This paper investigates the relation between artificial intelligence (AI) investment and firms' cost structures. Using a firm-level AI investment measure that captures AI-related skills in employee resumes, we find that firms with greater AI investment exhibit more elastic cost structures, consistent with AI improving prediction, coordination, and resource redeployment and thereby increasing firms' ability to adjust resources flexibly in response to demand uncertainty. This relation is stronger for firms facing greater supply chain uncertainty, covering a broader set of product markets, and approaching capacity, suggesting that AI is especially valuable when firms encounter greater difficulty aligning resources with demand and therefore have a greater need for flexibility. It is also stronger in environments that better support the effective use of AI. We further find that AI investment is associated with greater elasticity in cost of goods sold, lower reliance on vertical integration, and higher inventory turnover. These results suggest that AI also enhances firms' flexibility in adjusting production costs, coordinating supply chains, and utilizing assets more efficiently. Our results are robust to an instrumental variable approach and a change analysis. Overall, our findings suggest that AI is an important technological force that shapes firms' resource commitments, capacity choices, and cost structures.

This study investigates the influence of non-controlling state-owned equity on private enterprises' tax burden in China. Our findings suggest that state capital participation can reduce the tax burden of private enterprises. Specifically, this influence is more potent when the cordial and clean government-business relationship is unbiased, and the tax reduction effect is more pronounced for companies with lower levels of financialization. Further research indicates that state-owned capital can inhibit major shareholders from tunnelling and alleviating inefficient investment by enterprises, resulting in a reduction in the tax burden of private enterprises. This study, based on the background of China's reverse mixed-ownership reform, systematically reveals the governance role of state capital in tax planning within private enterprises. It expands the research on the integration of heterogeneous shareholders and provides a new analytical perspective for evaluating the effectiveness of the two-way mixed-ownership reform policy in emerging markets.

Given the importance of research resource allocation within brokerage firms, we examine key factors that influence the issuance of individual versus team analyst reports. Using a comprehensive sample of analyst reports from China for the 2008-2021 period, we find that this decision is influenced by (1) the brokerage firm's client interests, whereby firms held by the brokerage firm's mutual fund clients and firms that are the brokerage firm's underwriting clients receive more team than individual reports from the brokerage firm, and (2) the nature of corporate events, whereby routine events receive more team reports and nonroutine events receive more individual reports. Additional analyses suggest that analysts' personal traits and analyst team characteristics also affect the decision. Our findings further the understanding of the factors that affect the organization and resource allocation of sell-side equity research.

Using terrorist attacks and mass shootings as an exogenous source driving psychological changes in managerial sentiment, we explore the causal effect of managerial sentiment on firms' short‐term operating decisions. Employing cost stickiness to measure short‐term operating decisions on resource allocation and cost control, we find that firms located in the attacked metropolitan areas experience a significant decline in the degree of cost stickiness. We further find that the effect is more pronounced for firms that have inexperienced and less confident CEOs, when attack events are more salient, and when managers have lower prior exposure to negative events in their personal experiences. We also explore inventory management as another form of short‐term operating decisions and find that firms exhibit reduced asymmetric inventory management and a lower level of abnormal inventory holdings in postattack periods. Overall, our study suggests that shocks caused by exogenous negative events affect managerial sentiment, which in turn shapes managers' short‐term operating decisions.

Using the US economic policy uncertainty (EPU) index developed by Baker, S. R., Bloom, N., & Davis, S. J. [2016. Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636. https://doi.org/10.1093/qje/qjw024], we examine the impact of policy uncertainty on firms' non-GAAP reporting practices. We show that EPU increases both the likelihood and quality of non-GAAP earnings disclosures. These effects are more pronounced for firms with higher index ownership and for those with less informative GAAP earnings. Furthermore, we show that non-GAAP disclosures provide tangible economic benefit during periods of increasing EPU, including compensating for the reduced informativeness of GAAP earnings and reducing information asymmetry. Overall, our evidence suggests that non-GAAP reporting is a means by which managers communicate value-relevant information about their firms' performance to investors during periods of high EPU.

In this paper, we evaluate the economic value of a blockchain application. In the context of asset-backed securities (ABS) issuance in China, where some ABS are issued with blockchain technology and others are not, we find that the use of blockchain significantly reduces the coupon yield at issuance. Compared with other ABS, those issued using blockchain technology experience a decrease of 31.4 basis points in the yield spread, which corresponds to a relative decrease of 13%. We further document that the effect of blockchain is more pronounced for ABS deals rated by less reputable credit rating agencies and agencies that rely more on issuers for their rating business, for revolving ABS, and for ABS with a larger number of underlying assets. We also find that the use of blockchain can reduce the level of retained interest and number of credit enhancement mechanisms. This paper contributes to the literature by providing a small-sample analysis of the economic value of a blockchain application in financial markets. This paper was accepted by Brian Bushee, accounting. Funding: X. Chen and Q. Cheng acknowledge funding provided by the Lee Kong Chian Professorship at Singapore Management University. This work was supported by Singapore Ministry of Education [Grant MOE-T2EP40120-0005]. Supplemental Material: Data are available at https://doi.org/10.1287/mnsc.2023.4671 .

Chief Executive Officer (CEO) contractual protection, in the forms of CEO employment agreements and CEO severance pay agreements, is prevalent among S&P 1500 firms. While prior research has examined the impact of these agreements on corporate decisions from shareholders' perspective, there is little research on the impact from debt holders' perspective. We find that, compared with other loans, loans issued by firms with CEO contractual protection on average contain more performance covenants and performance-pricing provisions. This effect increases with CEOs' risk-taking incentives and opportunities, but it decreases with CEOs' preference for and opportunity of enjoying a quiet life. Furthermore, for loans issued by firms with CEO contractual protection, debt holders include stricter covenants, charge a higher interest rate and use a more diffuse syndicate structure. Collectively, these results shed light on the impact of CEO contractual protection on debt contracting.

We examine the impact of short sellers on insider trading profitability using a natural experiment of a pilot program which relaxed short-selling constraints for randomly selected pilot stocks. We find that pilot firms experienced a significant decrease in insider trading profitability during the pilot program. The results are more pronounced for the pilot firms with poor information quality, and for the pilot firms without corporate restrictions on insider trading. Our evidence suggests that short sellers serve an important market disciplinary role by reducing insider trading profitability. (C) 2021 Elsevier Inc. All rights reserved.

ABSTRACTA CFO gap arises when the CFO position is left vacant for a period between the departure of the old CFO and the appointment of a new CFO. We find that CFO gaps are fairly common; over the sample period 2004–2016, approximately one-third of CFO turnovers are associated with a CFO gap, lasting, on average, two quarters and two months. CFO gaps are more likely for firms that face more labor market search frictions and with financial reporting and performance issues, and are less likely for firms with succession plans and with greater growth opportunities. While CFO gaps are not associated with significant changes in firms' financial reporting quality, they are associated with significantly negative changes in firms' voluntary disclosure frequency and analysts' forecast quality. Our findings shed light on the factors that influence top executive gaps and the impact of such gaps on firms' information environment.

We examine how managerial sentiment affects non-generally accepted accounting principles (non-GAAP) earnings disclosure. Following recent studies, we use terrorist attacks in the US to measure the exogenous shocks to managerial sentiment. We find that (1) firms located in the attacked metropolitan areas are less likely to report non-GAAP earnings; (2) there is a significant decline in non-GAAP exclusions for affected firms, indicating more conservative non-GAAP earnings disclosure; (3) the effect of pessimistic sentiment on non-GAAP earnings disclosure is more pronounced when terrorist-attack events are perceived as more salient, and when managers are less experienced. Our main findings are robust to a battery of robustness tests. Overall, results of this study suggest that shocks induced by exogenous negative events affect managerial sentiment and corporate disclosure practice.

Using the data of Chinese industrial enterprises, we examine how the incentive to reach GDP growth targets affects the local firms' capacity utilization. We find that Chinese economic growth targets exhibit a persistent pattern of top-down amplification along different jurisdiction levels, which is associated with a decline in local firms' capacity utilization. Moreover, the effect of amplified targets on overcapacity is more pronounced (1) when officials utilize hard-constraint vocabulary in setting the economic growth target, (2) during the National Congress of Communist Party, and (3) when the age of prefecture-level officials is close to 55. We also find officials intervene local firms' capacity decisions by increasing private communication with local entities and loosening public policies for local firms within their jurisdictions. Further results show that the amplification of economic targets is detrimental to future development of both regional economy and local firms.

ABSTRACT In‐house human capital tax investment is a significant input to a firm's tax decisions. Yet, due to the lack of data on corporate in‐house tax departments, there is little empirical evidence on how tax departments are associated with tax planning and compliance outcomes. We expect the size of tax departments to be positively associated with the effectiveness of tax planning and compliance. Using hand‐collected data on the number of corporate tax employees in S&P 1500 firms over the 2009–2014 period, we find that firms with larger tax departments are associated with lower and less volatile cash effective tax rates. Furthermore, using tax employees' specialization, we identify tax departments' relative focus on planning or compliance and document a trade‐off between tax avoidance and tax risk. Specifically, tax departments with more of a tax planning focus have incrementally greater tax avoidance but higher tax risk, whereas tax departments with more of a tax compliance focus have incrementally lower tax risk but higher tax rates. Overall, this paper contributes to the literature by looking inside the “black box” of corporate tax departments and shedding light on the importance of human capital tax investment for tax outcomes.

We examine whether local political corruption affects managers' discretionary disclosures of non-GAAP earnings. Using United States Department of Justice data on the number of corruption convictions of government officials, we find that firms headquartered in more corrupt districts (1) are less likely to report non-GAAP earnings, (2) have less aggressive non-GAAP earnings disclosures, and (3) experience a significant decline in the exclusion magnitudes of non-GAAP earnings. These results are more pronounced for firms with concentrated operations in their headquarter states and are robust to controlling for demographic characteristics, employing alternative corruption and non-GAAP measures, using the instrumental variable approach, and conducting a difference-in-difference analysis based on firms' relocation. Finally, we show that as local political corruption increases, managers exclude lower levels of both recurring and non-recurring items when calculating non-GAAP earnings. Overall, the results suggest that managing non-GAAP reporting is one channel through which firms could deter rent-seeking by corrupt officials.

In this study, we provide large-sample evidence on how corporate in-house human capital investments in accounting affect earnings management. We construct a dataset of more than 411,000 individual-years of corporate accountants between 2009 and 2015 and measure firms' accounting human capital using the proportion of their accountants with Big N work experience or a CPA designation. We find that firms with higher accounting human capital have a lower probability of accounting irregularities, lower discretionary accruals, better internal control quality, and fewer unintentional accounting errors. The results hold when we control for potential endogeneity by using the staggered adoption of the CPA mobility law and the number of top accounting undergraduate programs near the firm as instrumental variables for accounting human capital. We further find that firms with higher accounting human capital exhibit stronger market reactions to earnings news and pay lower audit fees, confirming that external stakeholders perceive these firms as having better financial reporting quality.

\We examine whether family owners exploit internal control weaknesses for entrenchment purposes and whether the public disclosure requirement under SOX 404 helps alleviate this entrenchment. We find supportive evidence for both questions. In the initial years of SOX 404 implementation (2004 and 2005), ineffective internal control in family CEO firms is more conducive to entrenchment – measured by the occurrence of misstatements, frauds, and related party transactions – than ineffective internal control in nonfamily firms is. With the public disclosure requirement of SOX 404 in place, family CEO firms are more likely to remediate internal control weaknesses, and the resulting improvement in internal control in family CEO firms has significantly reduced family entrenchment. Our findings provide new evidence on the dynamics of family entrenchment in the U.S. and shed light on a key benefit of public disclosure of internal control quality.

This study investigates the association between employee quality and audit fee. Using data for firm-level employee quality (as proxied by employee education) from Chinese listed firms from 2011 to 2018, we find that firms operated by high-quality employees enjoy lower audit charges. The association between employee quality and audit fee is more pronounced in firms with a culture of high integrity. Our 2SLS estimation helps us establish a causal link between employee quality and audit fee. The final validity tests suggest that high-quality employees contribute to lower audit fee by reducing audit risk and audit effort.

We examine how short sellers affect long-run management forecasts using a natural experiment (Regulation SHO) that relaxes short-selling constraints on a group of randomly selected firms (referred to as pilot firms). We find that compared to other firms, the pilot firms issue more long-run good news forecasts but do not change the frequency of long-run bad news forecasts. The increase in good news forecasts is greater when the pilot firms have higher quality forecasts, more uncertainty about firm value, or higher manager equity incentives. Overall, these results and the results of additional analyses indicate that the reduction in short-selling constraints and the increase in short-selling threat induce managers to enhance disclosures through more long-run forecasts, primarily in the case of good news, to discourage short sellers.

程序性制裁制度在西方许多国家已经较为成熟，而我国程序法的规定不完善，甚至没有明确规定违反程序法的不利法律后果，这些导致我国司法实践中违反程序规则侵犯他人权利的行为时有发生。我国长期以来缺乏有效地制裁和惩罚违法行为的机制，这是程序违法的关键因素，文章通过研究理论及实践情况，在当前司法制度改革的背景下，提出完善我国程序性制裁理论以及制度体系，构建完整配套可操作运行的程序性制裁制度。

现代文明法治社会背景下,尊重和保障人权越来越受到人们的关注和重视,非法证据排除规则作为程序性违法制裁方式的重要方法之一,对促进程序法的实施和发展有着不可取代的重要作用,同时对保护公民基本权利、惩罚违宪侵权行为亦有不可忽视的存在价值.但其在司法实践中显露的不足与缺陷,阻却了其本身与程序法的发展和实施,建立更加完善的非法证据排除规则势在必行.

ABSTRACT How to address managerial short-termism is an important issue for companies, regulators, and researchers. We examine the effect of CEO contractual protection, in the form of employment agreements and severance pay agreements, on managerial short-termism. We find that firms with CEO contractual protection are less likely to cut R&D expenditures to avoid earnings decreases and are less likely to engage in real earnings management. The effect of CEO contractual protection is both statistically and economically significant. We further find that this effect increases with the duration and monetary strength of CEO contractual protection. The cross-sectional analyses indicate that the effect is stronger for firms in more homogeneous industries and for firms with higher transient institutional ownership, as protection is particularly important for CEOs in these firms, and is stronger when there are weaker alternative monitoring mechanisms. JEL Classifications: G32; M40