A Model of Aggregate Reporting Quality

We characterize firms’ aggregate reporting quality in an economy where a rational capital market as well as a regulator discipline firms’ reporting choices. When the regulator is resource constrained, multiple aggregate reporting choices are possible in equilibrium. This multiplicity is driven not just by the regulatory constraint, but also by how this constraint interacts with managerial incentives and the level of reporting discretion available to firms. These results obtain despite firms trying to signal their type through private voluntary activities such as dividends. This link between aggregate reporting and aggregate signaling activities is under-emphasized in the literature. The model’s results thus offer a way to jointly interpret empirical results on aggregate reporting, aggregate signaling, and underlying institutions.http://deepblue.lib.umich.edu/bitstream/2027.42/108495/1/1247_Nagar.pd

Governance Problems in Close Corporations

More than 90 percent of all US firms are close corporations, and these firms account for 51 percent of the private sector output and 52 percent of all private employment. Understanding governance issues and agency problems facing these firms is therefore of considerable importance. The legal and finance literature argues that the main governance problem in close corporations is not so much between the management and the shareholders as between the majority and the minority shareholders. As a solution, this literature recommends that the main shareholder in close firms surrender some control to minority shareholders at the outset. With shared control rights, no shareholder can take unilateral actions for her own benefit at the expense of the firm and other shareholders. We test this hypothesis using two independent novel datasets of close corporations. We find that shared ownership firms report substantially larger return on assets (up to 14 percentage points) and lower expense-to-sales ratios and these findings persist after we control for the endogeneity of ownership structure. We thus provide one of the first evidence on the presence of governance problems among shareholders in close corporations as well as the effectiveness of shared ownership as a solution

Trading incentives to meet the analyst forecast

We examine stock sales as a managerial incentive to help explain the discontinuity around the analyst forecast benchmark. We find that the likelihood of just meeting versus just missing the analyst forecast is strongly associated with subsequent managerial stock sales. Moreover, we provide evidence that managers manage earnings prior to just meeting the threshold and selling their shares. Finally, the relation between just meeting and subsequently selling shares does not hold for non-manager insiders, who arguably cannot affect the earnings outcome, and is weaker in the presence of an independent board, suggesting that good corporate governance mitigates this strategic behavior

Accounting for Crises

We provide among the first empirical evidence consistent with recent macro global-game crisis models, which show that the precision of public signals can coordinate crises (e.g., Angeletos and Werning, 2006; Morris and Shin, 2002, 2003). In these models, self-fulfilling crises (independent of poor fundamentals) can occur only when publicly disclosed signals of fundamentals have high precision; poor fundamentals are the sole driver of crises only in low precision settings. We find evidence consistent with this proposition for 68 currency and systemic banking crises in 17 countries from 1983 to 2005. We exploit a key publicly disclosed signal of fundamentals that drives financial markets, namely accounting data, and find that pre-crisis accounting signals of fundamentals are significantly lower only in low precision countries

Trading incentives to meet the analyst forecast

We examine stock sales as a managerial incentive to help explain the discontinuity around the analyst forecast benchmark. We find that the likelihood of just meeting versus just missing the analyst forecast is strongly associated with subsequent managerial stock sales. Moreover, we provide evidence that managers manage earnings prior to just meeting the threshold and selling their shares. Finally, the relation between just meeting and subsequently selling shares does not hold for non-manager insiders, who arguably cannot affect the earnings outcome, and is weaker in the presence of an independent board, suggesting that good corporate governance mitigates this strategic behavior

Organizational design choices in retail banking

http://deepblue.lib.umich.edu/bitstream/2027.42/35944/2/b2014087.0001.001.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/35944/1/b2014087.0001.001.tx

Measurement and control in retail banking

This first chapter develops an economic model of the firm linking current financial and non-financial measures to future earnings for retail banks. The data support the associations among current financial and non-financial measures predicted by model, suggesting that the economic model is applicable to the firms in my sample. I use the model to specify the regression of future earnings on current financial and non-financial. I find that non-financial measures contribute about 20 percent of the total explanatory power in predicting earnings one year ahead, suggesting that non-financial measures have substantial forward-looking information over and above current financial measures. I then interpret the coefficients on individual financial and non-financial measures in the context of the economic model. The second chapter finds some empirical support for the two main predictions of Jensen and Meckling\u27s (1992) theory on organizational design choices: (a) the allocation of decision rights to branch managers is associated with control systems that measure their performance and reward them based on these performance measures, and (b) the allocation of decision rights to branch managers and the attendant control systems are associated with the costs of transferring knowledge from branch managers to the top management. However, a simultaneous equation of these organizational design choices indicates that these choices, while correlated, are not made simultaneously