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We investigate how the Dodd-Frank Act (DFA) affects voluntary disclosures of large bank holding companies (BHCs) relative to other banks and unregulated firms in the financial sector. Using a difference-in-differences research design, we find that following the introduction of the DFA, large banks become less likely to issue earnings forecasts containing bad news. They also reduce the frequency of issuing earnings forecasts but increase the frequency of providing forecasts for dividends and return on assets. In earnings-related conference calls, managers of large banks offer information with incrementally higher numerical and forward-looking intensity in both the prepared remarks and their answers to analysts' questions. Finally, we find that large banks provide incrementally less information than other banks about certain regulated activities and instead focus more on commercial banking financial performance and market innovation. Our findings provide the first evidence of the unintended consequences of the DFA on changes in affected banks' voluntary disclosures, an important component of the information environment.
The issue of corporate reporting disclosure behaviour is influenced not only by environmental factors, but also by corporate-specific attributes (e.g. firm age, firm size, profitability, liquidity, government ownership, foreign ownership, and listing status); this has attracted many academic researchers in several countries to investigate the impact of corporate attributes on the extent of different disclosure levels (i.e. mandatory, voluntary or aggregate disclosure). To date, less attention has been paid by academic researchers to voluntary disclosure practices by financial institutions in general, and banking disclosure practices in particular, despite the fact that the banking sector plays a major role in economic growth in a country. Moreover, there is very little empirical evidence about the impact of commercial bank-specific characteristics on the extent of annual information voluntarily disclosed. Thus, this book intended to help develop the disclosure literature in relation to the commercial banking sector, which is currently sparse, due to the limited empirical research on the extent of banking disclosure and its determinants.
My dissertation examines the outcomes, incentives, and regulations surrounding the voluntary and mandatory disclosure of information by public firms. It contains three chapters. Using earnings conference calls as a prevalent setting to examine voluntary disclosure incentives and outcomes, Chapter 1 examines the market response to firms' scripting answers to questions they expect to receive during the question and answer (Q & A) session of the conference call. I hypothesize that firms script their Q & A responses when future performance is poor to avoid disclosing information that can be used in litigation against the firm or as a means of withholding bad news from investors. I develop a measure of Q & A scripting and find evidence that investors react negatively to scripted Q & A.I also find negative returns in the quarter following scripted Q & A suggesting that investors do not fully incorporate the negative signal into the stock price at the time of the conference call. Lastly, I provide evidence of a negative association between Q & A scripting and unexpected earnings for the two quarters following the conference call, suggesting that the negative reaction to scripted calls is warranted given the realization of negative future outcomes. Chapter 2 then focuses on the incentives for firms to provide disclosures prior to raising capital in seasoned equity offerings. Seasoned equity offerings involve significant information asymmetry between the firm and potential investors. Firms can reduce information asymmetry and the cost of obtaining financing by disclosing detailed plans for how the offering proceeds will be used to generate a return for investors. However, disclosure of forward-looking strategic information is costly. A policy of full disclosure can allow competitors to obtain and use proprietary information to the detriment of the firm or can preclude investors from investing in the offering if they disagree with the chosen strategy of the manager. I argue that managers are likely to disclose only if the expected benefits of disclosure outweigh the expected costs. I expect the benefits of disclosure are the lowest for high-ability managers. High-ability managers can credibly convey firm value at the offering date and enjoy lower levels of information asymmetry. Low-ability managers, on the other hand, cannot credibly convey the value of the offering resulting in high levels of information asymmetry at the time of the offering. I provide evidence that low-ability managers are more likely to disclose plans for the offering proceeds than high-ability managers to reduce information asymmetry and the cost of obtaining funds. Finally, Chapter 3 examines the effect of regulation on the disclosure and reporting decisions of banking institutions. All public firms, including banks, must register their securities with the Securities and Exchange Commission (SEC) if they meet certain thresholds. Registered firms must disclose financial information and adhere to strict reporting requirements. These firms are also subject to regulations such as the Sarbanes Oxley Act, which requires costly attestation of the adequacy of the firm's internal controls. In 2012, the Jumpstart Our Business Startups (JOBS) Act loosened the requirements for banks to register with the SEC. The JOBS Act raised the previous registration threshold of 300 shareholders of record to 1,200 shareholders of record, allowing banks with between 300 and 1,200 shareholders of record the opportunity to deregister their securities without incurring the costs of reducing their shareholders of record to be below the prior threshold. Within the first six months following the JOBS Act, 89 banks deregistered from the SEC, which is large given that only 142 banks deregistered over the ten years prior to the Act. We hypothesize that banks deregister to take advantage of private benefits of control. We find that banks deregistering after the Act have significantly lower institutional ownership, more insider trading and insider loans, and do not display significantly lower asset growth. In contrast to positive returns during pre-JOBS Act deregistration announcements, announcement returns for post-JOBS Act deregistrations are insignificant. By reducing the costs of deregistration, the Act likely allowed banks to capture private benefits while increasing the attractiveness of deregistration for higher growth banks.
We use the relaxation of interstate branching restrictions under the Interstate Banking and Branching Efficiency Act (IBBEA) to examine how increases in competition affect incumbents' voluntary disclosure choices. States implemented the IBBEA over several years and to varying degrees, allowing us to identify the effect of increased competition on the voluntary disclosure decisions of both public and private banks. We find that increases in competition are associated with an increase in press releases. Overall, press releases become more negative in tone as entry barriers decrease. However, disclosures by public banks and by banks issuing equity become incrementally positive in tone when entry barriers decrease. Thus, the increase in disclosure is consistent with a dominant incentive to deter entry via negative information, which is mitigated by an incentive to communicate positive information to investors.
Since 1998, the world’s leading experts on accounting and regulation have convened in a series of workshops to explore and analyze emerging issues in the field. They have covered a wide array of topics, including corporate governance, auditing, financial disclosure, international standards boards, and the dynamics of markets and institutions. Most recently, they have focused on the role that accounting practices and policies may have played in the global financial crisis of 2008. In this volume, the editors showcase contributions from the workshops that represent the full spectrum of issues and perspectives relating to accounting and regulation. Each paper incorporates the most current examples and references to reflect the latest insights, with an emphasis on exploring future implications for theory and research, practice, and policymaking. ​
Staff Discussion Notes showcase the latest policy-related analysis and research being developed by individual IMF staff and are published to elicit comment and to further debate. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues. This Web-only series replaced Staff Position Notes in January 2011.
What is my theory? How do I choose a theory? Why and how should I employ a particular method for collecting the empirical data? These basic questions concern everyone involved in research. A research study can be a voyage of discovering or choice of theoretical perspective as well as gathering empirics or facts on a problem or situation. This book provides a good guideline as to why and how to choose a particular theory or method to study an organisational phenomenon such as accounting. All the chapters provide both retrospective and contemporary views by scholars in the field. Each chapter documents the latest developments and research in accounting and control systems and provides valuable insights into methodological perspectives in accounting research. This second edition has also introduced a number of new chapters covering strategy-management control as practice, grounded theory approach, institutional logic and rhetoric, social interaction theory, actor-network theory and practice theory. The book is primarily intended for research students and academic researchers. It can also be used for undergraduate Honours course as well as postgraduate accounting and business methodology courses. Research organisations and consulting firms in accounting and business fields may also find this book useful. The principal aims of this second edition are (1) to update the chapters previously published in 2006 and (2) to introduce new chapters documenting recent developments in accounting research.