Coauthored with Josh Anderson, Yiting Cao, and Eddie Riedl
Review of Accounting Studies, 28, 792–826 (June 2023)
Presented at 2018 Journal of Accounting, Auditing and Finance Conference, the 2018 AAA Western Region Meeting, and Boston University
Abstract This paper examines how analysts incorporate other comprehensive income (OCI) and its component elements into their earnings forecasts. We first document that analysts’ one-year ahead earnings forecasts are associated with OCI and OCI components having predictive ability; this suggests analysts (at least partially) incorporate this information into their forecasting activities. We then provide evidence that analysts are neither complete nor timely in incorporating OCI information into their forecasts, as several OCI components remain associated with analysts’ forecast errors. Further, we document that higher uncertainty in firm performance exacerbates analysts’ underreaction, evidencing a friction to full incorporation of OCI-related information. Finally, as evidence of where and when analysts derive OCI-related information, we document that analysts’ forecast revisions correlate with the release of firms’ 10-Ks and early 10-Qs (i.e., Q1 and Q2, but not Q3).
Forthcoming, Management Science
Best Paper Award - 2019 AAA Northeast Region Meeting
SSRN Top Ten Download List: Advertising (Topic), Managerial Marketing eJournal
Presented at 2019 Northeast Regional AAA Meeting, 2021 Hawaii Accounting Research Conference, 2022 Haskayne and Fox Accounting Conference, Boston University, Cal State University at Fullerton, George Mason University, George Washington University, Penn State University at Erie, Southern Methodist University, The Chinese University of Hong Kong – Shenzhen, The Hong Kong Baptist University, The Hong Kong Polytechnic University, The University of Science and Technology of China, University of New Hampshire, University of Rhode Island, and University of Washington
Abstract This paper examines how different advertising categories are associated with attributes of brand asset recognition arising in the context of acquisitions. Prior research documents that aggregate advertising is positively associated with firm sales and brand values, but fails to consider major recent shifts in advertising from traditional channels (such as TV) to digital advertising (such as paid search and online display). Using proprietary data, I decompose advertising expenditures into the categories of traditional, online display, and paid search. Consistent with expectations, results confirm that target firms’ traditional and online display advertising exhibit a higher likelihood of brand asset recognition and higher recognized brand values, as compared to paid search advertising. Confirming the economic substance of the recognized brands, additional results reveal positive investor equity market reactions to brand value, which are driven by firms investing more in traditional and online display advertising. Overall, these results confirm that certain advertising channels exhibit stronger associations with the recognition and characteristics of the underlying brand asset, consistent with their heterogeneous properties.
Working Papers:
Counterpoised Disclosure: Evidence from the Biotechnology Industry
Coauthored with Luminita Enache, Lynn Li, and Eddie Riedl
Best Paper Award - 2021 European Institute for Advanced Studies in Management - Intangibles and Intellectual Capital
Presented at 2022 European Accounting Association Annual Meeting, 2021 AFAANZ, Bentley University, BI Norwegian Business School, 2022 Burton Accounting Research Conference at Columbia University, 2021 Canadian Accounting Association Annual Meeting, Deakin University, 2021 European Accounting Symposium for Young Scholars (EASYS), University of Bristol, University of Leeds, Monash University, University of New Hampshire, Saint Mary’s University, University of Southern California, University of Washington, and Warwick Business School
Abstract This paper examines the causes and effects of counterpoised disclosures, defined as a concurrent, voluntary release of information intended to mitigate adverse consequences of a mandatory disclosure. To capture mandated disclosures, we use the setting of 8-Ks issued by biotechnology firms to disclose material milestones of a drug’s development, such as product-specific regulatory decisions by the Food and Drug Administration (FDA). We formulate and empirically support three predictions. First, we document that managers are more likely to include counterpoised disclosure—specifically, information about other drugs under development—in 8-Ks revealing negative mandatory information (such as a drug’s rejection by the FDA) relative to 8-Ks revealing positive mandatory information (such as a drug’s approval by the FDA). Second, we confirm that negative market reactions to the release of the 8-Ks with negative signals are attenuated for those providing counterpoised disclosures. Third, we provide evidence that counterpoised disclosure represents credible signals consistent with informational (as opposed to opportunistic) motivations, as drugs receiving this disclosure treatment exhibit higher ex post likelihood of subsequent FDA approval relative to drugs that do not.
Using Advertising to Manage Attention: Evidence from ESG Violation Penalty
Coauthored with Estelle Sun
Presented at 2023 Haskayne and Fox Accounting Conference, 2024 Journal of International Accounting Research, and Boston University
Abstract This paper examines how firms react to reputation-damaging events by utilizing advertising strategies. Using ESG violation penalties and monthly paid search advertising data from 2014 to 2018, we find that firms receiving ESG violation penalties reduce their advertising expenditures in the month following the penalties. Such reduction in advertising expenditures helps decrease investor attention and information uncertainties. Additional analysis shows that financial constraints of the penalized firms are unlikely to be the primary reason for the reduction in advertising activities. Overall, our findings suggest that, subsequent to receiving ESG violation penalties, firms employ advertising as a strategic tool to manage downward attention and alleviate investors’ information uncertainties.