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http://hdl.handle.net/11375/24051
Title: | Three Essays in Financial Reporting |
Authors: | Kabir, Muhammad |
Advisor: | Nainar, Khalid |
Department: | Business Administration |
Publication Date: | 2018 |
Abstract: | This thesis investigates three important topics on financial reporting and information environment: 1) the timing of patent disclosure and its effect on the cost of equity capital; 2) how CEO mobility affects innovation through changes in firm information environment and incentive structure, and 3) how variability of tort law at the state level affects financial reporting opacity. In a natural experiment setting, the first essay shows that early disclosure of patent information reduces firms’ cost of equity capital. A notable feature of the American Inventors Protection Act (AIPA) is used, which separates the patent publication date from its grant or issue date. Using this feature as an exogenous shock, it is posited that patent disclosure choice in the patent application influences firms’ information environment by signaling firm’s proprietary information. Consistent with extant disclosure literature, this essay finds that early patent disclosure around the exogenous shock of regulatory change is associated with reduction in implied cost of equity capital. In light of scant prior literature on timing of patent disclosure, this essay offers empirical evidence that benefits of early patent disclosure outweigh the costs. This is the case even after adjusting for a real option to delay inherent in the AIPA. To exclude alternative explanations, I run a battery of robustness and sensitivity tests and the results of early patent disclosure still hold. This essay provides new evidence on the timing of proprietary disclosure that is of practical significance and importance to investors, policy makers, and regulators. Using Inevitable Disclosure Doctrine (IDD) as an exogenous shock, the second essay provides direct evidence of how external CEOs increase technology spillover and spur innovation. In particular, two channels which have received theoretical support from extant literature are examined. The first channel is technology spillover and the second one is income inequality. My results show that external CEOs, relative to internal CEOs, increase both technology spillover and income inequality. Moreover, I find direct causal evidence linking the technology spillover with innovation. On the other hand, I do not find similar evidence for income inequality. My results remain substantially unchanged for alternative measures of technology spillover and identification strategies. I also find that CEO’s industry origin is an important factor. Specifically, CEOs from the same or similar industries drive the results. In the third essay, I examine how the changes in U.S. state-level liability regimes affect the firm-level financial reporting opacity in the US banking industry. Using tort reform as an exogenous shock, it is found that banks located in states adopting tort reforms have more opacity (greater earnings management) than those located in non-adopting states. Further analyses suggest that banks in the adopting states also smooth earnings more than those in the non-adopting states. I conduct additional analyses to test for the exogeneity of tort reform and test alternative proxies for earnings management. The results from these tests further reinforce the main results. Given the scarcity of evidence on the effects of state-level laws, this study adds to our understanding in this area and informs the stakeholders such as bank regulators and legislators. |
URI: | http://hdl.handle.net/11375/24051 |
Appears in Collections: | Open Access Dissertations and Theses |
Files in This Item:
File | Description | Size | Format | |
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kabir_muhammad_m_201810_phd.pdf | 2.13 MB | Adobe PDF | View/Open |
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