Capital Allocation and Timely Accounting Recognition of Economic Losses

This paper explores direct relations between corporate investment behavior and the timeliness of accounting recognition of economic losses (TLR) reflected in a country’s accounting regime. We explicitly investigate the extent to which TLR plays a role in disciplining the investment decisions of firm managers. Building on the idea that asymmetric verification standards underpin TLR, we hypothesize that TLR has an asymmetric impact on investment behavior that depends on whether a firm is facing a decrease or an increase in investment opportunities. Specifically, we hypothesize that the sensitivity of investment to a decline in investment opportunities is increasing in country-level TLR, consistent with more timely loss recognition disciplining managers to avoid negative net present value projects. On the other hand, we hypothesize that TLR will not influence the sensitivity of investment responses to increasing investment opportunities. Using firm-level investment decisions spanning twenty five countries, we find that investment responses to declining opportunities increases with TLR, while we find no evidence that TLR influences the sensitivity of investment to increasing investment opportunities. Our results are robust to alternative estimates of TLR, alternative estimates of investment responses to changing investment opportunities, and to controls for important country-level, industry-level, and firm-level variables that may impact firms’ investment decisions

The Performance of Long-run Stock Returns Following Issues of Public and Private Debt

This study uses a balance sheet-based method to identify both public and private debt issues. This feature is important because there have been no studies of the information content of private debt issues, while private debt is substantially more prevalent than public debt. We find no abnormal returns following straight debt issues. However, convertible debt issuers under-perform the market on the order of 50 to 70 percent in the following five years. In pursuit of explanations, we find that convertible debt issues signal a deterioration of future profitability, which accounts for at least part of the stock price underperformance. Copyright Blackwell Publishers Ltd 1999.

Globalization and Executive Compensation: An Analysis of Pay Practices in U.K. Companies *

Please do not circulate without permissio

Political Bias in Corporate News: The Role of Conglomeration Reform in China

Using textual analyses of 1.77 million articles, we find that, through the Chinese government’s conglomeration reform that reorganizes official and nonofficial newspapers from the same locale into a news group under state control, there is an increase (decrease) in positive tone and political content in official (nonofficial) newspaper articles. The evidence is consistent with official newspapers becoming more concentrated on political goals and nonofficial newspapers becoming more focused on commercial objectives, thus better enabling the newspaper industry to pursue a dual role as the government’s mouthpiece and an information institution supporting the market economy. Our results are robust to using a matched firm-month research design that examines the content of articles written about the same firm in the same month, a matched firm-event approach that examines concurrent newspaper articles published immediately following corporate earnings announcements, and a difference-in-differences approach to test for conglomeration effects

Political Bias in Corporate News: The Role of Conglomeration Reform in China

Using textual analyses of 1.77 million articles, we find that, through the Chinese government’s conglomeration reform that reorganizes official and nonofficial newspapers from the same locale into a news group under state control, there is an increase (decrease) in positive tone and political content in official (nonofficial) newspaper articles. The evidence is consistent with official newspapers becoming more concentrated on political goals and nonofficial newspapers becoming more focused on commercial objectives, thus better enabling the newspaper industry to pursue a dual role as the government’s mouthpiece and an information institution supporting the market economy. Our results are robust to using a matched firm-month research design that examines the content of articles written about the same firm in the same month, a matched firm-event approach that examines concurrent newspaper articles published immediately following corporate earnings announcements, and a difference-in-differences approach to test for conglomeration effects