May 16 2011
Intensive PhD Seminar in financial accounting (REG 505)
NHH Norges Handelsøyskole
Instructor: Ole-Kristian Hope (CFA, CPA, CMA), Deloitte Professor of Accounting
E-mail: okhope@rotman.utoronto.ca
August 9-13, 2011
PRELIMINARY AND SUBJECT TO CHANGE
Course objectives
The objective of this course is to provide you with a brief introduction to the empirical financial accounting literature. (As such, note that at NHH, this is not considered a stand- alone course but rather is taken in conjunction with other accounting seminars.) We will focus on topics in disclosure “and international accounting.” Instead of studying “classics,” we will instead primarily read and discuss recent and current papers. In addition to discussing articles, an important part of the course is informal discussion related to how to conduct research and publish papers, as well as related career issues. We will not have much time (if any) to discuss methodological issues; thus it is imperative that you acquire methodological skills through other courses.
We will concentrate on articles that attempt to shed light on the factors underlying firms’ disclosure choices as well as studies that attempt to demonstrate the economic effects associated with differences in firms’ disclosure behavior. I do not apologize for including some of my own studies. I am not claiming that these are in any sense better than alternative papers; however, it makes sense for me for an instructor to focus on his strengths. More generally, we will not try to memorize the individual studies, but rather try to learn from them about topics, research design, methodology, the research process, etc. In fact, we should anticipate to learn more from each other than from the papers themselves.
Course style
This course will be conducted primarily as a seminar/workshop with only intermittent “lectures” given by the instructor. Although course participants are responsible for reading the assigned manuscripts for each class, the responsibility for leading the discussion will rotate among us. The discussion leader is not only to summarize the research, but also to help facilitate an in-depth understanding of the methodological innovations and problems in the manuscript.
Discussion Leader Papers have been assigned to a student who will prepare a written summary (approx. two pages) that will be given to all participants at the beginning of that session, and which may serve as a reference during the discussion. This student will begin class discussion by summarizing the paper and placing it in context. I may interject and ask questions to the discussion leader or other participants at any time (i.e., expect “cold calling”). An outline for the written summary might include the following:
• research question and its importance • research method (model, sample, statistical analysis) • results • critique • contribution (relative to closely related papers – and related to overall importance of topic)
[Depending on enrollment, for some of the (more involved) papers we may also have a back-up. He/she will not present the paper, but will be available to answer detailed questions regarding the content of the paper.]
Other students Every participant is expected to read all assigned papers carefully and to participate in our discussions. Each student ought to prepare questions and comments on each assigned paper.
Papers marked as Supplementary
Read if you’re interested in this line of research. Otherwise skim quickly or skip. We will generally not go through these papers. However, I may refer to some of them. (If you’re a serious PhD student, you should read these and many, many more…)
Course grade
Your grade will be based on the following:
1. Class participation, including presentations (67%). Course credit will not be granted unless you participate fully.
2. Research proposal (33%). This will be a maximum five page document (with reasonable font size, line spacing, and margins) that contains a description of an original research idea pertaining to the (preferably empirical financial) accounting literature. In particular, you should describe the research question, its potential contribution to the extant literature, the proposed research design, etc. Note that the proposal is required in order to obtain course credit.
Venue and time: Our sessions will be held in “Det Runde Vinduet” (close to the cafeteria on the lower level). Note we will start exactly when listed (not five or ten minutes after the hour).
Monday 1-4: Introduction and background (general; introducing each other; research tools; research process; dissertation and publishing) plus one disclosure paper
Botosan. 1997. Disclosure Level and the Cost of Capital. The Accounting Review. A simple but very well cited paper (first in this line of research).
Supplementary reading:
Lang, M. and R. Lundholm. 1996. Corporate disclosure policy and analyst behavior. The Accounting Review (October). Very well cited and you definitely need to know this article.
Ball. 2009. “Market and political/regulatory perspectives on the recent accounting scandals.” Journal of Accounting Research.
Verrecchia. 2001. Essays on disclosure. Journal of Accounting and Economics (especially 141-175).
Tuesday 9-12: Hope on disclosure and agency costs (and intro to segment disclosure; pay-for-performance; private firms and financing constraints)
Hope and Thomas. 2008. “Managerial Empire Building and Firm Disclosure.” Journal of Accounting Research. [Note the research design.]
De Franco, Hope, and Larocque. 2010. “The Effects of Disclosure on the Pay- Performance Relation.” Working paper, University of Toronto.
Hope, Thomas, and Vyas. 2010. “Transparency, Ownership, and Financing Constraints in Private Firms.” Working paper, University of Toronto and University of Oklahoma.
Supplementary reading:
Hope, Kang, Thomas, and Vasvari. 2009. “The Effects of SFAS 131 Geographic Segment Disclosures by U.S. Multinational Companies on the Valuation of Foreign Earnings.” Journal of International Business Studies
Bebchuk. L.A. and J.M. Fried. 2005. Pay without performance: Overview of the issues. Journal of Applied Corporate Finance 17 (4): 8-23.
Dyck, A., and L. Zingales. 2004. “Private benefits of control: An international comparison.” Journal of Finance Vol. 59: 537-600.
Rajan, R., and L. Zingales. 1998. “Financial Dependence and Growth”. The American Economic Review Vol. 88: 559-586.
Tuesday 2-4: Disclosure variations and cost of capital effects
Francis, Khurana, and Pereira. 2005. “Disclosure Incentives and Effects on Cost of Capital Around the World.” Accounting Review Vol. 80 No. 4: 1125-1162.
Hail and Leuz. 2006. “International differences in the cost of equity capital: Do legal institutions and securities regulation matter?” Journal of Accounting Research.
Supplementary reading:
Francis, Nanda, and Olsson. 2008. “Voluntary Disclosure, Earnings Quality, and Cost of Capital.” Journal of Accounting Research. This is a long paper but you should be aware of (1) the results and (2) the methodologies employed.
Hope, Kang, Thomas, and Yoo 2009. “Impact of excess auditor remuneration on cost of equity capital around the world. Journal of Accounting Auditing and Finance.
Wednesday 9 – 12: Disclosure and agency and proprietary costs Note that this will likely be our “toughest” session, so be well prepared so we can focus on important issues.
Berger and Hann. 2007. “Segment Profitability and the Proprietary and Agency Costs of Disclosure.” Accounting Review. [Since this is a long (but very nice) paper, the write-up and discussion should focus on main issues and tests and briefly describe sensitivity analyses.]
Bens, Berger, and Monahan. 2009. “Discretionary Disclosure in Financial Reporting: An Examination Comparing Internal Firm Data to Externally Reported Segment Data.” Working paper, University of Arizona, University of Chicago, and INSEAD. Make sure you carefully read Berger and Hann (2007) first. This is another long article, so let’s make sure we focus on the most important issues.
Bova, Dou, and Hope. 2010. “Employee Ownership and Firm Disclosure.” Working paper, University of Toronto.
Wednesday 1-4: International variations in earnings quality
Burgstahler, Hail, and Leuz. 2006. “The importance of reporting incentives: Earnings management in European private and public firms.” The Accounting Review.
Chen, Hope, Li, and Wang. 2010. Financial reporting quality and investment efficiency of private firms in emerging markets. Working paper.
Dou, Hope, and Thomas. 2010. Relationship-Specificity, Incomplete Contracts, and Income Smoothing: An International Study. Working paper, University of Toronto and University of Oklahoma.
Supplementary reading:
Leuz, Nanda, Wysocki. 2003. “Earnings management and investor protection: An international comparison.” Journal of Financial Economics 69. Widely cited (and note subtle inferences in Dou, Hope, and Thomas).
Thursday: 10 – 12: Brief intro to cross-listing literature
Lang, Ready, and Wilson. Earnings management and cross listing: Are reconciled earnings comparable to U.S. earnings? 2006. Journal of Accounting & Economics
Piotroski and Srinivasan. 2008. “Regulation and Bonding: The Sarbanes-Oxley Act and the Flow of International Listings.” Journal of Accounting Research.
Supplementary reading:
Hope, Kang, Kim, and Pereira. 2010. “Voluntary disclosure practices by foreign firms cross-listed in the United States. Working paper.
Hope, Kang, and Zang. 2007. “Bonding to the Improved Disclosure Environment in the United States and the Capital Market Consequences.” Journal of Contemporary Accounting and Economics. A nice paper even though published in a small journal.
Thursday 2-4: Financial analysts
Bae, Tan, and Welker. 2008. “International GAAP Differences: The Impact on Foreign Analysts.” The Accounting Review (long but nice paper).
Ke and Yu. 2009. Why Don’t Analysts Use Their Earnings Forecasts in Generating Stock Recommendations? Working paper, Pennsylvania State University and University of T exas.
Supplementary reading: Hope.” 2003. “Disclosure practices, enforcement of accounting standards and analysts’
forecast accuracy: An international study. Journal of Accounting Research.
Barniv, Hope, Myring, and Thomas. 2009. Do Analysts Practice What They Preach and Should Investors Listen? Effects of Recent Regulations. The Accounting Review Vol. 84 No. 4.
Barniv, Hope, Myring, and Thomas. 2010. International Evidence on Analyst Stock Recommendations, Valuations, and Returns. Forthcoming, Contemporary Accounting Research.
Friday 8:30 – 10:30: More on international variations
Barth, Landsman and Lang. 2008. “International Accounting Standards and Accounting Quality.” Journal of Accounting Research Vol. 46 No. 3.
Lang, Lins, and Maffett. 2009. “Transparency, Liquidity, and Valuation: International Evidence.” Working paper, UNC and University of Utah.
Supplementary reading:
Ball. 2006. “IFRS – pros and cons for investors.” Accounting and Business Research. An easy to read and beautiful article!
Bradshaw and Miller. 2008. “Will harmonizing accounting standards really harmonize accounting? Evidence from non-U.S. firms adopting US GAAP.” Journal of Accounting, Auditing and Finance. Note the very useful appendix!
Bradshaw, Bushee, and Miller 2004. “Accounting choice, home bias and U.S. investment in non-U.S. firms.” Journal of Accounting Research.
Covrig, DeFond, and Hung. 2007. Home bias, foreign mutual fund holdings, and the voluntary adoption of International Accounting Standards. Journal of Accounting Research.
Daske, Hail, Leuz, and Verdi. 2009. “Adopting a Label: Heterogeneity in the Economic Consequences of IFRS Adoptions.” Working paper, Mannheim, Wharton, Chicago, and MIT.
There are obviously a very large number of recent/current papers on IFRS adoption. However, I personally find many of these to be dreadfully boring…
We should have time to think about and discuss whether there still are interesting financial reporting differences left to examine… Let’s try to brainstorm. For example, what’s special about the Nordic countries (or Europe) with respect to accounting and institutional factors?
Friday 10:35 – 12: Voluntary brief individual meetings to discuss your research and PhD studies
For information about registration and access to the course website please contact: Elisabeth.Stiegler@nhh.no