LATEST RESEARCH
"Corporate Political Activism and Information Transfers"
Co-authored with Dane M. Christensen, Hengda Jin, and Laura A. Wellman
We examine whether there are externalities to the processing of political information by politically active firms and find evidence of stronger intra-industry information transfers from politically active firms to their industry peers.
Co-authored with Lindsey A. Gallo, Karen Ton, and Teri L. Yohn
We study the role of information intermediaries in the non-GAAP disclosure environment and find that investor uncertainty is increasing in the amount of I/B/E/S's non-GAAP adjustments but not in managers' non-GAAP adjustments. These results expand our understanding of the influence of I/B/E/S on capital markets.
Co-authored with Mary E. Barth and Doron Israeli
Equity book-to-market ratios (BTM) should not exceed one if a firm’s return on equity exceeds its cost of capital or it employs conservative accounting. Yet, BTM is above one for many firms. We find that this occurs because BTM above one reflects macroeconomic risk. We find that hedge returns for BTM above one are concentrated in recession years. We also find that BTM above one reflects potentially overstated equity book values, but only in non-recession years. Our study calls into question using HML as a return prediction factor for BTM above one and using BTM as a generic measure of conservative accounting or as the key indicator of overstated asset book values.
Co-authored with Jonathan Berkovitch, Cassandra Estep, and Doron Israeli
Motivated by the observation that investor trust facilitates greater informational price efficiency, we find that firms with more CSR enjoy faster incorporation of earnings news into stock prices and lower investor uncertainty around earnings announcements. Using a regression discontinuity design, we strengthen our identification of the effect of CSR on the speed with which stock prices reflect earnings news.
Co-authored with Lindsey A. Gallo and Hengda Jin
We propose and find that aggregating a small number of earnings signals from highly macroeconomically exposed firms yields an informative leading indicator of future GDP. This challenges the view that there is a mechanical link between aggregate earnings and GDP. We shed light on the “black box” of how market participants form expectations by showing that forecasters across organizations fail to efficiently incorporate the news contained in top macro-exposed firms. Overall, our results highlight the importance of aggregation for forming macroeconomic expectations and clarify the mechanism underlying the relation between aggregate earnings and GDP.