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.

In 2016, the Financial Accounting Standards Board (FASB) imposed on managers a responsibility to evaluate their companies’ forward-looking prospects for continuing as a going concern on a quarterly basis. Prior to this change, the responsibility of assessing the future of a company was only required annually by the external auditor through auditing standards. If this increase in management responsibility induced managers to implement a process and controls to obtain forward-looking information for disclosure, I would expect this information acquisition process to also improve overall financial reporting quality. I find that financial reporting quality increased for firms after Accounting Standards Update (ASU) 2014-15, as evidenced by less restatements. Additionally, while I find the timeliness of information decreased, as evidenced by slower earnings announcements, the decrease is not economically meaningful. Lastly, I find the effect of the standard change on financial reporting quality is greater for non-financially healthy companies who have to perform a more extensive analysis under ASU 2014-15. While the purpose of the accounting standard was to reduce diversity in the timing and content of going concern disclosures, I find evidence of other benefits with little costs that this standard had on firm’s financial reporting.

Prior studies examine how the use of earnings for valuation purposes is related to the use of earnings in contracting. I extend this literature by examining the value relevance of internal earnings relative to targets, a performance measure widely used in annual bonus contracts. Internal earnings relative to targets could be value relevant because they reflect board’s private information or the quality of firm’s management control systems. However, any internal performance measure could also be manipulated by the board or management, which would undermine its reliability and relevance to capital market participants. Using hand-collected data on internal earnings and annual bonus targets in Chief Executive Officer (CEO) cash bonus plans, I find that internal earnings relative to targets strongly predict annual stock returns. This effect is incremental to that of Generally Accepted Accounting Principles (GAAP) and street earnings surprises, as well as management earnings guidance surprises. Moreover, this effect is stronger for firms with more detailed disclosure about compensation contracts and with better governance. Buttressing the stock return results, I further show that internal earnings relative to targets predict future cash flows. This evidence suggests that the value of internal earnings relative to targets extends beyond its traditional role in contracting.

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.

A Chief Audit Executive (CAE) is the leader of a company’s internal audit function. Because there is no mandated disclosure requirement for the internal audit structure, little is understood about the influence of a CAE on a company. Following the logic that a CAE disclosed in SEC filings is more influential in a company’s oversight function, I identify an influential CAE using the disclosure of the role. I then examine the association between an influential CAE and monitoring outcomes. Using data hand collected from SEC filings for S&P 1500 companies from 2004 to 2015, I find companies that have an influential CAE are generally larger, older, and have a larger corporate board. More importantly, I find that an influential CAE in NYSE-listed companies is associated with higher internal control quality. This association is stronger for companies that reference a CAE’s direct interaction with the audit committee. This study provides an initial investigation into a common, but little understood position in corporate oversight.

The results in this research study shows that experience with corruption affects a person's behavior, although it does not impact their attitude towards corruption. Condemnation to both corruption and bribery is widespread amongst citizens of both countries; however, more Angolan citizens experienced bribe demands and confessed paying more bribes than Brazilians did. This paper studies the effect of corruption towards citizens by analyzing a sample of 200 surveyed Brazilians and Angolans. The surveys questioned participants about their (i.) experience with corruption by looking at the number of bribe demands, (ii.) attitudes by identifying their values or views towards corruption and bribery and finally (iii.) their behavior through their actions.

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.

The relative performance evaluation (RPE) hypothesis holds that executive compensation should not depend on uncontrollable exogenous shocks. Nevertheless, prior studies often find limited empirical support for this hypothesis in part because it is difficult to identify peers exposed to the same exogenous shocks. I propose a new way to identify peers and to test the RPE hypothesis in the context of a specific shock. In particular, I select peers based on the sensitivity of their stock returns to exchange rate fluctuations. I find evidence that firms respond to large exchange rate movements by ex post adjusting their peer selection to include peers with similar exchange rate risk exposure. Moreover, after allowing for ex post peer group adjustments, I find a much stronger support for the RPE hypothesis than most of prior work.