Financial Misconduct, Reputation Damage and Changes in Employee Satisfaction
(I am the first author) with Christos Makridis
Media Coverage: NYU School of Law, PCCE; Duke The FinReg Blog; Columbia Law School's Blue Sky Blog
Conferences: The First CUHK-RCFS Conference on Corporate Finance and Financial Intermediation, 2019;
30th Annual Conference on Financial Economics & Accounting, 2019
Financial Accounting and Reporting Section Midyear Meeting, 2020
Abstract: We use Glassdoor data to study the effects of the public announcement of financial misconduct on employees' perceptions of firms and managers and the main drivers of any change in perceptions. We nd fraud announcements are associated with a 0.27 standard deviation decline in employees' overall company ratings and 0.20 to 0.33 standard deviation declines in ratings of career opportunity, compensation, senior leadership, work-life balance, culture and values, and recommendation. Using a machine learning method to analyze employee comments, we nd that employees provide fewer positive comments and more negative ones and general feedback about firm culture and values, which indicates that reputational damage is the main reason behind the decrease in employee perceptions.
Financial Reporting Quality and International Trade
UCLA Dissertation Year Fellowship
Conferences: DSFI, Western Region AAA Meeting, 2020 (Best Student Paper Award);
The Trans-Atlantic Doctoral Conference, 2021
Workshop: The University of Utah; Dartmouth College; UPenn Wharton; London Business School; University of Minnesota; The Chinese University of Hong Kong; The University of Hong Kong; The Chinese University of Hong Kong (Shen Zhen)
Abstract: This paper examines the effects of financial reporting quality on exports and imports. I begin by using survey data from executives to measure accounting quality and conduct country-sector-level analyses. I find that a one standard deviation increase in financial reporting quality in a country is associated with increases in manufacturing exports and imports of 3.6 percent and 4.5 percent, respectively. I then exploit a reporting regulation change in China and use administrative firm-level international trade data to conduct differences-in-differences and triple-difference analyses. These results show that treated firms export 15.3 percent more after the financial reporting reform. They also export to more countries and export more types of goods after the reform. Next, I provide evidence for potential mechanisms for these effects; specifically, improvements in financial reporting quality (i) facilitate communication among people of different cultures, (ii) decrease information asymmetry between trade partners, and (iii) help firms raise external capital. This paper extends understanding of the real economic effects of financial disclosure and provides a potential link between information transparency and global economic growth.
Exchange Rate Movements, Firm Performance and Financial Market Reactions, with Ivo Welch
Abstract: Firms are exposed to exchange rate fluctuation risks. In this paper, we use administrative transaction-level international trade data to investigate the effects of exchange rate movements on firm performance and financial market reactions. We find that exchange rate fluctuations have significant impacts on firm performance, analysts' forecasts, earnings surprises, quarterly stock returns, and management guidance decisions. Evidence shows that the sensitivity of total exports to exchange rate movements is an important economic channel behind the findings. Further analyses document that the effects are mainly driven by dollar appreciation, but not depreciation. Moreover, hedging and segment disclosure reduce but do not eliminate the impact of exchange rate fluctuations.
Corporate Income Tax Rates and Household Consumption, with Henry Friedman
Abstract: We use staggered changes in U.S. state-level corporate income tax (CIT) rates to examine the effects of CIT on household consumption. Using household-level consumption data from Nielsen, we find that a one percentage point increase in CIT decreases household consumption by 0.8-0.9 percent. The effects of CIT are mainly driven by tax increases rather than rate reductions. When examining the types of consumption affected, we find that households adjust their consumption of short-term staples after the CIT increases. In addition, we show that dual-income households, white-collar workers, and ethnic minority families are more strongly affected by CIT rate changes than other households. Since household consumption is crucial for U.S. economic output and growth, our paper extends the understanding of the economic consequences and incidence of corporate taxes. Our results on heterogeneous effects of CIT rate changes across consumption categories and household types has policy implications for regulators considering CIT changes.
The Dog that Didn't Bark: Limited Price Efficiency and Strategic Nondisclosure
with Frank Zhou. March, 2020, Journal of Accounting Research
Abstract: The theory posits that investors can rationally infer the implications of strategic nondisclosure for firm value, pressuring managers to voluntarily disclose information. This study documents that the lack of an earnings guidance predicts an abnormal return of -41 basis points around the subsequent quarterly earnings announcement, suggesting that investors do not fully incorporate the implications of nonguidance. Further analysis shows that limitations in price efficiency, driven by investors' limited attention and short-selling constraints, explain the mispricing of nonguidance. Consistent with this mispricing lowering the capital market pressure for disclosure, we find that limited attention and short-selling constraints are associated with a lower likelihood of issuing guidance.
The Black-White Gap in Non-Cognitive Skills among Elementary School Children
with Todd Elder. January, 2021, American Economic Journal: Applied Economics
Abstract: Using data from two Early Childhood Longitudinal Study cohorts, we find large black-white gaps in teacher-reported measures of non-cognitive skills. We show that these measures likely understate true racial disparities in non-cognitive skills because of systematic differences across schools in what teacher reports represent. Correcting for the resulting bias nearly doubles the size of the estimated gaps, to roughly the same magnitude as analogous gaps in achievement test scores. We then use the British Cohort Study of 1970 to provide suggestive evidence that non-cognitive skills account for large black-white disparities in adult outcomes, including arrest rates and educational attainment.
The Effects of Divorce Laws on Labor Supply: A Reconsideration and New Results
Economics Bulletin, 2018, Volume 38, Issue 4, pages 1877-1888
Abstract: In this paper, I revisit the effects of unilateral divorce laws on female labor supply. I use a variety of models to check the robustness of the results and find that the estimated effects on female labor supply are remarkably robust. The estimates I mainly use in this paper suggest that unilateral divorce laws increase female labor force participation rates by roughly 4-5 percentage points, and that these effects strengthen over time. There are also strong long-term effects on the weeks and hours of work and on participation in full-time work. In addition, this paper compares the dynamic participation responses of married mothers versus married nonmothers, high education versus low education women, young versus old women and white versus black women.
Work in Progress
Employment Diversity, Firm Productivity and Other Outcomes, with Henry Friedman
Research proposal and data access were approved by the U.S. Census Bureau and the IRS. Preliminary results have been obtained.
Accounting Fraud and Customer/Supplier Relationships, with Judson Caskey
Research proposal and data access were under review by the U.S. Census Bureau and the IRS.