Miracle-dz/UniFAR-FTUs huggingface dataset:
How Do Look-Back Analyses and Evidence Specificity Affect Auditors’ Planning Judgments?

During a look-back analysis, auditors review prior-period evidence to understand estimation inaccuracies and assess the reliability of management’s estimation process. We find that evidence specificity moderates the relation between the consistency of an estimation inaccuracy with management’s incentives and auditors’ reliability assessments. The direction of an estimation inaccuracy has no effect on auditors’ reliability assessments when the prior-period evidence is less specific. When prior-period evidence is more specific, auditors report the highest (lowest) reliability assessments of management’s estimation process when an estimation inaccuracy is inconsistent (consistent) with management’s incentives. Auditors’ low reliability assessments in the more specific, consistent condition, however, do not translate to high risk assessments. Instead, specificity has a main effect on auditors’ risk assessments. A follow-up experiment reveals, though, an inverse relation between auditors’ reliability and risk assessments when auditors are provided procedures to address various levels of assessed misstatement risk.
Empirical Test on the Liquidity-Adjusted Capital Asset Pricing Model

In this study, we examine the effects of systematic liquidity risk on stock returns in the Australian market. We find that liquidity risk, in the form of (i) the co-movement between individual stock liquidity and market liquidity, (ii) the co-movement between stock returns and market liquidity, and (iii) the co-movement between stock liquidity and market returns, is priced individually and jointly in Australian equities. The results are robust to the use of alternative liquidity proxies and after controlling for other factors that are known to affect stock returns. The analysis across different market conditions shows that the net liquidity risk is approximately eight times higher in bearish markets than in bullish markets. Our overall results support the importance of liquidity risk in the generation of stock returns, particularly during market downturns.
Preliminary Draft: Please do not cite or circulate without permission of the authors Relevance and Consequences of Votes against Auditor Ratification – Evidence from a Mandatory and Binding Ratification Setting

This paper empirically examines the impact of shareholder ratification of auditors (SRA) voting results on audit fees in a mandatory and binding ratification setting (i.e., Germany). Motivation for our study comes from the widespread implementation of SRA in Europe. Furthermore, it addresses calls for research on the effect of mandatory SRA voting results and on SRA outside the US. We obtain three main findings: (i) Big 4 and Non-Big 4 auditors respond differently to large shareholder dissent, (ii) Big 4 audit fees are approximately 15 percent higher following an economically significant magnitude of negative votes on auditor ratification and (iii) respective audit fee increases are associated with higher audit report lag. Based on these results, we conclude that (i) the different response of Big 4 and Non-Big 4 auditors can be attributed to the relevance of shareholder dissent, (ii) Big 4 auditors try to remedy unfavorable SRA voting results by engaging in additional audit effort and (iii) this additional audit effort most likely relates to additional endeavors in audit service quality in order to meet the needs of the audit committee. Our study is, to the best of our knowledge, the first to examine how auditors respond to SRA voting results in a mandatory and binding ratification setting.
Running head: SIGNALING WHEN NOBODY IS WATCHING 1 Signaling when no one is watching: A reputation heuristics account of outrage and punishment in one-shot anonymous interactions

Moralistic punishment can confer reputation benefits by signaling trustworthiness to observers. But why do people punish even when nobody is watching? We argue that people often rely on the heuristic that reputation is typically at stake, such that reputation concerns can shape moral outrage and punishment even in one-shot anonymous interactions. We then support this account using data from Amazon Mechanical Turk. In anonymous experiments, subjects (total n = 8440) report more outrage in response to others’ selfishness when they cannot signal their trustworthiness through direct prosociality (sharing with a third party)—such that if the interaction were not anonymous, punishment would have greater signaling value. Furthermore, mediation analyses suggest that sharing opportunities reduce outrage by decreasing reputation concerns. Additionally, anonymous experiments measuring costly punishment (total n = 6076) show the same pattern: subjects punish more when sharing is not possible. And importantly, moderation analyses provide some evidence that sharing opportunities do not merely reduce outrage and punishment by inducing empathy towards selfishness or hypocrisy aversion among non-sharers. Finally, we support the specific role of heuristics by investigating individual differences in deliberateness. Less deliberative individuals (who typically rely more on heuristics) are more sensitive to sharing opportunities in our anonymous punishment experiments, but, critically, not in punishment experiments where reputation is at stake (total n = 3422); and not in our anonymous outrage experiments (where condemning is costless). Together, our results suggest that when nobody is watching, reputation cues nonetheless can shape outrage and—among individuals who rely on heuristics—costly punishment.
Insights on CFOs' Perceptions About Impairment Testing Under IAS 36

We survey CFOs of Italian listed companies and examine their views on the complexities involved in implementing IAS 36 requirements and the perceived usefulness of national guidelines aiming at assisting preparers in this respect. We find that IAS 36 is perceived as an atypical standard among IFRS, it demands subjective interpretation, its requirements can be made adaptable to managerial needs and do not limit creative accounting. Further, respondents do not see a strong link between IAS 36 disclosure requirements and market variables, except for stock returns. Moreover, the impairment testing process became more difficult during the recent financial crisis and guidelines issued by the Italian authorities do not appear to assist in implementing the recoverable amount estimation process or compliance with mandatory disclosure. The respondents explicitly call for a revision in IAS 36 and/or issuance of separate guidance. These findings inter alia respond directly to the IASB’s current quest on financial statements preparers’ concerns about the application of the IAS 36 requirements.
Stabilization of Compressed Earth Blocks (CEB) by Pozzolana Based Phosphate Geopolymer: Physico-Mechanical, Structural and Microstructural Investigations

This work proposes the poly(phospho-ferro-siloxo) binder resulting from the phosphoric acid activation of pozzolana (PZ) as a friendly stabilizing agent for compressed earth bricks (CEBs). Different proportions of pozzolana were incorporated into the clay soil (5, 10, 15 and 20 wt%). The CEBs were cured at room temperature and at 70 °C. Powder X-ray diffraction (PXRD), Fourier transformed infrared spectroscopy (FTIR), scanning electron microscopy (SEM) with energy-dispersive X-ray (EDX) spectroscopy, water absorption as well as mechanical strength tests were used to characterize the 28 days aged CEBs. The compressive strength of CEBs varies from 9.2 to 20.6 MPa and 10.2 to 42.8 MPa at room temperature and 70 °C, respectively. Water absorption ranges from 6 to 11% at 25 °C and 8 to 12% at 70 °C. This work showed that ground pozzolana can be used similarly as calcined laterites and clays for efficient geopolymerization stabilization of compressed earth bricks.
Does Stock Misvaluation Drive Merger Waves?

Despite the mounting evidence that stock misvaluation affects takeover characteristics and outcomes at the deal level, there remains a prolonged debate over whether mispricing drives aggregate industry-level merger activity. We depart from the extant literature and investigate whether stock misvaluation drives industry-level merger waves by contrasting the effects of acquirer valuation during “stock” and “cash” merger waves, defined using pure stock or cash acquisitions during 1981-2015. Using the timing of stock waves, we find that acquirer valuation peaks during wave periods, and acquirers have low stock performance in the 5-year period after the merger bid, with especially acute underperformance for mergers announced during stock waves. There is little evidence of such patterns around cash merger waves. These results suggest that equity misvaluation drives stock merger waves, and agency costs associated with overvalued equity prevent acquirer shareholders from reaping gains from merger waves.
Recognition versus Disclosure of Fair Values

This paper examines pricing differences across recognized and disclosed fair values. We build on prior literature by examining two theoretical causes of such differences: lower reliability of the disclosed information, and/or investors’ higher related information processing costs. We examine European real estate firms reporting under International Financial Reporting Standards (IFRS), which require that fair values for investment properties, our sample firms’ key operating asset, either be recognized on the balance sheet or disclosed in the footnotes. Consistent with prior research, we predict and find a lower association between equity prices and disclosed relative to recognized investment property fair values, reflecting a discount assigned to disclosed fair values. We then predict and find that this discount is mitigated by lower information processing costs (proxied via high analyst following), and some support that it is also mitigated by higher reliability (proxied via use of external appraisals). These latter results are documented using subsample analyses to test one attribute (either information processing costs or reliability) while holding the other constant. Overall, these findings are consistent with fair value reliability and information processing costs providing complementary explanations for observed pricing discounts assessed on disclosed accounting amounts.
Does Location Matter for Disclosure? Evidence from Geographical Segments

The segment disclosures of multinational companies provide strategic information. We use the location characteristics of geographic segments to identify the reasons for withholding or disclosing segments. We examine segment data from around the adoption of IFRS 8, a reporting standard that requires firms to reveal more disaggregated information. Consistent with a proprietary cost motive for nondisclosure, we find that segments in regions that are deemed better for business tend to be hidden, while higher entry barriers for a segment are positively related to disclosure. These effects appear to be stronger for firms for which proprietary cost motives are more important. Among the previously unrevealed segments, proprietary costs explain the nondisclosure of segment earnings and other relevant financial information for investors.
Do Stock-Level Experienced Returns Affect Security Selection?

We examine whether the managers of equity mutual funds exhibit reinforcement learning, investing more heavily in firms in which they previously experienced higher returns. The results reliably support this hypothesis. Experienced returns affect managers' re-balancing decisions in response to flows, and influence investments at the style level. Experienced returns do not affect the investments of index-tracking funds. When new managers come in a fund, their experiences with stocks in their old funds, influence the investments in these stocks by their new funds. Funds managed by managers who rely more on reinforcement learning, earn lower returns. Experienced returns, when aggregated across managers for each stock, predict lower stock returns. Overall, our evidence indicates that reinforcement learning affects the stock-specific return trades of portfolio managers, with important implications for fund performance and asset prices.
Review of Corporate Governance Bundle

Due to the importance of corporate governance in our business world today, especially after the frequent non-stop financial crises, and since one corporate governance mechanism may not fulfill the purpose, researchers recently came up with a bundle of corporate governance mechanisms which may complement each other or substitute one another. This paper reviews the literature as regards the evolution, development, current application, and potential future use of this bundle, together with relevant critiques.
Competition Laws, Governance, and Firm Value

Do antitrust laws influence corporate valuations? We evaluate the relationship between firm value and laws limiting firms from engaging in anticompetitive agreements, abusing dominant positions, and conducting M&As that restrict competition. Using firm-level data from 99 countries over the 1990-2010 period, we discover that valuations rise after countries strengthen competition laws. The effects are larger among firms with more severe pre-existing agency problems: firms in countries with weaker investor protection laws, with weaker firm-specific governance provisions, and with greater opacity. The results suggest that antitrust laws that intensify competition exert a positive influence on valuations by reducing agency problems.
Effect of COVID-19 Pandemic on Resolution of Cases in Courts: The Kenyan Judiciary

The Constitution of Kenya and the Judiciary Strategic Plan (2019-2023) identifies improved access to, and expeditious delivery of justice as key result areas for the Judiciary, a public institution that is the custodian of justice and pivotal for socio-economic wellbeing of the society. With the onset of the COVID-19 pandemic in Kenya, diverse interventions were instituted both at the Judiciary headquarters and at court level. The aim of the interventions was twofold. First was to control the spread of the disease through courts and second was to ensure continuity in service delivery. Despite the constitutional dictate, institutional aspiration, and interventions that were undertaken, the resolution of cases in courts, one of the indicator of access to justice, reduced during the pandemic period. Specifically, the number of cases that were resolved in all courts reduced from 469,359 in the financial year 2018/19 to 289,728 cases in 2019/20 when COVID-19 disease was first reported in Kenya. Could this reduction be attributed to the pandemic or to some other underlying factors, and by what magnitude if at all? Were the instituted measures able to impact on resolution of cases? To answer these questions, the study first sought to establish the measures that were undertaken by Judiciary. This entailed a review of interventions that were undertaken at Judiciary headquarters through the use of circulars, notices and guidelines that were issued from time to time, as well as collection and analysis of primary data from Heads of Stations and Deputy Registrars of courts on measures that were carried out at court level. Secondly, the study sought to determine the effect of COVID-19 pandemic and the consequent measures on resolution of cases in courts. This was realized through the use of two-step system Generalized Method of Moment’s regression that employed secondary panel data. The findings were that the courts had undertaken numerous measures to control the spread of the pandemic to ensure continuity of service delivery amidst the pandemic. Further, COVID-19 pandemic had adversely affected resolution of cases in courts despite the numerous measures that were instituted. Drawing from these findings, diverse policy actions and recommendations have been proposed with an aim of enhancing resolution of cases in courts during the pandemic period and beyond. <br>
Managing Returns Policies with Consumer Resale

We consider a retailer selling new products with a returns policy. After consumers purchase products and find them undesirable, they can either return the products to the retailer or resell them individually. Both the retailer and consumers incur transaction costs in resale. Anticipating that the product resale exists in the later period, consumers with heterogeneous valuations decide whether to purchase the new products or wait for the resold ones. We investigate how the existence of consumer resale affects the retailer's optimal returns policy. It is generally believed that the retailer always benefits from a higher product resale value without consumer resale. By contrast, we find that the retailer's profit may decrease in the product resale value when both the retailer and consumers have an option to resell. We also find that the existence of consumer resale may either increase or decrease the retailer's profit. Specifically, the retailer benefits from consumer resale only when consumers incur a lower resale transaction cost than the retailer does and the product has a high resale value. Moreover, the retailer may benefit from a larger resale transaction cost incurred by consumers too. Our results suggest that the retailer should consider a returns policy to manage the resale market as long as it is more efficient in resale than consumers.
Gender Diversity and Audit Quality: Evidence from Audit Partner Pairing

This study examines how audit-partner gender-diversity impacts audit quality, using data from China, where two partners are assigned to lead each engagement. Female and male partners bring different resources, in the form of information, expertise, experience, and perspectives that could result in higher professional skepticism and better audit quality. The beneficial effect of gender diversity on audit quality is likely to be stronger when the two partners have similar authority or collaborated before, resulting in effective inter-partner communication, and in complex engagements where different perspectives are more valuable. Using the propensity to issue modified audit opinions as a proxy for audit quality, we provide evidence supporting these propositions. Additional analyses show that dyads of gender-diverse partners are less likely to be sanctioned and can charge higher audit fees. These findings further support the hypothesis that partner gender diversity enhances audit quality.
Pre-Release Buzz Evolution Patterns and New Product Performance

This study examines the dynamics of online buzz over time before product release. Employing functional data analysis, we treat the curve of prerelease buzz evolution trajectory as the unit of analysis and find that the shape of the curve significantly adds power in predicting new product performance compared with using product characteristics and firm advertising alone. Moreover, daily prerelease buzz evolution data enable accurate sales forecasting long before product release, which allows sufficient time for managers to adjust product design and/or marketing strategy. For example, the forecasting accuracy using an early buzz evolution curve ending on the 61st day before product release is not only higher than that using accumulated buzz volume until then but also higher than that using the total volume of all buzz up until product release. Beyond the sales outcome, we find that prerelease buzz is quickly reflected in firm stock returns before product release and reduces the absolute amount of postrelease stock price correction. The model accounts for endogeneity, and the results are robust after controlling for buzz sentiment. We also explore the factors influencing prerelease buzz evolution patterns, thus generating insights into how to manage prerelease buzz dynamics to enhance new product performance.
Impact of CO 2 Emissions: Evidence from Pakistan

This study highlights the link among the four economic factors such as CO<sub>2</sub> per capita, GDP per capita, Energy Consumption and population growth in Pakistan with the help of ARDL econometric technique based upon time series data over the period of 41 years from 1970-2010. Initially, it is observed that all the variables have a unit root at a 1% level of significance through ADF test. The econometric results reveal that energy consumption, GDP per capita, and population growth have a long-run relationship as analyzed by Auto-Regressive Distributed Lag (ARDL) test of co-integration. It is found that a 1% increase in GDP per capita, population, and energy consumption will lead to a raise the CO<sub>2</sub> emission per capita by 0.46%, 9.70%, and 0.005% respectively. This paper also observed uni-directional causality among CO<sub>2</sub> per capita, GDP per capita, population growth, and energy consumption variables whereas the parameters are stable i.e. lie under the critical bound at a 5% level of significance in Pakistan.
Managerial Myopia and Brand Innovation

Using the newly available U.S. trademark dataset to measure the lifespan of new brands, we find that new brands’ survival rate significantly declines following managers’ myopic cuts in marketing budgets. This evidence is consistent with concerns raised by marketing managers that firms’ brand innovation is being sacrificed in order to manage reported earnings to meet short-term earnings targets. The observed effect is more pronounced for firms in industries where more resources are devoted to advertising expenditures and in more reputation-sensitive industries. Additional analyses show that the survival rate of new brands has a significantly positive impact on future sales growth and profitability, confirming the value-relevance of brand innovation and our findings about the detrimental effects of earnings management .
Household Portfolio Diversification: A Case for Rank Dependent Preferences

The proliferation of novel preference theories in financial economics is hampered by a lack of non-experimental evidence and by the theories' additional complexity which has not been shown to be critical in applications. In this paper I present arguments in support of preferences with rank dependency. Using the Survey of Consumer Finances data I document two widespread patterns inconsistent with expected utility: (i) many households simultaneously invest in well-diversified funds and in poorly-diversified portfolios of stocks; and (ii) some households with substantial savings do not invest anything in equities. I show that portfolio choice models with rank-dependent preferences, plausibly parameterized and under fully rational assumptions, are quantitatively consistent with the observed diversification. These results call for further efforts to integrate the models of rank-dependent preferences in portfolio theory and asset pricing. This paper was previously circulated under the title "Household Portfolio Diversification. " The paper has benefited from the comments of Shlomo Benartzi, Luca Benzoni, Markus Brunnermeier, John Dickhaut, Maria Pirozek, Raj Singh, Hersh Shefrin, and workshop participants at Minnesota Finance bag lunch, 2003 Wharton conference "Household Financial Decision Making and Portfolio Choice", and 2003 summer meetings of Econometric Society. I would like to thank Cam Harvey (the editor) and an anonymous referee for many helpful comments and suggestions. A special thanks to Jack Kareken for comments and editorial help on an earlier draft. I am grateful to Donna Zerwitz for editorial assistance. The views expressed herein are those of the author and not necessarily of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. All errors and omissions are sole responsibility of the author.