Thesis advisor: Fabio Schiantarelli / Thesis advisor: Thomas J. Chemmanur / After the 2007 financial crisis, a big attention has been dedicated to credit ratings. Whether ratings are capable to provide the most precise and timely information is a question that has been tackled from different angles. The possibility to discipline credit ratings via a regulatory mechanism, the influence that ratings may play on corporate governance decisions and the information they deliver in comparison to other financial intermediaries are the main points that this dissertation aims to address. The first paper compares the behavior of standard or issuer-paid rating agencies, represented by Standard & Poors (S&P) to alternative or investor-paid rating agencies, represented by the Egan-Jones Ratings Company (EJR) after the Dodd- Frank Act regulation is approved. Results show that both S&P and EJR ratings are more conservative, stable and, on average, lower after the Dodd-Frank implementation. However, EJR ratings are higher for firms that may generate high revenue for the rater. Additionally, I find that, after the regulation, S&P cares more about its reputation. Exploiting a measure that captures the bond marketís ability to anticipate rating downgrades, I show that, after Dodd-Frank, bond market anticipation decreases for S&P but increases for EJR, suggesting that S&P ratings are timelier. Finally, I study how the bond market responds to rating changes and how firms perceive ratings in their decision to issue debt in the post-Dodd-Frank period. Results suggest that both S&P downgrades and upgrades generate a greater bond market re- sponse. On the contrary, only EJR upgrades have a magnified effect on bond market returns. The greater informativeness of S&P ratings after Dodd-Frank is confirmed by the meaningful impact of these ratings on firm debt issuance. The second paper (coauthored with Annamaria C. Menichini) studies the relationship between credit rating changes and CEO turnover beyond firm performance. Using an adverse selection model that explicitly incorporates rating change related turnover, our model predicts that a downgrade triggers turnover, more so the lower the managerial entrenchment, but that this relation is weaker when the report provided by the rating agency is more reliable. Our empirical results support these predictions. We show that downgrades explain forced turnover risk, with the new CEO chosen outside the firm that has received the negative credit rating change. In addition, we find that the relation between rating changes and management turnover is stronger when the degree of managerial entrenchment is low, for firms characterized by a high level of investment and for firms less exposed to rating fees. Finally, we show that this relation has weakened in the post-2007 crisis period, in coincidence with the increased reputational concerns of the rating agencies. The results are robust to endogeneity concerns. The third paper (coauthored with Thomas J. Chemmanur and Igor Karagodsky) focuses on equity analysts, issuer-paid and investor-paid ratings. Equity analysts' forecasts and ratings assigned by issuer-paid credit rating agencies such as Standard and Poorís (S&P) and by investor-paid rating agencies such as Egan and Jones (EJR) all involve information production about the same underlying set of firms, even though equity analysts focus on cash flows to equity and bond ratings focus on cash flows to bonds. Further, the two types of credit rating agencies differ in their incentives to produce and report accurate information signals. Given this setting, we empirically analyze the timeliness and accuracy of the information signals provided by each of the above three types of financial intermediary to their investor clienteles and the information flows between these intermediaries. We find that the information signals produced by EJR are the most timely (on average), and seem to anticipate the information signals produced by equity analysts as well as by S&P. We find that changes in leverage are associated with lower EJR ratings but higher equity analysts' recommendations; further, credit rating changes by EJR have the largest impact on firms' investment levels. We also document an investor attention effect (in the sense of Merton, 1987) among stock and bond market investors in the sense that changes in equity analyst recommendations have a higher impact than either EJR or S&P ratings changes on the excess returns on firm equity, while EJR rating changes have a higher impact on bond yield spreads than either S&P ratings changes or changes in equity analyst recommendations. Finally, we analyze differences in bond ratings assigned to a given firm by EJR and S&P, and find that these differences are positively related to the standard proxies for disagreement among stock market investors.

In recent years, there has been a global trend of adopting International Financial Reporting Standards (IFRS). In 2011, Canada joined this trend by implementing mandatory IFRS adoption for publicly traded firms. Proponents of IFRS adoption claim that it will benefit investors by improving comparability and transparency of firms. At the same time, research on family firms has seen increasing focus. Because of family ties to the firm, family firms can exhibit different motivations, behaviours and performance than do non-family firms. In this research, I attempt to gain insight on the effects of IFRS adoption for a unique set of firms, namely publicly traded family firms by examining the effect of IFRS adoption on earnings informativeness. Although previous literature examines the economic consequences of IFRS adoption, my study is the first to my knowledge that examines IFRS adoption effects on the unique set of family firms. I run a pooled regression to examine the effects of IFRS adoption on earnings informativeness. I find that IFRS adoption by Canadian family firms is associated with a statistically significant higher level of earnings informativeness. The findings of this research could have implications for standard setters, minority shareholders of family firms, and academic researchers.

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The key objective of this research is to examine various issues relating to trades of UK directors (insiders’) in their company shares. Specifically, we examine the general patterns and characteristics of directors’ trades, the seasonality patterns of aggregate directors’ trades (measured by insider aggregate number and value of insider trading activities), the impact that director’s age has on trade informativeness, and the effect of industry classification on the information content of directors’ trades. To the best of our knowledge, no empirical examination of these issues has yet to be examined. When examining the general patterns and characteristics of directors’ trades, we find that directors buy more frequently than they sell but the average value of sell trades are approximately seven times larger, which suggests that directors sell less frequently but in larger monetary amounts. Furthermore, the majority of trades occur for directors aged between 45 and 65. Small transactions tend to be purchases while large transactions tend to be sells. The majority of the trades were by former directors (for both transaction types) followed by executive and non- executive directors. The majority of trades occurred in the financial industry. When examining the seasonal patterns of aggregate directors’ trades (as measured by the number and the value of insider transactions), the results show that there is a day of the week anomaly in aggregate insider activities. Insiders tend to trade more on Fridays and less on Tuesdays. Also, there is a month of the year anomaly in aggregate insider activities (as measured by the number of insider transactions). Specifically, insiders tend to trade more in March and trade less in August. The impact of director’s age is also examined, and the results suggest that younger directors’ buy transactions produce significantly higher abnormal returns than older directors. There is some evidence of statistically significantly negative CAARs for younger directors’ sell trades. When controlling for director type, we find that younger executives (formers) are more informed about their buy trades than executives (formers) of other age groups. Unlike the previous pattern, older non-executives (over 70) seem to be more informed about their buy trades than younger non-executives. Finally, the results of whether industry classifications have an impact on the informativeness of directors’ trades indicate that abnormal returns are highest for directors of technology industries. The level of information asymmetry has an impact on the informativeness of directors’ trades. Specifically, insider gains are highest, for directors, in high R&D, high volatility, low regulated, highly concentrated, and low CEO compensation industries/sectors.

Background: With the adoption of smartphones, a new mean of communication emerged for businesses, calling for deep knowledge on how to leverage this profitable direct-link to consumers. However, previous literature has mainly studied the subject from a quantitative standpoint with a theoretical foundation built on traditional advertising, hence, not studying the subject on its own. It is therefore relevant to study the topic from the ground up, exploring users perspective on main factors driving their attitudes towards mobile advertising.Purpose: To explore consumer attitudes toward mobile advertising.Methodology: A qualitative exploratory study based on 4 focus groups, sampled through convenience sampling and analysed using direct content analysis.Conclusion: Findings indicate that, mobile advertising lack credibility, which drives negative attitudes and that entertainment was non-present in mobile advertising. Perceptions expressed a vast element of irritation and that informativeness depends on the relevance of ads forming the outcome of attitude. Additionally, personalization emerged as a component influencing the majority of the studied factors, and consequently suggested to be further studied as a factor on its own.

This thesis focuses on probabilistic associative learning. One of the classic effects in this field is the stimulus associability effect for which I derive a statistically optimal inference model and a corresponding approximation that addresses a number of problems with the original account of Mackintosh. My proposed account of associability - a variable learning rate depending on a relative informativeness of stimuli - also accounts of the classic blocking effect \cite{kamin1969predictability} without the need for Prediction Error [PE] computation. Given that blocking was the main impetus for placing PE at the centre of learning theories, I critically re-evaluate other evidence for PE in learning, particularly the recent neuroimaging evidence. I conclude that the brain data are not as clear cut as often presumed. The main shortcoming of the evidence implicating PE in learning is that probabilistic associative learning is mostly described as a transition from one state of belief to another, yet those beliefs are typically observed only after multiple learning episodes and in a very coarse manner. To address this problem, I develop an experimental paradigm and accompanying statistical methods that allow one to infer the beliefs at any given point in time. However, even with the rich data provided by this new paradigm, the blocking effect still cannot provide conclusive evidence for the role of PE in learning. I solve this problem by deriving a novel conceptualisation of learning as a flow in probability space. This allows me to derive two novel effects that can unambiguously distinguish learning that is driven by PE from learning not driven by PE. I call these effectsgeneralized blocking and false blocking, given their inspiration by the original paradigm of Kamin (1969). These two effects can be generalized to the entirety of probability space, rather than just the two specific points provided by the paradigms used by Mackintosh and Kamin, and therefore offer greater sensitivity to differences in learning mechanisms. In particular, I demonstrate that these effects are necessary consequences of PE-driven learning, but not learning based on the relative informativeness of stimuli. Lastly I develop an online experiment to acquire data on the new paradigm from a large number (approximately 2000) of participants recruited via social media. The results of model fitting, together with statistical tests of generalized blocking and false blocking, provide strong evidence against a PE-driven account of learning, instead favouring the relative informativeness account derived at the start of the thesis.

Many previous studies find that family firms are prevalent among the U.S. firms. In particular, more than 35 percent of the S&P 500 firms consist of family firms in which families control about 18 percent of their firms’ shares. According to agency theory, the characteristics of a firm’s ownership, governance, and control play a critical role in the firm’s risk-taking activities and information flow to the market. Our study aims to investigate two controversies in the family business literature: whether family firms undertake fewer or more risks than non-family firms do, and whether family firms exhibit higher or lower information flow, reflected in their stock price informativeness and earnings informativeness, to the market. Using a sample of the S&P 500 companies as of 2003 for the period 2003-2007, we find that compared with non-family firms, the stock prices of family firms have more firm specific information impounded and the accounting earnings of family firms are more informative and thereby have more explanatory power for stock returns. These results are robust to different model specifications and variable proxies. In terms of risk-taking levels in corporate investment, our results indicate that family firms, on average, undertake fewer risks than non-family firms do. In particular, we find that although G-index is negatively associated with corporate risk-taking in non-family firms as previous studies (e.g. John et al., 2008) find for general firms, governance provisions do not have any influence on corporate risk-taking decisions in family firms. Numerous additional sensitivity tests using different corporate risk-taking proxies confirm the robustness of the findings.

Dual-class stock structure is characterized by the separation of voting rights and cash flow rights. The departure from a common “one share-one vote” configuration creates ideal conditions for conflicts of interest and agency problems between controlling insiders (the holders of voting rights) and remaining shareholders. The owners of voting rights have the opportunity to extract private benefits and act in their personal interest; as a result, dual-class firms are often perceived to have low transparency and high information asymmetry. This dissertation investigates the quality of information and the information environment of firms with two classes of stock. The first essay examines the quality of information by studying accruals in dual-class firms in comparison to firms with only one class of stock. The results suggest that the quality of accruals is better in dual-class firms than in single-class firms. In addition, the difference in the quality of accruals between firms that abolish their dual-class share structure by unification and singe-class firms disappears in the post-unification period. The second essay investigates the earnings informativeness of dual-class firms by examining the explanatory power of earnings for returns. The results indicate that the earnings informativeness is lower for dual-class firms as compared to single-class firms. Earnings informativeness improves in firms that unify their shares. The third essay compares the level of information asymmetry between dual-class firms and single-class firms. It is documented that the information environment for dual-class firms is worse than for single-class firms. Also, the finding suggests that the difference in information environment between dual-class firms and single-class firms disappears after dual-class stock unification.

This dissertation investigates the interrelationships between a client's non-GAAP earnings disclosures, financial health (profit and loss status), and the external auditor's assessment of the client's going concern status. This dissertation comprises two essays. Essay 1 examines the informativeness and the quality of non-GAAP earnings disclosures in profit and loss firms separately. Using a large sample of non-GAAP earnings voluntarily disclosed by managers, I find that the informativeness and the quality of non-GAAP earnings vary in firms cross-classified by GAAP loss status and non-GAAP loss status. I also find that loss firms have higher quality non-GAAP exclusions relative to profit firms, although the expenses excluded by both profit and loss firms are associated with firms' future performance. Further, I posit and find that profit firms which voluntarily disclose non-GAAP losses have high-quality exclusions, while other non-GAAP reporting profit firms have low-quality exclusions. Having found that non-GAAP earnings in loss firms is opportunistic to some extent, I next study, in Essay 2, whether auditors understand the implications of low-quality non-GAAP reporting in these firms. Specifically, I examine 1) whether non-GAAP earnings disclosures are associated with the propensity of the auditor's going concern issuance to loss firms, and 2) whether non-GAAP earnings disclosures affect the accuracy of the auditor's going concern assessment. This is important because auditors often conduct audits of loss firms that disclose non-GAAP earnings, and the consequences of issuing wrong audit opinions can be severe. I find that the propensity of the auditor's going concern issuance is negatively associated with the magnitude of expense exclusions in loss firms, after controlling for determinants of going concern opinions that are derived from GAAP earnings. This finding suggests that auditors take into account information embedded in non-GAAP earnings when assessing clients' going concern status. Using bankruptcy outcome as a benchmark, I find that non-GAAP earnings disclosures could increase type II errors in auditors' going concern reporting. I further find that small size auditors and non-specialist auditors are more likely to be misled by non-GAAP reporting when making going concern decisions. In sum, my dissertation furthers our understanding of non-GAAP reporting and its implication for auditors' decision making for issuing going concern opinions.

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