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Corporate Reporting Research

Abdolmohammadi, M. J., Read, W. J. Corporate Governance Ratings and Financial Restatements: Pre and Post-Sarbanes-Oxley Act. Journal of Forensic and Investigative Accounting, 1 (January-June 2010), 1-43.

The current study investigates how corporate governance ratings affect the certainty of buy-side analysts’ earnings forecasts. Nineteen financial analysts from the United States (U.S.) and 17 from the United Kingdom (U.K.) participated in a 1 x 2 (corporate governance ratings: below or above industry average) within-participant experiment. We find that, on average, analysts exhibit more certainty in their range forecasts when the corporate governance rating is above average, relative to below average. We also observe a significant interaction between the corporate governance ratings and country, indicating that U.K. analysts exhibit stronger responses to a below average rating than U.S. analysts, while responses to an above average rating are not significantly different between the two countries. These results suggest a need to investigate cultural or other factors that can impede the seamless integration of national capital markets into a unified global financial network.

For additional information contact Ali Abdolmohammadi (

Perrault, E., Williams, C.C. (2011). Non-financial reporting. In O. Ihlen, Bartlett, J. and May, S. (Eds.), The Handbook of Communication and Corporate Social Responsibility. Wiley Blackwell.

In the midst of a trend towards increased voluntary and mandatory reporting of corporate social and environmental information, we first document this reporting movement with an explanation of the benefits and drawbacks of this practice to illuminate the efficacy and apparent paradox brought about by these regulatory and voluntary efforts in changing unwanted corporate activity. In the second part of this chapter, we provide a description of non-financial reporting practices from a communication perspective. We identify three generic modes of firm-stakeholder engagement and discern the methods, audiences and content of non-financial reports within each stream. This information is summarized in a typology and a set of recommendations for both issuers and users of corporate voluntary reports.

For more information, please contact: Cynthia Clark (

Minnick, K. L.Noga, T. J. (2010). Do Corporate Governance Characteristics Influence Tax Management? Journal of Corporate Finance, 16 (5), 703-718. 

This paper investigates how corporate governance plays a role in long-run tax management. We focus on board composition, entrenchment, and compensation using a hand-collected data set of S&P 500 firms from 1996 to 2005. Companies with smaller, more independent boards, less entrenched management, and higher CEO and director pay-performance sensitivity influence tax management. We deconstruct the effective tax rate into its individual components, such as domestic tax rate, state taxes net of federal benefit, foreign taxes, and change in valuation allowance. Using these individual components, we document how companies manage their tax rates and how the governance plays in these individual components. Our results add insight into how governance can help improve firm performance and increase shareholder value.

For additional information contact Kristina Minnick (

Perrault, E., Williams, C. C. (2010). Should corporate social reporting be voluntary or mandatory? Evidence from the banking sector in France and the United States. Corporate Governance: The International Journal of Business in Society, 10 (4), 512-526.

This research project aims to investigate how country contexts pressure firms for greater reporting activity and to explore the impact of these pressures on disclosure quality. A theoretical lens is used to based on the three pillars of institutions: regulative, normative, and cultural in order to assess qualitatively how strong each pillar is reflected in creating a context with regard to disclosure, and then to compare two disclosure ratings reports - that of the Carbon Disclosure Project (CDP) and that of CERES - to provide a quantitative comparison of disclosure quality. Expecting that countries with higher regulative pressures, such as France, will lead to a minimum-requirement type of disclosure, while countries with more liberal markets, such as the USA, will present higher quality disclosure, counter-theoretical evidence was found in the results, indicating that French firms exhibit higher quality disclosure than US firms on average.

For more information, please contact: Cynthia Clark (

Chavez, G. A., Silva, A. (2009). Brazil's Experiment with Corporate Governance. Journal of Applied Corporate Finance, 21 (1), 34-44.

The adoption of special listing segments by the São Paulo Stock Exchange in the year 2000 was an important step forward for the Brazilian equity market. Bovespa's introduction of the Novo Mercado and its Special Corporate Governance Levels 1 and 2 provided concrete, standardized certification of corporate commitments to higher governance standards that could be readily observed and verified by all market participants.

For additional information contact Gonzalo Chavez (

Demirkan, S., Platt, H. (2009). Financial status, corporate governance quality, and the likelihood of managers using discretionary accruals. Accounting Research Journal, 22 (2), 93-117.

We investigate, using data on US manufacturing firms, how and when corporate governance affects managers’ decisions to use discretionary accruals and thereby artificially influence company financial reports. We employ 3SLS to study the relationship between financial status, corporate governance and financial reporting discretion. The sample spans years 2001 to 2003 during a severe downturn in the US stock market. Financial status is measured with the Altman-Z score (Altman, 1968). A significant difference is found between firms not classified as healthy or failed (i.e., the mid-range group) and the two extreme categories when examining governance quotient using a well known index. A positive relationship is found between discretionary accruals and the governance index. Strong governance appears to reduce the incidence of mid-range firms engaging in accruals management. The least healthy and the most distressed companies have the weakest relationship with discretionary accruals. By contrast, mid-range firms are more likely to resort to discretionary accruals. Non-executive members of boards of directors are warned to be particularly vigilant about discretionary accruals with firms transitioning between healthy and high failure risk. The relationship between firms’ financial health and discretionary accruals reveals an agency problem in credit markets with financially stressed firms. More attention is required on firms whose financial condition is uncertain. Also, we document significant findings of importance to the earnings quality and corporate governance literature by documenting the role of corporate governance on discretionary accruals and financial status.

For additional information contact Seb Demirkan (

Feldmann, D. A.Read, W. J.Abdolmohammadi, M. J. (2009). Restatements, Audit Fees and the Moderating Effect of CFO Turnover. Auditing: A Journal of Practice and Theory, 28 (1), 205-223.

We examine post-restatement audit fees and executive turnover for a sample of firms that restated their 2003 financial statements. We investigate and find evidence that audit fees are higher for restatement firms compared with a matched-pair control group of non-restatement firms. We propose that the higher audit fees reflect a cost of both an increase in perceived audit risk and a loss of organizational legitimacy. Prior literature suggests that changing top management is a response to a legitimacy crisis; thus we expect to find that executive turnover moderates the positive relationship between restatement and audit fees. Our results indicate that a change in CFO for a restatement firm moderates the increased audit fee, but a change in CEO does not.

For additional information contact Dorothy Feldmann (

Williams, C.C. (2008). Toward a Taxonomy of Corporate Reporting Strategies. Journal of Business Communication, special issue on corporate reporting, 45 (3): 232-264.

Studies of corporate reporting that focus on information disclosure do so primarily from a mandatory, financial perspective owing the decision to the rationality of corporate actors. Yet, social and environmental disclosures — often reported voluntarily — are increasing in importance because of their impact on a firm’s performance and perceived value. Likewise, disclosure decisions are made based on managerial choice, often being communicated for a specific strategic purpose. This article illustrates the importance of voluntary disclosures as an aspect of corporate reporting. A taxonomy of the disclosure process, activities, tasks, forms, types, and strategies is provided to add to our understanding of the additive and corrective nature of proactively disclosing information either to provide context to existing disclosures or to use information in a preventive manner.

For additional information contact: Cynthia Clark (

Abdolmohhamadi, M., Simnett, R., Thibodeau, J., Wright, A. (2006). Sell-Side Analysts’ Reports and the Current External Reporting Model. Accounting Horizons, 20 (4): 375-389.

This study explores the nature of the information (financial, non-financial and other) that is disseminated by quarterly recommendation reports of sell-side financial analysts. We content analyzed nearly 7,000 elements contained in 64 analysts’ quarterly recommendation reports for companies in four different industries, two intangible asset intensive industries and two tangible asset intensive industries. The results indicate that analysts’ recommendation reports provide a significantly higher proportion of financial information and lower proportion of non-financial information for tangible asset intensive companies than intangible asset intensive companies. We also identify the number of financial and non-financial information elements that are traced to SEC filings. We find that a high percentage of this information, especially non-financial information, is not provided in these filings. This finding raises significant concerns about the completeness of the current reporting model.

For additional information contact Ali Abdolmohammadi (