Information, Markets, and Organizations Conference 2013

June 13 - 14, 2013

Sponsored by Harvard Business School | HBS Campus

Organizer

Accounting & Management Unit

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Contact Information

Alyssa Konopka
Accounting & Management
Harvard Business School
Morgan Hall 390D
Soldiers Field, Boston, MA
Telephone: 617.495.6760
E-mail: akonopka@hbs.edu

Conference Program 

Please Note: Hard copies of papers will not be available on site.

Transportation to the HBS campus from the Doubletree and Charles Hotels will be provided.
A Harvard University shuttle bus will depart the Doubletree and Charles Hotels at 8:00am on June 13 and 14.  Passengers will be dropped off at the Spangler Rotary on the HBS campus.  
 

Jun 13
8:15AM - 9:00AM

Breakfast

Hawes First Floor Lounge

9:00 - 10:00 AM

Session 1: Sarah Zechman

Coauthors: Jonathan L. Rogers & Douglas J. Skinner

Paper: The role of the media in disseminating insider trading news

Hawes 101


Abstract: We use the disclosure of insiders’ trades to investigate whether the way in which news is disseminated by the media affects the securities market response. To do this, we utilize recent changes in the disclosure rules governing insider trades and an exogenous change in media coverage to cleanly identify media effects. Using high-resolution intraday data and a plausibly exogenous change in media coverage, we find clear effects of media disclosure in price and volume responses to news. These results help resolve open questions regarding the importance of investor inattention and help explain why apparently “second hand” news affects securities prices.

10:00 - 10:20 AM

Break

Hawes First Floor Lounge

10:20 - 11:20 AM

Session 2: Gwen Yu

Coauthors: Beiting Cheng & Suraj Srinivasan

Paper: Securities Litigation Risk for Foreign Companies Listed in the U.S

Hawes 101


Abstract: We study securities litigation risk faced by foreign firms listed on U.S. exchanges. We find that U.S. listed foreign companies experience securities class action lawsuits at about half the rate as do U.S. firms with similar levels of ex ante litigation risk. The lower rate appears to be partly attributable to higher transaction costs in uncovering and pursuing litigation against foreign firms. However, once a lawsuit triggering event like an accounting restatement, missing management guidance, or a sharp stock price decline occurs, there is no difference in the litigation rates between a foreign and comparable U.S. firm. This evidence suggests that effective enforcement of securities laws is constrained by transaction costs, and the availability of high quality information that reveals potential misconduct is an important determinant of litigation risk for foreign firms listed in the U.S.

11:20 - 11:40 AM

Break

Hawes First Floor Lounge

11:40 AM - 12:40 PM

Session 3: Abigail Allen

Co-authors: Karthik Ramanna & Sugata Roychowdhury

Paper: The auditing oligopoly and lobbying on accounting standards

Hawes 101


Abstract: We examine how the tightening of the U.S. auditing oligopoly over the last twenty-five years—from the Big 8 to the Big 6, the Big 5, and, finally, the Big 4—has affected the incentives of the Big N, as manifest in their lobbying preferences on accounting standards. We find, as the oligopoly has tightened, Big N auditors are more likely to express concerns about decreased “reliability” in FASB-proposed accounting standards (relative to an independent benchmark); this finding is robust to controls for various alternative explanations. The results are consistent with the Big N auditors facing greater political and litigation costs attributable to their increased visibility from tightening oligopoly and with decreased competitive pressure among the Big N to satisfy client preferences (who usually demand accounting flexibility at the expense of reliability). The results are inconsistent with the claim that the Big N increasingly consider themselves “too big to fail” as the audit oligopoly tightens.

12:40 - 1:40 PM

Lunch

Hawes First Floor Lounge

1:40 - 2:40 PM

Session 4: Robin Greenwood

Co-author: David Scharfstein

Paper: The Growth of Finance

Hawes 101


Abstract: The U.S. financial services industry grew from 4.9% of GDP in 1980 to 7.9% of GDP in 2007. A sizeable portion of the growth can be explained by rising asset management fees, which in turn were driven by increases in the valuation of tradable assets, particularly equity. Another important factor was growth in fees associated with an expansion in household credit, particularly fees associated with residential mortgages. This expansion was fueled by the development of non-bank credit intermediation (or “shadow banking”). We offer a preliminary assessment of whether the growth of active asset management, household credit, and shadow banking – the main areas of growth in the financial sector – has been socially beneficial.

2:40 - 3:00 PM

Break

Hawes First Floor Lounge

3:00 - 4:00 PM

Session 5: Suraj Srinivasan

Coauthors: Joseph Piotroski & Peter Joos

Paper: Can Analysts Assess Fundamental Risk and Valuation Uncertainty? An Empirical Analysis of Scenario-Based Value Estimates

Hawes 101


Abstract: We use a dataset of sell-side analysts' scenario-based equity valuation estimates to examine whether analysts are able to assess the risk surrounding a firm’s fundamental value. We find that the spread in analysts’ state-contingent valuations captures the riskiness of operations and predicts the absolute magnitude of future long-run valuation errors and changes in firm fundamentals (i.e., maps into the distribution of one-year-ahead price outcomes and changes in operating performance). Additionally, analysts’ assessment of fundamental risk and predictive ability systematically shifted during and after the financial crisis, consistent with the macro-economic shock raising awareness among analysts of their firms’ systematic risk exposures.

4:00 - 4:20 PM

Break

Hawes First Floor Lounge

4:20 - 5:20 PM

Session 6: Baruch Lev

Coauthors: Elizabeth Demers & Jing Chen

Paper: Oh What a Beautiful Morning! The Time of Day Effect on the Tone and Market Impact of Conference Calls

Hawes 101


Abstract: Using textual analysis software, we examine whether and how the tone of the question and answer (“Q&A”) portion of earnings-related conference calls varies with the time of day. We find that the tone of the conversations between analysts and managers becomes significantly more negative as the day wears off. This continuous, hour-by-hour change is likely the result of mental and physical fatigue gradually and imperceptibly setting in. Calls that are held later in the day also exhibit significantly greater textual uncertainty, that is, the conversational tone is more wavering and less resolute. We document that conversational tone has economic consequences; more negatively toned conversations are associated with more negative abnormal stock returns during the call period and immediately thereafter. Notwithstanding the negativity associated with later day calls, firms exhibit significant “stickiness” in their choice of call time; having initiated the earnings conference call in the afternoon in the prior quarter is the most significant determinant of their doing so in the current quarter, dominating the sign of the earnings news and alternative measures of the firm’s need for equity capital. Further analyses show that there is a negative price drift for about 8 days following the call day for both morning and afternoon “bad news” calls, followed by an extended period of positive abnormal returns (i.e., price reversals) that are higher for afternoon calls. While the bad news overreaction reverses, the recorded negative impact of the calls’ tone on stock returns lasts. To the best of our knowledge, this is the first study to document the effects of human physiological and mental factors on corporate communications with investors.

 

5:30 - 8:00 PM

Cocktails and Dinner

The Charles Hotel
1 Bennett Street, Cambridge, MA 02138

A Harvard University shuttle bus will depart the Spangler Rotary at 5:25pm to transport guests to the Charles Hotel.  The bus will return to the Charles Hotel at 8:15pm to transport guests back to the HBS campus and the Doubletree Hotel.

Jun 14
8:30AM - 9:00AM

Breakfast

Hawes First Floor Lounge

9:00 - 10:20 AM

Session 1: Rebecca Henderson

The Strategic Case for Sustainability: Why is Accounting So Critical?

Hawes 101


Abstract: Problems in sustainability are first and foremost problems in public goods, and as such have historically been viewed as problems that are best solved through political action. In this talk I will explore why private actors may nonetheless have a critically important role in addressing the challenges of sustainability, focusing particularly on the critical role of uncertainty in shaping strategic behavior and the potential role of accounting standards in triggering cooperative action across coalitions of firms and investors. I will also explore the implications of these ideas for the political strategy of the private sector.

10:20 - 10:40 AM

Break

Hawes First Floor Lounge

10:40 - 12:00 PM

Session 2: George Serafeim

Paper: The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research

Hawes 101


Abstract: A long-standing ideology in business education has been that a corporation is run for the sole interest of its shareholders. I present an alternative view where increasing concentration of economic activity and power in the world’s largest corporations, the Global 1000, has opened the way for managers to consider the interests of a broader set of stakeholders rather than only shareholders. Having documented that this alternative view better fits actual corporate conduct, I discuss opportunities for future research. Specifically, I call for research on the materiality of environmental and social issues for the future financial performance of corporations, the design of incentive and control systems to guide strategy execution, corporate reporting, and the role of investors in this new paradigm.

12:00 PM

Bag Lunch

Hawes First Floor Lounge