The Effect of Information Opacity and Accounting Irregularities on Personal Lending Relationships: Evidence from Lender and Manager Co-Migration

2018 ◽  
Vol 94 (4) ◽  
pp. 303-344 ◽  
Author(s):  
Urooj Khan ◽  
Xinlei Li ◽  
Christopher D. Williams ◽  
Regina Wittenberg-Moerman
Keyword(s):  
Information Environment ◽  
External Information ◽  
Lending Relationships ◽  
Managerial Turnover ◽  
New Firm ◽  
Information Opacity ◽  
Migration Probability

ABSTRACT We examine how personal lending relationships between lenders and managers are affected by information and accounting environments of borrowing firms. We address this question by exploring whether, following managerial turnover, lenders migrate with the manager from the firm where a relationship developed (origin firm) to the manager's new firm (destination firm). We find that the opacity of the external information environment of the destination firm significantly increases the probability of lenders' co-migration, while accounting irregularities at both the destination and origin firms decrease it. We also show that co-migration is affected by a lender's monitoring efficiency. A lender's monitoring efficiency increases its co-migration probability when a manager moves to an opaque firm, but not when she moves to a transparent one. When the destination or origin firm experiences accounting irregularities, even lenders with strong monitoring capabilities are mostly reluctant to continue their relationship with a migrating manager.

scholarly journals Modeling Changes in the Enterprise Information Capital in the Digital Economy

2021 ◽  
Vol 7 (3) ◽  
pp. 166
Author(s):  
Dmitriy Rodionov ◽  
Andrey Zaytsev ◽  
Evgeniy Konnikov ◽  
Nikolay Dmitriev ◽  
Yulia Dubolazova
Keyword(s):  
External Environment ◽  
Electronic Version ◽  
Social Processes ◽  
Information Environment ◽  
External Information ◽  
Digital Information ◽  
Information Analysis ◽  
Enterprise Information ◽  
Attractor Model ◽  
The Stability

The global COVID-19 pandemic has led to the self-isolation of people and the transformation of many economic and social processes into an electronic version thus contributing to the digitalization of all spheres. Being part of this environment, enterprises generate information resources to develop their desired image, which may vary according to the factors characterizing the information environment. Information capital is a comprehensive characteristic of an enterprise and determines its effectiveness and sustainability. The purpose of this study is to develop a toolkit that allows one to assess the information capital of an enterprise, reflecting its perception within the digital information environment. It is necessary to develop the methodology for the formation of such tools. As a result, a fuzzy-plural approach has been developed to evaluate the index of external information capital. This model allows us to assess the external information capital and to simulate its changes caused by various kinds of information events. The study of key elements, for example, the stability and tonality indices, index of target perception made it possible to systematize chaotic changes in the external environment and describe them using the Chen–Lee attractor model. The results of this study can be useful for researchers in the field of digital information analysis, in particular for the comparative analysis of enterprises and the assessment of their information capital.

Institutional Dual-Holders and Managers' Earnings Disclosure

2021 ◽  
Author(s):  
Leila Peyravan ◽  
Regina Wittenberg-Moerman
Keyword(s):  
Adverse Effect ◽  
Commercial Bank ◽  
Private Information ◽  
Voluntary Disclosure ◽  
Information Environment ◽  
Earnings Forecast ◽  
Excess Returns ◽  
Lending Relationships ◽  
Playing Field ◽  
Information Advantage

We investigate how institutional (non-commercial bank) investors that simultaneously invest in a firm's debt and equity (dual-holders) influence the firm's voluntary disclosure. Because institutional dual-holders trade on private information gleaned through lending relationships, we predict and find that borrowers increase earnings forecast disclosure to reduce these investors' information advantage following the origination of loans with their participation. We also show that the increase in disclosure is stronger when the access to a borrower's private information endows dual-holders with a greater information advantage and when the consequences of this access are likely to be more pronounced. We further find that institutional dual-holders earn excess returns when trading equity of non-guider firms following loan origination, but not when firms issue guidance, confirming that earnings disclosure helps level the playing field among investors. Our findings highlight that firms actively use disclosure to mitigate the adverse effect of dual-holders on their information environment.

scholarly journals Information Environment and the Investment Decisions of Multinational Corporations

2013 ◽  
Vol 89 (2) ◽  
pp. 759-790 ◽  
Author(s):  
Nemit Shroff ◽  
Rodrigo S. Verdi ◽  
Gwen Yu
Keyword(s):  
Multinational Corporations ◽  
Investment Decision ◽  
Investment Decisions ◽  
Information Environment ◽  
Data Availability ◽  
External Information ◽  
Foreign Subsidiaries ◽  
Information Frictions ◽  
Cross Border ◽  
Investment Decision Making

ABSTRACT This paper examines how the external information environment in which foreign subsidiaries operate affects the investment decisions of multinational corporations (MNCs). We hypothesize and find that the investment decisions of foreign subsidiaries in country-industries with more transparent information environments are more responsive to local growth opportunities than are those of foreign subsidiaries in country-industries with less transparent information environments. Further, this effect is larger when (1) there are greater cross-border frictions between the parent and subsidiary, and (2) the parents are relatively more involved in their subsidiaries' investment decision-making process. Our results suggest that the external information environment helps mitigate the agency problems that arise when firms expand their operations across borders. This paper contributes to the literature by showing that the external information environment helps MNCs mitigate information frictions within the firm. JEL Classifications: D83; G31; M41. Data Availability: Data are available from public sources identified in the paper.

Do False Financial Statements Distort Peer Firms' Decisions?

2015 ◽  
Vol 91 (1) ◽  
pp. 251-278 ◽  
Author(s):  
Valerie Li
Keyword(s):  
Capital Investment ◽  
Financial Statements ◽  
Information Environment ◽  
External Information ◽  
Specific Information ◽  
Capital Investments ◽  
Bottom Line ◽  
High Profile ◽  
Peer Firms ◽  
Financial Misstatements

ABSTRACT Beatty, Liao, and Wu (2013) document that financial misreporting by prominent firms distorts peer firms' capital investment decisions. Using a large sample of firms subject to SEC and DOJ enforcement actions for accounting misstatements, I establish three important generalizations. First, the adverse effect of financial misstatements documented by Beatty et al. (2013) is not limited to high-profile scandals and can be generalized to a larger population. Second, the distortions are not confined to capital investments; they also extend to choices peer firms make with respect to R&D, advertising, and pricing policies—decisions with immediate bottom-line impact. Third, I document that the magnitude of the distortion varies predictably with peer firms' characteristics, the misstating firms' external information environment, and the industry-specific information environment within which the misstatement occurs. Specifically, I find smaller distortions for larger peers and peers managed by more able managers, and larger distortions for more widely followed misstating firms and in the industries in which more firms misstate. Collectively, my results suggest that the distortive effect of financial misstatements is larger and more pervasive than documented in prior research.

Why Regulate Insider Trading? Evidence from the First Great Merger Wave (1897–1903)

2001 ◽  
Vol 91 (5) ◽  
pp. 1329-1349 ◽  
Author(s):  
Ajeyo Banerjee ◽  
E. Woodrow Eckard
Keyword(s):  
Insider Trading ◽  
Stock Price ◽  
Information Environment ◽  
External Information ◽  
Inside Information ◽  
Event Time ◽  
Merger Wave ◽  
Information Pricing

We use event-time methodology to study legal insider trading associated with mergers circa 1900. For mergers with “prospective” disclosures similar to today's, we find substantial value gains at announcement, implying participation by “out-side” shareholders despite the absence of insider constraints. Furthermore, preannouncement stock-price runups, relative to total value gain, are no more than those observed for modern mergers. Insider regulation apparently has produced little benefit for outsiders, with the inside information-pricing function and related gains shifting to external “information specialists.” Other results suggest market penalties for nondisclosure; i.e., insider trading is less successful in a restricted information environment. (JEL G3, K2, L5, N2)

Does Business Strategy Impact a Firm’s Information Environment?

2017 ◽  
Vol 34 (4) ◽  
pp. 563-587 ◽  
Author(s):  
Kathleen A. Bentley-Goode ◽  
Thomas C. Omer ◽  
Brady J. Twedt
Keyword(s):  
Information Asymmetry ◽  
Business Strategy ◽  
Information Environment ◽  
External Information ◽  
Growth Options ◽  
Earnings Guidance ◽  
Press Releases ◽  
Voluntary Disclosures ◽  
Information Intermediaries ◽  
External Sources

This study examines whether a firm’s business strategy affects their information environment. Organizational theory suggests that firms following an innovative “prospector” strategy have greater incentives to provide more frequent voluntary disclosures than firms following an efficient “defender” strategy. Furthermore, prospectors are more likely to attract greater coverage by external information intermediaries. We find that prospectors engage in more frequent management earnings guidance, issue more press releases, and are followed by more financial analysts compared with defenders. Next, we examine the association between business strategy and information asymmetry. We find that despite prospectors having attributes associated with information asymmetry (e.g., R&D, growth options), prospectors have lower information asymmetry than defenders. We attribute this finding to prospectors’ greater access to both internal and external sources of disclosure compared with defender firms, which we confirm using mediation analysis. Collectively, our results suggest that business strategy does affect firms’ information environments, incremental to known determinants, and that strategy serves as a useful context for understanding a firm’s underlying information environment.

Performance antecedents of voluntary and involuntary managerial turnover.

1985 ◽  
Vol 70 (2) ◽  
pp. 329-336 ◽  
Author(s):  
Deborah L. Wells ◽  
Paul M. Muchinsky
Keyword(s):  
Managerial Turnover

The economic analysis of rationality in the tradition of Harvey Leibenstein

2020 ◽  
pp. 21-38
Author(s):  
Ivan V. Rozmainsky ◽  
Yulia I. Pashentseva
Keyword(s):  
Economic Analysis ◽  
Real Life ◽  
Informal Institutions ◽  
External Information ◽  
Urban Residents ◽  
The Future ◽  
Information Constraints ◽  
High Degree ◽  
Market Capitalism

The paper is devoted to the economic analysis of rationality in the tradition of Harvey Leibenstein: the authors perceive rationality as “calculatedness” when making decisions, while the degree of this “calculatedness” is interpreted as a variable. Thus, this approach does not correspond to the generally accepted neoclassical interpretation of rationality, according to which rationality is both full and constant. The authors believe that such a neoclassical approach makes too stringent requirements for the abilities of people. In real life, people do not behave like calculating machines. The paper discusses various factors limiting the degree of rationality of individuals. One group of factors is associated with external information constraints such as the complexity and extensiveness of information, as well as the uncertainty of the future. Another group of factors is related to informal institutions. In particular, the paper states that the system of planned socialism contributes to less rationality than the system of market capitalism. Thus, in the post-socialist countries, including contemporary Russia, one should not expect a high degree of rationality of the behavior of economic entities. The paper mentions, in particular, the factors of rationality caused by informal institutions, such as the propensity to calculate, the propensity to be independent when making decisions and the propensity to set goals. The authors also believe that people who live on their own are usually more rational than people who share a common household with someone else. This assumption is verified econometrically based on data on young urban residents collected by the authors. It turned out that the behavior of people included in this database, in general, corresponds to what the authors believed.

Application Of BIM-Technology In The Restoration Of Buildings

2020 ◽  
pp. 42-48
Keyword(s):  
Chinese Communist Party ◽  
Laser Scanning ◽  
High Accuracy ◽  
Information Environment ◽  
Information Modeling ◽  
Structural Scheme ◽  
Traditional Design ◽  
Information Interaction ◽  
Heritage Buildings ◽  
Effective Organization

The paper describes the main trends in the development of BIM technologies in the field of restoration and reconstruction of historical and cultural heritage buildings. The practical part of the paper presents the experience in using information modeling technologies when restoring the building, where the VI Congress of the Chinese Communist Party in Moscow took place. The use of laser scanning technologies made it possible to reproduce with high accuracy in the information model the original appearance of the building using Autodesk RevitR software. It is shown, how the use of information modeling technologies affects the duration of restoration process, taking into account the calculation of the structural scheme and bearing structures of the building, ensuring the identity of the decoration and the effective organization of electromechanical installation. Operating in a single BIM information environment makes it possible to continuously obtain reliable information on the project, which provides more effective information interaction and communication of participants compared to using traditional design methods.

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