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• Case | HBS Case Collection | August 2012 (Revised July 2017)

  Netflix: Valuing a New Business Model

  Francois Brochet, Suraj Srinivasan and Michael Norris

  In autumn 2011, Netflix was working to right the ship after publicly stumbling through a price hike and strategic shift and then retreat. The company was changing its business model to focus on streaming video service rather than the DVDs by mail that had brought the company success and praise. One important wrinkle in this business model shift came in the accounting of streaming content. The case describes the rule, FAS 63, that Netflix used to account for streaming content and the implications for the future of the company that could be attributed to this accounting shift.

  Keywords: accounting; performance measurement; online business; asset recognition; Accounting; Performance Evaluation; Online Technology; Motion Pictures and Video Industry; United States; Canada; Latin America; West Indies;

  Citation:

  Brochet, Francois, Suraj Srinivasan, and Michael Norris. "Netflix: Valuing a New Business Model." Harvard Business School Case 113-018, August 2012. (Revised July 2017.)  View Details

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• Article | Accounting Review | July 2016

  The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms

  We examine how language barriers affect the capital market reaction to information disclosures. Using transcripts from the English-language conference calls of non-U.S. firms, we find that the calls of firms in countries with greater language barriers are more likely to contain non-plain English and erroneous expressions. For non-U.S. firms that hire an English-speaking manager, we find less use of non-plain English and fewer erroneous expressions. Calls that have greater use of non-plain English and more erroneous expressions show lower intraday price movement and trading volume. The capital market responses to non-plain English and erroneous expressions are more negative when the firm is located in a non-English-speaking country and has more English-speaking analysts participating in the call. Our results highlight that when disclosure takes the form of verbal communication, language barriers between speaker and listener affect the transparency of the narrative which in turn impacts the market reaction to the disclosure.

  Keywords: complexity; Voluntary Disclosure; Capital market consequences; Non-plain English; Spoken Communication; Complexity; Capital Markets; Cross-Cultural and Cross-Border Issues;

  Citation:

  Brochet, Francois, Patricia L. Naranjo, and Gwen Yu. "The Capital Market Consequences of Language Barriers in the Conference Calls of Non-U.S. Firms." Accounting Review 91, no. 4 (July 2016): 1023–1049.  View Details

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• Article | Accounting Review | March 2014

  Do Analysts Follow Managers Who Switch Companies? An Analysis of Relationships in the Capital Markets

  Francois Brochet, Gregory S. Miller and Suraj Srinivasan

  We examine the importance of professional relationships developed between analysts and managers by investigating analyst coverage decisions in the context of CEO and CFO moves between publicly listed firms. We find that top executive moves from an origin firm to a destination firm trigger analysts following the origin firm to initiate coverage of the destination firm in 10% of our sample, which is significantly higher than in a matched sample. Analyst-manager "co-migration" is significantly stronger when both firms are within the same industry. Analysts who move with managers to the destination firm exhibit more intense and accurate coverage of the origin firm than they do in other firms and compared to other analysts covering the origin firm. The advantage no longer holds after the executive's departure, and most of the analysts' advantage does not carry over to the destination firm. However, the analysts do increase the overall market capitalization of firms in their coverage portfolio. Our results hold after Regulation Fair Disclosure, suggesting that these relationships are not based on selective disclosure. Overall, the evidence shows both the importance and limitations of professional relations in capital markets.

  Keywords: management turnover; analyst coverage; capital market relationships; Capital Markets; Relationships;

  Citation:

  Brochet, Francois, Gregory S. Miller, and Suraj Srinivasan. "Do Analysts Follow Managers Who Switch Companies? An Analysis of Relationships in the Capital Markets." Accounting Review 89, no. 2 (March 2014).  View Details

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