Representational Faithfulness in Accounting: A Model of Hard Information

2006 ◽  
Author(s):  
Michael Kirschenheiter
Keyword(s):  
Hard Information ◽  
Representational Faithfulness

Related-Party Transactions and Stock Price Crash Risk: Evidence from China

2021 ◽  
pp. 2150020
Author(s):  
Ahsan Habib ◽  
Haiyan Jiang ◽  
Donghua Zhou
Keyword(s):  
Financial Reporting ◽  
Stock Price ◽  
Reporting Quality ◽  
Positive Association ◽  
Financial Reporting Quality ◽  
Crash Risk ◽  
Future Price ◽  
Accounting Data ◽  
Related Party Transactions ◽  
Representational Faithfulness

This paper investigates the association between related-party transactions (RPTs) and stock price crash risk in China. Our investigation is motivated by the controversy in the RPT literature over whether RPTs are value enhancing or opportunistic. Through the lens of stock price crash risk, we reveal that RPTs may violate the arm’s-length assumption of regular market-based transactions, impairing the representational faithfulness and verifiability of accounting data and, consequently, increasing the risk of future price crash. Importantly, we find that this detrimental economic consequence of RPTs is driven by abnormal RPTs that are opportunistic in nature. Our analyses also extend to operating RPTs, related-party loans, and two types of opportunistic RPTs: tunneling and propping. The positive association between RPTs and stock price crash risk is not mediated by financial reporting quality, suggesting that the risk factors associated with RPTs are operational. Our main results remain robust to a series of tests done to address the potential endogeneity between RPTs and stock price crash risk.

Strategic Nondisclosure in Takeovers

2021 ◽  
Author(s):  
Jing Li ◽  
Tingjun Liu ◽  
Ran Zhao
Keyword(s):  
Social Welfare ◽  
Winner's Curse ◽  
Cautionary Note ◽  
Winner’S Curse ◽  
Target Value ◽  
Hard Information ◽  
Withholding Information ◽  
Acquisition Price

We examine takeover auctions when an informed bidder has better information about the target value than a rival and target shareholders. The informed bidder’s information is either hard or soft, and only hard information can be credibly disclosed. We show that withholding information creates a winner’s curse, thereby serving as a preemption device that deters the rival’s participation. In turn, an endogenous dis- closure cost arises that induces the informed bidder to optimally withhold favorable information to minimize the acquisition price—breaking down the standard  unraveling result, even if his information is always hard. Perhaps surprisingly, stronger competition from the uninformed bidder can reduce the target shareholders’ payoff and increase the payoff of the informed bidder while unambiguously improving social welfare. Moreover, “hardened” information can reduce the gains to trade, decreasing welfare but increasing shareholders’ payoff. Our results provide a cautionary note to promoting more competition and more disclosure.

scholarly journals Corporate social disclosures: a user perspective on assurance

2014 ◽  
Vol 27 (5) ◽  
pp. 863-887 ◽  
Author(s):  
Renfred Wong ◽  
Andrew Millington
Keyword(s):  
Empirical Studies ◽  
Third Sector ◽  
Stakeholder Perceptions ◽  
Content Type ◽  
Responsible Investment ◽  
Stakeholder Perspective ◽  
Stakeholder Preferences ◽  
Representational Faithfulness ◽  
The Uk ◽  
Corporate Social

Purpose – The purpose of this paper is to investigate corporate social disclosure (CSD) assurance from a stakeholder perspective within a study which encompasses both stakeholder preferences and demand drivers of CSD assurance. Design/methodology/approach – Stakeholder perceptions of and their demand for CSD assurance are examined through a questionnaire survey. The analysis is based on responses in an empirical study from 147 organisations which are investing, procuring and third-sector stakeholders. Findings – Overall, stakeholder comments suggest an emphasis on the importance of specialist environmental assurors and the role of trust. The demand for assurance is positively related to stakeholders’ assessment of the value of CSD and the use of information from information intermediaries such as responsible investment indices, and negatively related to stakeholder perceptions of CSD representational faithfulness. Research limitations/implications – This paper only draws on data from the UK. Similar research can be explored in a context outside the UK. Practical implications – Better understanding of stakeholder defined determinants of the demand for CSD assurance as well as their perceptions of CSD assurance will inform regulators and enable companies to better discharge accountability towards stakeholders. Originality/value – This is one of the few empirical studies that investigate CSD assurance and one of the first to focus on stakeholder perceptions of, and demand for, CSD assurance within a multiple stakeholder perspective, rather than practitioner or corporate perceptions of CSD assurance.

LSD: 1967

1968 ◽  
Vol 114 (515) ◽  
pp. 1219-1222 ◽  
Author(s):  
Glin Bennet
Keyword(s):  
Lysergic Acid ◽  
Lysergic Acid Diethylamide ◽  
Hard Information ◽  
Personal Experiences

It is twenty years since the appearance of Stoll's paper: “Lysergic acid diethylamide, a hallucinatory agent of the ergot group” (23). In this he sought to reproduce in a group of subjects Hofmann's personal experiences of the drug, and so set the LSD snowball on its way. Some 1,500 papers must by now have been gathered to it; they deal with a greater range of uses than has been thought of for any drug, a greater variety of benefits and disasters, and a confusing number of claims. Yet we have little hard information about this curious substance.

scholarly journals Financial Intermediation and Technology

2020 ◽  
Vol 20 (161) ◽  
Author(s):  
Arnoud Boot ◽  
Peter Hoffmann ◽  
Luc Laeven ◽  
Lev Ratnovski
Keyword(s):  
Artificial Intelligence ◽  
Data Collection ◽  
Business Model ◽  
Financial Services ◽  
Financial Intermediation ◽  
Communication Channels ◽  
Policy Implications ◽  
Digital Platforms ◽  
Balance Sheets ◽  
Hard Information

We study the effects of technological change on financial intermediation, distinguishing between innovations in information (data collection and processing) and communication (relationships and distribution). Both follow historic trends towards an increased use of hard information and less in-person interaction, which are accelerating rapidly. We point to more recent innovations, such as the combination of data abundance and artificial intelligence, and the rise of digital platforms. We argue that in particular the rise of new communication channels can lead to the vertical and horizontal disintegration of the traditional bank business model. Specialized providers of financial services can chip away activities that do not rely on access to balance sheets, while platforms can interject themselves between banks and customers. We discuss limitations to these challenges, and the resulting policy implications.

scholarly journals Selecting Applicants

Econometrica ◽  
2021 ◽  
Vol 89 (2) ◽  
pp. 615-645
Author(s):  
Alex Frankel
Keyword(s):  
Test Score ◽  
Acceptance Rate ◽  
Soft Information ◽  
Test Results ◽  
Hard Information ◽  
Rate Functions ◽  
Simple Implementation ◽  
Acceptance Rates ◽  
Test Result

A firm selects applicants to hire based on hard information, such as a test result, and soft information, such as a manager's evaluation of an interview. The contract that the firm offers to the manager can be thought of as a restriction on acceptance rates as a function of test results. I characterize optimal acceptance rate functions both when the firm knows the manager's mix of information and biases and when the firm is uncertain. These contracts may admit a simple implementation in which the manager can accept any set of applicants with a sufficiently high average test score.

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