We study the immediate and delayed market reaction to U.S. Securities and Exchange Commission (SEC) EDGAR 10-K filings. Unusual trading volumes and stock-price movements are documented during the ...days around the 10-K filing dates. The abnormal price movements are positively associated with future accounting profitability, indicating that 10-K reports contain useful information about future firm performance. In addition, investors’ reaction to 10-K information seems sluggish, as demonstrated by the stock-price drift during the 12-month period after 10-K filing. We find that investors’ underreaction tends to be stronger for firms with more complex 10-K reports.
The principal purpose of this study was to analyze the determinants of tourists’ length of stay at a destination. Data were collected through a questionnaire survey conducted in the summer of 2005. ...Exceptionally different from other similar studies, this study employed survival analysis to analyze the data. The findings indicate that, out of 39 variables, 16 significantly associated with tourists’ decisions about the length of their stays during a summer vacation. More specifically, nationality, education, income, experience, familiarity and daily spending are among those as the major determinants of the length to stay. An increase or decrease in such variables is accompanied by a significant increase or decrease in the length of stay. Implications for both the theory and the practice are discussed.
Researchers have linked the rise in obesity to technological progress reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity. We examine this ...hypothesis in the context of Walmart Supercenters, whose advancements in retail logistics have translated to substantial reductions in the prices of food and other consumer goods. Using data from the Behavioral Risk Factor Surveillance System matched with Walmart Supercenter entry dates and locations, we examine the effects of Supercenters on body mass index (BMI) and obesity. We account for the endogeneity of Walmart Supercenter locations with an instrumental variables approach that exploits the unique geographical pattern of Supercenter expansion around Walmart’s headquarters in Bentonville, Arkansas. An additional Supercenter per 100,000 residents increases average BMI by 0.24 units and the obesity rate by 2.3% points. These results imply that the proliferation of Walmart Supercenters explains 10.5% of the rise in obesity since the late 1980s, but the resulting increase in medical expenditures offsets only a small portion of consumers’ savings from shopping at Supercenters.
We examine changes in the disclosure behavior of firms involved in 827 disclosure-related class-action securities litigation cases filed between 1996 and 2005. We find no evidence that the firms in ...our sample respond to the litigation event by increasing or improving their disclosures to investors. Rather, we find consistent evidence that firms reduce the level of information provided post-litigation. Our results suggest that the litigation process encourages firms to decrease the provision of disclosures for which they may later be held accountable, despite the increased protections afforded by the Private Securities Litigation Reform Act of 1995.
Empirical analysis of corporate fraud faces a challenge because the commission of fraud is not directly observable. We observe only detected frauds. In this article, I introduce a new empirical model ...to address this partial observability of fraud. The new model generates new insights about not only the determinants of fraud commission and fraud detection but also the interaction between the two latent processes. I also show that the empirical models used in the existing literature can lead to incorrect assessment of corporate or public policies designed to combat fraud.
We examine the determinants of adherence to U.S. Securities and Exchange Commission (SEC) mandated disclosures of environmental sanctions. Our sample includes non-superfund U.S. Environmental ...Protection Agency (EPA) sanctions between 1996 and 2005. Our results suggest that firms are more likely to provide sanction disclosures if they operate in environmentally sensitive industries, are subject to larger penalties and are voluntarily participating in a supplemental environmental project. Our results also suggest that firms are less likely to disclose sanctions involving judicial proceedings. Overall, we find that voluntary disclosure incentives impact compliance with mandatory reporting requirements. Although incentives exist for firms to comply with mandatory disclosures, our results suggest that increases in mandatory environmental accounting disclosures may not be effective under the current regulatory system despite the use of bright-line materiality thresholds. Our study contributes to the current and ongoing debate about the role and effectiveness of environmental risk disclosure mandates in providing information to the marketplace, as well as “mandated disclosure” rules in general. The value attributed to current and potential environmental disclosure regulations cannot be thoroughly understood without examining disclosure compliance with existing regulations. From an environmental and sustainability disclosure perspective, our findings are particularly germane since these disclosures focus on risks, liabilities, or other reputational shortcomings of the firm.
Using a novel data set covering all individual investors' stock market transactions in Norway over 10 years, we analyze whether individual investors have a preference for professionally close stocks, ...and whether they make excess returns on such investments. After excluding own-company stock holdings, investors hold 11% of their portfolio in stocks within their two-digit industry of employment. Given the poor hedging properties of such investments, one would expect abnormally high returns. In contrast, all estimates of abnormal returns are negative, in many cases statistically significant. Overconfidence seems the most likely explanation for the excessive trading in professionally close stocks.
We investigate analysts' use of stock returns and other analysts' forecast revisions in revising their own forecasts after an earnings announcement. We find that analysts respond more strongly to ...these signals when the signals are more informative about future earnings changes. Although analysts underreact to these signals on average, we find that analysts who are most sensitive to signal informativeness achieve superior forecast accuracy relative to their peers and have a greater influence on the market. The results suggest that the ability to extract information from the actions of others serves as one source of analyst expertise.
► Stock returns and analyst revisions are informative signals for forecasting earnings. ► Analysts respond more to these signals when they are more informative. ► Analysts under react more to these signals when they are more informative. ► Sensitivity to signal informativeness improves relative accuracy and market impact.
This paper investigates contractual definitions of net income and net worth and the cross-sectional variation in definitions of net income in a large sample of private debt contracts to shed light on ...the debt contracting demand for accounting numbers. The descriptive evidence indicates that removing transitory earnings is one principal concern in the measurement of earnings but not in the measurement of net worth. In the extreme, contracts are never written on comprehensive income as an earnings concept, whereas accumulated other comprehensive income is included in net worth in most contracts. In contrast, conservative adjustment, in the sense of including certain types of negative earnings but not the corresponding positive earnings, does not seem to be a primary consideration in measuring net income and net worth. Crosssectionally, I find that net income is more likely to be defined differently from the GAAP when net income plays a more important role in a contract, when the loan maturity is longer, and when transitory earnings are less useful for debt contracting. Collectively, the evidence shows that debt contracting parties choose contracting variables in a manner consistent with efficient contracting, and that transitory earnings are relatively less useful in measuring firm performance for debt contracting.
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