Jonas Heese - Faculty & Research - Harvard Business School
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Jonas Heese

Assistant Professor of Business Administration

Accounting and Management

Jonas Heese is an assistant professor of business administration in the Accounting & Management Unit. He teaches the Financial Reporting and Control course in the MBA required curriculum.

In his research, Professor Heese focuses on the political economy of regulatory enforcement of accounting standards in the United States, and specifically on the preferences of regulators and the reaction of firms to these preferences. He has explored these ideas in the context of the Securities and Exchange Commission and of agencies that regulate the health-care industry. 

Professor Heese holds a Ph.D. and an M.Sc. in accounting from Maastricht University in the Netherlands.

Academic Articles
  1. The Role of Overbilling in Hospitals' Earnings Management Decisions

    Jonas Heese

    This paper examines the role of overbilling in hospitals’ earnings management choices. Overbilling by hospitals is a form of revenue manipulation that involves misclassifying a patient into a diagnosis-related group that yields higher reimbursement. As overbilling allows hospitals to increase revenues without altering operations, affecting costs, or having to reverse such behavior in the future, I propose and find that overbilling reduces hospitals’ use of managing accruals or cutting discretionary expenditures. Next, I find that hospital managers prefer overbilling to managing accruals (cutting discretionary expenditures) when cutting discretionary expenditures (managing accruals) is constrained and vice versa. Collectively, my findings suggest that overbilling is an important alternative manipulation tool in hospitals.

    Keywords: Overbilling; accrual-based earnings management; real activities manipulation; for-profit hospitals; Earnings Management; Health Industry;

    Citation:

    Heese, Jonas. "The Role of Overbilling in Hospitals' Earnings Management Decisions." European Accounting Review (forthcoming).  View Details
  2. The Effects of Media Slant on Firm Behavior

    Vishal P. Baloria and Jonas Heese

    The media can impose reputational costs on firms because of its important role as an information intermediary and its ability to negatively slant coverage. We exploit a quasi-natural experiment that holds constant the information event across firms, but varies the availability of a major news outlet in local markets. We find that firms subject to the threat of slanted coverage suppress the release of negative information before the event and release it subsequently. Our results are consistent with theory on the active role firms can play in managing their reputational capital through anticipatory actions to avoid negative media coverage.

    Keywords: media slant; reputational capital; strategic corporate decisions; Media; News; Communication Strategy; Reputation;

    Citation:

    Baloria, Vishal P., and Jonas Heese. "The Effects of Media Slant on Firm Behavior." Journal of Financial Economics (forthcoming).  View Details
  3. Is the SEC Captured? Evidence from Comment-Letter Reviews

    Jonas Heese, Mozaffar Khan and Karthik Ramanna

    SEC oversight of publicly listed firms ranges from comment letter (CL) reviews of firms’ reporting compliance to pursuing enforcement actions against violators. Prior literature finds that firm political connections (PC) negatively predict enforcement actions, inferring SEC capture. We present new evidence that firm PC positively predict CL reviews and substantive characteristics of such reviews, including the number of issues evaluated and the seniority of SEC staff involved. These results, robust to identification concerns, are inconsistent with SEC capture and indicate a more nuanced relation between firm PC and SEC oversight than previously suggested.

    Keywords: comment letters; political connections; regulatory capture; SEC enforcement; Government Administration; Business and Government Relations; Government and Politics;

    Citation:

    Heese, Jonas, Mozaffar Khan, and Karthik Ramanna. "Is the SEC Captured? Evidence from Comment-Letter Reviews." Journal of Accounting & Economics 64, no. 1 (August 2017). (Revised June 2017.)  View Details
  4. Selective Regulator Decoupling and Organizations' Strategic Responses

    Jonas Heese, Ranjani Krishnan and Frank Moers

    We posit that nonprofits that provide a greater supply of unprofitable services (beneficent nonprofits) face lenient regulatory enforcement for mispricing in price-regulated markets. Consequently, beneficent nonprofits exploit such regulatory leniency and exhibit higher mispricing. Drawing on organizational legitimacy theory, we argue that both regulators and beneficent nonprofits seek to protect their legitimacy with stakeholders, including those who demand access to unprofitable services. Using data from hospitals, we examine mispricing via "upcoding," which involves misclassifying ailment severity. Archival analysis indicates less stringent regulatory enforcement of upcoding for beneficent nonprofit hospitals, defined as hospitals that provide higher charity care and medical education. After observing regulator leniency, beneficent hospitals demonstrate higher upcoding. Our results suggest that lenient enforcement assists beneficent nonprofits to obtain higher revenues in price-regulated markets.

    Keywords: Regulator leniency; nonprofit organizations; beneficence; mispricing; upcoding; Nonprofit Organizations; Health Care and Treatment; Revenue; Health Industry;

    Citation:

    Heese, Jonas, Ranjani Krishnan, and Frank Moers. "Selective Regulator Decoupling and Organizations' Strategic Responses." Academy of Management Journal 59, no. 6 (December 2016). (Selected for Best Paper Proceedings of the 2015 Academy of Management Annual Meeting. Winner of the Healthcare Management Division of the Academy of Management 2015 Best Paper Award.)  View Details
  5. Regulator Leniency and Mispricing in Beneficent Nonprofits

    Jonas Heese, Ranjani Krishnan and Frank Moers

    We posit that nonprofits that provide a greater supply of unprofitable services (beneficent nonprofits) face lenient regulatory enforcement for mispricing in price-regulated markets. Consequently, beneficent nonprofits exploit such regulatory leniency and exhibit higher mispricing. Drawing on organizational legitimacy theory, we argue that both regulators and beneficent nonprofits seek to protect their legitimacy with stakeholders, including those who demand access to unprofitable services. Using data from hospitals, we examine mispricing via "upcoding", which involves misclassifying ailment severity. Archival analysis indicates less stringent regulatory enforcement of upcoding for beneficent nonprofit hospitals, defined as hospitals that provide higher charity care and medical education. After observing regulator leniency, beneficent hospitals demonstrate higher upcoding. Our results suggest that lenient enforcement assists beneficent nonprofits to obtain higher revenues in price-regulated markets.

    Keywords: Nonprofit Organizations; Business Earnings; Fairness; Governance Compliance;

    Citation:

    Heese, Jonas, Ranjani Krishnan, and Frank Moers. "Regulator Leniency and Mispricing in Beneficent Nonprofits." Art. 11998. Academy of Management Proceedings (2015).  View Details
Practitioner Articles
Working Papers
  1. Government Preferences and SEC Enforcement

    Jonas Heese

    I examine whether political influence by the government as a response to voters' interest in employment conditions is reflected in the enforcement actions of the Securities and Exchange Commission (SEC). I find that large employers are less likely to be subject to an SEC enforcement action, after controlling for firm size, accounting quality, distance to SEC office, and political contributions, among other factors. Next, I show that large employers are less likely to face an SEC enforcement action in presidential election years if they are headquartered in politically important states. I also find that firms that employ a larger proportion of a congressional district's total workforce and are located in districts with high unemployment rates are less likely to be subject to an SEC enforcement action if the incumbent congressman serves on a committee that oversees the SEC. These findings suggest that voters' interests are reflected in SEC enforcement.

    Keywords: SEC enforcement; government preferences; employment; voters' interests; Political Elections; Accounting; Government Administration; Labor; United States;

    Citation:

    Heese, Jonas. "Government Preferences and SEC Enforcement." Harvard Business School Working Paper, No. 15-054, December 2014. (Revised April 2015.)  View Details
Cases and Teaching Materials
  1. Accounting Turbulence at Boeing

    Jonas Heese, Suraj Srinivasan, David Lane and James Barnett

    Unlike its rival Airbus, Boeing used a practice called program accounting to record its commercial aircraft expenses since the 1980s. Program accounting allowed Boeing to expense estimated average costs instead of the actual production costs of an aircraft. This practice lowered the effect of the initially high costs of manufacturing new aircraft models on Boeing’s profitability and reflected potential learning efficiencies that could drive down manufacturing costs over time. By 2016, Boeing had deferred about $27 billion in production costs related to its 787 program. If Boeing had been forced to expense these costs, it would have shown profits of $1.4 billion between 2012 and 2016 instead of $25.2 billion, raising questions about Boeing’s true profitability.

    Keywords: asset recognition; program accounting; airline industry; Accounting; Production; Cost; Air Transportation Industry;

    Citation:

    Heese, Jonas, Suraj Srinivasan, David Lane, and James Barnett. "Accounting Turbulence at Boeing." Harvard Business School Case 118-020, August 2017. (Revised October 2017.)  View Details
  2. Accounting for Nuclear Power Provisions at RWE

    Paul Healy and Jonas Heese

    In early 2016, RWE, a utility that operates nuclear power plants in Germany, came under scrutiny from regulators and the media over the adequacy of its provisions for costs of decommissioning and dismantling (D&D) its nuclear power plants. Accounting standards required utilities to record the present value of projected D&D costs as a liability. However, there were many uncertainties associated with these estimates given the actual cash outlays would be incurred decades into the future. In addition, German government bond rates used to discount projected future costs had fallen to record lows, and RWE, as well as its competitors were struggling with depressed electricity prices. Would RWE's provisions be adequate to cover the future costs?

    Keywords: liabilities; provisions for long-term obligations; discounting; Accounting; Energy Generation; Energy Industry; Germany;

    Citation:

    Healy, Paul, and Jonas Heese. "Accounting for Nuclear Power Provisions at RWE." Harvard Business School Case 118-013, August 2017. (Revised December 2017.)  View Details
  3. Accounting for the iPhone Upgrade Program (B)

    Jonas Heese, Krishna G. Palepu, H. David Sherman and Monica Baraldi

    In October 2016, Apple Inc. announced the financial results for its fiscal year 2016. CEO Tim Cook commented on a very successful fiscal year 2016 and focused on all the positive financial results. However, Apple’s 2016 annual report was also telling another story. Apple’s total revenue had decreased 9%, and iPhone revenue decreased 13% compared to the fourth quarter of fiscal year 2015. Apple also faced some criticism from consumers regarding the iPhone 6 and iPhone 6 Plus Upgrade Program. A September 2016 survey reported that an increasing number of customers decided to subscribe to the iPhone Upgrade Program. In spite of this, the company was very supply constrained on the iPhone 7 and 7 Plus, and financial analysts were still eager to receive more information on the impact of the iPhone Upgrade Program on Apple’s financials.

    Keywords: accounting; Apple Inc.; iPhone 6s; International Accounting; California; United States;

    Citation:

    Heese, Jonas, Krishna G. Palepu, H. David Sherman, and Monica Baraldi. "Accounting for the iPhone Upgrade Program (B)." Harvard Business School Supplement 117-039, December 2016. (Revised January 2017.)  View Details
  4. Accounting for the iPhone Upgrade Program (A)

    Jonas Heese, Krishna G. Palepu, H. David Sherman and Monica Baraldi

    On September 9, 2015, Apple Inc. announced the “iPhone Upgrade Program,” a new way to purchase iPhone models 6s and 6s Plus in Apple’s retail stores throughout the U.S. Next to the strategic implications of the Upgrade Program, financial analysts tried to understand the accounting implications, especially the recognition of revenue, which the Upgrade Program could have on Apple’s financials.
    Analysts’ reactions to the disclosure were mixed. Was Apple’s accounting system “right” for the iPhone Upgrade Program introduced in 2015?

    Keywords: accounting; Apple Inc.; iPhone 6s; International Accounting; Electronics Industry; California; United States;

    Citation:

    Heese, Jonas, Krishna G. Palepu, H. David Sherman, and Monica Baraldi. "Accounting for the iPhone Upgrade Program (A)." Harvard Business School Case 117-020, August 2016. (Revised January 2017.)  View Details
  5. Dollar General Bids for Family Dollar

    Jonas Heese, Paula A. Price and Suraj Srinivasan

    In spring 2015, Dollar General CEO Rick Dreiling was looking ahead to retiring at year's end but worried about ensuring continued growth for the company he had built since 2008 into a market leader in the U.S. discount retail world. Dollar General operated over 11,500 stores in 40 states at the start of 2015, but had recently been rebuffed in a tender offer for its leading rival, Family Dollar. Though Dollar General had held talks with Family Dollar as early as 2013, Family Dollar shareholders chose to ignore Dollar General's more lucrative tender offer and the urging of several activist investors and sold their firm to the smaller Dollar Tree chain. Dreiling could not help but revisit some of the key decisions he and the rest of the board had made in their pursuit of Family Dollar. From a governance perspective, he was confident that the Dollar General board had fulfilled its duty to shareholders during the bidding process despite Family Dollar's decision to sell to Dollar Tree. From a strategic perspective, he wondered whether Family Dollar had been the right competitor to buy.

    Keywords: Dollar General; Family Dollar; Dollar Tree; antitrust; board of directors; corporate strategy; Activist Investors; Federal Trade Commission; Acquisition; Valuation; Corporate Strategy; Retail Industry;

    Citation:

    Heese, Jonas, Paula A. Price, and Suraj Srinivasan. "Dollar General Bids for Family Dollar." Harvard Business School Teaching Note 116-052, April 2016. (Revised June 2017.)  View Details
  6. Dollar General Bids for Family Dollar

    Jonas Heese, Paula A. Price, Suraj Srinivasan and David Lane

    In spring 2015, Dollar General's CEO Rick Dreiling was looking ahead to retiring at year's end but worried about ensuring continued growth for the company he had built since 2008 into a market leader in the U.S. discount retail world. Dollar General operated over 11,500 stores in 40 states at the start of 2015 but had recently been rebuffed in a tender offer for its leading rival, Family Dollar. Though Dollar General had held talks with Family Dollar as early as 2013, Family Dollar shareholders chose to ignore Dollar General's more lucrative tender offer and the urging of several activist investors and sold their firm to the smaller Dollar Tree chain. Dreiling could not help but revisit some of the key decisions he and the rest of the board had made in their pursuit of Family Dollar. From a governance perspective, he was confident that the Dollar General board had fulfilled its duty to shareholders during the bidding process despite Family Dollar's decision to sell to Dollar Tree. From a strategic perspective, he wondered whether Family Dollar had been the right competitor to buy.

    Keywords: Dollar General; Family Dollar; Dollar Tree; antitrust; board of directors; corporate strategy; Activist Investors; Federal Trade Commission; Acquisition; Valuation; Corporate Strategy; Retail Industry; United States;

    Citation:

    Heese, Jonas, Paula A. Price, Suraj Srinivasan, and David Lane. "Dollar General Bids for Family Dollar." Harvard Business School Case 116-007, November 2015. (Revised October 2017.)  View Details