We survey public company executives and directors to understand what audit clients want from their auditor in today’s regulated environment. Our results provide at least three important takeaways. First, executives and directors view elements of auditors’ service quality (e.g., timeliness of communications) as at least as important as auditors’ technical competence. Second, we find no evidence that stakeholders’ preferences for service quality replaces their expectation for technical competence. Third, we find that 57

We investigate ethnic minority and nonminority sell-side analysts' participation in public earnings conference calls. We find that minority analysts are underrepresented in conference call Q & A sessions, and minority analysts who do participate on the calls experience lower levels of prioritization than do nonminority analysts. Minority analysts' lower participation rates are partially but not fully mediated by characteristics such as experience, work environment, and stock rating favorability. Additionally, firm and conference call fixed effects mediate approximately half the magnitude of lower minority participation rates. Extroverted minority analysts participate at higher rates, but the negative association between minority status and conference call participation is exacerbated when calls are more time constrained, when executive teams are less diverse, and when analysts are from less prestigious brokerage houses. Overall, we document the underrepresentation of minority analysts on earnings conference calls and provide evidence suggesting both analysts' and managers' choices influence minority analysts' participation rates.

Despite the prevalence and importance of humor in interpersonal communication, the disclosure literature is silent on the use of humor in the context of corporate communication. Using a sophisticated machine learning algorithm, we identify managers' successful uses of humor during public earnings conference calls. When managers use humor on an earnings call, stock market returns and analyst forecast revisions following the call are more positive, primarily because of a muted response to negative earnings news. Consistent with managers' successful use of humor being a favorable signal of future firm performance, we find no evidence of a return reversal over the subsequent quarter, and managers' use of humor predicts more favorable news at the subsequent quarter's earnings announcement. Our study provides new evidence on the use of humor in corporate disclosures, and our findings indicate that humor can meaningfully influence the market response to public earnings conference calls.

We survey 211 corporate media relations officers and conduct 12 follow-up interviews to examine the role media relations officers play in shaping a company’s information environment. Media relations officers indicate they are very involved in company messaging around mergers and acquisitions, changes in the senior executive team, and new product launches. We find that nearly one in four public companies hosts a quarterly conference call exclusively for members of the media in conjunction with earnings releases, and media relations officers view The Wall Street Journal and LinkedIn as the most influential traditional media outlet and social media platform, respectively. Revealing their positive bias, media relations officers are far more likely to post on social media when their company announces positive earnings news compared to negative earnings news. Overall, our findings shed light on the ways media relations officers share their company’s message across an evolving media landscape.

We survey 462 financial journalists and conduct 18 interviews to obtain insights on the inputs to their reporting, the incentives they face, and the factors that influence their coverage decisions. We report many findings relevant to the accounting literature and identify multiple avenues for future research. For example, financial journalists say the likelihood they write about a specific company or CEO increases when the company is controversial or the CEO has a colorful personality, suggesting journalists gravitate toward provocative topics. We also find that financial journalists routinely use company-issued disclosures and private phone calls with company management when developing articles, and that they believe they are evaluated primarily on the accuracy, timeliness, and depth of their articles. Journalists also believe monitoring companies to hold them accountable is one of financial journalism's most important objectives, but they often face negative consequences for writing articles that portray companies in an unfavorable light.

We examine the participation of analysts from different buy-side institutions (hedge funds, mutual funds, and RIAs) in public earnings conference calls and the associated capital market implications. Using 81,652 conference call transcripts for 3346 companies from 2007 to 2016, we find that buy-side analysts ask questions on approximately 18% of calls. Relative to sell-side analysts, buy-side analysts' interactions with management are shorter, convey less favorable tone, and exhibit more uncertainty. Buy-side activity on earnings calls is also associated with subsequent reductions in sell-side coverage, and buy-side tone is associated with sell-side analysts' price target revisions after the call. Importantly, our findings suggest that buy-side analysts representing a hedge fund play an important and unique role on conference calls. Specifically, hedge fund analysts represent nearly half (47%) of all buy-side appearances. In addition, when short interest in the firm is high, analysts representing a hedge fund are less likely to be permitted to ask the first question on the call, to ask lengthy questions, or to ask additional follow-up questions. Relatedly, relative to other buy-side analysts, the information conveyed by hedge fund analysts during the call is more strongly associated with both stock returns and investor uncertainty following the call.

Prior research finds that sell-side analysts are generally willing partners with company management in facilitating the consistent meeting or beating of earnings expectations. We examine analysts who demonstrate the opposite behavior: issuing an unusually optimistic earnings forecast at the end of the year that increases the likelihood of an earnings miss. We first identify a set of analysts whose unfavorable stock recommendations suggest a pessimistic outlook on the firm, and define a difficult-to-beat forecast as a final earnings forecast prior to the earnings announcement that exceeds even the most optimistic forecast issued by any other analyst covering the stock. We find that 11% of all firm-year observations are subject to at least one such forecast, and that these forecasts increase the likelihood that a firm misses the consensus forecast by 21%. However, the market reaction to a negative earnings surprise is muted when an analyst has issued a difficult-to-beat forecast.

Using a sample of 28,000 quarterly earnings conference call transcripts from 2008 to 2013, we examine the frequency and nature of buy-side analysts’ participation in the Q&A session of corporate earnings conference calls. We find that buy-side analysts appear on approximately 15% of all conference calls, with analysts employed by hedge funds (mutual funds) representing 46% (22%) of buy-side analyst appearances. Buy-side analysts are more likely to appear on conference calls of firms followed by fewer sell-side analysts, with higher bid-ask spreads, and not in the S&P 1500, suggesting that buy-side analysts are more likely to ask questions on conference calls when uncertainty about the firm is high. Management gives buy-side analysts priority by allowing them to ask the first question on a disproportionate number of calls. We also examine the length and tone of analysts’ interactions with management, and find that relative to sell-side analysts, buy-side analysts’ interactions are shorter and their exchanges with management exhibit less favorable tone. Finally, we document that changes in bid-ask spreads following conference calls are positively associated with buy-side participation on the call and that institutional holdings increase (decrease) when buy-side tone is relatively favorable (unfavorable). Our findings add to a growing literature on buy-side analysts by documenting their use of quarterly earnings conference calls.

We investigate whether sell-side analysts who are ethnic minorities face unequal access to management during public earnings conference calls. We find that minority analysts are underrepresented in the Q&A sessions of these calls, and minority analysts who do participate on the calls experience lower levels of prioritization and fewer opportunities to engage with management than do nonminority analysts. Disparities in minority analysts’ participation are heightened when analyst following is higher, and the inequalities we document do not appear to be related to analyst extroversion. We find some evidence that diverse executive teams and brokerage house prestige are associated with more favorable participation outcomes for minority analysts. The consequences of unequal access extend beyond conference calls, as investors are less likely to vote for minority analysts as Institutional Investor All-Stars.

Televised media interviews with public company CEOs occur nearly every trading day. During these interviews, investors observe visual cues in addition to hearing the verbal information managers disclose. Building on findings in the psychology and communications literature, we ask whether investors learn from CEO facial expressions. Using a sample of 959 interviews on CNBC from 2014-2018, we focus on CEO expressions of anger, an emotion generally associated with negative outcomes. We find that CEOs are more likely to show facial expressions of anger when the CEO is more expressive generally, when the journalist shows an angry facial expression, and when recent stock returns are lower. We also find that investors respond negatively to CEO facial expressions of anger and that CEO anger can nullify the benefits of a positive message from journalists.

Despite the importance of sell-side analysts in the capital markets, we know little about the effectiveness of routine monitoring of the sell-side industry. We examine the attributes of sell-side research issued by analysts before and after their brokerage faces regulatory sanctions. We find that after a sanction, analysts at sanctioned brokerages lower their stock recommendations, both in absolute terms and relative to the recommendations of other analysts following the same firms. These analysts are also more likely than analysts at other brokerages to downgrade a company's stock after the receipt of unfavorable information about the firm. Importantly, we document that analysts at nonsanctioned brokerages also reduce the optimism of their stock recommendations when a peer analyst's brokerage is sanctioned, consistent with spillovers as a result of routine regulatory monitoring. Our study provides evidence that regulatory action against sell-side brokerages is associated with a reduction in sell-side analysts' positive bias.

Research on financial misconduct uses data on enforcement outcomes, such as the penalties that the firm pays. The distribution of most enforcement outcomes shows extreme observations or outliers, but you wouldn’t necessarily glean that by a casual examination of some of the leading research on financial misconduct. In this paper I describe the public-policy context of such research and raise the issue of whether the extreme-values problem has been given adequate attention. I touch on a number of papers, and then focus on a 2018 Journal of Accounting Research article by Andrew Call, Gerald Martin, Nathan Sharp, and Jaron Wilde (CMSW), which purports to show a positive association between the severity of enforcement outcomes and the involvement of a whistleblower. I show that the top one percent of the enforcement outcomes (11 observations) in CMSW’s large sample of 1,133 enforcement actions drive their results; a number of robustness checks suggest that the extreme-values problem is serious. Moreover, I explain numerous sources of fuzziness in their whistleblower coding, and explain that research with the extreme-values problem is highly sensitive to such fuzziness because a few dubious codings can change the results. Unfortunately, CMSW do not disclose how each coding was arrived at, so we cannot peer into the fuzziness to see how the extreme observations came to be coded as they are. I suggest that CMSW could have been upfront about the looming problem of a few extreme values in enforcement outcomes, should have shown how the outliers affect their results, and should have explained and resolved (to the extent possible) the mysteries surrounding the coding. Furthermore, as regards the larger issue of public policy, it should be emphasized that we would expect strong and natural correlations among severity of misconduct, likelihood of penalties, and whistleblowing, like the correlations among the severity of health emergencies, likelihood of medical interventions, and calls to 9-1-1. Correlation is not causation. CMSW do not give this point the emphasis that it deserves. It looms especially large in light of my findings that CMSW’s results are not robust to removing the outliers. Accordingly we should perhaps be surprised that CMSW did not find a statistically significant correlation for one of the enforcement-outcome categories.

We extend research on the effects of local audit office characteristics on audit quality by investigating whether audit offices in highly religious U.S. Metropolitan Statistical Areas (MSAs) exhibit going concern decisions that reflect heightened professional skepticism relative to audit offices in less religious MSAs. Prior research links religiosity to risk aversion and ethical development and suggests audit practice offices in more religious MSAs are more likely to issue going concern opinions because they will assess the effects of mitigating factors in a more skeptical manner. Our results indicate that audit practice offices located in highly religious MSAs are more likely to issue going concern audit opinions, consistent with a more skeptical assessment of mitigating factors. Additional tests provide direct evidence consistent with the argument that these audit offices are more risk averse in issuing going concern opinions. Our findings are relevant to auditors, audit clients, researchers, and regulators.

Whistleblowers are ostensibly a valuable resource to regulators investigating securities violations, but whether there is a link between whistleblower involvement and the outcomes of enforcement actions is unclear. Using a data set of employee whistleblowing allegations obtained from the U.S. government and the universe of enforcement actions for financial misrepresentation, we find that whistleblower involvement is associated with higher monetary penalties for targeted firms and employees and with longer prison sentences for culpable executives. We also find that regulators more quickly begin enforcement proceedings when whistleblowers are involved. Our findings suggest that whistleblowers are a valuable source of information for regulators who investigate and prosecute financial misrepresentation.

This paper explores the extrinsic and intrinsic motivations driving individual-level responses to reputational threats in the context of the director labor market. Integrating work on reputation with self-determination and identity theories, we theorize that negative attention from the media and star equity analysts threatens directors' reputations, motivating proactive behavior to mitigate both the external and internal consequences of reputation damage. Using a sample of directors of S&P 1500 firms between 2003 and 2014, we argue and find that negative media coverage and downgrades by star equity analysts are positively related to director exit, even after controlling for firm performance, overall media visibility, and negative events such as lawsuits and financial restatements. We also find that director status intensifies the effect of negative media coverage on exit, serving as the board chair attenuates the effect of star analyst downgrades on exit, and director tenure intensifies the effects of both negative media coverage and star downgrades on exit. In post-hoc testing, we provide further evidence of director reputation maintenance by demonstrating the counterintuitive finding that negative attention from the media and star analysts also increases directors' likelihood of joining the boards of other S&P 1500 firms.

Investor relations officers (IROs) play a central role in corporate communications with Wall Street. We survey 610 IROs at U.S. public companies and conduct 14 follow-up interviews to deepen our understanding of the role of IROs in corporate disclosure events. Three important themes emerge from our results: (i) the value, nature, and timing of private communication between IROs, analysts, and investors; (ii) the significant influence IROs have on corporate disclosures; and (iii) the degree of “theater” involved in public earnings conference calls, even the Q&A portion. We provide insights into the investor relations, analyst, institutional investor, and disclosure literatures.

We examine whether financial analysts strategically time the announcement of their recommendation revisions consistent with their incentives to maintain relations with management. We provide evidence that investor and media attention to recommendation revisions is reduced on weekends, which analysts can exploit to strategically time the release of their revisions. We find that downgrades are a higher proportion of weekend revisions than weekday revisions and that analysts with characteristics that suggest they possess the strongest incentives to maintain favor with management are more likely to downgrade on the weekend. In contrast, analysts absent these characteristics are more likely to release downgrades during the week, consistent with these analysts being driven primarily by other incentives, such as the timely release of their recommendation and garnering media attention. We also present evidence suggesting that strategic disclosure of recommendation downgrades is associated with greater access to management on public earnings conference calls.

We examine the participation of analysts from different buy-side institutions (hedge funds, mutual funds, and RIAs) in public earnings conference calls and the associated capital market implications. Using 81,652 conference call transcripts for 3,346 companies from 2007 to 2016, we find that buy-side analysts ask questions on approximately 18% of calls. Relative to sell-side analysts, buy-side analysts’ interactions with management are shorter, convey less favorable tone, and exhibit more uncertainty. Buy-side activity on earnings calls is also associated with subsequent reductions in sell-side coverage, and buy-side tone is associated with sell-side analysts’ price target revisions after the call. Importantly, our findings suggest that buy-side analysts representing a hedge fund play an important and unique role on conference calls. Specifically, hedge fund analysts represent nearly half (47%) of all buy-side appearances. In addition, when short interest in the firm is high, analysts representing a hedge fund are less likely to be permitted to ask the first question on the call, to ask lengthy questions, or to ask additional follow-up questions. Relatedly, relative to other buy-side analysts, the information conveyed by hedge fund analysts during the call is more strongly associated with both stock returns and investor uncertainty following the call.

Research on the director labor market has primarily focused on internal factors driving director exit, such as firm performance or director characteristics, but has mostly overlooked how external factors may influence director exit. We draw on the reputation literature and self-determination theory to argue that downgrades from