We examine how corporate social media affects the capital market consequences of firms' disclosure in the context of consumer product recalls. Product recalls constitute a "product crisis" exposing ...the firm to reputational damage, loss of future sales, and legal liability. During such a crisis it is crucial for the firm to quickly and directly communicate its intended message to a wide network of stakeholders, which, in turn, renders corporate social media a potentially useful channel of disclosure. While we document that corporate social media, on average, attenuates the negative price reaction to recall announcements, the attenuation benefits of corporate social media vary with the level of control the firm has over its social media content. In particular, with the arrival of Facebook and Twitter, firms relinquished complete control over their social media content, and the attenuation benefits of corporate social media, while still significant, lessened. Detailed Twitter analysis confirms that the moderating effect of social media varies with the level of firm involvement and with the amount of control exerted by other users: the negative price reaction to a recall is attenuated by the frequency of tweets by the firm, while exacerbated by the frequency of tweets by other users.
We examine the relative accuracy of management and analyst forecasts of annual EPS. We predict and find that analysts' information advantage resides at the macroeconomic level. They provide more ...accurate earnings forecasts than management when a firm's fortunes move in concert with macroeconomic factors such as Gross Domestic Product and energy costs. In contrast, we predict and find that management's information advantage resides at the firm level. Their forecasts are more accurate than analysts' when management's actions, which affect reported earnings, are difficult to anticipate by outsiders, such as when the firm's inventories are abnormally high or the firm has excess capacity or is experiencing a loss. Although analysts are commonly viewed as industry specialists, we fail to find evidence that analysts have an information advantage over managers at the industry level. The two have comparable abilities to forecast earnings for firms with revenues or earnings that are more synchronous with their industries.
This study examines when firms inflate reported cash from operations in the statement of cash flows (CFO) and the mechanisms through which firms manage CFO. CFO management is distinct from earnings ...management. Unlike the manipulation of accruals, firms cannot manage CFO with biased estimates, but must resort to classification and timing. I identify four firm characteristics associated with incentives to inflate reported CFO: (1) financial distress, (2) a long-term credit rating near the investment/non-investment grade cutoff, (3) the existence of analyst cash flow forecasts, and (4) higher associations between stock returns and CFO. Results indicate that, even after controlling for the level of earnings, firms upward manage reported CFO when the incentives to do so are particularly high. Specifically, firms manage CFO by shifting items between the statement of cash flows categories both within and outside the boundaries of generally accepted accounting principles (GAAP), and by timing certain transactions such as delaying payments to suppliers or accelerating collections from customers.
We use corporate jet flight patterns to identify private meetings with investors that are ex ante unobservable to non-participants. Using approximately 400,000 flights, we proxy for private meetings ...with “roadshows,” defined as three-day windows that include flights to money centers and to non-money centers in which the firm has high institutional ownership. Roadshows exhibit greater abnormal stock reactions, analyst forecast activity, and absolute changes in local institutional ownership than other flight activity. We also find positive trading gains in firms with more complex information and infrequent private meetings, suggesting that roadshows provide participating investors an advantage over non-participating investors.
While shareholders have strong incentives to limit value-destroying perquisite consumption, it is challenging to identify such perquisites. Many corporate assets that enable forms of perquisite ...consumption also provide operational benefits. Corporate jets represent a potent example. We find business-related flights increase firm performance. Our results also highlight the channels through which jet use can either enhance or destroy firm value. Consistent with the benefits of information gathering and monitoring, firms with soft and complex information that is difficult to transmit remotely are more likely to fly to company subsidiaries and plants, and these flights positively affect firm value. In contrast, among firms with weak governance structures where flights are more likely motivated by agency factors, jet use is more likely to be value-decreasing. The ability to differentiate has important implications in today's activism environment.
ABSTRACT
We examine firm decisions to provide listings of sell-side analyst coverage on corporate investor relations (IR) websites. These listings are related to three major areas of financial ...research—voluntary disclosure, investor relations, and analysts. Our hand-collected data permit cross-sectional and time-series analyses. Firms are more likely to have such listings when analysts are more important information intermediaries and when firms are directly involved in managing their IR websites. For firms with listings, the probability of an analyst being included on the listing is increasing in firm awareness of and familiarity with the analyst, how active and favorable the analyst is, and the analyst’s reputation. Additional analysis indicates similar results across self-hosting versus third-party hosting IR websites, with a notable exception that self-hosting firms exhibit a stronger preference for analysts who issue more favorable research about the firm. Decisions to add or drop analysts from listings reinforce the main results.
Data Availability: Data are available from public sources identified in the text.
JEL Classifications: G17; G24; M41.
The within-year walkdown of analysts' earnings forecasts has largely been attributed to analysts' incentives to curry favor with managers. We appeal to cognitive psychology literature on motivated ...reasoning and propose that forecasting difficulty interacts with such incentives to yield the observed walkdown. Higher forecasting difficulty generates a wider range of outcomes from which analysts can justify optimistically biased forecasts. In regression analyses, we find that the interaction between analysts' incentives for optimism and difficulty exhibits the strongest effect on earnings walkdowns. We also examine revenue forecasts as a benchmark of lower forecasting difficulty and find that revenue walkdowns are relatively diminutive. However, when analysts forecast losses, revenue forecasts are more critical and exhibit markedly steeper walkdowns. Our results suggest that analyst forecast walkdowns are better characterized by an interactive effect between analysts' strategic incentives for optimism and forecasting difficulty.
We examine whether opinions on firms subsequently revealed to have misstated earnings affect analysts' reputation with investors. We find that positive opinions by bullish analysts hurt their ...reputation, leading investors to react less to their research on non-misstatement firms after the misstatement revelation (i.e., negative spillovers). We also find that bearish analysts issuing more negative opinions gain reputation and experience positive spillovers. Finally, for analysts who dropped coverage of the misstatement firm before the misstatement revelation, we find no spillovers, which suggests that analysts experience limited reputational gains when they did not issue a public negative opinion.
This paper examines when firms manage reported cash from operations in the statement of cash flows (CFO) and the mechanisms through which CFO can be managed. CFO management as investigated in this ...paper is distinct from earnings management. Unlike the manipulation of accruals, firms cannot manage CFO with biased estimates, but must resort to classification and timing. I identify five firm characteristics associated with incentives to manage reported CFO: (i) financial distress, (ii) a long-term credit rating near the investment/non-investment grade cutoff, (iii) less persistent earnings, (iv) a trend of diverging earnings and CFO, and (v) the existence of analyst cash flow forecasts. Results indicate that firms manage reported CFO at times when the incentives to do so are particularly high. Specifically, CFO is managed by shifting items between the statement of cash flows categories both within and outside the boundaries of GAAP and by timing certain transactions such as delaying payments to suppliers or accelerating collections from customers.
Fibromyalgia is commonly considered a stress-related chronic pain disorder, and daily stressors are known triggers. However, the relation between stress and pain development remains poorly defined by ...clinical approaches. Also, the aetiology remains largely unknown.
We used a newly developed mouse model and lipidomic approaches to probe the causation and explore the biological plausibility for how perceived stress translates into chronic non-inflammatory pain. Clinical and lipidomic investigations of fibromyalgia were conducted for human validation.
Using non-painful sound stimuli as psychological stressors, we demonstrated that mice developed long-lasting non-inflammatory hyperalgesia after repeated and intermittent sound stress exposure. Elevated serum malondialdehyde level in stressed mice indicated excessive oxidative stress and lipid oxidative damage. Lipidomics revealed upregulation of lysophosphatidylcholine 16:0 (LPC16:0), a product of lipid oxidisation, in stressed mice. Intramuscular LPC16:0 injection triggered nociceptive responses and a hyperalgesic priming-like effect that caused long-lasting hypersensitivity. Pharmacological or genetic inhibition of acid-sensing ion channel 3 impeded the development of LPC16:0-induced chronic hyperalgesia. Darapladib and antioxidants could effectively alleviate the stress-induced hyperalgesia by inhibiting LPC16:0 synthesis. Clinical investigations showed that excessive oxidative stress and LPC16:0 expression also exist in patients with fibromyalgia. Moreover, LPC16:0 expression was correlated with pain symptoms in patients with high oxidative stress and disease severity.
Our study provides experimental evidence for the causal effect of psychological stressors on chronic pain development. The findings identify a possible pathophysiological mechanism of stress-induced chronic non-inflammatory pain at molecular, behavioural and clinical levels that might indicate a new therapeutic approach for fibromyalgia.
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