ABSTRACT We examine the spillover effects of local initial public offerings (IPOs) on new business formation. An IPO in a local area is associated with a 1%–4% increase in new business registrations, and this effect is particularly pronounced in counties facing higher economic uncertainty. New business registrations are significantly influenced by the extent of EDGAR downloads related to the IPO firm's public disclosures and the information in the IPO firm's S‐1 disclosure. The findings highlight the role of IPOs in conveying crucial information through signaling of potential success prospects and additional provision of information through disclosures. A field survey of 503 entrepreneurs further supports these conclusions.

This paper provides early evidence on the integration and impact of generative artificial intelligence (GenAI) in accounting at the accountant and task levels. Using survey data from 277 professional accountants, we document substantial heterogeneity in adoption patterns, perceived benefits, and concerns about GenAI. Using proprietary field data from an AI-enabled accounting platform serving 79 small- and medium-sized enterprises, we analyze over 200,000 transaction-level records. We document that GenAI adoption is associated with significant productivity gains and systematic reallocation of effort away from routine data entry toward business communication and quality assurance tasks. GenAI use is also associated with improvements to financial reporting quality, evidenced by more granular ledgers and faster month-end closing. Examining human-AI interaction, we find that accountants selectively intervene when AI confidence scores are low, consistent with complementarity between professional expertise and AI. A framed field experiment further shows that while AI assistance improves classification accuracy on average, reliance on non-consensus AI recommendations can increase the risk of error. Overall, our findings highlight both the promise and the risks of GenAI in accounting and suggest that, in practice, AI is most effective as a tool that augments-rather than replaces-professional judgment.

We examine the labor market consequences of the 2020 Regulation S-K requiring human capital disclosure in 10K filings. Using large-sample job-level data and a Generative Large Language Model (GLLM), we observe that public firms subject to the regulation increase their disclosure of diversity, equity, and inclusion (DEI) information in job postings relative to a matched sample of large private firms. The increase in job-posting disclosure is more pronounced among firms facing greater external pressure to increase their workforce diversity. These findings suggest a shift in demand for diverse candidates by public firms following the regulation. Yet, consistent with short-term inelastic labor supply, this demand shift lengthens the recruitment period, with noticeable increases in workplace gender diversity emerging one year after the regulation, particularly among firms that demonstrate a credible commitment to DEI. Our study documents how securities regulations can impact labor market practices and underscores the challenges involved in shaping workforce diversity.

This survey analyzes literature at the intersection of financial disclosure and labor economics. While accounting research has long considered how high-ranking executives and directors influence corporate reporting, more recent work has expanded our understanding of lower-level employees, e.g., the “rank-and-file,” as both producers and users of corporate information. We introduce a Labor Life Cycle (LLC) framework to organize employment relationships into four stages: Human Capital Development, Search and Matching, Employment, and Turnover and Retirement. At each stage, we first outline the principal economic theories and map them to the extant accounting research. We then consider open questions and provide suggestions for future studies. Three themes emerge from our analysis. First, rank-and-file labor often shapes the corporate information environment: factors such as workforce quality, compensation, and stability are predictors of reporting and audit outcomes. Second, financial reporting acts as a labor market institution: in particular, mandatory disclosures influence job search, wage bargaining, and mobility. Third, the feedback loop between reporting and labor decisions, where disclosure affects employment and employment affects disclosure, remains a central open question. The survey provides accounting researchers with a structured introduction to the economic theories that underpin work on rank-and-file labor and organizes a large empirical literature into a novel framework. Our LLC framework identifies major findings and open questions where accounting researchers are well-positioned to provide new insights.

Early empirical evidence showed a lack of relative performance evaluation (RPE) for executive pay, a surprise given its theoretical appeal. We hypothesize that executive pay transparency can enhance the monitoring of pay practices and increase RPE use. We examine RPE over the two decades centered on the 2006 executive pay disclosure reforms in the United States, which stakeholders—including shareholders, proxy advisors, and compensation consultants—could use to monitor pay plans. Firms that increase disclosures exhibit a significant increase in RPE after the reforms. To understand why, we examine and document that (i) stakeholder attention to pay practices increases after the reform, (ii) stakeholder attention positively relates to increases in RPE, and (iii) say-on-pay voting confirms shareholders’ preference for RPE. Overall, our findings are consistent with executive pay transparency increasing RPE due to enhanced pay monitoring across stakeholders.

This paper develops and estimates a structural model of the labor market for accountants that integrates forward-looking lifetime occupational choices with oligopsonistic employer demand. Using longitudinal resume data covering career transitions of business graduates across six sectors (Big 4, non-Big 4, internal accounting, finance/consulting, technology, and other), we specify a discrete choice dynamic programming model in which workers accumulate sector-specific skills while considering monetary and non-monetary factors, and employers compete for talent under imperfectly elastic labor supply. Estimates indicate that accounting labor markets are characterized by economically significant markdowns (the gap between a worker’s marginal product and their wage) and entry barriers. Counterfactual analyses suggest that reducing employer market power and, to a lesser degree, eliminating entry barriers would increase accountants’ lifetime career values and improve (labor) resource allocation across sectors.

We combine U.S. Census data with SEC enforcement actions to examine employees' outcomes, such as wages and turnover, before, during, and after periods of fraudulent financial reporting. We find that fraud firms’ employees lose about 50% of cumulative annual wages, compared to a matched sample, and the separation rate is much higher after fraud periods. Yet, employment growth at fraud firms is positive during fraud periods; these firms overbuild and hire new, lower-paid employees concurrent with the fraud, unlike firms in distress which tend to contract. When the fraud is revealed, firms shed workers, unwinding this abnormal growth and resulting in most of the negative wage consequences. Wage outcomes are particularly unfavorable in thin labor markets, and lower-wage employees, though unlikely to have perpetrated the fraud, experience more severe wage losses compared to higher-wage employees.

Motivated by the Financial Accounting Standards Board’s project on the disaggregation of income statement expenses, we study a Korean rule change that allowed firms to withhold a previously mandated disaggregation of cost of sales (CoS). We find that after withholding, firms’ profitability increases by 1.6 percentage points. Our industry-focused results suggest that withholding affects profitability by reducing the transfer of competitive information to peer firms. We then document a range of evidence consistent with the idea that firms withhold disaggregated CoS to protect cost innovations from rivals. First, we construct a novel measure of firms’ cost-innovative potential and show that it predicts withholding and subsequent profitability gains under the voluntary disclosure regime. Second, we document efficiency gains following the withholding of disaggregated CoS. Third, our survey experiment of 1,257 U.S. public firm managers shows that they would reduce investments in process/cost innovations if they were required to disaggregate CoS. Our study highlights to standard setters and academics that CoS disaggregation entails operational consequences for firms. This paper was accepted by Brian Bushee, accounting. Funding: The authors acknowledge financial support from the University of Chicago Booth School of Business, the Stanford Graduate School of Business, and the Southern Methodist University Cox School of Business. Supplemental Material: The data files and online appendix available at https://doi.org/10.1287/mnsc.2023.4780 .

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ABSTRACTWe examine whether financial reporting quality affects worker wages using employer‐employee matched data in the United States. We find that low financial reporting quality is associated with a compensating wage differential—that is, a risk premium—using three distinct approaches while controlling for worker characteristics by (1) regressing wages on firm‐year–level and firm‐level reporting quality, (2) documenting wage changes when workers switch firms, and (3) estimating a structural approach that separates reporting quality from performance‐related volatility. We find evidence consistent with two channels: performance pay and turnover risk, where workers bear risks from noise in performance measurement and unemployment, respectively. To mitigate endogeneity concerns, we show that—after the accounting scandals in 2002 and after the announcements of an internal control weakness (ICW)—former Arthur Andersen clients and ICW firms pay wage premiums to employees, with magnitudes between 0.9% and 2.8% of annual wages.

We examine how information about the diversity of a potential employer's workforce affects individuals' job-seeking behavior. We embed a field experiment in job recommendation emails from a leading career advice agency in the United States. The experimental treatment involves highlighting a diversity metric to jobseekers. Our results indicate that disclosing diversity scores in job postings leads jobseekers to click on firms with higher diversity scores, with such effects varying across jobseeker demographics. A follow-up survey provides evidence on potential explanations for why jobseekers value diversity information. We then examine how jobseekers' preferences for diversity relate to disclosure choices under the U.S. SEC Human Capital Disclosure requirement. We find that firms in industries characterized by higher jobseeker responsiveness to diversity information tend to voluntarily disclose diversity metrics in their 10-Ks under these new disclosure requirements.

We study the information content of earnings announcements and its relevance for job search using detailed search data from half a million anonymous job seekers. We find evidence consistent with job seekers initiating job-search activity in response to a prospective employer's earnings announcements. Job seekers search more intensely for employers with media coverage and earnings growth, consistent with the attention and information roles of earnings announcements. We find corroborating evidence about the usefulness of earnings announcements' financial information content to job seekers: (1) a survey experiment indicates that job seekers are more willing to apply to firms when provided with evidence of positive performance; (2) job seekers search for financial information during applications and interviews; and (3) financial information is predictive of future job prospects, including job openings and career growth. Overall, our paper suggests that earnings announcements—among other sources—prompt and guide job seekers' search activities.

This paper evaluates the role of accrual accounting in improving firms' production decisions and resource allocation across firms. I introduce two imperfect firm-performance measures, cash flows and accounting earnings, into a general equilibrium model with heterogeneous firms under imperfect information. The model demonstrates that improvements in measurement systems lead to more informed decisions on the part of firms and ultimately to allocation of greater resources to high-productivity firms via the product and input markets. Estimated parameter values are consistent with accrual accounting improving managers' information about current productivity by providing a better measure of historical firm performance. Quantitative analysis suggests that introducing accrual-accounting information on top of cash-accounting information leads to a 0.5% increase in aggregate U.S. productivity and a 0.7% increase in aggregate U.S. output via improved resource allocation. The corresponding estimates for China and India, as benchmarks for developing countries, are larger: a 1.5% to 2.3% increase in aggregate productivity and a 2.3% to 3.4% increase in aggregate output. I conclude that accrual accounting plays a significant role in determining aggregate productivity via improved resource allocation.

This paper examines whether, when, and why job seekers search for firms’ financial information. We broadly define financial information as the firm-level characteristics provided by financial reporting. With a theoretical model of job search paired with firms’ heterogeneous earnings, we identify the potential importance of financial information in the job search process. Then, by exploiting geographical variation in SEC Edgar financial reporting download data and Burning Glass Technologies job posting data, we find that job postings are positively related to financial reporting downloads at the firm-state-month level. The results are robust across different fixed-effect controls, during non-earnings announcement periods, and in low-income counties. We find that there is a higher correlation between the job postings and the financial reporting downloads when the labor market is more competitive, the vacancies require higher levels of education or more experience, or the vacancies are for management, accounting, or finance related roles. We also find that a firm’s performance positively correlates with job application intensity, and this correlation is stronger amongst the firms with more financial information downloads. Overall, these findings suggest that job seekers use financial information in the job search process.

We examine the relationship between public firm disclosure and aggregate new business formation. Consistent with the notion that public company disclosures provide information spillovers that reduce the extent of uncertainty about new investment opportunities, we find that increased public firm presence is positively associated with new business formation in an industry. Furthermore, using plausibly exogenous information shocks generated by new IPOs in a geographic area, we find that post-IPO, new business registration in the public company's geographic area rise by 4 to 10%, consistent with soft information channels serving to reinforce hard information in public disclosures. New IPOs are associated with significant increases in Edgar downloading activity in the IPOs' geographic area, consistent with the notion that public firm disclosures are providing important investment opportunity information that facilitates new business formation.

Using detailed search data from half a million anonymous job seekers, we study the information content of earnings announcements for job seekers. In the spirit of Beaver (1968), we find evidence that job seekers initiate job-search activity in response to a prospective employer’s earnings announcements. Job seekers search more actively for employers with media coverage and earnings growth, consistent with the attention and information roles of earnings announcements. We find corroborating evidence about the usefulness of earnings announcements’ financial information content to job seekers: (1) a survey experiment indicates that job seekers are more willing to apply to firms when provided with evidence of positive performance, (2) job seekers search for financial information during applications and interviews, and (3) financial information is predictive of future job prospects, including job openings and career growth. Overall, our paper suggests earnings announcements—among other sources—prompt and guide job seekers’ search activities.

Pay for non-performance is among the most prominent arguments of executive rent extraction, especially Bertrand and Mullainathan’s (2001) pay for luck. We revisit their model over the last two decades, 1997 through 2016; we believe that an update is due because there is dynamism in pay governance as business environments and regulations change. Pay for luck presents in the first decade but declines markedly in the second decade, particularly for variable cash and restricted stock. Other components of pay do not correlate with lucky firm performance. We do not find evidence that evolution in industry performance nor the financial crisis of 08-09 bring about this decrease in pay for luck. Instead, declines in pay for luck are associated with transparency-based and shareholder-oriented regulatory changes, such as option expensing, new performance pay disclosure, and say-on-pay rules. These regimes plausibly enhance shareholder monitoring, which pushes compensation committees to decrease pay for luck.

Early empirical evidence showed a lack of relative performance evaluation (RPE) for executive pay, a surprise given its theoretical appeal. We predict and find that director shirking reduces RPE use, and executive pay transparency can enhance shareholder monitoring of company boards and increase RPE use. We examine RPE over the two decades centered on the 2006 executive pay reforms, which required disclosures that shareholders could use to monitor pay plans. Firms that increase disclosures exhibit a significant improvement in RPE use after the reforms relative to other firms. To further connect board-shareholder frictions and oversight with pay transparency and RPE, we show four results. (i) Sales targets set by inattentive boards are more likely to lack RPE features. (ii) Shareholders want RPE, evidenced by say-on-pay voting. (iii) Access to pay disclosures on the SEC website increases after the reforms, and this access positively relates to changes in RPE use. (iv) RPE increases occur for firms with inattentive boards before the reforms and with more shareholder engagement after the reforms.