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This paper examines the relationship of financial reporting to corporate innovation. Given the importance of a high‐quality information system and coordination to innovation, I predict a positive association between financial reporting quality and future innovation. My empirical evidence is consistent with this prediction. I also find some evidence that the positive association between financial reporting quality and innovation is more pronounced for firms with intensive internal research and development activities and for firms in competitive industries. The main findings are robust to using an instrumental variable approach as well as controlling for alternative explanations. I find that firms with high‐quality financial reporting transform investment inputs into greater innovation outcomes and firm value. This study provides additional insight into the role of financial reporting quality and its relation to the real economy.

In this paper, we design and fabricate a 3D scaffold using rapid prototyping (RP) technology for tissue engineering. The scaffold should have a three-dimensional interconnected pore network. We fabricate a polycaprolactone (PCL) scaffold with interconnecting pores and uniform porosity for cell ingrowth using a 3D plotting system. In order to keep the three dimensional shape under mechanical loading while implanted, we design an oscillating nozzle system to increase elastic modulus and yield strength of PCL strand. We characterize the influence of pore geometry, compressive modulus of the scaffold, elastic modulus and yield strength of the strand using SEM, dynamical mechanical analysis (DMA) and Nano-UTM. Finally the cell responses on scaffolds are observed. 3D scaffold, polycaprolatone (PCL), rapid prototyping (RP), oscillating nozzle, tissue engineeringCitation: Lee J-H, Park S-A, Park K E, et al. Fabrication and characterization of 3D scaffold using 3D plotting system. Chinese Sci Bull, 2010, 55: 94-98, A 3D scaffold for tissue regeneration is a supporting structure to hold cells in place. It should have a three-dimensional interconnected pore network for cell growth, nutrient delivery, and metabolic waste. And it also needs good mechanical properties to keep the three-dimensional shape under mechanical loading while implanted [1,2]. Conventional scaffold fabrication methods include solvent casting and particle leaching [3], gas foaming [4], melt molding [5], fiber meshes and fiber bonding [6,7], phase separation [8], and freeze drying [9,10]. But there are several limitations to the conventional scaffold fabrication methods. These methods cannot precisely control pore size, interconnection of pores, or pore geometry.In order to overcome these limitations, a rapid prototyping (RP) system has been proposed to solve these problems [1,2]. The RP system can control the pore size, pore geometry, and interconnection of pores in the scaffold. The scaffold fabricated by a RP system has a three-dimensional interconnected pore network, so it can transport more oxygen and nutrients deep into the scaffold. Metabolic waste can be easily transported within the interconnected pore network. There are a lot of methods for the fabrication of the RP scaffold, such as selective laser sintering (SLS) [11], fused deposition modeling (FDM) [12], stereolithography (SLA) [13], 3D printing [14] and 3D plotting [15]. As the 3D scaffold is a supporting structure, the mechanical properties of the scaffold are of great importance, especially for the field of bone tissue engineering. Some of the work has been done to analyze the mechanical properties of the 3D scaffold made by particle leaching method [16][17][18]. However, few studies have been done to characterize and improve the mechanical properties of the 3D scaffold made by an RP system.In this paper, we design and fabricate a 3D PCL scaffold using a PR system-3D plotter. In order to increase the elastic modulus and yield strength of the PCL strands in the

Prior research provides evidence consistent with managers using real earnings management (REM) to increase earnings. This study examines whether short sellers exploit the overvaluation of firms employing REM. I find that firms with more REM have higher subsequent short interest. The positive relation between REM and short interest is more pronounced in settings where the costs associated with accrual-based earnings management are high, such as when a firm has low accounting flexibility or faces greater scrutiny from a high quality auditor. I also find some evidence that short sellers respond to REM more than to other fundamental signals of firm overvaluation. My inferences are robust to the use of propensity score matching. Collectively, my evidence suggests that short sellers not only trade on REM information, but they also trade as if they understand the substitutive nature of alternative earnings management methods. This study provides additional insight into the important role that short sellers play in monitoring managerial operating decisions and overall earnings quality.

Purpose The purpose of this paper is to examine the relation between executive compensation of peer firms and earnings management. Given the prevalence of the competitive benchmarking practice in executive compensation, chief executive officer (CEO) compensation of potential peer firms can influence the behavior of CEOs at their current firms. Design/methodology/approach This paper employs an ordinary least squares regression model to test whether CEO compensation of other firms in similar product markets is associated with a firm’s accruals management. It also employs firm fixed effects regressions to control for time invariant omitted variables. Lastly, it conducts subsample analyses based on CEO duality and the passage of Sarbanes-Oxley Act (SOX) and a propensity score matching analysis. Findings Using time-varying industry classifications based on product similarity, the author finds that CEO compensation of other firms in similar product markets is positively associated with a firm’s accruals management. The relation is more pronounced for firms with CEO duality, while it is less pronounced in the period after the passage of SOX. The main findings are robust to the use of firm fixed effects regressions, a propensity score matching analysis, and an alternative weighting scheme. Originality/value This paper contributes to the literature on executive compensation and earnings management. It provides useful insight into the spillover effect of other firms’ executive compensation on earnings management.

Purpose The purpose of this paper is to investigate whether sell-side equity analysts use labor cost information when forming expectations of future earnings. The availability of disaggregated earnings components will benefit financial statement users to the extent that the additional information released by a firm is useful to infer differential persistence of disaggregated earnings components. Design/methodology/approach This paper employs ordinary least squares, logit, and two-stage Heckman (1979) regressions which test whether analysts incorporate labor cost information into their earnings forecasts after controlling for a managerial self-selection to disclose labor costs, and further test whether a firm’s decision to voluntarily disclose labor costs improves analyst forecast accuracy. Findings This research finds that analysts incorporate labor cost information into their earnings forecasts after controlling for other earnings components. More importantly, this research shows that voluntary disclosure of labor cost information is positively associated with analyst forecast accuracy. Additional tests show that the benefit of voluntary labor cost information is more pronounced for firms with high information uncertainty and for analysts with less firm-specific experience and analysts affiliated with small brokerage houses. Originality/value This paper contributes to the literatures on the effect of labor cost on investors’ behavior and on analyst-specific factors in explaining analyst ability to predict future earnings.

Research Question/Issue: This study addresses how financial analysts' information environment varies with the extent to which insiders' voting rights diverge from their cash flow rights (i.e., control divergence) in the firm.Research Findings/Insights: This study finds evidence that both analysts' public and private information precisions are decreasing with insiders' control divergence for a sample of US dual class share firms. Dual class share firms feature ownership structures that allow us to measure the control divergence between insiders' voting rights and their cash flow rights. Furthermore, we document that these effects are more pronounced for firms with lower firm-level uncertainty and for periods prior to the introduction of the SOX Act. Our results are robust to omitted variables, endogenous ownership, and any selection biases associated with dual class equity.Theoretical/Academic Implications: Analysts' skill and ability to formulate accurate forecasts are influenced by the quality of their information environment. We provide insights on how ownership mechanisms such as control divergence impact this ability by affecting their information environment. By using empirical proxies that precisely measure analysts' information environment, we are able to better capture the adverse impact of control divergence on the public and private information that analysts convey in their forecasts.

PurposeThis study examines the relation between pay inequalities in top management teams and how efficiently firms convey valuation-relevant information to investors. Given that reward comparisons with reference groups create feelings of inequity, top management team pay inequalities can impair the information environment. This manifests into lengthier or less readable financial reports.Design/methodology/approachThis paper employs an ordinary least squares (OLS) regression model to test whether and how the pay distribution in the top management team is associated with the readability of the annual report. It also employs a two-stage least squares (2SLS) regression model to further address the endogeneity concern. Lastly, it conducts cross-sectional analyses to examine heterogeneity in the observed relation.FindingsUsing the intra-firm pay gap as a proxy for pay inequality and file size, Bog Index and Fog Index of the 10-K filings as a proxy for financial report readability, the author finds that firms with larger pay gaps exhibit lengthier or less readable 10-K filings. The main findings are robust to the use of an instrumental variable approach. She finds some evidence that the relation is less pronounced when pay gaps are justified by explicit legal authority of CEOs or high ability of CEOs. The main results are robust to considerations of alternative explanations.Originality/valueThis paper adds a new dimension to the debate on pay inequality by studying pay gaps in the top management team and financial report readability. The author's findings have important implications for executive compensation policies and for corporate disclosure policies.