The Valuation Implications of Sales Growth in Start-up Ventures

We examine whether and how investors\u27 reliance on financial information is affected by the rate of sales growth of a start-up venture. We find that investors discern between firms by the extent to which their products are adopted by the market. For firms that failed to increased their sales since IPO, investors preceive financial data as not providing relevant or predictive information for investment decision making. In contrast, investors seem to rely heavily on financial information provided by firms presenting a continuous increase in sales. We suggest that investors may perceive firms with a continuous increase (decrease) in sales as those that are (un)able to transfer through the technology adoption lifecycle and make the transition from an early market dominated by a few visionary customers to a mainstream market. Whereas prior studies relate changes in the value-relevance of financial statements to a firm\u27s maturity, as measured on the basis of time (firm age), our findings indicate that the main factor affecting value-relevance is a firm\u27s degree of market penetration

Regulation and Dishonest Behavior: How Controlling Regulatory Mechanisms Prompt Dishonesty in Tax Consulting

We study experimentally how the conflict of interest faced by tax consultants— between telling the truth and pleasing their clients—affects their professional decision-making process, under different levels of scrutiny in the form of an audit. Eighty percent of the experiment’s participants exhibited dishonest behavior. The possibility of being audited by the tax authorities significantly affected the decision-making process of participants when acting dishonestly. While this possibility improved the consulting quality at the beginning of the process, more manipulative efforts followed, leading to an end result similar to that observed in the absence of the risk of an audit. Remarkably, the manip¬ulative efforts increased with the likelihood of an audit