Miracle-dz/UniFAR-FTUs huggingface dataset:
Is It Worth Trusting Your Manager?

Recent work has emphasized that trust between parties may sustain relational governance, but we need further understanding and empirical evidence of the role of trust in principal-agent relationships. Our paper contributes to the literature by focusing on the asymmetry of trust between an owner and a manager, which may for example arise because owners and managers come from regions with different trust levels. We find that a firm does almost equally well when the owner and the managers come from regions with equal trust (equal trust) and when the owner comes from a region with higher trust (over-trust). However, firm performance is significantly lower when the owner comes from a region with lower trust than that of the manager (under-trust). Moreover, this negative effect is particularly strong when communication between an owner and a manager is more difficult and when the difference in trust is less evident up front.
Are Bank Loans Special? Evidence on the Post-Announcement Performance of Bank Borrowers.

Unlike equity offerings or public debt offerings, bank loan financing elicits a significantly positive announcement return, which has led financial economists to characterize bank loans as "special" or somehow different from other types of external finance. Here, we find that firms announcing bank loan financing suffer negative abnormal stock returns during the three-year post-announcement period. In the long run, therefore, it appears that bank loans are no different from seasoned equity offerings or public debt issuance. We also find that bank borrowers had operating performance below their peers' a year before their loan announcement, and that their performance does not improve in the subsequent three years. Finally, we document a reduction in earnings transparency following bank loan announcements. These findings are inconsistent with the notion that bank loans mitigate asymmetric information problems of the borrower.
Local and Spillover Shocks in Implied Market Volatility: Evidence for the U.S. And Germany

The occurrence and the transmission of large shocks in international equity markets is of essential interest to the study of market integration and financial crises. To this aim, implied market volatility allows to monitor ex-ante risk expectations in different markets. We investigate the behavior of implied market volatility indices for the U.S. and Germany under a straightforward mean reversion model that allows for Poisson jumps. Our empirical findings for daily data in the period 1992 to 2002 provide evidence of significant positive jumps, i.e. situations of market stress with positive unexpected changes in ex-ante risk assessments. Jump events are mostly country-specific with some evidence of volatility spillover. Analysis of public information around jump dates indicates two basic categories of events. First, crisis events occurring under spillover shocks. Second, information release events which include three subcategories, namely---worries about as well as actual---unexpected releases concerning U.S. monetary policy, macroeconomic data and corporate profits or single profit warnings. Additionally, foreign exchange market movements may cause volatility shocks.
Auditing Practice and Cognitive Aging: Evidence from a Quasi-Experiment

We show that auditing practice is more likely to prevent cognitive reflection abilities (CR-abilities) decline than financial reports elaboration practice. We rely on the institutionally unique setting of the Brazilian accounting profession together with previous research and interviews to reason that, while auditors and preparers follow indistinguishable educational paths, auditors usually engage in more cognitively taxing tasks than preparers. We collect data from a large number of Brazilian CPAs and use a quasi-experimental approach to estimate the moderation effect of career on the relationship between aging and CR-abilities. We find that CR-abilities do not differ at early career stages, but preparers’ CR-abilities decline across aging, whereas auditors’ CR-abilities are preserved. We cluster CPAs by age subgroups and compare auditors and preparers who are very similar across several personal and professional individual characteristics but career. This approach overcomes some of the pitfalls of previous studies, strengthening causal inferences.
Antioxidant content and phytochemical properties of apple ‘Granny Smith’ at different harvest times

Understanding the biochemical composition of fruit to be stored could be used as a tool for planning postharvest management to maintain quality and reduce losses of fresh fruit. This study evaluated the effects of harvesting fruit seven days before (H1) and at optimal commercial harvest (H2) on the antioxidant contents and phytochemical properties of ‘Granny Smith’ apples. Both ascorbic acid content (345.6 vs 227.0 mg g−1) and total antioxidant capacity (100.82 vs 82.37 μM g−1) were significantly higher in H2 fruit, whereas concentration of total phenolics was slightly higher in fruit harvested at H1 (25.34 vs 30.87 mg g−1). Phenolic compounds including catechin, epicatechin and quercetin were significantly higher in fruit harvested at H1 compared with H2. These results showed that differences in antioxidant capacity and concentration of phytochemical compounds are the major factors segregating fruit harvested before and at optimal commercial harvest.
Analysts’ Stock Recommendations, Earnings Growth and Risk

A key output of sell‐side analysts is their recommendations to investors as to whether they should, buy, hold or sell a company’s shares. However, relatively little is known regarding the determinants of those recommendations. This study considers this question, presenting results that suggest that recommendations are dependent on analysts’ short‐term and long‐term earnings growth forecasts, as well as on proxies for the analysts’ unobservable views on earnings growth in the more distant future and risk. Furthermore, analysts who appear to incorporate earnings growth beyond the long‐term growth forecast horizons and risk into their recommendation decisions make more profitable stock recommendations.
Geographic Diffusion of Accounting Information, Analyst Behavior, and Return Predictability

We use a new disclosure-based approach to show that value-relevant information about publicly-traded firms is geographically distributed within the United States and the market is slow in aggregating this information. Firm fundamentals such as earnings and cash flows can be predicted using the fundamentals of other firms in economically relevant U.S. states, but sell-side equity analysts and institutional investors only partially incorporate this information in their respective earnings forecasts and holdings. Consequently, a Long−Short trading strategy that exploits the slow diffusion of geographic information earns an annual risk-adjusted return of over 9%.
Leveraged Buybacks

Debt-financed share buybacks generate positive short-term and long-run abnormal stock returns. Leveraged buyback firms have more debt capacity, higher marginal tax rate, lower excess cash and lower growth prospects ex ante, increase leverage and reduce investments more sharply ex post than cash-financed buyback firms. Firms that are over-levered ex-ante are associated with lower returns and real investments following leveraged buybacks. The lower announcement returns of over-levered firms are concentrated on firms with weaker corporate governance. The evidence is consistent with leveraged buybacks enabling firms to optimize their leverage, on average benefiting shareholders. The benefits decrease with a firm’s leverage ex ante.
Short-Selling Pressure and Last-Resort Debt Financing: Evidence from 144A High-Yield Risk-Adjusted Debt

This paper examines why non-financial publicly traded firms knowingly issue wealth destroying Rule 144A debt, which is associated with a negative announcement return and a higher yield. We provide a plausible “demand-side” explanation (i.e. last-resort debt financing) for the motivation for issuing such debt. We also provide evidence as to what drives this negative reaction. Our findings suggest that the negative market impact is mainly driven by short-selling pressure from convertible bond arbitrageurs.
Do Investors Value Higher Financial-Reporting Quality, and Can Expanded Audit Reports Unlock This Value?

We present new theory and experimental findings indicating that investors ascribe value to firms that use higher financial-reporting quality (FRQ), controlling for the influence of higher FRQ on their estimates of these firms’ fundamental value. To guide our investigation, we draw on the cooperation literature in accounting, finance and psychology. We identify expanded audit reports, particularly auditor commentary, as a mechanism that credibly communicates whether a firm uses higher FRQ. Auditor commentary increases investors’ willingness to pay (WTP) more to own shares of a firm using higher FRQ than a competing firm using lower FRQ. We also provide process evidence that investors perceive higher FRQ as cooperative behavior by measuring their affective responses and cognitive beliefs, which mediate the influence of audit commentary on investors’ increased WTP for higher FRQ. A second experiment bolsters the link between investors’ affective and cognitive responses to a firm’s FRQ and perceived cooperative behavior. Overall, we contribute to the accounting literature by motivating a reinterpretation of studies on value relevance and mispricing. We also provide theory and evidence that there is greater value in expanded audit reports than previously understood, and this value likely has standard-setting and audit-pricing implications.
An Examination of Heterogeneous Beliefs With a Short-Sale Constraint in a Dynamic Economy

We study the effects of a market-wide short-sale constraint in a dynamic general equilibrium economy populated by optimistic and pessimistic investors. Imposing the constraint reduces the stock price if the optimist's intertemporal elasticity of substitution is less than one and increases the stock price if the optimist's intertemporal elasticity of substitution is greater than one. In all cases, the presence of the constraint implies that the pessimist's stock price marginal valuation is lower than the equilibrium price. In parameterized examples, the pessimist finds the stock most overvalued when the optimist's intertemporal elasticity of substitution is greater than one which is exactly when imposing the constraint reduces the equilibrium stock price. Additionally, the optimist's market price of risk falls and the instantaneous interest rate rises when the short-sale constraint is imposed. Imposing the constraint leads to a higher stock volatility when the optimist's intertemporal elasticity of substitution is less than one and a lower stock volatility when the optimist's intertemporal elasticity of substitution is greater than one.
Learning While Working: How Do Early Litigation Experiences Affect Managers' Disclosure?

We track the employment histories of over 3,000 chief executive officers (CEOs) and study how their past litigation experiences affect corporate disclosure decisions. We define litigation experience to be any securities class action experienced during a CEO’s early career in other firms and in non-CEO positions. We find that firms managed by these litigation-experienced CEOs provide guidance more frequently than firms not managed by such CEOs. Moreover, we find that they provide more timely earnings guidance, however, with wider range. We also find that market response to their disclosure is lower. Collectively, this evidence is consistent with the perspective that past litigation experience leads CEOs to increase the frequency with which they provide voluntary disclosure, but the surprise content (as measured by market reaction) of such disclosure falls. Such behavior is consistent with these managers seeking to avoid large price-change events, as such events are argued to attract litigation.
Let The Bear Beware: What Drives Stock Recalls

We exploit joint dynamics of lendable and lent shares in the equity lending market to measure recall activity by lenders. We find that high recall activity predicts poor stock performance and precedes the lowest returns by two months. This suggests that short sellers are forced out of otherwise profitable positions prematurely. Short sellers lose more of their potential profits if lenders have access to non-public information signals, if high inventory concentration and correlated signals among lenders limit loan diversification, and if negative information diffuses slowly in the market. Overall, we establish that informational sophistication of lenders is the primary driver of informative stock recalls, which are most damaging to profitable short positions.
Security Analysis, Agency Costs and UK Firm Characteristics

In this paper we examine the monitoring activity of security analysis from the manager-shareholder conflict perspective. Using a unique data set of more than 400 UK firms tracked by security analysts over the 1999-2000 period, our preliminary evidence supports the view that security analysis acts as a monitoring mechanism in reducing agency costs for the three measures of agency costs employed by this paper. More importantly, we also find that security analysts are more effective in reducing managerial non-value maximising behaviour for smaller firms than for larger firms supporting the supposition that as firms grow in size and become more complex, the monitoring activity of security analysis becomes less effective. In addition, we find that security analysis has a positive and significant impact on firm value for smaller as opposed to larger firms.
The Impact of Values‐Job Fit and Age on Work‐Related Learning

Research shows that both individual and job&#8208;related factors influence a worker's work&#8208;related learning. This study combines these factors, examining the impact of fit between one's work values and job characteristics on learning. Although research indicates that fit benefits multiple work&#8208;related outcomes, little is known about the impact of fit on learning. Moreover, life span theories indicate that values evolve throughout the lifespan. Therefore, we examined how age influences work values and thereby work&#8208;related learning. Our self&#8208;report questionnaire was completed by 221 workers of various ages and occupations. Our findings indicate that work values, job characteristics and their fit influence the quantity and quality of work&#8208;related learning. Generally, a higher fit benefits learning, but misfit can also stimulate learning. Workers of different ages report an equal amount of learning, but perform different learning activities. However, this relationship is unrelated to work values. Recommendations for research and practice are discussed.
Assessing the Quality of Bank Loan Ratings

As opposed to the public debt market, the ultimate users of bank loan ratings, lenders, may prefer inflated ratings to reduce their risk-weighted assets. By exploiting variation in borrower information asymmetry, and thus rating agencies' ability to acquiesce to lender demands, we provide evidence of whether ratings assigned on private bank loans are reliable indicators of borrower distress. We find that bank loan ratings are systematically biased upwards for bank borrowers with greater information asymmetry. We also find that bank loan ratings are less responsive to changes in underlying credit conditions for borrowers with greater information asymmetry, implying that rating agencies stray away from hard information when formulating ratings for these borrowers. Bank loan ratings are downgraded less often for borrowers with greater information asymmetry, while no difference exists for upgrades. In addition, ratings and ratings changes for high information asymmetry borrowers are less predictive of subsequent loan default. The Basel Accords allow banks to condition capital allocation on borrowers' credit ratings. Our study cautions against this practice.
SPAC IPOs and Sponsor Network Centrality

The structure of a special purpose acquisition company (SPAC) provides a special role for its sponsors. We show that while few characteristics can explain SPACs' returns, sponsors' connections and network, measured by their centrality, explain a large portion of return variation in the cross-section. A one standard deviation increase in sponsors' network centrality leads to a 3.7% higher merger and acquisition success probability and a 2.1% higher post-merger monthly abnormal return. We attribute this outperformance of firms with high network centrality to superior deal sourcing and fundraising abilities. Overall, we show that the network connections of the SPAC management teams can add value to SPACs' deals despite the general underperformance of SPACs after business combinations.
Gradual Information Diffusion across Commonly Owned Firms

Firms with institutional common ownership (ICO) correlate with each other in several key indicators of fundamental growth, yet their monthly stock returns follow a lead-lag pattern. An ICO momentum has greater return-predicting power than Ali and Hirshleifer (2020)'s shared-analyst momentum. Institutional investors' trading patterns and the augmentation effect of ICO on the predicted returns support an extended gradual-information-diffusion model of Hong and Stein (1999) with multiple correlated risky assets. Institutions privately observe heterogeneous valuation signals which are correlated among the fundamentally connected firms. The signals spread across institutions over time and are gradually incorporated into stock prices.
Will I Be Able to Function Effectively? Pandemic and Its Effect on Entrepreneurial Well-Being and Post-COVID-19 Functioning

The present study proposes a theoretical framework to explain the resource constraints induced by pandemic on entrepreneurs. It has affected entrepreneurial well-being, which is described to dampen post-pandemic functioning. This theoretical study has also advanced the role of the type of entrepreneur in dealing with such stressor of a pandemic using the Lerman and colleagues' (2020) stress event theory (SET). This study is theoretical. It proposes a conceptual framework for the relationships between COVID-19 induced resource constraints and the entrepreneurial post-COVID-19 functioning with the underlying mechanism of entrepreneurial well-being. Following SET, this conceptual paper also proposes that opportunity entrepreneurs would be able to cope with this stressful event, which makes the difference in his or her well-being, social relationships, and functioning compared to the necessity entrepreneur. This study expects that the pandemic-induced constraints in property loss, physical infection, psychological stress, and the loss of loved have negatively affected the entrepreneur's well-being, which has limited the entrepreneurial functioning to perform post-pandemic. However, the type of entrepreneur makes a difference in affected well-being and functioning. This is the first study to explain the effect that pandemic has induced on the valued resources of entrepreneurs and will affect the post-pandemic functioning. The authors have presented a theoretical model incorporating the predictors and outcomes of entrepreneurial well-being in times of COVID-19 pandemic to suggests future research directions. The paper's proposed relationships can be tested empirically to understand better the magnitude of such effects on entrepreneurial post-pandemic functioning. Further, the conceptual model has important implications for practitioners.
Impact of Regulations on Shareholder Value: Evidence from the 2016 US Presidential Election

This study examines whether changes in the federal regulatory environment have a direct impact on firm value. Using the 2016 US presidential election result as a shock to expectations about the future regulatory environment, I find that firms in the most regulated industries earned, on average, 3.7% higher abnormal stock returns during the first ten trading days after the election. Additional results exploring the underlying economic mechanisms indicate that greater levels of regulation disproportionately benefit shareholders of low-growth firms, and help incumbent firms to extract monopoly rents by curtailing competition and through political favoritism.
Proving Approval: Bank Dividends, Regulation, and Runs

Bank stability depends on information. Regulators can allow banks to release some information about their safety and soundness. This paper shows how dividend regulation and information interact to affect bank stability. In the model, wealth-expropriation, excess cash flow, and signaling incentives affect a bank’s decision to pay dividends. The regulator aims to prevent wealth expropriation through dividend restrictions on undercapitalized banks. However, this action increases the banks’ incentives to pay dividends for signaling. Signaling incentives are further exacerbated in the presence of bank runs. We show that the first best solution is achievable through dividend restrictions only if capital requirements are sufficiently high. Furthermore, a more restrictive dividend regulatory policy is optimal in stressed economic environments, when banks are more run-prone, allowing the weak banks to pool with strong.
The Walkdown to Beatable Analyst Forecasts: The Roles of Equity Issuance and Insider Trading Incentives

Security regulators and the business press have alleged that firms play an 'earnings-guidance game' where analysts make optimistic forecasts at the start of the year and then 'walk down' their estimates to a level the firm can beat by the end of the year. In a comprehensive sample of I/B/E/S individual analysts' forecasts of annual earnings from 1983-1998, we find strong support for the claim in the post-1992 period. We examine whether the 'walk down' to beatable targets is associated with managers' incentives to sell stock after earnings announcements on the firm's behalf (via new equity issuance) or from their personal accounts (insider trades). Consistent with these hypotheses, we find that the 'walk down' to beatable targets is most pronounced in firms that are either net issuers of equity or in firms where managers are net sellers of stock after an earnings announcement. These findings provide new insights on how capital market incentives affect communications between managers and analysts.
Capital Structure or Debt Tax Shielding Ratio: An Empirical Investigation for Belgian Firms

So far research on capital structure choice has yielded little support for the trade-off theory of capital structure choice. Berens and Cuny (1995) argue that most of the existing research is not suited for investigating the relevance of this theory, as firms can avoid tax payments completely without being fully debt-financed. It would therefore be more appropriate to consider the extent to which firms avoid taxes, their so-called debt tax shielding ratio, rather than their leverage. It could then also be argued that the theoretical determinants of capital structure choice should explain firms' debt tax shielding ratios. In this paper I investigate whether the trade-off theory can explain the variance in debt tax shielding by Belgian firms. The results provide hardly more support for the trade-off theory than traditional research on the determinants of capital structure choice.