The effects of external shocks on market based accounting research (MBAR)

Abstract

The thesis adopts three-chapter requirements and employs quantitative methods. All using difference-in-difference (DID) approach, chapter 2 takes 1999 rulings as an exogenous shock, while chapter 3 and chapter 4 both explore the real impacts of FAS 166/167. Using a sample spanning from 1995-2003 (with 1999 excluded), chapter 2 suggests that the litigation pressure from shareholders might be a potential explanation for managers to smooth income. The findings are robust to confounding laws and the falsification test. And the decrease in income smoothing after the 1999 rulings are more significant when firms fail to meet financial goals, are with more peer pressure, more financially constrained, in non-consumer-oriented industries and with moderate labor unions. My chapter 3 continuously explores the real impact of exogenous shock on accounting manipulation, proving the positive spillover effect of FAS 166/167 on corporate earnings management. We only find the increase in corporate accrual-based earnings management after their lenders adopt FAS 166/167, while no such evidence can be observed in real earnings management. The findings are robust to a battery of concurrent events which are triggered by the financial crisis and might be influential in the shock period. The spillover effect is more significant when firms are facing higher financially stress and experiencing lower-level governance. My chapter 4 extends the line of chapter 3 and proves the positive spillover effect of FAS 166/167 on corporate CSR performance. The main findings are robust to a set of tests and the falsification tests. And the spillover effect is more concentrated among firms which are more financially constrained, more externally monitored and with higher risk levels.

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Identifiers

ORCID for Tingyu(Suntina) Sun: orcid.org/0000-0002-5056-9639

ORCID for Jason Zhang: orcid.org/0000-0001-5369-3144

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