Financial disclosure transparency and employee wages

Abstract

Any opinions and conclusions expressed herein are those of the authors and do not necessarily represent the views of the U.S. Census Bureau. All results have been reviewed to ensure that no confidential information is disclosed. All errors and omissions are our own.

Short selling and readability in financial disclosures: A controlled experiment

“…1 Researchers have examined the impact of annual report readability on earnings persistence (Li, 2008), the trading activities of small and retail investors (Lawrence, 2013;Miller, 2010), return volatility and earnings forecast errors and dispersion (Bonsall et al, 2017;Loughran & McDonald, 2014), borrowing costs (Ertugrul et al, 2017), the valuation of closed-end funds (Hwang & Kim, 2017), employee wages (Bai et al, 2022), capital investment efficiency (Biddle et al, 2009), analyst coverage and analyst dispersion (Lehavy et al, 2011), management risk incentive (Chakrabarty et al, 2018)), the cost of equity (Rjiba et al, 2021), and litigation risk (Humphery-Jenner et al, 2022). For a detailed review, see Loughran and McDonald (2016).…”

“…Consequently, the existing research develops annual report readability measures to assess the effective communication of valuation-relevant information between the firm and capital market participants (Bonsall et al, 2017;Loughran & McDonald, 2014). Recent research connects annual report readability to the obfuscation of earning-relevant information (Bushee et al, 2018;Li, 2008), borrowing costs (Ertugrul et al, 2017), the valuation of closed-end funds (Hwang & Kim, 2017), management risk incentive (Chakrabarty et al, 2018), the cost of equity (Rjiba et al, 2021), and employee wages (Bai et al, 2022). This paper investigates the causal effect of short-sale constraints on annual report readability.…”

Financial Reporting and Employee Job Search

“…Given the dearth of existing studies, 6 Studies find higher employee turnover following accounting misreporting (Kedia and Philippon [2009], Chakravarthy, deHaan, and Rajgopal [2014], Zhou and Makridis [2019], Choi and Gipper [2021]), and that distressed firms have a harder time attracting and retaining employees (see previous cites). 7 For example, Bai, Serfling, and Shaikh [2022], Choi, Gipper, and Malik [2022], and Golshan, Khurana, and Silva [2022] find an association between reporting quality and employee compensation, but critics question the studies' primitive assumption that employees learn from accounting reports. Our findings support this critical assumption.…”

Financial Reporting Quality and Wage Differentials: Evidence from Worker‐Level Data

“…[2019], Baik et al. [2019], Whited [2019], Jia, Gao, and Martin [2020], Bai, Serfling, and Shaikh [2022], Choi and Gipper [2022]). Our paper documents worker responses—that is, compensating wage differentials—to accounting characteristics of the firm while controlling for worker characteristics.…”

“…Second, we contribute to recent papers in both accounting and finance that associate labor market outcomes (such as wages, turnover, and job searches) with firm financial characteristics (e.g., John, Lang, and Netter [1992], Berk, Stanton, and Zechner [2010], Agrawal and Matsa [2013], Chodorow-Reich [2014], Brown and Matsa [2016], Baghai et al [2018], Hass, Hribar, and Kalogirou [2018], Babina et al [2019], Baik et al [2019], Whited [2019], Jia, Gao, and Martin [2020], Bai, Serfling, and Shaikh [2022], Choi and Gipper [2022]). Our paper documents worker responses-that is, compensating wage differentials-to accounting characteristics of the firm while controlling for worker characteristics.…”