Not all clawbacks are the same: Consequences of strong vs. weak clawback provisions.

Journal of Accounting and Economics (66), pp. 291-317, 2018 (with Ying Gan and Burcin Yurtoglu)

We develop a Clawback Strength Index and show that while some firms adopt unambiguous and strong clawback provisions, others adopt weak ones. We find that strong clawback adopters experience improvements in financial reporting quality, fewer CEO turnovers, and lower CEO pay. We advance two possible explanations: First, clawback strength may be primarily responsible for the improvements in reporting quality. Second, strong clawbacks may yield benefits because they are part of a broader reform package. While our findings on reporting quality and CEO turnover are consistent with both explanations, our results on CEO pay support only the broader reform explanation.

International evidence on the impact of adopting English as an external reporting language.

Journal of International Business Studies, 46, pp. 180-205, 2015 (with Thomas Jeanjean, Hervé Stolowy and Teri Lombardi Yohn)

This study investigates the economic consequences of non-English-speaking companies adopting English as an external reporting language. We examine a sample of European companies that initiate the voluntary issuance of an annual report in English in addition to the local language annual report. To control for self-selection, we use a difference-in-differences design with a propensity score matched control sample. We find that adoption of English as an external reporting language is associated with increased foreign ownership, decreased information asymmetry, and increased analyst following. We also find that these benefits are not conditional on the use of IFRS for financial reporting. Our findings hold if we run a number of robustness checks to control for correlated events (creation of an investor relations service, provision of conference calls,and/or changes in management). These results are consistent with the language used in the annual report acting as a barrier to investment for some investors and with annual reports issued in English reducing investors’ information processing costs.

Non-financial information: State of the art and research perspectives based on a bibliometric study.

Comptabilité, Control et Audit, 21 (3), pp. 13-90, 2015 (with Luc Paugam and Hervé Stolowy)

We conduct a bibliometric analysis of academic articles published on the topic of non-financial information (NFI). This analysis covers 787 articles published in 53 journals over the timespan 1973 to 2013. We examine several important questions about the state of the art of academic research on NFI: How is NFI defined in the literature? Can NFI be precisely defined? How has interest in NFI evolved over time in the academic literature? What are the main topics covered by NFI research? What are the main methodologies used by researchers? To what extent are studies country-specific? We find that many articles do not define the concept of NFI but refer to underlying concepts such as social, environmental, human capital or corporate social responsibility (CSR) reporting. We document that academic research on NFI reached a certain degree of maturity around the late 1990s / early 2000s, a time when several new specialized journals were created that now capture an important share of the market. We identify 10 topics covered by research on NFI and show that the most frequently-studied topic in NFI research is CSR reporting. We also discover that the volume of research concerning auditing of NFI is growing, whereas management accounting/control research on NFI is limited. We find that the growth in NFI research is fueled mainly by articles using archival data (quantitative or qualitative) and essay methodologies. Finally, we suggest directions for future research.

Disclosure non-compliance.

Under Review (with Axel Adam-Mueller)

We examine the compliance with corporate risk disclosure for a sample of 383 firms from 20 European countries. We find that firms comply on average to only 62 percent with mandatory risk disclosure guidelines. Moreover, non-compliance is associated with country-specific cultural and institutional factors. The role of enforcement is generally positive, but even more pronounced if firm outsiders have a greater need for accounting information. Overall, the intention of standards setters and regulatory bodies to foster standardized disclosure does not match firms’ actual disclosure practices. We highlight that imposing harmonized accounting standards is insufficient to guarantee disclosure compliance in the presence of cultural differences and heterogeneous incentives. Consequently, cross-country differences in culture and institutions must be properly accounted for by regulators and the firms’ corporate governance systems.

Welcome back? CEO reappointments.

With Ying Gan and Hervé Stolowy

We analyze reappointments of former CEOs of U.S. listed firms over the period 1992 – 2016. For a sample of around 200 CEO reappointments, we find that shareholders of these firms experience statistically significant negative stock valuation consequences. Our findings are robust to multiple return measurement windows and alternative definitions of abnormal returns. We also document that market reactions depend on certain executive-specific attributes, such as whether she is the founder of the firm or whether she is also appointed as chairman of the board of directors. Finally, we show that firm performance deteriorates after a former CEO is appointed relative to appointing a non-former CEO. Our results provide evidence that the market considers reappointed CEOs as “leaders of last resort” and highlights the importance of CEO succession planning.

Actions speak louder than words: Earnings management vs. unlock day trading.

With Yun Dai

We show that, around unlock days of initial public offerings (IPOs), pre-IPO shareholders inflate earnings to get a high price to cash out. Yet, the unlock day trading plays a counter-effective role, alerting investors to interpret earnings cautiously. The unlock day returns react negatively to previous earnings management, and a high level of earnings management in post-lockup earnings announcement is punished by low stock return.


With Emre Ertunc

We examine the economic consequences of cross-delisting taking into account the legal environments of the home countries. We find no evidence suggesting that cross-delisting from a U.S. stock exchange on average results in an increase in information asymmetry or a decrease in liquidity.