We examine the real effects of mandatory disclosure to a key stakeholder-employees-by focusing on pay range disclosure laws that require companies to disclose salary ranges. Exploiting the staggered adoption of such laws across U.S. jurisdictions between 2019 and 2024, we analyze over four million H-1B visa cases using a stacked difference-indifferences approach. Our results show a significant increase in H-1B workers' wages after these laws took effect. The increase in employee wages is more pronounced when the laws require firms to disclose pay range in job posting rather than upon request by current or potential employees. Further, we provide evidence that higher wages after pay range disclosure laws occur because of improved employee negotiation power and labor market competition among employers for H-1B workers. Overall, our findings demonstrate the real effect of pay range disclosure laws on employee wages and help inform policy makers.

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Prompted by high pay disparity within firms, many employees have raised concerns about the equity of management compensation. This study examines the relation between employees' perceptions of inequitable management compensation and their whistleblowing behavior. We expect that when employees feel more strongly that management compensation is inequitable and unjust, they are more motivated to blow the whistle on potential management misconduct. Consistent with this expectation, we find that firms with higher CEO pay ratios are more likely to experience employee whistleblowing of alleged misconduct in the following year. This positive association is stronger when employees are more likely to perceive a high CEO pay ratio as being unjust. We also provide several tests to mitigate concerns about alternative explanations based on corporate culture or underlying fraud and to support the assumptions underlying our arguments. In addition, our results are robust to alternative measures of within-firm pay disparity. Overall, our findings identify potentially positive aspects of high pay disparity within a firm because its employees are more motivated to monitor management through whistleblowing.

ABSTRACT A firm’s initial public offering (IPO) generates negative externalities for industry competitors. To mitigate this threat, incumbent firms manage their earnings downward, issue more negative management forecasts, and use a more negative disclosure tone when their industry peers file for an IPO. Negative accruals reverse when the threat subsides. Incumbents manage earnings more aggressively when costs are small and benefits are large, and when they follow negative disclosures of industry leading incumbents. Such strategic disclosure lowers incumbent firm valuation multiples and associates with more negative IPO firm media sentiment. IPO firms obtain lower offer prices, raise less capital, and are more likely to withdraw from the offering. They also invest less, hoard more cash, and experience lower profitability post-IPO, whereas incumbents experience higher profitability and market share growth. Our results highlight the role of strategic reporting on product market competition and identify a new cost of going public.

Using a sample of Standard and Poor’s 500 firms, we examine determinants and consequences of U.S. firms’ return-to-office (RTO) mandates. Results of our determinant analyses are consistent with managers using RTO mandates to reassert control over employees and blame employees as a scapegoat for bad firm performance. Also, our findings do not support the argument that managers impose mandate because they believe RTO increases firm values. Further, our difference in differences tests report significant declines in employees’ job satisfactions mandates but no significant changes in financial performance or firm values after RTO mandates. In summary, our research contributes to the ongoing debate over RTO versus working from home and has important implications for practitioners.

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This study examines whether qualitative disclosure in tax footnotes affects the market valuation of tax avoidance activities. We predict that more disclosures in tax footnotes mitigate investors' concerns over the agency risk of managers engaging in potentially illegal tax avoidance and improve the transparency of firm performance, thus increasing firm valuation. Consistent with the prediction, we find that the market valuation of tax avoidance increases when firms' tax footnotes disclose more qualitative information related to their tax avoidance activities. We provide several tests to show mechanisms underlying our main findings and mitigate concerns about alternative explanations. Overall, our study suggests that the tax-related disclosures in tax footnotes are useful for investors assessing the value of tax avoidance.

This study examines how the implementation of the new lease accounting standard (ASC 842) affects banks’ internal credit ratings for their clients. Leveraging ASC 842’s staggered implementation due to different fiscal year ends, we find that, contrary to the concern held by most managers, banks rate firms as less risky post-ASC 842. This improvement is stronger for firms with greater credit assessment uncertainty in the pre-period, more abnormal operating lease activities in the pre-period, and more operating lease-related information disclosed after adopting ASC 842. Overall, our results are consistent with the implementation of ASC 842 reducing firms’ credit risk perceived by banks. Answering the call by the FASB for more research on ASC 842 to inform its post-implementation review, our evidence suggests that ASC 842 achieved its intent of improving transparency about operating lease activities.

Accounting Standards Update No. 2016–02 (ASU 2016–02) generated considerable debate between managers and standard setters. We find evidence that after issuance of ASU 2016–02, lessee firms decreased their use of long-term operating leases, increased their use of short-term operating leases, and increased their use of capital expenditures. The shift from long-term operating leases to capital expenditures is more pronounced for firms that had greater reporting incentives to use operating leases prior to ASU 2016–02. However, we find no evidence that the change in leasing behavior leads to negative outcomes predicted by managers (i.e., no evidence of a decrease in reported firm performance, a decrease in firm value, increase in firm risk, decrease in credit ratings, increase in debt covenant violations, or decrease in employment). Our study adds to the literature on the real impacts of accounting standards on managers' investment behavior and economic consequences for lessee firms and their stakeholders.

ABSTRACT Following management theory on organizational legitimacy, we predict that managers mimic the accounting of industry-leading companies to gain legitimacy. Such demand for legitimacy is expected to be greater for new managers because stakeholders are more uncertain about the managers’ ability. Using a sample of CEO turnovers, we find that a firm increases financial statement comparability with industry leaders after the new CEO assumes office. This relation is stronger when (1) new managers lack executive experience at larger firms, are younger, or belong to an underrepresented group (i.e., are female or nonwhite); (2) networks that facilitate imitation are more intense, such as when firms and peers are located in the same metropolitan statistical area (MSA) and when they share auditors or blockholders; and (3) firms’ operating environments are more volatile. These findings support the idea that CEOs’ demand for legitimacy leads to more comparable accounting. Data Availability: Data are available from the public sources cited in the text.

The many management guidance withdrawals during the COVID-19 pandemic have attracted considerable attention from the media, investors, and regulators. This study analyzes the determinants and consequences of these withdrawals. We find that guidance withdrawals are due to economic uncertainty, resulting from firms' exposure to the COVID-19 pandemic rather than poor financial performance. Also, the effect of COVID-19 exposure on guidance withdrawals is stronger when firms face higher litigation risk. Further, guidance withdrawals result in abnormally large trading volumes and high analyst forecast dispersion but do not harm stock prices or the level of analyst earnings forecasts. Overall we believe the findings have implications for understanding corporate disclosure practices during periods with heightened economic uncertainty.

To “crack down” on tax havens and offshore financial centers, the Organisation for Economic Co-operation and Development (OECD) has promoted an internationally agreed tax standard of exchange of information on request since 2009. Using a difference-in-differences analysis, we find that the implementation of the standard significantly reduces aggressive tax avoidance by affected U.S. multinational firms with material subsidiaries in tax havens and other offshore financial centers. The effects are stronger when firms have more incentives and opportunities for income-shifting or when tax enforcement is stronger. Overall, our study helps the OECD and other regulators better understand the effect of the internationally agreed standard on corporate tax avoidance.

We employ a generalized difference-in-differences analysis that exploits the staggered adoptions of state False Claims Acts (FCAs) to examine the implications of state whistleblower laws for bank loan contracting terms. We find that loan interest spreads are significantly reduced after firms are exposed to state general FCAs relative to firms not exposed to state general FCAs. We also find significant reductions in the number of general covenants, the number of financial covenants, and the probability of collateral requirement after firms are exposed to state general FCAs. To shed light on potential mechanisms, we provide evidence that financial reporting quality and audit quality increase after firms are exposed to state whistleblower laws. We also find that riskier firms exhibit a larger reduction in loan cost following exposure to state general FCAs. Overall, our findings suggest that whistleblower laws reduce firms’ cost of debt financing.

Using hand-collected data and exploiting a natural experiment in China, we show that directors with foreign experience improve corporate transparency in emerging markets. The positive effect of these directors manifests itself if their experience originates from countries with high disclosure quality, if they reach a critical mass at the board, or if they serve on the audit committee. When exploring potential channels, we find that earnings transparency and voluntary disclosure increase after firms hire directors with foreign experience. Furthermore, after interacting with returnee directors, directors without foreign experience are more likely to dissent on management proposals; transparency also propagates to other firms with which they hold board seats. These findings highlight the role of board diversity in shaping transparency and facilitating governance transfer within boardrooms and across firms.

Using a sample of manually collected data on divisional managers for S&P 500 firms, this study examines the effect of co-opted divisional managers on revenue manipulation. Co-opted divisional managers are those appointed after the incumbent chief executive officer assumes office. I find that a firm with a higher percentage of co-opted divisional managers has more upward revenue management when the firm just meets or beats analyst forecast. Such a finding is more pronounced when the top management has more equity ownership or when co-opted divisional managers face greater career concerns. In contrast, co-opted divisional managers are not significantly associated with revenue management when the firm’s earnings miss or are well above analyst forecast. These results are consistent with my prediction that co-opted divisional managers manipulate revenues to help top management achieve performance targets. Overall, my study suggests that divisional managers have a significant impact on financial reporting through revenue manipulation.

This study examines how dividend taxation affects corporate voluntary disclosure. Using a sample of firms in 32 OECD countries from 2001 to 2017, our difference-in-differences regressions find that higher dividend tax rates reduce both the issuance and the frequency of management forecasts. The decreases are more pronounced when governance is weaker or agency problems are potentially more severe. Also, the effect of dividend tax rates on management forecasts is asymmetric. That is, tax cuts increase management forecasts, but tax hikes do not decrease management forecasts. In addition, the change in management forecasting behavior following dividend tax changes significantly affects firms’ cost of equity and stock market liquidity. Overall, our findings are consistent with the prediction of the agency theory framework that dividend taxation negatively affects corporate voluntary disclosure behavior.