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Papers on Information Production, Information Processing & Price Discovery
Papers on Information Production, Information Processing & Price Discovery
with Jing Pan and Ed, Sul, accepted at Review of Accounting Studies (2026)
Intensive efforts to acquire and process firm-specific information can delay the incorporation of macroeconomic information into stock prices.
Extreme earnings surprises lead to the neglect of macro news embedded in the aggregate return, resulting in predictable returns over the subsequent 3-day [t+1, t+3] period after the earnings announcement (EA) date when conditioned on the magnitude of the aggregate return on the EA date.
Macro news delays and return predictability are larger when:
Firm'specific firm acquisition efforts are highest.
Investors have limited resources (retail trade intensity)
The firm's economics are more strongly tied to the macroeconomy (beta).
While prior research shows that information acquisition aids price discovery, our study finds that limited investor attention and a focus on firm-specific news can delay the processing of macroeconomic information.
Measuring Intangible Capital with Market Prices
with Michael Ewens and Ryan Peters, Management Science, (2025).
Existing accounting standards expense R&D, advertising and SG&A.
These expenditures build intangible capital, but are missing from a firm's balance sheet, resulting in a downward bias of reported assets.
To characterize off-balance sheet intangible assets, we use transaction prices to estimate this missing intangible capital.
Our new measure of intangible capital is 10% smaller than prior estimates, while varying more by industry.
Our estimates better explain market values, increase HML portfolio returns, act as a better proxy for human capital and brand rankings, and exhibit a strong association with patent values.
Measuing Intangible Capital with Market Prices
with Michael Ewens and Ryan Peters, Management Science, (2025).
Existing accounting standards expense R&D, advertising and SG&A.
These expenditures build intangible capital, but are missing from a firm's balance sheet, resulting in a downward bias of reported assets.
To characterize off-balance sheet intangible assets, we use transaction prices to estimate this missing intangible capital.
Our new measure of intangible capital is 10% smaller than prior estimates, while varying more by industry.
Our estimates better explain market values, increase HML portfolio returns, act as a better proxy for human capital and brand rankings, and exhibit a strong association with patent values.
The Relationship between Non-GAAP Earnings and Aggressive Estimates in Reported GAAP Numbers
with Ryan Guggenmos, Kathy Rupar, Kristina Rennekamp, Journal of Accounting Research, (2022)
This study triangulates multiple methodologies to find the following: (1) Allowing financial reporting discretion in an alternative disclosure channel, i.e., non-GAAP earnings, can reduce firms’ opportunistic GAAP reporting. (2) Statements by regulators about increased attention to non-GAAP earnings constrain this channel, and this can result in more aggressive GAAP earnings management and reduced GAAP earnings quality.
We provide evidence relevant to standard setters and regulators that non-GAAP measures may serve an important role even if they can be used opportunistically.
with Mary Barth, Wayne Landsman and Vivek Raval, The Accounting Review, (2020) 95(4) 23-50
We document a potential cost of conditional conservatism.
Firms with higher levels of asymmetric timeliness have earnings information that is more difficult to process.
As a result, investors' reactions are delayed, impeding the price discovery process when earnings are announced.
sole-authored, Accounting, Organizations, and Society, (2019) 72: 61-73.
All information intermediaries are not created equal.
Analysts have an industry-level information advantage, while insiders have a firm-specific information advantage.
If equity markets are already efficient with respect to one party's informational advantage, the level at which they assist the price discovery processes is greatly attenuated.
Know Thy Neighbor: Industry Clusters, Information Spillovers and Market Efficiency
with Joey Engelberg and Arzu Ozoguz, Journal of Financial and Quantitative Analysis, (2018) 53(5), 1937-1961.
Nearby geographic clustering of firms in the same industry facilitates information spillovers (i.e. learning about firm X will also give you information about firm Y and Z).
These firms have lower information acquisition costs for analysts and institutional investors.
As a result, firms co-located together in industry clusters have more efficient market prices.
News-driven return reversals: Liquidity provision ahead of earnings announcements
with Eric So, Journal of Financial Economics, (2014) 114, 20-35.
Short-term return reversals are much larger when earnings information is being announced.
Our results are consistent with market makers' acting to absorb additional inventory risk when holding net positions through a period where information uncertainty is being resolved.
Papers on Information Bias & Suboptimal Decision Making
Papers on Information Bias & Suboptimal Decision Making
with Kathy Rupar and Ha Young Yoon, Journal of Accounting and Economics, (2025)
Bad news has a 57% larger adverse impact on analysts' valuations when the CEO is Non-White, resulting in more pessimistic valuations compared to White CEOs.
Non-White CEO firms are more likely to surpass analysts' valuation targets in the subsequent 12 months, suggesting this racial gap lacks economic justification.
Evidence of racial bias is provided through (1) A controlled experiment corroborating the empirical findings and (2) the fact that analysts' valuation disparities towards Non-White CEOs becomes larger when race relations are worse
Increases in racial awareness and CEO familiarity attenuate these disparities, suggesting the bias is subconscious.
Findings suggest resources allocated towards Diversity, Equity and Inclusion (DEI) regarding racial stereotypes may promote equality within capital markets.
CFO Narcissism and the Power of Persuasion Over Analysts: A Mixed-Methods Approach
with Chad Ham, Mark Piotroski and Nick Seybert, Review of Accounting Studies (2025)
Presented at 2024 Review of Accounting Studies Conference
Best Paper (Outstanding Manuscript) award at the 2023 American Accounting Association's ABO conference.
We find evidence that narcissistic executives can positively influence external stakeholder perceptions of the firm.
In the laboratory, we measure the narcissism of experimental participants using well-established psychometric tests (NPI-16), and find that individuals with high narcissism are more likely to engage in persuasive tactics to elicit higher firm valuation from financial analysts.
Analyzing historical data from analyst valuation reports, we find that CFO narcissism is associated with overly optimistic target prices.
These valuations are less sensitive to earnings news, particularly when the earnings news is bad.
Analyzing conference call transcript data, we find evidence that narcissistic CFOs engage in persuasive tactics when speaking with analysts.
Narcissistic CFOs exhibit greater levels of engagement with analysts, speak more optimistically and are more likely to use argumentative prose and corporate euphemisms.
Narcissism is a Bad Sign: CEO Signature Size, Investment, and Performance
with Chad Ham and Nick Seybert, Review of Accounting Studies, (2018) 23(1), 234-264.
The first of a three-paper series on executive narcissism.
As of 8/2024 this was the 4nd most cited paper out of 391 publications at RAST (according to Web of Science) since its publication year.
This paper validates signature size is a measure of narcissism via two separate laboratory studies, and is correlated with employee perceptions of CEO narcissism.
We hand-collect CEO signatures and find the following:
(1) CEO narcissism associated with overinvestment, and such overinvestment is associated with worse profitability.
(2) Despite this, CEO narcissism is associated with higher compensation.
CFO Narcissism and Financial Reporting Quality
with Chad Ham, Mark Lang, and Nick Seybert, Journal of Accounting Research,(2017) 55(5), 1089-1135.
The second of a two-paper series on executive narcissism.
As of 8/2024 this was the 5th most cited paper out of 294 publications at JAR (according to Web of Science) since its publication year.
CFO narcissism predicts misreporting behavior, and signature size predicts misreporting through its association with narcissism.
CFO narcissism is associated with poor accounting quality (poor accrual quality, more restatements and audit red flags).
The Prevention of Excess Managerial Risk Taking
with Ed Van Wesep, Journal of Corporate Finance, (2014) 29, 579-593.
CEO's with poor prior performance may be inclined to take on negative NPV projects (with high volatility) in the hopes of meeting performance-based compensation targets.
Severance pay can keep CEO's from taking on such excess risk.
Severance pay should be contingent on results: complete failure should nullify payouts.
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