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.

Despite advances in forensic sciences, there is a significant increase in the number of cases that remain unsolved—cold cases. Cold case investigations present numerous unique challenges above and beyond those of typical (i.e., timely) investigations. In cold cases, witness memory is likely to be weakened substantially due to the historical nature of the incident (e.g., the victim of historical sexual abuse) and subject to interference from different sources (e.g., conversations with others and previous interviews). Despite the numerous and challenging barriers present within cold case investigations, researchers have not systematically explored the barriers faced by cold case investigators or the best ways of obtaining detailed and accurate information from witnesses and victims of cold cases. Solving cold cases can prevent perpetrators from committing further crimes, help bring peace to the loved ones of deceased victims, and communicate to living victims that they are not forgotten. Our goal is to generate interest in a program of rigorous experimental and applied work in this neglected field. We also aim to provide preliminary resources and practical considerations for cold case investigators based on current best practices.

The accounting literature provides evidence that customers can influence their suppliers’ real activities and reporting decisions. Customers exert this influence by threatening to terminate their relationship or imposing higher contracting costs and operating restrictions on suppliers deemed to have greater disruption risk or misaligned strategic values. Using suppliers’ carbon emissions as an important source of disruption risk and strategic values, we find that suppliers underreport their carbon emissions to the Environmental Protection Agency (EPA) to mitigate customer-imposed negative performance effects of high carbon emissions. Our setting offers a unique opportunity to demonstrate how strategically managing environmental reporting can help to achieve real effects (i.e., greenwashing to achieve higher profitability). Given the growing concerns of stakeholders over the environmental performance of the firm’s own operations and its supply chain, policy makers and environmental regulators should be aware that suppliers have economic incentives to misreport their environmental performance because of customer influence.

Managers may provide incomplete disclosure for various reasons (e.g., high processing costs, operating uncertainty, proprietary concerns, agency conflicts, etc.). In contrast, rank-and-file employees face fewer of these limitations. Through "wisdom of the crowd" displayed on social media, employees can aggregate their individual private beliefs to provide an informative business outlook. Using employee data from Glassdoor.com, we find that employee business outlook disclosures reveal more information in loan spreads of private lending contracts when firms have more opaque information environments. Furthermore, we observe that employee disclosures help to reveal more private information when the business outlook is worsening and as employees' collective knowledge increases. This relation is more prominent when employees are expecting worsening performance, consistent with employee disclosures revealing more private bad news. Our study demonstrates the conditions under which employee disclosures on social media are more likely to disseminate private information.

This study examines how algorithmic trading (AT) affects forward-looking disclosures in Management Discussion and Analysis (MD&A) of annual reports. We predict and find evidence that AT relates negatively to modifications in year-over-year forward-looking MD&A disclosures. This evidence is consistent with AT reducing investors' demand for fundamental information, which reduces managers' incentives to supply costly forward-looking disclosures. Cross-sectional tests provide additional evidence that this negative relation is more pronounced for firms with larger earnings surprises and those with losses. We further validate our conclusion by demonstrating that investors' fundamental information searches are a channel through which AT affects forward-looking disclosures. The conclusion is robust to using the SEC's Tick Size Pilot Program as an exogenous shock to AT and to using alternative disclosure measures (e.g., tone revisions and number of sentences in forward-looking MD&A disclosures). Overall, our study demonstrates that AT is a contributing factor to regulators' concerns over the diminishing usefulness of forward-looking information in MD&A disclosures.

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.

Survey evidence and academic research raise the possibility that audit regulation can impact not only the information contained in external financial reports but also the internal information used by management. We investigate this possibility by examining the improvement in management forecast accuracy around initiation of the Public Company Accounting Oversight Board's (PCAOB) international inspection program. Consistent with managers having improved information, we find that managers issue more accurate forecasts following PCAOB inspection access. Multiple additional analyses support that an improved information environment is the mechanism underlying our results, and this effect is distinct from, and incremental to, any effects of PCAOB inspection on external reporting quality. Our study provides evidence that audit regulation benefits an important internal stakeholder—managers.

The literature measures classification shifting as the relation between unexpected core earnings and income-decreasing special items. The general view in this literature is that managers shift core expenses to special items to inflate core earnings to achieve self-motivated reporting objectives. However, an additional possibility is that classification shifting helps investors better predict future performance. We find evidence of this positive consequence of classification shifting. Our study raises the possibility that measures of classification shifting in certain settings do not reflect managers' opportunistic reporting. Given the relatively limited evidence in the literature on the consequences of classification shifting on investors, we believe these findings need to be considered as the literature moves forward.

The purpose of our study is to further understand managerial incentives that affect the volatility of reported earnings. Prior research suggests that the volatility of fourth-quarter earnings may be affected by the integral approach to accounting (i.e., “settling up” of accrual estimation errors in the first three quarters of the fiscal year) or earnings management to meet certain reporting objectives (e.g., analyst forecasts). We suggest that another factor affecting fourth-quarter earnings is managers’ intentional smoothing of fiscal-year earnings. For each firm, we create pseudo-year earnings using four consecutive quarters other than the four quarters of the reported fiscal year. We then compare the earnings volatility of pseudo years to the earnings volatility of the firm’s own reported fiscal year. We find evidence consistent with fourth-quarter accruals reflecting managerial incentives to smooth fiscal-year earnings. This conclusion is validated by several cross-sectional tests, the pattern in quarterly cash flows and accruals, and several robustness tests. Overall, we contribute to the literature exploring alternative explanations for the differential volatility of fiscal-year and fourth-quarter earnings. This paper was accepted by Brian Bushee, accounting.

This study examines the effect of legal environment on corporate state income tax avoidance. We find that the extent of penalties on corporate officers reduces state tax avoidance. However, we find no evidence that the extent of penalties on shareholders reduces state tax avoidance. Thus, the legal environment faced by managers has a greater deterrent effect on tax avoidance than does the legal environment faced by shareholders. Only when managerial ownership is high do we find evidence that shareholder penalties affect corporate tax avoidance behavior. Our study contributes to the literature on agency problems related to corporate tax reporting.

Managers may provide incomplete disclosure due to having various contracting, proprietary, agency, and other incentives leading them to withhold information. Employees do not face similar incentives and, through “wisdom of the crowd” displayed on social media, have the ability to aggregate their individual beliefs to provide informative business outlook. Thus, the extent to which employee disclosures provide information not revealed in management disclosures provides an indication of managers’ strategy in withholding private information. To test this idea, we use employee business outlook ratings on Glassdoor.com and examine the extent to which they reveal incremental information on loan spreads in private lending contracts. As expected, we find that employee disclosures reveal more private information as the quality of management disclosures decreases. We also show that this relation is more prominent when employees are expecting worsening performance, consistent with employee disclosures revealing more private bad news when managers have stronger incentives to withhold information. Our study demonstrates the potential of employee disclosures on social media to generate and disseminate private information being withheld by managers.

Purpose Eliciting detailed and comprehensive information about the structure, organisation and relationships between individuals involved in organised crime gangs, terrorist cells and networks is a challenge in investigations and debriefings. Drawing on memory theory, the purpose of this paper is to develop and test the Reporting Information about Networks and Groups (RING) task, using an innovative piece of information elicitation software. Design/methodology/approach Using an experimental methodology analogous to an intelligence gathering context, participants (n=124) were asked to generate a visual representation of the "network" of individuals attending a recent family event using the RING task. Findings All participants successfully generated visual representations of the relationships between people attending a remembered social event. The groups or networks represented in the RING task output diagrams also reflected effective use of the software functionality with respect to "describing" the nature of the relationships between individuals. Practical implications - The authors succeeded in establishing the usability of the RING task software for reporting detailed information about groups of individuals and the relationships between those individuals in a visual format. A number of important limitations and issues for future research to consider are examined. Originality/value The RING task is an innovative development to support the elicitation of targeted information about networks of people and the relationships between them. Given the importance of understanding human networks in order to disrupt criminal activity, the RING task may contribute to intelligence gathering and the investigation of organised crime gangs and terrorist cells and networks.

Classification shifting is defined in the literature as managers’ intentional classification of certain core expenses as income-decreasing special items with the intent to inflate reported core performance. We develop and validate a new measure of firms’ propensity to engage in this reporting strategy, documenting that a firm’s use of classification shifting is persistent over time and relates to its use by peer firms. We also find that the cross-sectional variation in firms’ use of classification shifting is increasing in more recent years and that this strategy is associated with higher future firm valuation and stock returns. As one possible channel through which this valuation effect orginates, we hypothesize and find evidence consistent with classification shifting allowing firms to increase their debt capacity, thereby shifting risks from shareholders to debtholders.

ABSTRACT We explore how managerial stock holdings and option holdings affect CEOs' income smoothing incentives. Given the different roles of stock holdings and option holdings in solving agency problems, managers may smooth past earnings using discretionary accruals for the purpose of revealing information to help investors better predict future earnings or for the purpose of hiding volatility of past earnings. We find the association between past smoothing and predictability of future earnings is increasing (decreasing) in CEO stock (option) holdings. Results are consistent with stock holdings aligning the interests of managers and shareholders, and managers using discretionary accruals to smooth past earnings to reveal information to investors about future performance. In contrast, option holdings have been linked with excessive risk taking by managers, and managers use discretionary accruals to mask volatility of less predictable earnings. We demonstrate that income smoothing can be informative or opportunistic, depending on the incentives of CEOs.

Recent theoretical and empirical studies suggest that blockholders (shareholders with ownership ≥ 5%) exert governance through the threat of exit. Blockholders have strong incentives to gather private information and sell their shares when managers are perceived to underperform. To prevent blockholders from selling their shares and the firm from suffering a stock price decline, managers align their actions with the interests of shareholders. As a result of the greater manager-shareholder alignment, managers’ actions are more likely to be in shareholders’ best interest, and consequently there is less need for managers to manipulate earnings. Consistent with these predictions from economic theory, we find evidence that as exit threat increases, firms have higher financial reporting quality. Theory also predicts that the impact of blockholders’ exit threat on financial reporting quality should increase as the manager’s wealth is tied more closely to the stock price, and this is what we find. Our study contributes to the research on the impact of shareholders on financial reporting quality and to an emerging literature on the impact of blockholders in financial markets. Blockholders play an important role in managers’ reporting outcomes through their actions as informed investors.

Multinational firms have been accused by politicians, regulators, and citizen groups of shifting profits to low-tax geographic areas. We present evidence that multinational firms with tax-haven operations tend to aggregate their geographic disclosures to a greater extent. The results are consistent with managers attempting to avoid criticism by reducing the transparency of their tax-avoidance activities. We find these results to be stronger for larger firms with higher political costs and for firms in natural-resources industries, in retail industries, or with low competition. The evidence is relevant to policymakers and others interested in multinational firms' financial reporting and tax activities.