Publications
Publications
(with Don M. Autore, Spencer Barnes, and Andrew Schrowang)
Journal of Corporate Finance, forthcoming
[Abstract]: The Inflation Reduction Act of 2022 imposes a 1 % excise tax on US corporate share repurchases, effective January 1, 2023. The tax's implementation is associated with a significant decline in corporate repurchases that is not offset by a corresponding increase in dividends. Aggregate repurchases decline from about $1 trillion in 2022 to just over $800 billion in 2023, and the average firm reduces quarterly repurchases (as a fraction of market capitalization) by roughly 25 %. The decline in repurchases by US firms far exceeds a contemporaneous decline in repurchases by Canadian firms, is large in a historical context, and is not driven by firm fundamentals. Tax-induced cuts to repurchases are associated with an increase in cash but no increase in investment, implying that the tax has not generated the stated policy objective.
(with Don M. Autore, Huimin Chen, and Jingrong Lin)
British Accounting Review, 2024
[Abstract]: We investigate whether corporate adoption of blockchain technology is associated with a change in firms’ financial reporting behavior. On one hand, the features of blockchain technology (immutability, decentralized consensus, and real-time data sharing) can enhance data integrity, suggesting corporate blockchain adoptions may reduce earnings management. However, despite fast growth in blockchain adoptions, it remains unclear whether improved financial reporting quality or reduced accounting manipulation is a motivating factor in firms’ blockchain adoption as firms vary in how they implement this new technology. On the other hand, the hype and/or increased expectations associated with blockchain adoptions, as well as the market’s misperception that blockchain adoption could increase data integrity, may incentivize and provide opportunity for firms to upwardly manage earnings. We conduct our tests in the setting of the supply chain, as prior work establishes that shocks to one firm can impact linked firms through customer-supplier relationships. Our empirical evidence supports the latter prediction, as we find robust evidence that supplier firms’ earnings management increases after their customers adopt blockchain. This result holds with numerous robustness tests. We provide direct evidence consistent with hype / increased expectations and reduced monitoring of supplier firms. Our findings suggest unintended consequences of blockchain adoption on financial reporting.
(with Dylan Norris and Andrew Schrowang)
The Financial Review, 2024
[Abstract]: This study examines the relation between managerial reference points and corporate payout policy. We find that share repurchase activity increases as a firm’s current stock price declines in relation to the price at which it previously repurchased shares. To facilitate a behavioral interpretation of this relation, we show that it weakens around stock splits, is asymmetric over gains and losses, and strengthens when prior repurchase prices are more salient. Further, the relation is not explained by traditional repurchase motives. The results suggest a behavioral pattern in which managers use prior repurchase prices as reference points for current repurchases.
Finance Research Letters, 2022
[Abstract]: This paper uses a novel method to assess the timing of corporate share repurchases by examining abnormal returns after firms stop repurchasing shares. This method reveals several new findings. First, repurchasing firms experience positive abnormal returns only after they stop repurchasing shares. Second, the impact of repurchase timing is underestimated when abnormal returns are estimated after all repurchases. Third, there is evidence that frequent repurchasers and large firms time their repurchases, but only when measuring abnormal returns after they stop repurchasing shares. These findings have important implications for future research and regulation surrounding share repurchases.
(with Don M. Autore and Danling Jiang)
Financial Management, 2021
[Abstract]: Many corporate executives believe blockchain technology is broadly scalable and will achieve mainstream adoption, yet there is little evidence of significant shareholder value creation associated with corporate adoption of blockchain technology. We collect a broad sample of firms that invest in blockchain technology and examine the stock price reaction to the first public revelation of this news. Initial reactions average close to +15% and are followed by reversals over the next three months. However, we report a striking difference based on the credibility of the investment. Blockchain investments that are at an advanced stage or are confirmed in subsequent financial statements are associated with higher initial reactions and little or no reversal. The results suggest that credible corporate strategies involving blockchain technology are viewed favorably by investors.
(with Don M. Autore and Baixiao Liu)
Journal of Banking and Finance, 2019
[Abstract]: This study examines the role of activist investors in firms’ decisions to conduct open market share repurchases. Compared with firms making ordinary share repurchases, firms making activist-involved repurchases have more cash holdings, are more undervalued, experience better subsequent stock performance and similar improvements in operating performance, and eventually repurchase more shares. Moreover, repurchasing firms in which an activist investor claims to take a passive role exhibit no undervaluation, and repurchasing firms that make multiple repurchases exhibit share undervaluation only in repurchases where an activist is involved. In all, our findings suggest that activist-involvement is associated with improved corporate repurchase decisions.
(with Don M. Autore, Matthew Gustafson, and Andrew Schrowang)
(with Don M. Autore)