Qingkai(Kai) Dong

"Managing What You Measure: Evidence from Federal Infrastructure Surveys" (with Matthias Breuer)

We study how federal information-collection requirements affect counties' infrastructure spending. Using the introduction and a modification of the federal survey on highway infrastructure as a plausibly exogenous change in information collection, we find that more information on the state of counties' highways increases counties' spending on their highways. Interestingly, this increase does not appear to result from federal or state-level transfers flowing toward the surveyed highways, nor does it appear to reflect counties' learning about their highways' conditions. It rather appears to reflect counties' awareness of the federal governments' measurement effort. Notably, the managing of the measured and monitored federal information appears to (weakly) improve counties' highway infrastructure and economic position. Collectively, our findings support the view that the act of measuring and collecting information matters for capital allocation without necessarily improving the allocation efficiency.

"Rising Healthcare Costs and Strategic Communication in Labor Markets: Evidence from Job Postings" (with Mingyi Hung, Chao Jin, and Jiexin Zheng)

This paper examines the impact of rising healthcare costs on firms’ strategic communication of age-related hiring preferences and the resulting implications for firm performance and workers’ employment outcomes. Exploiting increases in firms’ insurance premiums induced by major insurer mergers and acquisitions between 2010 and 2020, we find that firms include more age-stereotyped language in job postings in response to rising healthcare costs. This effect is weaker when firms have less bargaining power relative to employees. Additionally, firms using more ageist language in job postings experience relatively smaller increases in healthcare costs but show little improvement in labor productivity. Overall, our findings suggest that firms strategically disclose their hiring preferences to mitigate the impact of rising healthcare costs, but such age-related hiring bias exacerbates the adverse employment and insurance coverage outcomes faced by older workers.

"The Impact of Municipal-Auditor Appointments on Auditors’ Private Business Activities" (with Zhihong Chen and Antonino Costa; R&R at Journal of Accounting Research)

This paper examines the impact of serving in public positions on individuals' private-sector business activities. Using the random assignment of municipal auditors in Italy, we compare first-time municipal auditors with those who have never held such positions. We find that auditors experience an increase in the number of private clients following their municipal appointment. We also find an expansion in the geographic scope of these auditors' private practices, although there is no evidence that newly acquired clients are closer to appointing municipalities. Further analyses suggest that the impact of municipal appointments on private business activities is likely driven by increased visibility rather than social capital, such as political influence associated with public positions. Lastly, we document that firms employing auditors with municipal appointments implement cost-cutting measures, mirroring the fiscal policies imposed on municipalities. Overall, our findings suggest that holding public positions enhances private-sector job opportunities and facilitates knowledge transfer between public and private roles.

"Cost Accounting Standards and Organizations' Cost Management Practices" (with Anthony Le and Sunho Yoo; R&R at The Accounting Review)

The U.S. federal government allocates substantial resources to support public purposes through grants and contracts. The Cost Accounting Standards (CAS), which establish rules for cost allocation among federal contractors and grant recipients, are a central policy tool aimed at enhancing oversight and accountability in federal funding. We study the impact of the initial implementation of CAS on the costs and research outputs of Institutions of Higher Education (IHEs). After CAS adoption, we find that costs of federally funded research at IHEs decline, and the cost allocation process becomes more consistent. We also find that the quantity and quality of research outputs do not significantly decline. The impact of CAS is most substantial for IHEs with low prior reliance on government grants and IHEs where it is more challenging to monitor costs. Additional analyses suggest that the cost decline is likely due to CAS producing information that allows the NIH to screen projects better. Our collective results suggest that CAS makes IHEs' usage of federal funds more efficient.

"The Impact of Audited Financial Statements on Local Governments: Evidence from U.S. School Districts" (solo-authored; R&R at Journal of Accounting Research)

This paper investigates whether the audited financial statements of US independent school districts affect the districts' public provision of education services. Exploiting an increase in the regulatory threshold that exempts the school districts from preparing audited financial statements after 2015, I compare the newly-exempted school districts with those that have never been exempted and those that have always been exempted. I find that the newly-exempted school districts experience deteriorating financial and academic performance, population outflows, housing price decreases, and shrinking local tax revenues after the threshold increase. The evidence suggests that audited financial statements enhance the functioning of school districts.

"The Impact of Financial Reporting Mandates on Labor Unions" (with Anthony Le; R&R at Journal of Accounting Research)

Labor unions in the United States are subject to financial reporting mandates, requiring them to disclose detailed financial information annually. This paper studies the effects of the reporting mandate on unions' representation elections and union charges. Exploiting a regulatory threshold that determines the amount of information publicly disclosed by unions, we document that unions just above the threshold, who are required to disclose more information, file fewer election petitions, are less likely to win elections, and receive fewer votes during those elections than unions just below the threshold. These effects are the strongest when employers hire labor relations consultants during elections. Additionally, we find that unions above the threshold have significantly fewer charges and grievances filed against them. This result is primarily driven by a decrease in non-meritorious charges. Collectively, our results suggest that mandated financial reporting imposes a substantial proprietary cost on unions during representation activities.

"Regulatory Capital Manipulation Through Shadow Insurance by U.S. Life Insurers" (with Sehwa Kim and Stephen G. Ryan; R&R at Management Science )

We examine whether and how U.S. life insurers exercise discretion to mitigate the adverse impact of a statutory accounting rule change on their regulatory capital. Capital regulation is key to the stability of individual financial institutions and the financial system. However, discretionary actions taken by financial institutions to circumvent capital regulation may undermine the effectiveness of the regulation and yield unintended consequences for the institutions’ real activities and financial health. We employ Actuarial Guideline 43 as a regulatory shock to the regulatory capital adequacy of the insurers that sell variable annuities. Using a DID approach around the 2009 effective date of the rule change, we find that affected insurers are more likely to cede insurance coverage to unauthorized captive reinsurers subject to lax regulation via reinsurance contracts, referred to as “shadow insurance,” and to delay other-than-temporary impairments of investment securities. Lastly, we show that affected insurers that engage in these forms of regulatory capital management mitigate the decrease in their variable annuity sales, likely an unintended consequence of the rule.

"When Do Firms Deliver on the Jobs They Promise In Return for State Aid?" (with Aneesh Raghunandan and Shivaram Rajgopal; Review of Accounting Studies)

US state governments frequently provide firms with targeted subsidies. In exchange, recipient firms promise to create or retain a certain number of jobs in the subsidizing state. In this paper, using novel hand-collected data, we address three questions: (i) the extent to which firms meet job creation targets promised in the application process, (ii) the factors that determine which firms meet job creation targets, and (iii) the benefits to firms from meeting promised job targets. We find that 63% of subsidies awarded to publicly traded U.S. firms between 2004 and 2015 actually meet their ex-ante promised job creation targets. Firms with poorer labor practices are less likely to meet job targets, as are politically connected firms that receive subsidies in election years. Conversely, promised job targets are more likely to be met for subsidies accompanied by government press releases, highlighting potential signaling by awarding governments. In terms of consequences, firms that meet job targets are more successful in obtaining subsequent subsidies both in- and out- of subsidizing states and are more likely to make subsequent political contributions in subsidizing states. However, firms’ success in meeting job targets is not rewarded by ESG rating agencies, even on scores specific to community impact. Our results should be of interest to both academics and policymakers interested in the design of state-level economic incentive programs.

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