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Description
This study investigates the relation between credit supply competition among banks and their clients’ conditional accounting conservatism (i.e., asymmetric timely loss recognition). The Interstate Banking and Branching Efficiency Act (IBBEA) of 1994 permits banks and bank holding companies to expand their business across state lines, introducing a positive shock to credit supply competition in the banking industry. The increase in credit supply competition weakens banks’ bargaining power in the negotiation process, which in turn may weaken their ability to demand conservative financial reporting from borrowers. Consistent with this prediction, results show that firms report less conservatively after the IBBEA is passed in their headquartered states. The effect of the IBBEA on conditional conservatism is particularly stronger for firms in states with a greater increase in competition among banks, firms whose operations are more concentrated in their headquarter states, firms with greater financial constraints, and firms subject to less external monitoring. Robustness tests confirm that the observed decline in conditional conservatism is causally related to the passage of IBBEA. Overall, this study highlights the impact of credit supply competition on financial reporting practices.
ContributorsHuang, Wei (Author) / Li, Yinghua (Thesis advisor) / Huang, Xiaochuan (Committee member) / Kaplan, Steve (Committee member) / Arizona State University (Publisher)
Created2018
Description
Given its impact on the accounting profession and public corporations, Sarbanes-Oxley Act of 2002(SOX) is a widely researched regulation among accounting scholars. Research typically focuses on the impact it has had on corporations, executives and auditors, however, there is limited research that illustrates the impact SOX may have on average Americans. There were several US criminal code sections that resulted from the passing of SOX. Statute 1519, which is often referred to as the "anti-shredding provision", penalizes anyone who "knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to" obstruct a current or foreseeable federal investigation. This statute, although intended to punish behavior similar to that which occurred in the early 2000s by corporations and auditors, has been used to charge people beyond its original intent. Several issues with the crafting of the statute cause its broad application and some litigation even reached the Supreme Court due to its vague wording. Not only is the statute being applied beyond the intent, there are other issues that legal scholars have critiqued it for. This statute is far from being the only law facing these issues as the same issues and critiques are found in the 14th amendment. Rewriting the statute seems to be the most effective way to address the concerns of judges, lawyers and defendants regarding the statute. In addition, Congress could have passed this statute outside of SOX to avoid being seen as overreaching if obstruction of justice related to documents was actually an issue outside of corporate fraud.
ContributorsGonzalez, Joana (Author) / Samuelson, Melissa (Thesis director) / Lowe, Jordan (Committee member) / School of Accountancy (Contributor) / Barrett, The Honors College (Contributor)
Created2016-12
Description
Insider trading potentially reveals proprietary information, allowing rivals to compete more effectively against the insiders' firm. This paper examines whether proprietary costs are associated with insiders' trading decisions and the profitability of their trades. Using a variety of approaches to identify proprietary information risk, I find proprietary costs significantly deter insiders' trading activities. The deterrence effect is more pronounced when insider trading is likely to be more informative to rivals. Specifically, trades by top executives, non-routine trades, and trades at low complexity firms are curbed to a greater extent by proprietary costs. Examining the mechanisms of this deterrence effect, I find firms with higher proprietary costs are more likely to impose insider trading restrictions, and insiders' trading decisions are more sensitive to proprietary costs when they have higher share ownership of the company. These results suggest insiders reduce trading activities not only due to firm policies, but also due to incentive alignment. Finally, when insiders trade despite higher proprietary costs, they earn significantly higher abnormal profits from their purchase transactions. Overall, this study suggests product market considerations are an important factor associated with insiders' trading decisions and profitability of their trades. These findings are likely to be of interest to regulators and corporate boards in setting insider trading policies, and help investors make investment decisions using insider trading signals.
ContributorsChoi, Lyungmae (Author) / Hillegeist, Stephen (Thesis advisor) / Faurel, Lucile (Thesis advisor) / Hugon, Jean (Committee member) / Huang, Xiaochuan (Committee member) / Arizona State University (Publisher)
Created2017
Description
Accounting estimates are developed in a bottom-up fashion; subordinates generate estimates that are reviewed by managers. The anchoring heuristic suggests managers may be highly influenced by subordinates’ initial estimates. However, motivated reasoning theory predicts that reporting incentives will bias managers’ review in favor of estimates that are incentive consistent, and managers will selectively attend to information that supports their preferred conclusion, including their perceptions of the subordinate. Using experimental methods I manipulate the consistency of the subordinate estimate with management reporting incentives, and the narcissistic description of the subordinate. Consistent with motivated reasoning theory, I find that managers anchor on incentive consistent subordinate estimates, regardless of subordinate narcissism, but anchor less on incentive inconsistent subordinate estimates, especially when the estimate comes from a narcissistic subordinate. I also find evidence that managers believe narcissistic subordinates act strategically in their own self-interest, and selectively attend to this belief to adjust away from incentive inconsistent subordinate estimates, but not incentive consistent subordinate estimate. My results reveal two potential weaknesses in the management review process: susceptibility to subordinate anchors, and bias created by reporting incentives.
ContributorsHayes, Matthew J (Author) / Reckers, Philip (Thesis advisor) / Lowe, Jordan (Committee member) / Maksymov, Eldar (Committee member) / Arizona State University (Publisher)
Created2016
Description
Recent research finds that there is significant variation in stock market participation by state and suggests that there might be state-specific factors that determine household stock market participation in the United States. Using household survey data, I examine how accounting quality of public companies at the state level affects households’ stock market participation decisions. I find that households residing in states where local public companies have better accounting quality are more likely to invest in stocks. Moreover, those households invest greater amounts of their wealth in the stock market. Cross-sectional tests find that the effect of accounting quality on stock market participation is more pronounced for less affluent and less educated households, consistent with prior findings that lacking familiarity with and trust in the stock market is an important factor deterring those types of households from stock investments. In state-level tests, I find that these household outcomes affect income inequality, which is less severe in states where high public-firm accounting quality spurs more stock market participation by poorer households. Conversely, in states where public firms have lower accounting quality, stock market participation among poorer households is less common, and a larger share of high equity returns accrues to richer households, exacerbating income inequality.
ContributorsKim, Min (Author) / Huang, Xiaochuan (Thesis advisor) / Rykaczewski, Maria (Committee member) / White, Roger (Committee member) / Arizona State University (Publisher)
Created2020
Description
This paper consists of a literature review, wherein four papers surrounding Motivation Crowding Theory (MCT) were read and analyzed. The paper then goes into an analysis of a survey I conducted. The survey consisted of three main questions with three sub-questions for each, and all attempted to find a "limit" to MCT. However, results for the survey were ultimately inconclusive. The paper concludes with lessons learned in conducting research and surveys in particular, as well as a nod to the relevancy of MCT in business and personal applications.
ContributorsSmith, Mallory Anne (Author) / Reckers, Phil (Thesis director) / Samuelson, Melissa (Committee member) / Lowe, Jordan (Committee member) / School of Accountancy (Contributor) / Department of Information Systems (Contributor) / WPC Graduate Programs (Contributor) / Barrett, The Honors College (Contributor)
Created2020-05
Description
This research study aims to find out the way how goodwill should be evaluated. This paper is about accounting for goodwill which will provide general information about goodwill value, especially of public companies. Additionally, I will discuss sources of goodwill, the importance of goodwill, why it is important to evaluate goodwill correctly, and what methods have been applied to evaluate goodwill. This thesis will analyze the advantages and disadvantages of both methods of accounting for goodwill which are the impairment testing method and the amortization method. This study is done by researching studies, journal articles, reviews, books, and websites about accounting. Lastly, this study will provide a suggestion for how goodwill should be evaluated effectively.
ContributorsPham, Trang Thi Thuy (Author) / Shields, Paul (Thesis director) / Huang, Xiaochuan (Committee member) / School of Accountancy (Contributor) / Department of Information Systems (Contributor) / Barrett, The Honors College (Contributor)
Created2021-05