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I examine the effect of strategic competition on management sales forecast bias. Strategic complement firms react to a rival’s action by moving in the same direction (e.g., increasing their own sales in response to a rival’s sales increase). Strategic substitute firms react to a rival’s action by moving in the opposite direction. I predict that strategic complement firms will issue pessimistic sales forecasts (i.e., behave less aggressively) and strategic substitute firms will issue optimistic sales forecasts (i.e., behave more aggressively) to induce their respective rivals to compete less aggressively. I find that strategic complement firms issue more pessimistic sales forecasts than strategic substitute firms. I also predict and find that strategic complement (substitute) firms issue more pessimistic (optimistic) forecasts in industries with a greater proportion of firm-specific shocks. In contrast, in industries with a greater proportion of industry-wide shocks, firms competing strongly in strategic complements and substitutes issue more pessimistic forecasts than firms competing weakly in these types. / Business Administration/Accounting

I investigate systematic patterns of tone within an earnings call and how market participants react to such variation. Prior research suggests that people heavily weigh the final moments of an experience. I explore whether managers end earnings calls with a more positive tone to manipulate the audience’s impression of the call. My analyses of more than 57,000 earnings call transcripts show that the tone of managers’ answers improves markedly near the end of the earnings call. The magnitude of tone improvement is negatively associated with current and future firm performance, which suggests that managers end on a high note to mask negative information. Moreover, the magnitude of tone improvement is associated with negative 3-day abnormal stock return and downward analyst forecast revisions. Together these findings suggest that the market participants quickly price the information that managers try to conceal by ending on a high note. / Business Administration/Accounting

I examine the causal impact of initial patent reviews on firms’ subsequent debt financing. I collect data on patent examiners’ first action reports from the U.S. Patent and Trademark Office. These initial reports reveal the merits of an invention at an early stage in the multi-year patent application process and signal the likelihood of future patent approval. To separate the net causal impact of initial patent reviews from the underlying invention quality, I use examiners’ propensity to approve an application as an instrument. I predict and find that better initial patent review outcomes improve firms’ subsequent loan financing outcomes, including higher borrowing capacity, broader banking relationships, and more favorable loan contract terms. I further show an increase in future operating cash flow and a reduction in information asymmetry as channels through which favorable patent reviews alleviate loan financing problems. Altogether, I provide evidence that the patenting process mitigates debt financing problems for innovative firms and facilitates lending. At a higher level, I highlight the importance of accounting intangibles, which is incremental to economic intangibles. / Business Administration/Accounting

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Managers have shorter investment horizons than well-diversified shareholders for various reasons such as the threat of managerial turnover arising from takeovers, risk aversion, liquidity constraints, and the need to access capital markets. Such myopic managerial behaviors are affected by various factors including monetary incentives and internal/external monitoring by board of directors or active shareholders. In this dissertation, I first provide empirical evidence that myopic behaviors of managers are affected by their compensation structure. Using a sample of 23,107 firm-year observations from 1993-2014 for firms in the S&P 1500 index, I show that the asymmetric cost behavior called cost stickiness is 1) weaker when CEOs are compensated relatively more in the form of annual cash bonus, and 2) stronger when they receive relatively more long-term compensation. I also show that the magnitude of analysts’ earnings forecast bias created by cost stickiness also decreases with CEO’s short-term cash bonus and increases with long-term compensation. Next, I show how corporate governance affects managerial decision horizon directly and indirectly through executive compensation. Using a sample of 7,639 firm-year observations from 1999-2011 for firms in the S&P 1500 index, I show that board characteristics such as board independence and CEO-chairman separation induce more R&D investments not only directly but also indirectly by encouraging more use of long-term compensation and thus extending managerial decision horizon. / Business Administration/Accounting

This dissertation consists of two studies investigating taxpayer behaviors. Both studies investigate taxpayer behaviors following some type of tax policy change. With the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, many individuals anticipated a tax benefit on their subsequent tax return. But when individuals mistakenly assumed that a lower refund meant they did not benefit from the tax policy change, some taxpayers became outspoken about their lack of support for and perceived unfairness of the law. Study one utilizes a 2 x 2 between-subjects experiment to examine the effects of tax benefit salience and informational justice on taxpayers' perceptions of the fairness of a law change and their subsequent compliance intentions. I find that tax benefit salience and informational justice both have a positive direct effect on taxpayers' perceptions of the fairness of the law change. Importantly, the effect of salience is stronger when informational justice is low compared to when informational justice is high. Finally, the indirect effect of salience on compliance intentions through perceived fairness is stronger for taxpayers who receive an explanation low in informational justice compared to those who received an explanation high in informational justice, suggesting a potential substitution effect for informational justice and salience. That is, a tax benefit should be either salient or accompanied by an explanation high in informational justice, but not necessarily both, to avoid a drop in fairness perceptions. Study two utilizes a 2 x 2 between-subjects experiment to investigate the effects of filing method and filing method autonomy on taxpayer behavior. Because individuals in the U.S. are accustomed to freedom of choice, including freedom associated with tax filing, taking that freedom away by requiring individuals to use a pre-filled system could have negative consequences. According to the Tax Policy Center, at least 36 countries around the world have some sort of pre-filled filing system available to taxpayers since such systems are cost-effective and easy to use. In January 2020, the Internal Revenue Service (IRS) modified its agreement with Free File, Inc., the company that represents the providers of free e-file software for those who qualify, revoking its promise not to compete with these software companies. This opens the door for a U.S. pre-filled filing system, but it is unclear whether taxpayers' use of the system would be voluntary or mandatory. Prior research has shown that a pre-filled system can decrease compliance in the U.S. I replicate this finding in an experimental setting and demonstrate that, compared to those without filing method autonomy, taxpayers who are given the choice to use the pre-filled system report significantly less aggressively. This implies that filing method autonomy may be key to the success of an IRS-sponsored pre-filled filing system in the U.S.

Sustainability reporting is standard practice for large and mid-cap global companies. Sustainability reports are voluntary in nature and are used by companies to report on their sustainability activities to investors and other stakeholders. The supplier diversity disclosure is common amongst sustainability reports; however, current standards provide limited guidance on the information that is pertinent to the users of the information. Supplier diversity and inclusion is an important strategic business initiative, and yet the topic has garnered little attention in academic research. To further examine this topic, I conduct three studies examining the topic using multiple methods. The first study presents a content analysis that examines the content of supplier diversity disclosures against GRI Reporting Standards. In general, the disclosures adhere to the guidance recommended in the standards; however, the guidance is vague, the information varies between companies and is difficult to compare. The disclosures are a step in the right direction, but unfortunately further guidance is needed to strengthen the content of the disclosures and increase the number of companies that report this information. The second study uses Critical Race Theory as a lens to explore supplier diversity disclosures and initiatives that can be used to facilitate change in the social-economic status of diverse suppliers and the communities they serve. The theory supports a broad understanding of issues surrounding supplier diversity with the focus being on the minority perspective. Supplier diversity programs are effective and allow companies to economically empower disadvantage communities; however, empowerment should not be compartmentalized to one aspect of the business. Study three presents an adaptation of the Theory of Planned Behavior to assess and predict the impact of supplier diversity disclosures on investor decision-making in an experimental setting. The model presented in this study uses theory and constructs from cognitive psychology and theorizes that the quality of information included in the disclosure, as well as individual and information-specific factors, influence investor judgments and decisions. This study provides empirical evidence that retail investors have positive attitudes towards supplier diversity disclosures and value this information for their investment decisions. The results reveal the model and associated constructs presented in the study can predict investor behavior.

Abstract not available