Are All Independent Directors Created Equal? Do Their Professional Backgrounds Influence Firms’ Financial Disclosures? Evidence From Biotechnology Firms

The empirical evidence on the association between board structure and firms’ voluntary disclosures is mixed and controversial. We extend the literature by arguing that independent directors do not represent a homogeneous group of people, as previously considered. We hypothesize that the professional backgrounds of independent directors shape their assessments of costs and benefits related to disclosure of information that potentially reduces agency costs but also lessens firms’ competitive advantages. Using hand-collected data from a sample of biotechnology firms, we find results consistent with this idea. Particularly, firms whose independent directors provide links to the wider social community, but lack functional or business experience, more frequently disclose proprietary information. We find opposite results for the firms whose independent directors possess significant functional expertise. We conclude that all independent directors are not equal in their influence on firms’ disclosure policies. Our study has several policy implications

The challenges of improving revenue-recognition standard for multiple-element firms:evidence from the software industry (SOP 97-2)

I investigated whether implementing SOP 97-2, the revenue-recognition standard for the software industry, reduces earnings informativeness. This standard is particularly important for two reasons: First, its provisions coincide with provisions of SAB 101, the current general revenue-recognition standard. Second, the software industry provides a laboratory setting for examining multiple-element firms, whose revenue-recognition challenges keep mounting as more and more firms bundle multiple products and services. I found that implementing SOP 97-2 leads to additional revenue deferrals and a decline in earnings informativeness. However, the market prices these deferrals as revenues, as if these amounts had not been deferred. Moreover, the proforma earnings, which I calculated by undoing the revenue deferrals, more strongly correspond with market returns than do the reported earnings. My findings indicate that the accounting numbers calculated using the pre-SOP 97-2 revenue-recognition rules more strongly correspond with market returns than do those calculated using SOP 97-2. My findings should interest FASB in its project on developing a new revenue-recognition standard

Geochemistry and petrogenesis of early cretaceous sub-alkaline mafic dykes from Swangkre-Rongmil, East Garo Hills, Shillong plateau, Northeast India

Numerous early Cretaceous mafic and alkaline dykes, mostly trending in N-S direction, are emplaced in the Archaean gneissic complex of the Shillong plateau, northeastern India. These dykes are spatially associated with the N-S trending deep-seated Nongchram fault and well exposed around the Swangkre-Rongmil region. The petrological and geochemical characteristics of mafic dykes from this area are presented. These mafic dykes show very sharp contact with the host rocks and do not show any signature of assimilation with them. Petrographically these mafic dykes vary from fine-grained basalt (samples from the dyke margin) to medium-grained dolerite (samples from the middle of the dyke) having very similar chemical compositions, which may be classified as basaltic-andesite/andesite. The geochemical characteristics of these mafic dykes suggest that these are genetically related to each other and probably derived from the same parental magma. Although, the high-field strength element (+rare-earth elements) compositions disallow the possibility of any crustal involvement in the genesis of these rocks, but Nb/La, La/Ta, and Ba/Ta ratios, and similarities of geochemical characteristics of present samples with the Elan Bank basalts and Rajmahal (Group II) mafic dyke samples, suggest minor contamination by assimilation with a small amount of upper crustal material. Chemistry, particularly REE, hints at an alkaline basaltic nature of melt. Trace element modelling suggests that the melt responsible for these mafic dykes had undergone extreme differentiation (~ 50%) before its emplacement. The basaltic-andesite nature of these rocks may be attributed to this differentiation. Chemistry of these rocks also indicates ~ 10-15% melting of the mantle source. The mafic dyke samples of the present investigation show very close geochemical similarities with the mafic rocks derived from the Kerguelen mantle plume. Perhaps the Swangkre-Rongmil mafic dykes are also derived from the Kerguelen mantle plume

Public health semantics of YY paradox

Abstract Background: Body Mass Index (BMI) has lost its credibility as an indicator of fatness. 3D sca

Labor Costs of Implementing New Accounting Standards

While much research focuses on the informational benefits of new accounting standards, the costs of implementing new standards remain unclear. We examine the adoption of two new major standards: lease accounting and revenue recognition. We find increase in the number of accounting job postings, related to those standards, in standards’ issuance years. Firms most affected by new standards, measured by accounting complexity and early adoption behavior, post higher number of accounting jobs. We estimate incremental labor costs at about 30 percent of median audit fees for each standard for the most affected firms. These costs, as a percentage of their total employee cost, are higher for smaller firms, indicating greater regulatory-compliance burden. We provide large-sample evidence on the direct labor costs, and thus on the lower bound of implementation costs associated with new accounting standards. Our findings should interest standard setters as they evaluate cost-benefit tradeoffs before issuing new standards

Geochemical characteristics of mesoproterozoic metabasite dykes from the Chhotanagpur Gneissic Terrain, eastern India: implications for their emplacement in a plate margin tectonic environment

A number of mafic intrusive bodies (mostly dykes) are exposed in the Chhotanagpur Gneissic Terrain (CGT). Most dykes trend in ENE–WSW to E–W following major structural trends of the region. These metabasite dykes show granoblastic to grano-nematoblastic textures and contain hornblende, plagioclase, chlorite, quartz and epidote which suggest their metamorphism under amphibolite grade P–T conditions. Although no radiometric age is available for the metabasite dykes, field relationships with host rock and available geochronology on granitoids suggest their emplacement during Mesoproterozoic. Geochemical characteristics of these dykes classify them as low-K tholeiite to medium-K calc-alkaline type. At least two types of metabasite dykes are recognized on the basis of their HFSE contents; one group shows entirely calc-alkaline nature, whereas the other group has rocks of tholeiite-calc-alkaline series. High Mg# observed in a number of samples indicates their derivation from primary melt. Multi-element spidergrams and rare-earth element patterns observed in these samples also corroborate their derivation from different magma batches. Trace element patterns observed for Nb–Ta, Hf–Zr, Sr and Y suggesting involvement of subduction related processes in the genesis of CGT metabasite dykes. Perceived geochemical characteristics suggest that metamorphism did not affect much on the chemistry of metabasites but source region, responsible for the generation of CGT metabasites, was possibly modified during subduction process. This study suggests that magma generated in a destructive plate setting fed the Mesoproterozoic mafic dykes of the CGT

Managerial incentives and changes in corporate investments following the inception of credit default swap trade

A credit default swap (CDS) enables a lender to hedge its risk exposure on a loan given to reference client. The lender then reduces the monitoring of the client’s activities as well as aiding the distressed client. Two contrasting predictions can be made about how the borrower would respond to the altered lender-borrower relationship. (1) The borrower reduces risky investments to lower its vulnerability to financial distress. (2) The borrower pursues volatility-enhancing projects to increase the value of call options built into its shareholder investments. We find that a borrower shifts to a more conservative policy when its managers have low portfolio sensitivity to stock volatility (vega). A borrower with high managerial vega, however, seeks volatility-enhancing projects. Shareholders then increase vega incentives for managers to maintain investments in risky, positive NPV projects at pre CDS levels. This action, however, also results in higher bankruptcy risk. Our study shows a unique interaction between the manager-shareholder and lender-shareholder conflicts arising from CDS inception, which alters the course of the borrower’s operating policy

Heightened Shareholder Interest in Firm Affairs following the Inception of Credit Default Swap Trade

The literature shows that a lender reduces its monitoring of client activities and decreases the accommodation it offers to a distressed client after the lender receives insurance on its outstanding client debt via a credit default swap (CDS). These changes in lender behavior can exacerbate downside risk but can also create upside potential for the reference firm’s shareholders. We predict that the firm’s shareholders, being the residual claimholders, would then increase their interest in firm affairs, by demanding improved corporate governance and the quality of financial reports. We find an increase in independence of the board of directors and a decline in the dual position of chief executive officer and board chairman following the onset of CDS trading. We also find higher earnings response coefficient and trading volumes around the earnings announcement dates and lower post–earnings announcement drift. Overall, our results suggest that shareholders demand and obtain higher quality of, or pay greater attention to, financial reports in the years following the onset of CDS trading