We examine whether CEOs make political contributions with their own money to reduce the likelihood that they are personally subject to SEC enforcement. Unlike firm contributions, CEO contributions spike during misconduct periods. Moreover, the increased contributions are disproportionately directed toward candidates with greater potential to influence regulatory outcomes. We find that CEO contributions are uniquely associated with differential enforcement against the CEO, while firm contributions are uniquely associated with differential enforcement against the firm. Collectively, our analyses show that CEO contributions are economically important and have several properties that distinguish them from firm contributions. In addition, our results suggest that CEO contributions may be indicative of personal regulatory capture, a possibility that extends the literature that examines the strategic nature of CEO contributions.
Best Paper Award at Music City Accounting Research Conference 2022 hosted by Vanderbilt Owen Graduate School of Management
Best Paper Award at The Mediterranean Accounting Conference (TMAC) 2025
Media Coverage: Columbia Law School: Blue Sky Blog on corporate governance
We investigate the influence of customer-base concentration on supplier firms’ financial reporting quality in an international setting. Using a large sample of 110,447 firm-year observations from 61 countries for the period of 2003-2018, we find that firms with a more concentrated customer base have higher-quality financial reporting. We further explore the country of origin of major customers and find that this positive relation is mostly driven by foreign major customers rather than domestic major customers. However, the impact of foreign major customers on financial reporting quality is reduced with a higher level of institutional distance between the customer and the supplier. In addition, we find that the documented positive relation is stronger when suppliers are in countries with a lower degree of trust, a lower level of legal enforcement, and lower monitoring quality from other stakeholders. Overall, our results support the notion that major customers perform an important disciplinary role on suppliers and promote the financial reporting quality of suppliers.
Using a regression discontinuity design in a sample of U.S. congressional special elections, we investigate how donor firms’ political wins impact the adaptive responses of their product-market peers in their political activities, with a particular focus on the appointment of politicians to their boardroom. By analyzing closely contested special elections, we find that when donor firms had donated to a candidate who narrowly won a special election, their peer firms were 41% more likely to appoint politicians to their boards in the following year than peers of the donor firms that had supported a narrowly defeated candidate. This adaptive response is more pronounced among peer firms facing greater political risks and operating in industries with more intense competition for government sales. Donor firms’ political wins also lead peer firms to increase their product differentiation from those donor firms. We interpret these patterns as evidence of a competitive-dynamics mechanism, where peer firms perceive donor firms’ political wins as a threat that could disadvantage them in the regulatory environment, prompting them to strengthen their boards with political capital to navigate potential regulatory changes and mitigate perceived risks. Our findings enrich scholarly understandings of corporate political activities and director selections.
This paper investigates the impact of accounting and auditing enforcement releases (AAERs) on the compensation policies of non-accused firms. The investigation focuses on releases in which the SEC mentions top executives’ pursuit of wealth through compensation schemes (i.e., compensation-mentioned-releases or CMRs). Using a sample of AAERs from 1992 to 2021, I find that peer firms learn from these CMRs and significantly reduce their CEO’s delta and vega following CMRs. Peer firms also decrease their performance share grants and extend the vesting periods for option grants, resulting in a decrease in the convex payoff structure of CEO pay. Furthermore, I find evidence that peer firms reduce their CEO’s risk-taking incentives to circumvent litigation and prevent misreporting and shareholder scrutiny. Overall, the findings indicate that information describing one firm’s misreporting could affect the compensation policies of other firms, suggesting that regulatory enforcement accompanied by public awareness can effectively shape corporate behaviors.
We propose an empirical measure of the types of financial misreporting based on misreporting incentives. We identify three distinct types: (1) misreporting driven by top executives’ wealth pursuits, (2) misreporting induced by capital market pressure, and (3) misreporting by subordinates due to inadequate management oversight. Our measure is developed by conducting a detailed analysis of the textual data from SEC Accounting and Auditing Enforcement Releases (AAERs). We also provide rigorous empirical validations. Additionally, we create a composite misreporting severity score that incorporates the three misreporting incentives. Using our measure of misreporting incentives, we help reconcile previous mixed findings on the link between equity incentives and financial misreporting. Furthermore, in predicting market reactions to misreporting, our misreporting severity score outperforms a measurement that does not integrate misreporting incentives. Our measures can be practical tools for investigating a wide range of research questions related to the causes and consequences of financial misreporting.
We examine whether and how the time-oriented tendency embedded in languages influences income smoothing. Separating languages into weak- versus strong-future time reference (FTR) groups, we find that firms in weak-FTR countries tend to smooth earnings more. We also find that relationships with major stakeholders (i.e., debtholders, suppliers, and employees) amplify the effect of the FTR of languages on income smoothing. Additional analyses suggest that income smoothing driven by the FTR of languages enhances earnings informativeness. These findings provide new insights on the role that language plays in financial reporting decisions and on how relationships with major stakeholders influence the relation between an important feature of language and corporate income smoothing behavior.
Using CEO Twitter engagement as an empirical setting, we analyze whether boards adjust equity-based incentives to balance the potential benefits and risks of CEOs’ social media communication. Drawing on data from S&P 1500 firms between 2010 and 2023, we find a positive association between the intensity of CEO Twitter activity and flow delta, and some evidence of a negative association with flow vega. These results suggest that boards increase pay-for-performance sensitivity to discipline CEOs’ social media behavior, while avoiding additional risk-taking incentives that could encourage speculative or controversial tweeting. The positive relation between Twitter activity and flow delta is more pronounced in well-governed firms, consistent with stronger corporate governance facilitating efficient contracting. Our findings remain robust after controlling for firm-by-CEO fixed effects, employing instrumental variable analyses that exploit exogenous variation in Twitter usage, restricting the sample to newly appointed CEOs, and applying entropy balancing. Further analyses show that higher flow delta discourages non-work-related, negative, and uncertain tweets and strengthens the positive relation between CEO Twitter activity and firm value. Overall, the evidence indicates that boards employ traditional incentive mechanisms to govern CEO behavior in the digital era, aligning CEO social media engagement with shareholder value creation.
This study examines whether firms align the environmental and social (ES) profile of their suppliers with that of their industry peers. Using supplier–customer links for U.S. listed firms from 2004 to 2022, we find that a firm’s supplier ES score is positively associated with the lagged supplier ES score of its peers, and the association is as strong for firms whose suppliers are rated above their peers’ as for those rated below. Firms whose suppliers are rated below their peers’ add rather than drop suppliers, and shift their additions toward suppliers their peers already use. In individual sourcing decisions, peer usage strongly predicts which supplier is chosen, even among close product-market substitutes, while a candidate’s own ES rating does not. Peer usage carries more weight for well-rated suppliers among close substitutes and in decisions about which suppliers to keep. The peer effect is strongest where suppliers are rarely rated and weakens as rating coverage expands, suggesting that firms use peers’ choices as a substitute for information about supplier sustainability. Firms follow profitable or highly rated peers and respond most under external scrutiny and where ES issues are financially material. The relation persists when peers are defined by shared analyst coverage, and randomly assigned peers produce no comparable effect. Changes in supplier ES scores are followed by more supply-chain disclosure and fewer supply-chain incidents. Our findings identify peer imitation as a horizontal channel through which supplier relationships, and their sustainability, spread within industries.
We examine whether the semantic meaning embedded in analysts’ given names is associated with the accuracy of their earnings forecasts. The Chinese setting is well-suited because given names are constructed from characters with culturally shared meanings, allowing systematic measurement of two dimensions grounded in person perception: Name Competence and Name Warmth. Motivated by self-fulfilling prophecy theory, we posit that name semantics act as a stable identity cue linked to performance through self-expectancies (analytical discipline) and interpersonal expectancies (information access). Using a sample of 274,563 annual earnings forecasts issued by Chinese sell-side analysts for A-share firms from 2006 through 2022, we find that analysts with higher Name Competence and Name Warmth issue more accurate forecasts within firm-by-year and brokerage-by-year fixed effects. A name-shuffling placebo examines whether the associations arise from name distributions within brokerage, birth-year, and gender strata. A birth-cohort test examines an explanation based on concentrated parental investment. Cross-sectional analyses reveal that Name Competence matters more under fundamental ambiguity, whereas Name Warmth matters more under information frictions and among less experienced analysts, consistent with the proposed expectancy mechanisms. Overall, we introduce name semantics as a measurable identity-based predictor of analysts’ performance and show how stable identity cues are reflected in the production of financial information.
Teams of similarly skilled workers are usually expected to be more productive because their members can monitor one another effectively. We show that the same similarity can backfire when producing more today leads to higher targets tomorrow. Using personnel records from a manufacturing firm, we find that high-ability teams whose members have similar ability coordinate around the production target and produce little beyond it. Comparisons of the same worker across different team assignments show that workers hold back more when placed in high-ability, homogeneous teams. Individual ability alone does not predict restriction; group composition does. In contrast to prior findings that similarity within teams promotes productivity, our results suggest that similarity can also facilitate coordinated restriction when incentives penalize sustained overperformance. Team assignment can therefore be a powerful tool for managing strategic behavior.