Séminaires de recherche

Is Transparency a Recipe for Innovation? The Real Effects of Reporting Regulation

Comptabilité et Contrôle de Gestion

Intervenant : Xi Li
London School of Economics

27 janvier 2017 - HEC Paris - salle T017 - De 14h00 à 16h00


Rajan and Zingales (1998, 2003) argue that good accounting standards and disclosure rules
reduce the wedge between the cost of internal and external funds and enhance growth. We test
the causal link between financial reporting and growth using a quasi-natural experiment – the
mandatory adoption of International Financial Reporting Standards (IFRS) across the world -
and examine its effect on innovation, a corporate activity that directly drives economic growth.
Our Difference-in-Differences (DiD) results suggest that improved financial reporting leads to
more innovation in the long run – it generates more patents and patents with higher impact. We
also find that the positive effect of improved financial reporting on innovation is more
pronounced among industries with higher dependence on external financing, consistent with
the role of good financial reporting in reducing the cost of external financing. In addition, we
find results consistent with the managerial learning hypothesis that managers are able to learn
from the stock market after improved financial transparency. Our paper sheds new light on the
real effects of financial reporting.

Credit availability for Social Enterprises: field study evidence

Comptabilité et Contrôle de Gestion

Intervenant : Marika Arena
Politecnico di Milano

7 octobre 2016 - HEC Paris T030 - De 14h00 à 16h00


This paper aims to analyze the complex relationship between the organizations engaged in the social business sector, and the banking systems, with particular focus on the problem of access to credit for Small and Medium sized Social Enterprises (SMSEs). Recently these organizations had to confront themselves with the need of diversifying their funding sources, that traditionally relied grants and donations and started to apply for credit from commercial banks. Still, only a limited percentage of the applicants do obtain the requested funding. Against this background, the paper explores the characteristics of the lending technologies that are currently used by banks for SMSEs and discusses the impacts of these choices in terms of SMSEs capacity to access to commercial finance.

A time-series analysis of the macro-level factors affecting annual report length

Comptabilité et Contrôle de Gestion

Intervenant : Rick Mergenthaler
University of Iowa

9 septembre 2016 - HEC Paris - Salle T030 - De 14h00 à 16h00


We examine why the length of annual reports has grown approximately ten-fold from the early 1900s to today. We rely on prior literature to identify four theories (litigation, enforcement, standard setting, and investor demand) that could explain, at least in part, the growth in annual report length. We use a data set that includes annual reports from the early 1900s through 2006 that uniquely positions us to answer our question of interest. We implement a time-series research design where we regress the average increase in page length not explained by cross-sectional variables on macro-factors that we predict will impact time-series variation in page length. We find that increases in SEC enforcement and the number of interpretive standards issued by the FASB are positively associated with increases in annual report length. We also find that that a downtick in market returns, our proxy for negative market sentiment, is associated with increases in annual report length. Finally, we find that increases in macro uncertainty are associated with decreases in annual report length. Overall, our evidence suggests that enforcement, standard setting and investor demand have contributed to the increase in annual report page length and that these factors explain a large portion of the time-series variation in page length. Our analysis helps characterize the complete set of forces contributing the rise in annual report page length, and can inform regulators and standard setters as they try to address disclosure overload and its documented negative effects on users of financial reports.

The Effects of Audit Committee Ties and Industry Expertise on Investor Judgments

Comptabilité et Contrôle de Gestion

Intervenant : Jeffrey Cohen
Boston College

10 juin 2016 - HEC Paris - Salle S127 - De 14h00 à 16h00


Despite regulations mandating audit committee independence, the CEO may still influence audit committee members’ objectivity through social ties (e.g., belonging to the same country club) or professional ties (e.g., having served on boards together). Further, research finds that audit committee industry expertise enhances financial reporting quality. In an experiment with 342 reasonably informed investor participants, we find that ties (professional or social) and industry expertise affect assessments of independence and competence. Further, investors assess audit committees with no ties and industry expertise (social ties and no industry expertise) as the most (least) effective and also result in the highest (lowest) likelihood of investing. Moreover, the potential negative effects of ties are attenuated by industry expertise, while the presence of no ties also appears to attenuate in part the lack of industry expertise. These findings support increased disclosures to investors of ties between management and members of the audit committee, as well as information on industry expertise.

The Creative Destruction of Auditing Regulation

Comptabilité et Contrôle de Gestion

Intervenant : Bertrand Malsch
Queen's University

3 juin 2016 - HEC Paris - Salle T201 - De 14h00 à 16h00


Despite increasingly transnational regulation, responses by national regulators to globalization and their implications on the forms of power and regulation underlying professional projects have still received limited attention (Faulconbridge & Muzio, 2011). Based on a longitudinal study covering the period 2003-2013, we examine the reactions of the French audit regulator (H3C) and the French audit industry to the ‘rescaling’ of their regulatory space from both a global and a local perspective. Overall, our findings highlight a performative process of ‘creative destruction’ (Schumpeter [1943], 2003) at work within the auditing regulation where globalizing pressures and firms’ entrepreneurial attitudes disrupt existing regulatory structures from within, while pushing the regulator and the profession to constantly redefine their positioning vis-à-vis global influences. Throughout this process, our analysis characterizes a chaotic dynamic of resistance and counter resistance where the H3C and the audit industry alternate opportunistically between internationalist aspirations and nationalist postures to maintain their spheres of influence. Even with their faith proclaimed in globalization and discourses aimed at discrediting their local regulation, audit firms remain infused with a significant ‘national character’ (Cooper et al., 1998) and don’t hesitate to forge circumstantial and powerful alliances with the H3C and various state actors aimed at domesticating transnational forces. From a broader viewpoint, we argue that the regulator’s resistance operates reciprocally with the power mobilized by the profession to defend its interests. Both are part of the same conditions of each other’s possibilities of action and prevent the emergence of a stable field of power, while facilitating the ongoing reconstruction of the local regulatory space.

Performance Measures and Intra-Firm Spillovers: Theory and Evidence

Comptabilité et Contrôle de Gestion

Intervenant : Christian Hofmann
LMU Munich

22 avril 2016 - HEC Paris - Salle T004 - De 14h00 à 16h00


We revisit the question of how performance measures are used to evaluate business unit managers in response to intra-firm spillovers. Specifically, we are interested in variation in the relative incentive weightings of aggregated “above-level” measures (e.g., firm-wide net income), “own-level” business unit measures (e.g., business unit profit), and specific “below-level” measures (e.g., R&D expenses) in response to spillover arising from either the focal unit’s effect on other business units or the other units’ effect on the focal manager’s unit. Our theory highlights complementarity between above- and below-level measures and the existence of an interaction between the two directions of spillovers. In our empirical work, we account for the interaction effect. Based on a survey of 122 business unit managers, we report that the incentive weighting on above-level (below-level) measures increases by approximately 50 (17) percentage points when managers face both types of spillovers (as opposed to one type of spillover).

Annulé

Comptabilité et Contrôle de Gestion

Intervenant : Brad A. Badertscher
University of Notre Dame

15 avril 2016 - HEC Paris - De 14h00 à 16h00


4th Annual ESSEC-HEC Joint Research Workshop (organised by ESSEC)

Comptabilité et Contrôle de Gestion

11 mars 2016 - ESSEC – Cergy Campus K-Lab - De 09h30 à 16h00


HEC/ESSEC - Private Information and the Granting of Stock Options

Comptabilité et Contrôle de Gestion

Intervenant : Mary Ellen Carter
Boston College

12 février 2016 - HEC Champerret - salle 677 - De 14h00 à 16h00


We examine the relation between firms’ grants of executive stock options and the presence of positive private information about the firm. Firms privately receive notices of forthcoming patents and have a period of time before that information is made public. We examine whether firms’ option-granting behavior during this period of time, relative to a benchmark period, is consistent with CEOs receiving more option grants based on that private information. Our tests suggest that firms use that information to provide more valuable option grants to CEOs and, further, that firms’ option-granting behavior during the private-information period is related to their reliance on innovation and the value of the patent received. We also find that the increase in option granting is concentrated in periods when the US Patent and Technology Office does not publish information about patent applications prior to issuing patents, and that CEOs appear to benefit more broadly from patent-related private information than outside directors do. Overall, we provide support for our expectation that firms with private information about a forthcoming patent use that information to provide more valuable option grants to their CEO.

DETERMINING MISSTATEMENT AND MANAGEMENT BIAS IN ACCOUNTING ESTIMATES

Comptabilité et Contrôle de Gestion

Intervenant : Mark W. NELSON
Cornell University

27 novembre 2015 - HEC Paris T030 - De 14h00 à 16h00


Audit Fees and Interpretive Guidance

Comptabilité et Contrôle de Gestion

Intervenant : Rick Mergenthaler (ANNULE)
The University of Iowa

20 novembre 2015 - HEC Campus T004 - De 14h00 à 16h00


Does interpretive accounting guidance make audits more or less expensive? Many contend that U.S. GAAP has too much interpretive guidance, making it complex and difficult to assimilate. This effect would lead to higher audit effort and higher fees. However, specific guidance could both lower litigation risk and increase audit efficiency by reducing the need for auditors to continually deliberate complicated accounting issues across engagements. These effects would lead to lower audit fees. Overall, using both levels and changes regressions, we find that interpretive accounting guidance is associated with higher audit fees. However, this effect is smallest for firms facing the highest ex-ante litigation risk.

The Influence of Board of Directors’ Risk Oversight on Risk Management Maturity and Firm Risk-Taking

Comptabilité et Contrôle de Gestion

Intervenant : Christopher D. Ittner (ANNULE)
Wharton Business School

17 novembre 2015 - HEC/ESSEC - CNIT La Défense - Salle 333 - De 14h00 à 16h00


The Board of Directors’ role in risk oversight has come under increased scrutiny, resulting in shareholder lawsuits, increased regulation, and more extensive disclosure and listing requirements. While theory predicts that Board risk oversight can benefit stakeholders by mitigating risk-related agency conflicts, critics argue that changes in Board practices in response to external pressure reflect window-dressing. Using novel, proprietary data on corporate risk oversight and risk management processes, we find the location of Board risk oversight responsibilities to be a major determinant of Board risk oversight practices, with greater oversight in firms that assign responsibilities to the Board as a whole as well as to certain committees. Supporting the view that risk oversight is conducted for economic reasons, the quality of Board oversight practices has a direct positive relation with the maturity of risk management processes, as well as a significant indirect influence on future stock return volatility and tail risk through the enhanced risk management maturity. Positive associations between risk oversight, risk management and future share price and operating performance indicate that risk reductions do not come at the expense of firm value.

Functional Stupidity in the Boardroom: A Qualitative Examination of Compensation Committees

Comptabilité et Contrôle de Gestion

Intervenant : Yves GENDRON
Laval

29 octobre 2015 - HEC Salle T004 - De 14h00 à 16h00


This study provides a better understanding of the dynamics of knowledge and expertise in the context of public companies’ compensation committees (CCs), through a focus on CC members’ cognitive limitations. Drawing on semi-structured interviews, we mobilize the concepts of reflexive thinking and functional stupidity (Alvesson and Spicer 2012) to document and analyze CC members’ difficulties and/or unwillingness “to use cognitive and reflective capacities in anything other than narrow and circumspect ways” (Alvesson and Spicer, 2012, 1201). Overall, our findings indicate that CC members, although being firmly committed to knowledge development and problem solving, are disinclined to mobilize three key aspects of cognitive capacity (i.e., reflexivity, meaningful justification and substantive reasoning) in the design of remuneration policies. Our study also shows that these cognitive limitations are fuelled by a multidimensional exercise of power, which we conceive of as a form of “stupidity management” (Alvesson and Spicer 2012). The latter aims to limit CC members’ meaningful communicative action by constraining disruptive thinking and preventing critical issues from impacting committees’ agenda and deliberations – all of this in the name of aspirational yet superficial forms of decision-making leadership in the boardroom. Our analysis also highlights the central role of compensation consultants as “stupidity managers”, involved in the orchestration of the constraining of committee members’ mind. Significant implications of these findings for research and policy-making are discussed.

Analyst use of corporate toxic emissions data to assess firm’s future financial performance: an empirical analysis

Comptabilité et Contrôle de Gestion

Intervenant : Yue LI
Rotman School of Management, University of Toronto, Toronto, Canada

19 juin 2015 - Salle S126 - De 14h00 à 16h00


This study examines financial analysts’ use of non-financial, non-corporate disclosure environmental performance information to assess firms’ future earnings and financial prospect. Specifically, we examine analyst reactions to annual release of the Toxics Release Inventory (TRI) data by the U.S. Environmental Protection Agency (EPA). We hypothesize that analysts use the TRI data to assess corporate environmental risks and impound such risks into their stock recommendations and earnings forecasts. Using a large sample of U.S. public companies from 1997 to 2011, we find that increased environmental risk exposure is associated with lower accuracy and higher dispersion in analyst earnings forecasts. We also find that analysts are more likely to revise their stock recommendations and earnings forecasts of a firm downward if the firm experiences an increase in their environmental risk exposures, and vice versa. In addition, we find evidence that analyst revisions in stock recommendations following the TRI release favourably impact firm’s future pollution reduction, consistent with analyst actions motivating firms to improve future environmental performance. Overall, the findings are consistent with analysts using non-financial, not-corporate disclosure environmental performance information to assess corporate environmental risk exposure and shed light on the mechanism through which corporate environmental risks are impounded into the stock prices.

Can Excess Pay Be Explained Away?

Comptabilité et Contrôle de Gestion

Intervenant : Lakshmanan SHIVAKUMAR (Shiva)
LBS

29 mai 2015 - HEC Campus, salle T020 - De 14h00 à 16h00


This paper examines whether firms provide greater compensation-related textual disclosures to better explain the compensation awarded to their senior management team. Applying a textual analysis based approach to parse the contents of proxy statements for balanced scorecard related keywords and phrases, we create a text-based score and find that it is highly associated with the incidence of higher compensation. We then look at the Say-on-Pay setting, to assess whether greater textual performance disclosures are considered credible by shareholders when they cast their advisory votes on executive compensation. We find that firms that provide more compensation-related textual disclosures have a higher probability of obtaining SoP approval (i.e. over 70% support). We also find that firms that fail to obtain SoP approval provide greater disclosures in the following period. Finally, we find evidence suggesting that providing greater disclosures in response to past SoP disapproval increases the probability of obtaining an approval in the next SoP vote.


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