Embedded Files
Refereed Publications
Refereed Publications
with J.M. Karpoff, Journal of Business Ethics 163, 217-238 (2020)
We propose a construct, the Trust Triangle, that highlights three primary mechanisms that provide ex post accountability for opportunistic behavior and motivate ex ante trust in economic relationships. The mechanisms are (i) a society’s legal and regulatory framework, (ii) market-based discipline and reputational capital, and (iii) culture, including individual ethics and social norms. The Trust Triangle provides a framework to conceptualize the relationships between trust, corporate accountability, legal liability, reputation, and culture.
With D. Amiram, Z. Bozanic, J. D. Cox, J. M. Karpoff and R. Sloan, Review of Accounting Studies 23, 732-783 (2018)
Fig1. This figure illustrates the spectrum of financial reporting choices.
Financial reporting fraud and other forms of financial reporting misconduct are a significant threat to the existence and efficiency of capital markets. This study reviews the literature on financial reporting misconduct from the perspectives of law, accounting, and finance. Our goals are to establish a common language for researchers interested in this line of research, describe the main findings and challenges in these literatures, and provide directions for future research. Although research on financial reporting misconduct faces challenges, those challenges provide significant opportunities to advance the literature, as the answers to many questions on financial reporting misconduct remain unsettled.
Working Papers
Working Papers
Event Time Regression Results, Stock Ownership Indicator
Trust is an essential element of economic transactions. Earlier work underscores the role of counterparty reputation in building trust. However, a newer literature highlights the influence of cultural institutions (e.g., religions) on individuals’ trust. In this paper, I ask whether trust in cultural institutions affects financial participation. I focus on household equity ownership, a setting where trust is particularly important, since individuals must entrust their money to strangers. For identification, I employ staggered revelations of U.S. Catholic clergy abuse between 2002 and 2006 as a negative shock to local Catholics’ trust in their religion. In a stacked triple-difference estimation of panel data between 1999 and 2007, shocked Catholic households’ equity ownership decreases at the intensive and extensive margins, by 5 to 7 percentage points. These results shed new light on the importance of cultural institutions for economic decisions, the impact
of institutional misconduct, and the barriers to household financial participation.
Event Time Regression Results, Trade Credit
We study how trust in cultural institutions affects cooperation between firms, employing local religious scandals for identification. We focus on trade credit as a trust-intensive aspect of supply chain relationships. In a triple-difference estimation, we find that firms located in scandal areas where the affected religion is prominent reduce trade credit to customers (relative to sales) by 5 percentage points. Consistent with the scandal damaging local norms of cooperation, results are stronger in relationships with limited history, greater geographic barriers, or transaction complexity. A public good game experiment further supports this mechanism, with treated participants anticipating reduced cooperation from others.
Community-based Institutions and Market Frictions: Black Churches, Unemployment, and Bridging Social Capital.
With G. Hilary. Draft available upon request.
We explore how community-based institutions address market failures by generating bridging social capital. As a setting, we focus on Black Churches and their impact on job searches. Church attendance reduces unemployment durations for Blacks, especially in states with a history of racial violence where Churches are a long-lasting source of social support for the community. While Blacks in those states experience higher employment spells than non-Blacks, Church attendance decreases this gap by about 50%, a benefit comparable to obtaining a college degree. The effect is strongest for those who are most marginalized, who are also more likely to receive support from fellow congregants, and who belong to economically diverse denominations. The effect is strongest during the 2008 economic crisis but vanishes during the COVID-19 crisis when physical access to religious services is restricted. Our results are robust to multiple specifications and corroborated by the experience of ministers in Black Churches.
Business and the Common Good: A Moral View of the Corporate Purpose.
With G. George and T. Fewer. Draft available upon request.
There is a growing expectation that businesses take more active roles in addressing societal problems. Recent scholarship further endorses the idea of corporate purpose, which implicitly assumes a form of moral responsibility towards society. By drawing from the philosophical doctrines of the common good, we offer a moral view of corporate purpose. We conceptualize the common good as a multidimensional construct that draws from three moral perspectives, substantive, procedural, and consequential, where all three are jointly necessary but individually insufficient to explain the moral view of corporate purpose. We explain how the dimensions underlying each of these perspectives of common good could serve as a rubric for decision-making through the process of framing, formalizing, and realizing corporate purpose. We develop a research and practice agenda that provide tests of the common good as applied to a firm’s governance, actions, and outcomes.
Work in Progress
Work in Progress
The Role of Trust in the Transition to Self-Employment: Evidence From Religious Affiliation and the Global Financial Crisis. With E. L. Sherman
A Theory of Social Capital. With J.M. Karpoff
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