Research seminars

Credit availability for Social Enterprises: field study evidence

Accounting & Management Control

Speaker: Marika Arena
Politecnico di Milano

7 October 2016 - HEC Paris Room T030 - From 2:00 pm to 4:00 pm

This paper aims to analyze the complex relationship between the organizations engaged in the social business sector, and the banking systems, with particular focus on the problem of access to credit for Small and Medium sized Social Enterprises (SMSEs). Recently these organizations had to confront themselves with the need of diversifying their funding sources, that traditionally relied grants and donations and started to apply for credit from commercial banks. Still, only a limited percentage of the applicants do obtain the requested funding. Against this background, the paper explores the characteristics of the lending technologies that are currently used by banks for SMSEs and discusses the impacts of these choices in terms of SMSEs capacity to access to commercial finance.

A time-series analysis of the macro-level factors affecting annual report length

Accounting & Management Control

Speaker: Rick Mergenthaler
University of Iowa

9 September 2016 - HEC Paris - Room T030 - From 2:00 pm to 4:00 pm

We examine why the length of annual reports has grown approximately ten-fold from the early 1900s to today. We rely on prior literature to identify four theories (litigation, enforcement, standard setting, and investor demand) that could explain, at least in part, the growth in annual report length. We use a data set that includes annual reports from the early 1900s through 2006 that uniquely positions us to answer our question of interest. We implement a time-series research design where we regress the average increase in page length not explained by cross-sectional variables on macro-factors that we predict will impact time-series variation in page length. We find that increases in SEC enforcement and the number of interpretive standards issued by the FASB are positively associated with increases in annual report length. We also find that that a downtick in market returns, our proxy for negative market sentiment, is associated with increases in annual report length. Finally, we find that increases in macro uncertainty are associated with decreases in annual report length. Overall, our evidence suggests that enforcement, standard setting and investor demand have contributed to the increase in annual report page length and that these factors explain a large portion of the time-series variation in page length. Our analysis helps characterize the complete set of forces contributing the rise in annual report page length, and can inform regulators and standard setters as they try to address disclosure overload and its documented negative effects on users of financial reports.

The Effects of Audit Committee Ties and Industry Expertise on Investor Judgments

Accounting & Management Control

Speaker: Jeffrey Cohen
Boston College

10 June 2016 - HEC Paris - Room S127 - From 2:00 pm to 4:00 pm

Despite regulations mandating audit committee independence, the CEO may still influence audit committee members’ objectivity through social ties (e.g., belonging to the same country club) or professional ties (e.g., having served on boards together). Further, research finds that audit committee industry expertise enhances financial reporting quality. In an experiment with 342 reasonably informed investor participants, we find that ties (professional or social) and industry expertise affect assessments of independence and competence. Further, investors assess audit committees with no ties and industry expertise (social ties and no industry expertise) as the most (least) effective and also result in the highest (lowest) likelihood of investing. Moreover, the potential negative effects of ties are attenuated by industry expertise, while the presence of no ties also appears to attenuate in part the lack of industry expertise. These findings support increased disclosures to investors of ties between management and members of the audit committee, as well as information on industry expertise.

The Creative Destruction of Auditing Regulation

Accounting & Management Control

Speaker: Bertrand Malsch
Queen's University

3 June 2016 - HEC Paris - Room T201 - From 2:00 am to 4:00 am

Despite increasingly transnational regulation, responses by national regulators to globalization and their implications on the forms of power and regulation underlying professional projects have still received limited attention (Faulconbridge & Muzio, 2011). Based on a longitudinal study covering the period 2003-2013, we examine the reactions of the French audit regulator (H3C) and the French audit industry to the ‘rescaling’ of their regulatory space from both a global and a local perspective. Overall, our findings highlight a performative process of ‘creative destruction’ (Schumpeter [1943], 2003) at work within the auditing regulation where globalizing pressures and firms’ entrepreneurial attitudes disrupt existing regulatory structures from within, while pushing the regulator and the profession to constantly redefine their positioning vis-à-vis global influences. Throughout this process, our analysis characterizes a chaotic dynamic of resistance and counter resistance where the H3C and the audit industry alternate opportunistically between internationalist aspirations and nationalist postures to maintain their spheres of influence. Even with their faith proclaimed in globalization and discourses aimed at discrediting their local regulation, audit firms remain infused with a significant ‘national character’ (Cooper et al., 1998) and don’t hesitate to forge circumstantial and powerful alliances with the H3C and various state actors aimed at domesticating transnational forces. From a broader viewpoint, we argue that the regulator’s resistance operates reciprocally with the power mobilized by the profession to defend its interests. Both are part of the same conditions of each other’s possibilities of action and prevent the emergence of a stable field of power, while facilitating the ongoing reconstruction of the local regulatory space.

Performance Measures and Intra-Firm Spillovers: Theory and Evidence

Accounting & Management Control

Speaker: Christian Hofmann
LMU Munich

22 April 2016 - HEC Paris - Room T004 - From 2:00 am to 4:00 am

We revisit the question of how performance measures are used to evaluate business unit managers in response to intra-firm spillovers. Specifically, we are interested in variation in the relative incentive weightings of aggregated “above-level” measures (e.g., firm-wide net income), “own-level” business unit measures (e.g., business unit profit), and specific “below-level” measures (e.g., R&D expenses) in response to spillover arising from either the focal unit’s effect on other business units or the other units’ effect on the focal manager’s unit. Our theory highlights complementarity between above- and below-level measures and the existence of an interaction between the two directions of spillovers. In our empirical work, we account for the interaction effect. Based on a survey of 122 business unit managers, we report that the incentive weighting on above-level (below-level) measures increases by approximately 50 (17) percentage points when managers face both types of spillovers (as opposed to one type of spillover).


Accounting & Management Control

Speaker: Brad A. Badertscher
University of Notre Dame

15 April 2016 - HEC Paris - From 2:00 am to 4:00 am

4th Annual ESSEC-HEC Joint Research Workshop (organised by ESSEC)

Accounting & Management Control

11 March 2016 - ESSEC – Cergy Campus K-Lab - From 9:30 am to 4:00 pm

HEC/ESSEC - Private Information and the Granting of Stock Options

Accounting & Management Control

Speaker: Mary Ellen Carter
Boston College

12 February 2016 - HEC Champerret - Room 677 - From 2:00 am to 4:00 am

We examine the relation between firms’ grants of executive stock options and the presence of positive private information about the firm. Firms privately receive notices of forthcoming patents and have a period of time before that information is made public. We examine whether firms’ option-granting behavior during this period of time, relative to a benchmark period, is consistent with CEOs receiving more option grants based on that private information. Our tests suggest that firms use that information to provide more valuable option grants to CEOs and, further, that firms’ option-granting behavior during the private-information period is related to their reliance on innovation and the value of the patent received. We also find that the increase in option granting is concentrated in periods when the US Patent and Technology Office does not publish information about patent applications prior to issuing patents, and that CEOs appear to benefit more broadly from patent-related private information than outside directors do. Overall, we provide support for our expectation that firms with private information about a forthcoming patent use that information to provide more valuable option grants to their CEO.