Annual Conference

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Accounting

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May 2016

Capital-Market Consequences of Asymmetric Output-Price Rigidities

Jin XIE
Firms adjust output prices to cost decreases with a delay relative to cost increases. I document firms’ operating income becomes less persistent when their input costs decrease than when their costs increase. The stocks of firms slowly cutting output prices due to asymmetric output-price rigiditie...
Keywords: New Keynesian economics, Downward nominal price rigidities, Trend inflation, Earnings persistence, stock market
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Annual Conference

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Accounting

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May 2016

Corporate Hedging and the Design of Incentive-Compensation Contracts

Christopher S. ARMSTRONG, Sterling HUANG, Stephen GLAESER
We use the introduction of exchange-traded weather derivative contracts as a natural experiment to examine the relation between risk and incentives. Specifically, we examine how executives’ ability to hedge weather-related risk that was previously difficult and costly to manage influences the desi...
Keywords: executive compensation, contract design, equity incentives, risk-taking incentives;
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Annual Conference

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Accounting

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May 2016

Can Twitter Help Predict Firm-Level Earnings and Stock Returns?

Eli BARTOV, Lucile FAUREL, Partha MOHANRAM
Prior research has examined how companies exploit Twitter in communicating with investors, and whether Twitter activity predicts the stock market as a whole. We test whether opinions of individuals tweeted just prior to a firm’s earnings announcement predict its earnings and announcement returns. ...
Keywords: Twitter, Social media, Wisdom of Crowds, earnings, analyst earnings forecast, abnormal stock returns
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Annual Conference

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Accounting, Economic Transformation of Asia

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May 2016

Accounting Based Regulation and Earnings Management

Radhakrishnan GOPALAN, Xiumin MARTIN, Kandarp SRINIVASAN
We document the distortionary effects of accounting-based regulation on reported earnings. In India only firms with negative book value of equity (networth) can seek bankruptcy protection. Using a novel dataset of bankrupt firms from India, we show that firms manage earnings downward to seek bankrup...
Keywords: bankruptcy, emerging markets, regulation, accruals, accounting rules, tunneling
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Annual Conference

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Economic Transformation of Asia

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May 2016

Trade, Migration and Productivity: A Quantitative Analysis of China

Trevor TOMBE, Xiaodong ZHU
We study how goods- and labor-market frictions affect aggregate labor productivity in China. Combining unique data with a general equilibrium model of internal and international trade, and migration across regions and sectors, we quantify the magnitude and consequences of trade and migration costs. ...
Keywords: Migration, internal trade, spatial misallocation, gains from trade, China
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