summer, Vol. 17, No. 2, pp. 13-36. </span></span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-50464846051731398532018-11-04T20:18:00.000+07:002018-11-04T20:18:24.363+07:00Innovation, Reallocation, and Growth<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census microdata on firm-level output, R&D, and patenting. The model provides a good fit to the dynamics of firm entry and exit, output, and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4 percent improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Acemoglu, Daron, Ufuk Akcigit, Harun Alp, Nicholas Bloom and William Kerr. <span class="year">2018.</span> <span class="title">"Innovation, Reallocation, and Growth."</span> <span class="journal">American Economic Review</span>, <span class="vol"> 108(11):3450-91<span class="pages">.</span></span> </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-369926787586387012018-11-04T20:15:00.000+07:002018-11-04T20:15:41.843+07:00Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">This paper uses a natural experiment to estimate the causal effect of temporary trade protection on long-term economic development. I find that regions in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-1815) increased capacity in mechanized cotton spinning to a larger extent than regions which remained more exposed to trade. In the long run, regions with exogenously higher spinning capacity had higher activity in mechanized cotton spinning. They also had higher value added per capita in industry up to the second half of the nineteenth century, but not later. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Juhász, Réka. <span class="year">2018.</span> <span class="title">"Temporary Protection and Technology Adoption: Evidence from the Napoleonic Blockade."</span> <span class="journal">American Economic Review</span>, <span class="vol"> 108(11):3339-76<span class="pages">.</span></span> </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-30211553056138359542018-10-28T09:44:00.000+07:002018-10-28T09:44:55.984+07:00The Expected Rate of Credit Losses on Banks' Loan Portfolios<br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Estimating expected credit losses on banks' portfolios is difficult. The issue has become of increasing interest to academics and regulators with the FASB and IASB issuing new regulations for loan impairment. We develop a measure of the one-year-ahead expected rate of credit losses (</span><i style="font-family: Arial, Helvetica, sans-serif;">ExpectedRCL</i><span style="font-family: Arial, Helvetica, sans-serif;">) that combines various measures of credit risk disclosed by banks. It uses cross-sectional analyses to obtain coefficients for estimating each period's measure of expected credit losses. </span><i style="font-family: Arial, Helvetica, sans-serif;">ExpectedRCL</i><span style="font-family: Arial, Helvetica, sans-serif;"> substantially outperforms net charge-offs in predicting one-year-ahead realized credit losses, and reflects nearly all the credit loss-related information in the charge-offs. </span><i style="font-family: Arial, Helvetica, sans-serif;">ExpectedRCL</i><span style="font-family: Arial, Helvetica, sans-serif;"> also contains incremental information about one-year-ahead realized credit losses relative to the allowance and provision for loan losses and the fair value of loans. It is a better predictor of the provision for loan losses than analyst provision forecasts, and is incrementally useful beyond other credit risk metrics in predicting bank failure up to one year ahead.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>banks, credit loss, loan loss provisions, bank failure, analyst forecast, standard setting</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="NLM_string-name">Trevor S. Harris</span>, <span class="NLM_string-name">Urooj Khan</span>, and <span class="NLM_string-name">Doron Nissim</span> (<i>2018</i>) The Expected Rate of Credit Losses on Banks' Loan Portfolios. The Accounting Review: September 2018, Vol. 93, No. 5, pp. 245-271. </span></div>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-35960204250333848082017-10-08T19:08:00.000+07:002017-10-08T19:08:45.981+07:00The Financial Crisis and Corporate Credit Ratings<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Credit ratings on many financial instruments failed to accurately portray default risk before the global financial crisis. I find no decline in the performance of <i>corporate</i> credit ratings during or after the crisis, indicating that the failures of ratings on financial instruments were due to conditions unique to the rating agencies' financial instruments divisions. Rather, the preponderance of tests indicate that corporate credit rating performance improves after the crisis, consistent with the rating agencies positively responding to public criticism and regulatory pressures. At the same time, I find evidence of sophisticated market participants decreasing their reliance on corporate credit ratings after the crisis. Consistent with theoretical models of reputation cyclicality, a likely explanation is that the rating agencies suffer spillover reputation damage from their failed ratings on financial instruments. My study informs regulators, practitioners, and academics about the performance of corporate credit ratings during and after the crisis, and provides novel empirical evidence consistent with reputation concerns affecting credit rating usage decisions.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>credit ratings, financial crisis, rating reputation, rating performance, debt contracting</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"> Ed deHaan (<i>2017</i>) The Financial Crisis and Corporate Credit Ratings. The Accounting Review: July 2017, Vol. 92, No. 4, pp. 161-189. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-52330558307446005792017-10-08T19:05:00.000+07:002017-10-08T19:05:01.264+07:00Auditing Challenging Fair Value Measurements: Evidence from the Field<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Concern about effective auditing of fair value measurements (FVMs) has risen in recent decades. Building on prior interview-based and experimental research, we provide an engagement-level analysis of challenging FVMs, using quantitative and qualitative data on audit phases from risk assessment to booking adjustments. Challenging FVMs have high estimation uncertainty, high subjectivity, significant/complex assumptions, and multiple valuation techniques. Estimation uncertainty is associated with higher inherent risk assessments, which are, in turn, predictive of client problems identified during the engagement. The use of a valuation specialist by auditors, associated with higher inherent risk and client specialist use, is a key decision: procedures performed by specialists have the highest yield in identifying problems. Auditor-client discussion of an adjustment increases with problem identification and auditors' expressions of residual concern about uncertainty post-testing. However, booked audit adjustments are infrequent; the only factors explaining income-decreasing adjustments are better evidential support and breadth of problems identified.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>auditing, fair value measurement, estimation uncertainty, materiality, valuation specialists</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"> Nathan H. Cannon and Jean C. Bedard (<i>2017</i>) Auditing Challenging Fair Value Measurements: Evidence from the Field. The Accounting Review: July 2017, Vol. 92, No. 4, pp. 81-114. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-35598518765056949702017-10-08T19:02:00.000+07:002017-10-08T19:02:25.811+07:00Do CEO Succession and Succession Planning Affect Stakeholders' Perceptions of Financial Reporting Risk? Evidence from Audit Fees<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">In this paper, we examine how CEO succession and succession planning affect perceptions of financial reporting risk among stakeholders who are responsible for and oversee firms' financial reporting (e.g., auditors, management, and audit committees). Management succession introduces uncertainty about firms' future operations, financial policies, and potential motivation for earnings management, which we predict elevates the perceived risk of financial reporting improprieties. Consistent with this prediction, we find that audit fees are higher for firms with new CEOs. Importantly, however, we note that careful CEO succession planning (i.e., promoting an “heir apparent”) attenuates perceptions of higher risk, as evidenced by a lack of an audit pricing adjustment. These results are robust to several alternative specifications and analyses designed to mitigate the concern that the association between audit fees and CEO succession and succession planning is driven by factors leading to the CEO change. We also show that audit fee increases dissipate over time as the new, non-heir CEO stays longer at the firm, reinforcing the inference that audit fees increase in response to the uncertainty surrounding a new CEO. Additionally, we do not find evidence of a deterioration in audit quality with new CEOs, independent of the succession plan.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>CEO succession, succession planning, financial reporting risk, audit fees, heir apparent, insider CEO</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"> Kenneth L. Bills, Ling Lei Lisic, and Timothy A. Seidel (<i>2017</i>) Do CEO Succession and Succession Planning Affect Stakeholders' Perceptions of Financial Reporting Risk? Evidence from Audit Fees. The Accounting Review: July 2017, Vol. 92, No. 4, pp. 27-52. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-72581775685196391172017-06-24T19:18:00.000+07:002017-06-24T19:23:29.568+07:00Comparability and Cost of Equity Capital<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>SYNOPSIS</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">We investigate how the comparability of a company's financial statements is related to its cost of equity capital. The Financial Accounting Standards Board's (FASB 2010) Statement of Financial Accounting Concept No. 8 proposes that comparability is a key tenet of accounting because it allows users of financial statements to benchmark a firm against similar firms when distinguishing between alternative investment opportunities. We provide evidence that greater financial statement comparability is associated with lower cost of equity capital, and show that comparability's effect on cost of equity remains after controlling for within-firm accounting quality. Additionally, we find that investors derive greater benefits from financial statement comparability in firms whose information environments are less transparent (high information asymmetry) and whose equity shares trade in markets that are less competitive (imperfect markets). Our findings contribute to accounting research by providing evidence justifying comparability as a separate element of the FASB's conceptual framework.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>financial statement comparability, cost of equity capital, information risk, information asymmetry, market imperfection.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"> Michael J Imhof, Scott E. Seavey, and David B. Smith (<i>2017</i>) Comparability and Cost of Equity Capital. Accounting Horizons: June 2017, Vol. 31, No. 2, pp. 125-138. </span></div>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-33678550981534814442017-06-24T19:16:00.000+07:002017-06-24T19:16:05.580+07:00A Theory of Crowdfunding: A Mechanism Design Approach with Demand Uncertainty and Moral Hazard<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Crowdfunding provides innovation in enabling entrepreneurs to contract with consumers before investment. Under aggregate demand uncertainty, this improves screening for valuable projects. Entrepreneurial moral hazard and private cost information threatens this benefit. Crowdfunding's after-markets enable consumers to actively implement deferred payments and thereby manage moral hazard. Popular crowdfunding platforms offer schemes that allow consumers to do so through conditional pledging behavior. Efficiency is sustainable only if expected returns exceed an agency cost associated with the entrepreneurial incentive problems. By reducing demand uncertainty, crowdfunding promotes welfare and complements traditional entrepreneurial financing, which focuses on controlling moral hazard. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Strausz, Roland. <span class="year">2017.</span> <span class="title">"A Theory of Crowdfunding: A Mechanism Design Approach with Demand Uncertainty and Moral Hazard."</span> <span class="journal">American Economic Review</span>, <span class="vol"> 107(6):1430-76<span class="pages">.</span></span> </span><br />
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-20725738787867171392017-05-21T21:15:00.000+07:002017-05-21T21:15:29.837+07:00Busy Auditors, Partner-Client Tenure, and Audit Quality: Evidence from an Emerging Market<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Using a sample of public firms listed in the Chinese market for the years 2000–2009, we find that audit partners with more public clients are associated with lower audit quality, consistent with the “busyness” effect that auditing multiple clients dissipates audit partner effort and, thus, reduces audit quality. However, the negative association is more pronounced for auditors with short audit partner-client tenure, supporting the idea that the lack of client-specific knowledge exacerbates the busyness effect. Collectively, these findings contribute to a better understanding of audit partner behavior in an emerging market.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>multiple audit clients, audit partner signature, client specific knowledge, and audit quality</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"> Ferdinand A. Gul, Shuai (Mark) Ma, and Karen Lai (<i>2017</i>) Busy Auditors, Partner-Client Tenure, and Audit Quality: Evidence from an Emerging Market. Journal of International Accounting Research: Spring, Vol. 16, No. 1, pp. 83-105. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-29045390128048157642017-05-21T21:11:00.000+07:002017-05-21T21:11:25.888+07:00Is Modern Technology Responsible for Jobless Recoveries?<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Since the early 1990s, recoveries from recessions in the US have been plagued by weak employment growth. We investigate whether a similar problem afflicts other developed economies, and whether technology is a culprit. We study recoveries from 71 recessions in 28 industries and 17 countries from 1970-2011. We find that though GDP recovered more slowly after recent recessions, employment did not. Industries that used more routine tasks, and those more exposed to robotization, did not recently experience slower employment recoveries. Finally, middle-skill employment did not recover more slowly after recent recessions, and this pattern was no different in routine-intensive industries.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Graetz, Georg and Guy Michaels. <span class="year">2017.</span> <span class="title">"Is Modern Technology Responsible for Jobless Recoveries?."</span> <span class="journal">American Economic Review</span>, <span class="vol"> 107(5):168-73<span class="pages">.</span></span> </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-25446253360887855472017-05-21T21:03:00.000+07:002017-05-21T21:03:40.773+07:00Forecasting Taxes: New Evidence from Analysts<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">We provide new evidence about how analysts incorporate and improve on management ETR forecasts. Quarterly ETR reporting under the integral method provides mandatory point-estimate forecasts by management, but firms must record certain “discrete” tax items fully in the quarter in which they occur, polluting these forecasts. We investigate management ETR accuracy, analysts' decisions to mimic management's estimate, analysts' accuracy relative to each other or to management, and dispersion. Our comprehensive analysis reveals that analysts deviate from management more and are more accurate relative to management as complexity increases, with real effects on EPS accuracy and dispersion. In contrast to prior research that analysts ignore or are confused by taxes, we provide evidence that analysts pay attention to taxes and improve on management estimates. Based on our evidence that management's quarterly ETRs have less predictive value in the presence of discrete items, we suggest standard-setters reexamine the discrete item exception to require more disclosure.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>analysts, discrete items, forecasts, ETRs, integral method, taxes</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Article citation:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Brian Bratten, Cristi A. Gleason, Stephannie A. Larocque, and Lillian F. Mills (<i>2017</i>) Forecasting Taxes: New Evidence from Analysts. The Accounting Review: May 2017, Vol. 92, No. 3, pp. 1-29. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-54609497437075380982017-05-21T20:56:00.000+07:002017-05-21T20:56:11.479+07:00Banks as Secret Keepers<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Banks produce short-term debt for transactions and storing value. The value of this debt must not vary over time so agents can easily trade it at par like money. To produce money-like safe liquidity, banks keep detailed information about their loans secret, reducing liquidity if needed to prevent agents from producing costly private information about the banks' loans. Capital markets involve information revelation, so they produce risky liquidity. The trade-off between less safe liquidity and more risky liquidity determines which firms choose to fund projects through banks and which ones through capital markets.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Article citation:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Dang, Tri Vi, Gary Gorton, Bengt Holmström and Guillermo Ordoñez. <span class="year">2017.</span> <span class="title">"Banks as Secret Keepers."</span> <span class="journal">American Economic Review</span>, <span class="vol"> 107(4):1005-29<span class="pages">.</span></span> </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-21618058836460314562017-05-21T20:53:00.001+07:002017-05-21T20:53:36.571+07:00Escaping the Great Recession<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation in the US economy at the zero lower bound. We first estimate a Markov-switching VAR to highlight that a zero-lower-bound regime captures most of the comovements during the Great Recession: a deep recession, no deflation, and large fiscal imbalances. We then show that a microfounded model that features policy uncertainty accounts for these stylized facts. Finally, we highlight that policy uncertainty arises at the zero lower bound because of a trade-off between mitigating the recession and preserving long-run macroeconomic stability.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Articel citation:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Bianchi, Francesco and Leonardo Melosi. <span class="year">2017.</span> <span class="title">"Escaping the Great Recession."</span> <span class="journal">American Economic Review</span>, </span><span class="vol"><span style="font-family: Arial, Helvetica, sans-serif;"> 107(4):1030-58<span class="pages">.</span></span> </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-85413738375699452702017-03-19T00:10:00.000+07:002017-03-19T00:10:18.428+07:00A Case Study of Fraud Concerns at a Homeowners' Association<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<div class="abstractSection">
<span style="font-family: Arial, Helvetica, sans-serif;">This case is based on a series of actual events in a local homeowners' association (HOA). Instructors teaching fraud detection in their courses often use historical cases in which the “answer” to whether fraud has been committed is known. This case is unique because it is based on real incidents that occurred in an HOA. The case starts with the inception of the HOA up to the present, at which time the situation is still evolving. Students are required to recognize the conditions that increase the potential for fraudulent activity in an organization. Then they must analyze the activities in this particular association to identify the “red flags” that indicate that fraudulent activity could occur. Finally, students must develop recommendations to mitigate the identified risk areas. After completing this case, students will be more aware of potential and actual incidents of fraudulent activity and be able to address how these incidents can be prevented. This knowledge will benefit them in any area of accounting they choose to pursue. This case can be used in fraud examination, auditing, accounting information systems, and financial accounting classes.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>fraud, fraud detection, fraud triangle, “red flags”, risk assessment, case studies, COSO framework</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Article Citation:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"> Constance M. Lehmann and Cynthia D. Heagy (<i>2017</i>) A Case Study of Fraud Concerns at a Homeowners' Association. Issues in Accounting Education: February 2017, Vol. 32, No. 1, pp. 67-77. </span></div>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-55858749396894631142017-03-19T00:07:00.000+07:002017-03-19T00:07:21.339+07:00Audit Market Structure and Audit Pricing<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>SYNOPSIS</b></span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
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<span style="font-family: Arial, Helvetica, sans-serif;">Extant literature finds mixed evidence on the association between audit market concentration and audit fees. We re-examine this issue using a large sample of U.S. audit clients covering 90 metropolitan statistical areas (MSAs) spanning 2000–2013. We find that audit market concentration is associated with significantly higher audit fees, consistent with the concerns of regulators and managers. We also find that increases in audit market concentration are associated with fewer initial engagement fee discounts (i.e., reduced lowballing), particularly for non-Big 4 clients. We reconcile our findings with those of prior research and find that our divergent findings are attributable to controls for MSA fixed effects. In supplemental analyses, we find that audit market concentration is associated with higher audit quality. We also find that concentration is associated with higher audit quality for first-year engagements, but only if the auditor does not lowball on the engagement. Our results are relevant to the ongoing debate regarding the consequences of increased concentration within the U.S. audit market (GAO 2003, 2008).</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>audit pricing, auditor switches, audit market concentration, lowballing</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Article Citation:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"> John Daniel Eshleman and Bradley P. Lawson (<i>2017</i>) Audit Market Structure and Audit Pricing. Accounting Horizons: March 2017, Vol. 31, No. 1, pp. 57-81. </span></div>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-83060888158663075612017-03-19T00:03:00.000+07:002017-03-19T00:03:24.212+07:00Synergy between Accounting Disclosures and Forward-Looking Information in Stock Prices<div class="abstractSection">
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">It is well recognized that stock prices provide relevant feedback that can guide future firm decisions. This paper develops a model to examine how accounting disclosures affect the decision-usefulness of such stock market reactions. We demonstrate that information in accounting reports can prove useful because it helps observers better interpret and isolate the decision-relevant information embedded in the ensuing stock price reaction. This leads to natural synergies between accounting reports and stock prices in directing firm strategies—the more forward-looking information that can potentially be gleaned from stock prices, the more the firm will invest in improving precision of accounting disclosures even when such disclosures pertain to unrelated current activities.</span></div>
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<span class="keywordsLabel"><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>disclosure, reporting quality, stock market feedback</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Article Citation:</span></div>
<div class="articleCitation">
<span style="font-family: Arial, Helvetica, sans-serif;"> Anil Arya, Brian Mittendorf, and Ram N. V. Ramanan (<i>2017</i>) Synergy between Accounting Disclosures and Forward-Looking Information in Stock Prices. The Accounting Review: March 2017, Vol. 92, No. 2, pp. 1-17. </span></div>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-43578122673555937062017-03-18T23:59:00.001+07:002017-03-18T23:59:37.728+07:00Predicting Restatements in Macroeconomic Indicators using Accounting Information<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Earnings growth dispersion contains information about trends in labor reallocation, unemployment change, and, ultimately, aggregate output. We find that initial macroeconomic estimates released by government statistical agencies do not fully incorporate this information. As a consequence, earnings growth dispersion predicts future restatements in nominal and real GDP growth (and unemployment change) both in the in-sample and out-of-sample tests. Further, when we adjust GDP estimates using the out-of-sample restatement predictions, we find statistically and economically significant effects for the monetary policy prescriptions (Taylor rule) and banking regulation (Basel III).</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>earnings growth dispersion, labor reallocation, GDP restatements, unemployment restatements</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Article Citation:</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"> Suresh Nallareddy and Maria Ogneva (<i>2017</i>) Predicting Restatements in Macroeconomic Indicators using Accounting Information. The Accounting Review: March 2017, Vol. 92, No. 2, pp. 151-182. </span></div>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-39037167453988852612017-01-21T21:55:00.000+07:002017-01-21T21:55:39.512+07:00Industry Characteristics, Risk Premiums, and Debt Pricing<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<span style="font-family: Arial, Helvetica, sans-serif;">Despite theoretical and anecdotal evidence highlighting the importance of industry-level analyses to lenders, the empirical literature on debt pricing has focused almost exclusively on firm-level forces that affect expected loss. This paper provides empirical evidence that industry-level characteristics relate to debt pricing through risk premiums. We address the empirical challenges that arise when testing these theories by using a proprietary dataset of time-varying and forward-looking measures of industry characteristics. These characteristics include growth, sensitivity to external shocks, and industry structure, all measured at the six-digit NAICS level. Our results show that lenders demand higher spreads to bear industry-level risk. The relation exists within subsamples with constant credit ratings, and strengthens when lenders' loan portfolios are less diversified and during periods when diversification is difficult. Therefore, our results suggest that industry characteristics relate to debt pricing by informing lenders not only about expected loss, but also about risk premiums.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>debt, probability of default, loss given default, industry characteristics</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">Article Citation:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"> Dan Amiram, Alon Kalay, and Gil Sadka (<i>2017</i>) Industry Characteristics, Risk Premiums, and Debt Pricing. The Accounting Review: January 2017, Vol. 92, No. 1, pp. 1-27. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-47698348229874316192016-11-18T11:20:00.000+07:002016-11-18T11:20:01.490+07:00Accounting for Biological Assets and the Cost of Debt<div class="separator" style="clear: both; text-align: center;">
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<span style="font-family: Arial, Helvetica, sans-serif;"><b>ABSTRACT</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Firms 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.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;"><span class="keywordsLabel">Keywords: </span>biological assets, fair value, historical cost, IFRS, cost of debt</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Article Citation:</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"> Abbie Daly and Hollis A. Skaife (<i>2016</i>) Accounting for Biological Assets and the Cost of Debt. Journal of International Accounting Research: Summer, Vol. 15, No. 2, pp. 31-47.</span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-1318184034068658212016-10-02T11:49:00.000+07:002016-10-02T11:49:12.642+07:00Joint Impact of Materiality Guidance and Justification Requirement on Auditors' Planning Materiality<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;"><strong>ABSTRACT</strong></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br />In this study, we examine a setting in which overreliance on structured materiality guidance leads to less appropriate materiality assessments by auditors, and investigate whether a justification requirement in the absence of accountability mitigates this effect. Results from our experiment show that audit managers make less conservative and less appropriate planning materiality assessments in the presence of structured materiality guidance, but that this detrimental effect is mitigated by the need to justify their judgments. Our study on the joint effect of these two features extends current literature on materiality judgments and has implications for audit practice.<br /><br />Keywords: </span><span style="font-family: Arial, Helvetica, sans-serif;">planning materiality</span><span style="font-family: Arial, Helvetica, sans-serif;">, </span><span style="font-family: Arial, Helvetica, sans-serif;">structured guidance</span><span style="font-family: Arial, Helvetica, sans-serif;">, </span><span style="font-family: Arial, Helvetica, sans-serif;">justification</span><br /><br /><span style="font-family: Arial, Helvetica, sans-serif;"> Article Citation:<br /> Juthathip Audsabumrungrat, Sompong Pornupatham, and Hun-Tong Tan (2016) Joint Impact of Materiality Guidance and Justification Requirement on Auditors' Planning Materiality. Behavioral Research in Accounting: Fall, Vol. 28, No. 2, pp. 17-27. </span></div>
kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-59101786805973950852016-10-02T11:34:00.000+07:002016-10-02T11:34:11.608+07:00Bailouts, Time Inconsistency, and Optimal Regulation: A Macroeconomic View<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT<br /><br />A common view is that bailouts of firms by governments are needed to cure inefficiencies in private markets. We propose an alternative view: even when private markets are efficient, costly bankruptcies will occur and benevolent governments without commitment will bail out firms to avoid bankruptcy costs. Bailouts then introduce inefficiencies where none had existed. Although granting the government orderly resolution powers which allow it to rewrite private contracts improves on bailout outcomes, regulating leverage and taxing size is needed to achieve the relevant constrained efficient outcome, the sustainably efficient outcome. This outcome respects governments' incentives to intervene when they lack commitment.<br /><br /> <br />Citation :<br />Chari, V. V. and Patrick J. Kehoe. 2016. "Bailouts, Time Inconsistency, and Optimal Regulation: A Macroeconomic View." American Economic Review, 106(9): 2458-93. </span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-70069312355276861162016-08-06T10:45:00.002+07:002016-08-06T10:45:54.569+07:00Cost of Capital Free-Riders<table class="sectionHeading"><tbody>
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<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><div style="text-align: center;">
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<span style="font-weight: normal;">We document the interrelationship of disclosure policy decisions among firms by providing evidence that the cessation of quarterly management forecast guidance by 656 firms (“stoppers”) during 2004–2009 is associated with a pursuant increase in quarterly forecasts by previously non-forecasting firms in the same industries (“free-riders”). Increased forecasting by free-riders is positively associated with the information loss in the industry (proxied by the number of stoppers in the industry, the strength of previously existing information transfer relations between stoppers and free-riders, and whether stoppers and free-riders are peer firms) and the importance of the information loss to the free-riders (proxied by analyst following and the existence of new share issues). Following the cessation event, free-riders' cost of capital decreases as a function of the extent to which free-riders immediately initiate quarterly forecasting.</span><br /><br /><span style="font-weight: normal;">Keywords: management forecasts, disclosure policy, cost of capital, information transfer, free-rider</span><br /><br /><span style="font-weight: normal;">Article Citation:</span><br /><span style="font-weight: normal;">Stephen P. Baginski and Lisa A. Hinson (2016) Cost of Capital Free-Riders. The Accounting Review: September 2016, Vol. 91, No. 5, pp. 1291-1313.</span></span></th></tr>
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kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-26316345673467254002016-08-06T10:41:00.000+07:002016-08-06T10:41:22.722+07:00CEO Financial Background and Audit Pricing<div style="text-align: center;">
<b style="font-family: Arial, Helvetica, sans-serif;">SYNOPSIS</b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Accounting scholars theorize that audit price is a function of a client's audit and business risk. Existing research finds that the functional expertise of Chief Executive Officers (CEOs) in finance improves financial reporting quality (Matsunaga, Wang, and Yeung 2013), increases profitability, and reduces the likelihood of firm failure (Custodio and Metzger 2014). These factors suggest that auditors' engagement risk decreases when incumbent CEOs possess financial expertise, raising the likelihood that auditors will charge these firms lower fees. In this study, we examine whether CEOs' work experience in accounting- and finance-related jobs affects audit fees. Using a panel of U.S. firms between 2004 and 2013, we find that firms that have a financial expert CEO pay lower audit fees. Our results are robust to various specifications, including firm-fixed effect model and specifications that control for other CEO- and Chief Financial Officer (CFO)-specific and audit committee characteristics. Our findings thus add to the literature on the advantages and disadvantages of a functional background of top managers and how this background can create value for a firm through savings in audit fees.<br /><br /><br />Keywords: CEO financial expertise, audit fees<br />Article Citation:<br /><br />Rachana Kalelkar and Sarfraz Khan (2016) CEO Financial Background and Audit Pricing. Accounting Horizons: September 2016, Vol. 30, No. 3, pp. 325-339.</span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0tag:blogger.com,1999:blog-4076642928256814149.post-88269465576313780812016-08-06T10:37:00.002+07:002016-08-06T10:37:30.131+07:00Credit Derivatives and Analyst Behavior<div style="text-align: center;">
<span style="font-family: Arial, Helvetica, sans-serif;">ABSTRACT</span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><div style="text-align: center;">
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This paper presents a comprehensive analysis of the role of credit default swaps (CDS) in information production surrounding earnings announcements. First, we demonstrate that the strength of CDS price discovery prior to earnings announcements is related to the presence of private information and the illiquidity of the underlying corporate bonds, consistent with the CDS market being a preferred venue for informed trading. Next, we ask how the information revealed through CDS trading influences the output of equity and credit rating analysts. We find that post-CDS trading, the dispersion and error of earnings per share forecasts are generally reduced, and downgrades by both types of analysts become more frequent and more timely before large negative earnings surprises, suggesting that the CDS market conveys information valuable to financial analysts.<br /><br />Keywords: credit default swap, informed trading, earnings announcement, analyst forecast, buy/sell recommendation, rating downgrade<br /><br />Article Citation:<br />George Eli Batta, Jiaping Qiu, and Fan Yu (2016) Credit Derivatives and Analyst Behavior. The Accounting Review: September 2016, Vol. 91, No. 5, pp. 1315-1343.</span>kenhttp://www.blogger.com/profile/05727041703214168552noreply@blogger.com0