Matching Items (6)
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- All Subjects: Accounting
- Creators: Brown, Jenny
- Resource Type: Text
Description
In this study, I test whether firms reduce the information asymmetry stemming from the political process by investing in political connections. I expect that connected firms enjoy differential access to relevant political information, and use this information to mitigate the negative consequences of political uncertainty. I investigate this construct in the context of firm-specific investment, where prior literature has documented a negative relation between investment and uncertainty. Specifically, I regress firm investment levels on the interaction of time-varying political uncertainty and the degree of a firm's political connectedness, controlling for determinants of investment, political participation, general macroeconomic conditions, and firm and time-period fixed effects. Consistent with prior work, I first document that firm-specific investment levels are significantly lower during periods of increased uncertainty, defined as the year leading up to a national election. I then assess the extent that political connections offset the negative effect of political uncertainty. Consistent with my hypothesis, I document the mitigating effect of political connections on the negative relation between investment levels and political uncertainty. These findings are robust to controls for alternative explanations related to the pre-electoral manipulation hypothesis and industry-level political participation. These findings are also robust to alternative specifications designed to address the possibility that time-invariant firm characteristics are driving the observed results. I also examine whether investors consider time-varying political uncertainty and the mitigating effect of political connections when capitalizing current earnings news. I find support that the earnings-response coefficient is lower during periods of increased uncertainty. However, I do not find evidence that investors incorporate the value relevant information in political connections as a mitigating factor.
ContributorsWellman, Laura (Author) / Dhaliwal, Dan (Thesis advisor) / Hillegeist, Stephen (Thesis advisor) / Walther, Beverly (Committee member) / Mikhail, Mike (Committee member) / Hillman, Amy (Committee member) / Brown, Jenny (Committee member) / Arizona State University (Publisher)
Created2014
Description
Executive compensation is broken into two parts: one fixed and one variable. The fixed component of executive compensation is the annual salary and the variable components are performance-based incentives. Clawback provisions of executive compensation are designed to require executives to return performance-based, variable compensation that was erroneously awarded in the year of a misstatement. This research shows the need for the use of a new clawback provision that combines aspects of the two currently in regulation. In our current federal regulation, there are two clawback provisions in play: Section 304 of Sarbanes-Oxley and section 954 of The Dodd\u2014Frank Wall Street Reform and Consumer Protection Act. This paper argues for the use of an optimal clawback provision that combines aspects of both the current SOX provision and the Dodd-Frank provision, by integrating the principles of loss aversion and narcissism. These two factors are important to consider when designing a clawback provision, as it is generally accepted that average individuals are loss averse and executives are becoming increasingly narcissistic. Therefore, when attempting to mitigate the risk of a leader keeping erroneously awarded executive compensation, the decision making factors of narcissism and loss aversion must be taken into account. Additionally, this paper predicts how compensation structures will shift post-implementation. Through a survey analyzing the level of both loss- aversion and narcissism in respondents, the research question justifies the principle that people are loss averse and that a subset of the population show narcissistic tendencies. Both loss aversion and narcissism drove the results to suggest there are benefits to both clawback provisions and that a new provision that combines elements of both is most beneficial in mitigating the risk of executives receiving erroneously awarded compensation. I concluded the most optimal clawback provision is mandatory for all public companies (Dodd-Frank), targets all executives (Dodd-Frank), and requires the recuperation of the entire bonus, not just that which was in excess of what should have been received (SOX).
ContributorsLarscheid, Elizabeth (Author) / Samuelson, Melissa (Thesis director) / Casas-Arce, Pablo (Committee member) / WPC Graduate Programs (Contributor) / School of Accountancy (Contributor) / Barrett, The Honors College (Contributor)
Created2018-12
Description
In 2004, the American Jobs Creation Act allowed a yearlong repatriation holiday for corporations in the United States. The corporations could bring their earnings back to the United States at a considerably reduced tax rate under this repatriation holiday. Despite some criticisms of the original repatriation holiday, there have been attempts to recreate the repatriation holiday. I created an estimate of what the companies who participated in the first repatriation holiday would pay in taxes and what amount of previously permanently reinvested earnings they would be able to bring back to the United States under a second repatriation holiday. This revealed $744 billion in post-tax earnings that could be brought back to the United States. The data is a good starting point for expanded research on the impacts and implications of a new repatriation holiday, despite the hypothetical nature of the data and its potential for obsolescence.
ContributorsMasters, Matthew Brandon (Author) / Brown, Jenny (Thesis director) / Levendowski, Glenda (Committee member) / Duncan, William (Committee member) / Barrett, The Honors College (Contributor) / School of Accountancy (Contributor) / Department of Psychology (Contributor)
Created2013-05
Description
I examine whether a stock’s inclusion in green exchange traded funds and mutualfunds (GMFs) affects liquidity and analyst following. I base these predictions on prior
literature that establishes that a firm’s pro-ESG (Environmental, Social, and Governance)
orientation can spur investors’ interest and mitigate investors’ agency concerns (by
signaling that managers are pro-social). I test these predictions using difference-indifferences
models of monthly turnover, bid-ask spread, and analyst coverage to examine
whether firm liquidity, trading costs, and analyst following improve post-GMF inclusion.
I find support for all three predictions, even though GMF ownership in my sample is
exceedingly modest. Importantly, I identify my treatment effects as incremental to the
liquidity boost firms receive when added to conventional mutual funds and exchange
traded funds (ETFs). Together, these results suggest that GMF inclusion is perceived as
an informative signal of a firm’s green credentials, which leads to more trading volume,
lower trading costs, and more analyst participation.
ContributorsHolden, Nicole (Author) / White, Roger (Thesis advisor) / Brown, Jenny (Committee member) / Kaplan, Steve (Committee member) / Arizona State University (Publisher)
Created2023
Description
Relative performance evaluation (RPE) in Chief Executive Officer (CEO) compensation contracts entails the use of peer performance to filter out exogenous shocks and reduce exposure to risk. Theory predicts that high-quality peers can effectively filter out noise from performance measurement, yet prior empirical studies do not examine how differences in peer quality affect the use of RPE in practice. In this study, I propose a model to select peers with the highest capacity to filter out noise and introduce a novel measure of peer quality. Consistent with the theory, I find that firms with high quality peers rely on RPE to a greater extent than firms with few good peers available. I also examine the extent to which peers disclosed in proxy statements overlap with the best peers predicted by my model. I find that the overlap is positively associated with institutional ownership, use of top 5 compensation consultants, and compensation committee competence.
ContributorsCho, Jeh-Hyun (Author) / Matejka, Michal (Thesis advisor) / Kaplan, Steve (Committee member) / Casas-Arce, Pablo (Committee member) / Arizona State University (Publisher)
Created2020
Description
Over the years from 2009 to 2017, the people of Arizona witnessed the state consistently defunding the schools, its students academically underperforming, and as a result, the poverty achievement gap widening. Even with the efforts in recent years to re-invest in education, Arizona’s education funding falls below its level at 2008 and the national average. Among Arizona’s funding sources is the Public School Tax Credit, a unique legislation for the state that allows for taxpayers to donate money to certain programs at Arizona public schools and reduce their state income tax liability dollar-for-dollar. Because of the already severe achievement gap in Arizona, this funding source which relies on surrounding neighborhoods’ income raises the concern that, instead of helping Arizona students, it is exacerbating the existing achievement gap. The purpose of this paper is to examine the relationship between income and donations received by schools to determine the validity of this concern. To ensure a comprehensive examination of the relationship between income and donations received, regression tests are run on both the aggregate level and individual level. The tests find that, although income does have a statistically significant correlation with the donations received, it is only positive for the effect of total income on total donations, negative for the effect of average income per return on average donation per donor, and negative for average income per return on total donations. The results imply that to garner high donations, it matters less to be located in a high-earning neighborhood and more important to be located in a moderate-earning neighborhood with a lot of people donating using this credit. Therefore, the concern of income’s effect on donations is valid, but perhaps not in the straightforward way that we would expect.
ContributorsChen, Vivian Young (Author) / Kenchington, David (Thesis director) / Brown, Jenny (Committee member) / Department of Finance (Contributor) / School of Accountancy (Contributor) / School of Politics and Global Studies (Contributor) / Barrett, The Honors College (Contributor)
Created2020-12