Browsing by Subject "Corporations--Accounting"

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The differential effects of proprietary cost on the quality versus quantity of voluntary corporate disclosures
(2005) Zhang, May Hongmei; Jennings, Ross
Recent analytic research distinguishes between the quantity and quality of public information and demonstrates their independent roles in affecting cost of capital. However, there exists no empirical evidence on the differences between the two. This study decomposes voluntary disclosure decisions into the quantity decision and the quality decision and examines their differential relations with disclosure determinants such as proprietary cost in a joint determination system. I find strong evidence of contrasting effects of proprietary cost on the quantity versus quality of voluntary disclosures. Firms with high proprietary cost provide more frequent but less precise and less accurate information disclosures than firms with lower proprietary cost, consistent with the explanations that high proprietary cost firms lower disclosure quality to reduce the usefulness of the information to competitors and instead they use a high quantity of disclosures to resolve information asymmetry in the capital market in response to investors’ demand for information. Three-stage least squares (3SLS) regression results reveal a substitute relation between quantity and quality of disclosures for firms facing high proprietary cost. Results of this study highlight the importance of the distinction between quantity and quality of information in discretionary disclosure research. Future research may examine the differential capital market consequences of the quantity and quality of voluntary disclosures.
The spread of aggressive corporate tax reporting : a detailed examination of the corporate-owned life insurance shelter
(2008-05) Brown, Jennifer Lynn, 1975-; Robinson, John Richard
This paper investigates the spread of aggressive corporate tax reporting by modeling a firm's decision to adopt the corporate-owned life insurance (COLI) shelter. I use a sample of known COLI participants to examine whether certain firm characteristics are associated with the decision to adopt a COLI shelter. I find some evidence that firms with higher performance-matched discretionary accruals are more likely to adopt a COLI shelter, suggesting a positive relation between aggressive financial reporting and aggressive tax reporting. I also find that firms with greater capital market visibility are less likely to adopt a COLI shelter, consistent with a potential reputational cost for being associated with aggressive tax avoidance activities. Further, my results suggest that COLI adopters are generally R&D intensive firms with low leverage and few foreign operations. In addition to firm specific characteristics, I consider two explanations for the spread of COLI adoption motivated by theory on diffusion of innovations and institutional isomorphism. I investigate whether firms imitate prior COLI adopters and whether COLI adoption spreads through common auditors. My results are not consistent with an imitation explanation. Further, my results suggest that having the same auditor as a prior COLI adopter does not increase the likelihood that a firm will adopt COLI.