ChatGPT, a language-learning model chatbot, has garnered considerable attention for its ability to respond to users' questions. Using data from 14 countries and 186 institutions, we compare ChatGPT and student performance for 28,085 questions from accounting assessments and textbook test banks. As of January 2023, ChatGPT provides correct answers for 56.5 percent of questions and partially correct answers for an additional 9.4 percent of questions. When considering point values for questions, students significantly outperform ChatGPT with a 76.7 percent average on assessments compared to 47.5 percent for ChatGPT if no partial credit is awarded and 56.5 percent if partial credit is awarded. Still, ChatGPT performs better than the student average for 15.8 percent of assessments when we include partial credit. We provide evidence of how ChatGPT performs on different question types, accounting topics, class levels, open/closed assessments, and test bank questions. We also discuss implications for accounting education and research.

ABSTRACT We examine firm disclosure choice during the initial public offering (IPO) roadshow presentation to understand the informativeness of a management presentation designed to attract investors. Although firms submit a comprehensive registration filing during the IPO, managers also prepare a roadshow presentation, which is shorter and typically allows managers more autonomy to select the information released and how it is discussed. We find that IPO roadshows have significantly more positive, less negative, and less uncertain language than the SEC filing. Using machine learning to classify roadshow sentences into five major topics from the registration statement, we find that roadshows differ in both the topics selected and the language used within each topic. We then examine the predictive ability of the roadshow language, finding that roadshow language predicts future accounting performance, whereas filing language does not. These results highlight the informational role of management presentations, despite the flexibility they grant managers. JEL Classifications: M41; G10; M13.

Regulation is often proposed, developed, and finalized over a lengthy rulemaking periodprior to its adoption. We examine the period over which banking authorities discussed,adopted, and implemented Basel III to understand how firms respond to proposed regulation.We find evidence to suggest that affected banks not only lobbied rule makers against it, butthat they also made strategic financial reporting changes and altered their business models inways that reduced their exposure to the proposed rule prior to rule makers finalizing theregulation. Further, our results indicate a sequential response, with banks responding throughlobbying and strategic financial reporting prior to making business model changes. Thesefindings highlight the interplay among firms’ financial reporting, business model, andpolitical choices in response to proposed regulation, and indicate that the appropriate datefor an event study may be the regulation’s announcement date rather than its adoption orimplementation dates.

Firms’ use of special purpose acquisition companies (SPACs) to go public has increased dramatically, leading to market and regulatory debate about their use of projections. Examining SPAC mergers from 2004 through 2021, we find that 80% of firms provide projections for four years ahead on average, with approximately one-quarter of recent projections extending more than five years. For the sample of SPAC mergers with observable postmerger revenue, we find that only 35% of firms meet or beat their projections. This proportion declines for forecasts that are longer horizon, and nonserial SPAC sponsors miss forecasts by greater percentages. When we compare SPAC projected revenue growth with benchmark samples of firms completing an initial public offering (IPO) and matched firms, the SPAC projections are approximately three times larger on average than benchmark firms’ actual revenue growth, with even greater differences for long-term projections. After the merger, firms reduce their use of projections, providing them at statistically similar rates as benchmark firms. Overall, the evidence supports concerns that the SPAC merger includes highly optimistic projections. This paper was accepted by Suraj Srinivasan, accounting.

Research and practice suggest that cofounded ventures outperformsolo-founded ventures. Yet, little work has explored the conditions under which solo founding might be preferable to cofounding. Combining an inductive case-oriented analysis with a Qualitative Comparative Analysis of 70 new entrepreneurial ventures, we examine why and how solo founders can be as successful as their peers in cofounded ventures. We find that successful solo founders strategically use a set of cocreators rather than cofounders to overcome liabilities, retain control, and mobilize resources in unique and unexpected ways. A primary contribution of this paper is an emergent configurational theory of entrepreneurial organizing. Overall, we reveal the broader significance and theoretical importance of adopting a configurational lens for both practitioners and scholars of entrepreneurship.

We examine firm disclosure choice when information is received on a real-time, continuous basis. We use transaction-level credit and debit card sales for a sample of retail firms to construct a weekly measure of abnormal revenue for each firm. We validate the informativeness of this abnormal real-time revenue information, confirming its positive correlation with abnormal returns, unexpected revenue realizations, and management revenue forecast news. Using revenue forecasts, we find that firms are less likely to disclose abnormally negative news early in the quarter. As the quarter progresses, firms reduce their withholding of negative news. These results are consistent with impending earnings announcements disciplining managers to provide negative news. This pattern of initial withholding and then disclosure exists primarily in firms with high analyst coverage, high institutional ownership, or high litigation risk. Finally, we find increased insider stock sales in weeks with abnormally negative news and no firm disclosure. Overall, our study provides evidence of the informativeness of real-time information and manager discretion in its release.

ABSTRACT This study examines whether audit firms hire former PCAOB employees in response to negative PCAOB inspection reports, and whether such hiring leads to reductions in future inspection deficiencies and an increase in audit quality. We find that the number of PCAOB employees hired by large audit firms is positively related to the number of deficiencies reported in their prior inspection reports, and that the number of deficiencies reported in firms' future inspection reports is negatively associated with the number of former PCAOB employees hired. However, we find no significant association between the number of former PCAOB employees that a firm hires and improvement in audit quality. These findings suggest that former PCAOB personnel possess valuable knowledge about how to perform and document audit procedures to satisfy PCAOB reviewers, but that this expertise does not necessarily have direct implications for the accuracy and reliability of clients' financial reports. JEL Classifications: G28; G38; M41; M49.

We examine whether textual attributes of founder-led firms' regulatory filings reflect founder-CEO characteristics and whether investors consider this relation when assessing firm value. We build on prior research that shows founders have unique personality attributes, particularly overoptimism. Our results suggest that 10-K text for founder-led firms is characterized by "excess" optimism relative to current and future realized earnings and relative to non-founder-led firms. The effect is mitigated for firms with large auditors, high litigation risk and high analyst following. Based on the stock price at the 10-K release, investors do not appear to appropriately discount the tone, resulting in predictable negative returns during the year subsequent to the 10-K release, particularly for the first 2 years after firms go public. Collectively, our findings contribute to the existing literature examining the effects of executives on firm disclosure by providing initial evidence about the conditions under which firms' scripted narrative disclosures reflect CEO characteristics.

Much research finds evidence of a “founder premium” – i.e., that founder leadership is positively associated with both the valuations and stock performance of public firms. However, this empirical finding is puzzling as it appears mismatched with management theory suggesting that leadership styles and capabilities must change as a firm evolves and becomes more complex. Motivated by this disconnect, we re-examine the founder premium in public firms. We find that a valuation premium is associated with founder leadership at IPO, but that it quickly disappears as these firms underperform on the secondary market. Our findings also indicate that the premium associated with having a founder-CEO declines more rapidly relative to the premium associated with having a founder in a non-CEO position. Together, our results provide needed boundary conditions for the founder premium and offer a stronger theory/data fit by underscoring how managerial capabilities must be updated as firms grow and develop.

To compensate for their professional limitations, founders that hold the CEO position in large firms are often encouraged to hire a “second-in-command” (i.e., a COO or President). Surprisingly, however, little is known about the prevalence of a second-in-command in founder-led firms, or its influence on firm performance (if any). Using novel methods and a sample of over 2,000 IPO firms, we address these gaps. We find that founder-led firms are more likely to have a second-in-command relative to firms without founder CEOs. In contrast to firms without founder CEOs, whose performance is adversely affected by the presence of a second-in-command, we find that founder-led firms perform better when a second-in-command is present. Collectively, our findings add fresh contributions to the entrepreneurship and upper echelons literatures.

We use the introduction of the Unicorn label to reference venture-backed firms with valuations above $1 billion to examine how firm categorization influences investor demand and retail trade activity. Our findings suggest that the positive appeal associated with an IPO firm’s Unicorn categorization increases investor demand, particularly among retail investors. Moreover, our findings indicate that the Unicorn categorization label affects retail trade activity both directly and indirectly through the mediating effects of news coverage. Additional findings reveal that there is no significant relation between Unicorn categorization and future operating performance and that Unicorn categorization relates negatively to post-IPO stock performance. Together, our findings provide evidence that firm categorization obscures category members’ individual value-relevant characteristics and causes them to assume the category’s affective tone.

As firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding TMT members are viewed as critical resources in helping compensate for the founder’s managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder-led firm’s performance later in a firm’s life. Using novel methods and a sample of over 2,000 firms, we address this gap. We find that although team structure has a significant impact on the performance of non-founder-led firms (consistent with past literature), it has little to no effect on the operating performance of founder-led firms, suggesting that founder CEOs may exert too much control. Thus, the irony is that founders are retained to propel progress but their very retention may prevent progress. Taken together, our findings add to the entrepreneurship, team, and research methods literatures.

CEO successions represent critical junctures for firms. Although extant research explores the performance consequences resulting from different succession types, what remains unexplored is what hap...

Research SummaryAs firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding top management team (TMT) members are viewed as critical resources in helping compensate for the founder's managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder‐led firm's performance later in a firm's life. Using novel methods and a sample of over 2,000 firms, we address this gap. We find that although team structure has a significant impact on the performance of nonfounder‐led firms (consistent with past literature), it has little to no effect on the operating performance of founder‐led firms, suggesting that founder chief executive officers (CEOs) may exert too much control. Thus, the irony is that founders are retained to propel progress but their very retention may prevent progress. Taken together, our findings add to the entrepreneurship, team, and research methods literatures.Managerial SummaryAlthough founders have the entrepreneurial skills to successfully grow a startup, they generally lack the managerial skills required to lead a large, public firm. As a result, many founder CEOs are replaced before a firm goes public. When founders do stay as CEO, the prevailing belief is that they require a strong TMT to help compensate for the founder's managerial deficiencies. However, given founders' desire to retain control, there is a question of whether they will rely on that team, or if they will simply continue to follow their own intuition. We find evidence that founder CEOs are much less likely to listen to and benefit from their teams relative to nonfounder CEOs.

As firms mature, their founders are often replaced with seasoned executives. When founders are retained, the surrounding TMT members are viewed as critical resources in helping compensate for the founder’s managerial deficiencies. Surprisingly, however, little is known about how TMT members affect a founder-led firm’s performance later in a firm’s life. Using novel methods and a sample of over 2,000 firms, we address this gap. We find that although team structure has a significant impact on the performance of non-founder-led firms (consistent with past literature), it has little to no effect on the operating performance of founder-led firms, suggesting that founder CEOs may exert too much control. Thus, the irony is that founders are retained to propel progress but their very retention may prevent progress. Taken together, our findings add to the entrepreneurship, team, and research methods literatures.

As a firm grows and matures, its founders often do not possess the managerial skills that are required to lead the increasingly complex firm, and are thus replaced by “professional management.” Other firms, however, retain their founders. In such cases, the supporting top management team members appear to be of increased importance since they are needed to help compensate for founders’ managerial deficiencies. Surprisingly, however, little is known about how founders structure their teams or how that structure impacts firm performance. We address this gap in the literature by using entropy balancing, a recently developed multivariate matching approach new to management research, to examine the question of “do founders structure their teams differently than non-founders, and does it matter?” We find, using a sample of more than 2,000 firms that went public from 1997-2013, that founder leadership is associated with differences in several key dimensions of team structure. Moreover, and consistent with founders exercising significant decision rights in their firms, we also show that the operating performance of founder-led firms is less sensitive to team structure, except under key contingencies. These findings add fresh contributions to research methods and to both the entrepreneurship and team literatures.

New ventures face many liabilities of newness. While much has been written about these liabilities, surprisingly the literature does not distinguish between new ventures founded by a single founder and new ventures founded by co-founders. The literature that does exist suggests that solo-founded ventures should experience greater liabilities of newness than co-founded ventures and so exhibit lower performance. However, empirical research is silent on the conditions under which solo-founded ventures might perform as well or better than co-founded ventures. We address this gap by exploring the question of “under what conditions do solo-founded ventures perform as well as or better than co-founded ventures?” Using data on IPO firms from 1997-2010, we find that solo founders and co-founders are subject to unique and competing liabilities of newness. More broadly, our findings unpack liabilities of newness and add fresh contributions to the fields of entrepreneurship, strategy and organization theory.

This paper investigates whether greater competition increases or decreases individual bank and banking system risk. Using a new text-based measure of competition, and an instrumental variables analysis that exploits exogenous variation in bank deregulation, we provide robust evidence that greater competition increases both individual bank risk and a bank's contribution to system-wide risk. Specifically, we find that higher competition is associated with lower underwriting standards, less timely loan loss recognition, and a shift toward noninterest revenue. Further, we find that higher competition is associated with higher stand-alone risk of individual banks, greater sensitivity of a bank's downside equity risk to system-wide distress, and a greater contribution by individual banks to downside risk of the banking sector.