Research

Published Articles

Impression Management Strategy — The Relationship between Accounting Narrative Thematic Bias and Financial Graph Distortion, 

with Jeff Boone, Cheryl Linthicum, and Viet Pham, The British Accounting Review, 2024 (accepted)

Prior literature has examined 10-K narrative thematic bias and financial graph distortion as two independent outcomes that might arise from managements’ efforts at impression management. Largely unexplored is an analysis of narrative thematic bias and financial graph distortion as joint and interrelated outcomes that would arise if management coordinates both in the same 10-K report as part of an impression management strategy. We fill this void in the literature by using a simultaneous equation system to examine the joint relationship between narrative thematic bias and graph distortion in the 10-K filings of S&P 500 firms from 2014 to 2018. We draw upon Paivio’s (1986) dual coding theory to predict a positive association between narrative thematic bias and financial graph distortion based on the insight that graph distortion helps reinforce the effects of thematic bias, and vice versa. Consistently, we find a simultaneous and positive relationship between thematic bias and graph distortion. Further, we find that this complementary relationship is more pronounced in firms with weak corporate governance and weak external monitoring. Our findings suggest that management may exploit the reinforcing effects of thematic bias and graph distortion to leave financial statement users with a more favorable impression of firm performance.

Stuck in Traffic: Do Auditors Price Traffic Congestion?, with Viet Pham, The British Accounting Review, 2023

Although the detrimental impact of traffic congestion on firm operations and human health is widely acknowledged, it is unclear whether auditors perceive traffic congestion as a risk factor. We posit and find that the traffic congestion levels in audit clients’ domicile cities are positively associated with audit fees. Using a structured equation model, we identify and illustrate several channels that explain the effect of traffic congestion on audit fees. We also find evidence of audit fee increases after events that expose clients to higher levels of traffic congestion. Finally, the effect of traffic congestion on audit fees is more pronounced when clients have higher operation concentration near their headquarters or when auditors’ offices are located near clients’ headquarters. Collectively, our findings suggest that auditors view traffic congestion as a risk factor that is priced into audit fees. 

The effect of disclosure committees on non-GAAP reporting quality, Journal of Accounting and Public Policy, 2023

I examine whether company-implemented disclosure committees help to improve non-GAAP reporting quality. I find that firms with disclosure committees provide higher quality non-GAAP performance metrics and that the exclusions used to calculate their non-GAAP numbers are less persistent for future operating income and operating cash flows. Moreover, I find that firms with disclosure committees are less likely to receive SEC comment letters about non-GAAP disclosure. For firms that receive comment letters about non-GAAP reporting, disclosure committees can help to improve non-GAAP reporting quality. Comparing the influence of audit committees and disclosure committees, I find that audit committee financial experts have stronger monitoring effects than those on disclosure committees. Meanwhile, legal experts on disclosure committees provide similar monitoring compared to audit committees’ financial experts. Finally, the interaction between audit committee financial experts and disclosure committee legal experts produces the strongest effect on non-GAAP reporting quality. In sum, my analyses suggest that disclosure committees can provide important monitoring of non-GAAP reporting.

The paper was featured in a podcast interview with the Council for Institutional Investors.

The ASC 606 Standard, Revenue Informativeness, and Analysts Forecast Quality with Viet T. Pham, Accounting and Finance, 2022

We examine the adoption effect of ASC 606 on revenue informativeness, analyst forecast dispersion, and forecast errors. We find that the adoption of ASC 606 is associated with increases in revenue informativeness but decreases in analyst forecast accuracy and consensus. Such adoption effects are mainly temporary and focused in firms that are more affected by the new standard. Last, we find that firms using the full retrospective adoption method are associated with higher revenue informativeness and lower analyst forecast error than firms using the modified retrospective method. 

COVID-19 Disclosures and Market Uncertainty: Evidence from 10-Q Filings with Viet T. Pham, Australian Accounting Review, 2022

We examine whether the quarterly filing COVID-19 disclosures reduce uncertainty for investors and analysts. We find a negative relationship between COVID-19 disclosure and return volatility, suggesting COVID-19 disclosure reduces investor uncertainty. This reduction effect concentrates mainly during the short window following 10-Q releases and phases out over time. We then detect that the industry-wide COVID-19 disclosure dispersion is positively associated with return volatility, suggesting high variation of industry-wide COVID-19 disclosures reduces information comparability across firms, resulting in increased investor uncertainty. Moreover, we find that COVID-19 disclosures are positively associated with analysts’ downward earnings forecast revisions and negatively associated with analyst forecast dispersion after 10-Q releases, suggesting the disclosures reduce information risk even for sophisticated market participants. Further analyses show that COVID-19 disclosures are negatively associated with future financial and operational performances (i.e., sales, operating cash flow, operating income, and ROA). Lastly, we find that the low readability of COVID-19 disclosure attenuates the negative relation between COVID-19 disclosure and market volatility. Collectively, our findings suggest that 10-Q COVID-19 disclosures contain value-relevant information that temporarily assists market participants in evaluating the changes in firms’ values in the time of a crisis.

Perceptions of corporate corruption culture and debt contracting with Viet T. Pham, Daniel Sanchez and Juan Manuel Sanchez, Journal of Corporate Finance, 2021

We find that the perception of corporate corruption culture in the top executive team affects both pricing and non-pricing loan provisions. Firms with higher levels of perceived corruption culture face higher interest spreads and are more likely to receive a collateral requirement. The bank syndicate is larger and more performance-based covenants and managerial negative restrictions (e.g., limits on capital expenditures or dividend restrictions) are put in place in loans made to firms with higher levels of perceived executive-based corruption. We further find that cultural proximity between lenders and borrowers mitigates the perceived corruption effects significantly, leading to contracts that are less costly and less restrictive. Additional tests suggest that lenders display an in-group bias in favor of culturally proximate borrowers.

The Gender Effects of Audit Partners on Audit Outcomes: Evidence of Rule 3211 Adoption with Viet T. Pham and Meng Guo, Journal of Business Ethics, 2021

This paper investigates whether the impact of PCAOB Rule 3211 on the quality and cost of audit services differs between female and male audit partners. We find that the improvement of audit quality is more pronounced for female audit partners than male partners after Rule 3211 adoption. Female audit partners are also associated with higher increases in fees and report lags than male counterparts after the adoption of Rule 3211. Further, we find that the presence of female CFOs (or female audit committee members) attenuates the audit fees and report lag increases in the post-adoption periods. Overall, our findings confirm the importance of the gender effect on audit outcomes, which needs further consideration by standard setters. Our study also provides empirical evidence of the benefits of gender equality in the workplace.

Accounting Information Quality and the Clustering of Stock Prices with Ahmed Baig and Benjamin Blau, American Business Review, 2020

The foundation of economic theory is based on the premise that prices will converge to their equilibrium value. However, prior research has documented that stock prices cluster on round pricing increments. In this study, we develop and test the hypothesis that audit quality and the management of earnings—both of which affects the information environment of the firm—influence the degree of price clustering. Results show that firms with Big 4 auditors have less clustering in their stock prices while firms with higher abnormal audit fees, more discretionary accruals, and firms that tend to manipulate earnings have a higher degree of price clustering. These findings support our hypothesis and suggest that accounting information quality helps explain the price clustering anomaly and subsequently influences the efficiency of financial markets. 

Presentations

Stuck in Traffic: Do Auditors Price Traffic Congestion?. Paper was presented at the AAA Audit Midyear Meeting - New Orleans, LA (January 2024) - Coauthor presented

Client Lending Relationships and Audit Production. Paper was presented at the British Accounting Review conference at Harvard University (December 2023) - Presenter

The Impact of ESG Mandatory Disclosure on Firms' Graph Disclosure Quality - Evidence from European Union Directive. Paper was presented at the AAA Annual Meeting - Denver, CO (August 2023) - Presenter

The Impact of ESG Mandatory Disclosure on Firms' Graph Disclosure Quality - Evidence from European Union Directive. Paper was presented at Susquehanna University's research workshop (October 2023) - Presenter 

Impression Management Strategy — The Relationship between Accounting Narrative Obfuscation and Financial Graph Distortion. Paper was presented at California State University - Los Angeles 's research workshop (November 2019) - Presenter

Impression Management Strategy — The Relationship between Accounting Narrative Obfuscation and Financial Graph Distortion. Paper was presented at DePaul University 's research workshop (November 2019) - Presenter

Impression Management Strategy — The Relationship between Accounting Narrative Obfuscation and Financial Graph Distortion. Paper was presented at Susquehanna University's research workshop (October  2019) - Presenter

Impression Management Strategy — The Relationship between Accounting Narrative Obfuscation and Financial Graph Distortion. Paper was presented at the University of Memphis's research workshop (October  2019) - Presenter

Impression Management Strategy — The Relationship between Accounting Narrative Obfuscation and Financial Graph Distortion. Paper was presented at Bucknell University's research workshop (September  2019) - Presenter

Does the Gender of Audit Partners Matter? – Evidence from the Passage of Rule 3211. Paper was presented at the American Accounting Association Annual Meeting, San Francisco, CA (August 2019) - Presenter

The Effect of Disclosure Committee on Non-GAAP Earnings Disclosure Quality. Paper  was presented at the American Accounting Association Annual Meeting, San Francisco, CA (August 2019) - Presenter

Does the Gender of Audit Partners Matter? – Evidence from the Passage of Rule 3211. Paper was presented at American Accounting Association Auditing Midyear Meeting, Nashville, TN (January 2019) - Presenter

Does the Gender of Audit Partners Matter? – Evidence from the Passage of Rule 3211. Paper was presented at American Accounting Association Auditing Southwest Regional Meeting, Houston, TX (March 2019) - Coauthor presented

The CEO Compensation Gender Gap: Do CEO Ability and Labor Market Mobility Matter. Paper was presented at American Accounting Association Annual Meeting, Washington, D.C. (August 2018) - Presentor

Perception of Corporate Corruption Culture and Debt Contracting. Paper was presented at American Accounting Association Annual Meeting, Washington, D.C. (August 2018) - Coauthor presented

Accounting Information Quality and the Clustering of Stock Prices. Paper was presented at Southwestern Finance Association Annual Meeting, Albuquerque, NM (March 2018) - Presenter

Accounting Information Quality and the Clustering of Stock Prices. Paper was presented at American Accounting Association Southwest Regional Meeting, Albuquerque, NM (March 2018) - Presenter