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Governmental subsidy policy and channel information structure have substantial effects on supply chain emission reduction, operations and marketing decisions. In this paper, we use game theory to study the interplay of government subsidizing arrangement and information asymmetry on manufacturers' emission reduction and retailers' low-carbon promotion. Suppose realistically that the investment coefficients for manufacturers' emission reduction levels and retailer' low-carbon promotion levels are their respective private information. Among diverse governmental subsidy schemes, we find dual subsidizing are the best choice for the defined level of total subsidy under information asymmetry, while it is not always the best choice if the total subsidy level is uncertain. Under information asymmetry, the results show that manufacturer have no incentive to lie under any subsidy policy. However, the retailer has incentive to misrepresent individual information and its misreporting behaviour is related to the coefficient and allocation ratio of governmental subsidies. On this basis, we illustrate that a screening model can be deployed to reduce the negative effects of information asymmetry on supply chain operations. We therefore propose the method of improving the performance of low-carbon supply chains under various situations of information asymmetry and governmental subsidizing schemes to achieve system-wide Pareto improvement. [ABSTRACT FROM AUTHOR]

The increasing popularity of sharing platforms is raising concerns about a lack of information on the demand side: the cost of serving specific buyers is typically unknown to sellers. To mitigate this concern, some platforms, such as Airbnb, have adopted the bilateral review system (BRS), allowing buyers and sellers to rate each other. This differs from the traditional unilateral review system (URS), which allows only buyers to rate sellers. In this study, we examine how these two review systems impact the operation of a peer-to-peer (P2P) sharing platform, where sellers with different qualities are matched with buyers with different serving costs. Our analysis reveals that under URS, even with perfect seller information, high-quality sellers can still be driven out of the market due to unknown information about the buyer and the "coproduction" nature of the serving cost. This differs from the adverse selection problem often observed in the used car market, for example, where sellers of high-quality products withdraw due to generally unknown product quality. Additionally, we highlight the critical role of the expected buyer cost: When this cost is high, BRS can benefit the platform by alleviating the adverse selection problem; however, when this cost is low, BRS becomes detrimental to the platform. Our analysis also shows that BRS helps buyers but can hurt sellers. However, BRS has the potential to generate a favorable outcome for all parties involved, resulting in a win-win-win situation benefiting the platform, buyers, and sellers. Our results not only shed light on review system design but also provide a plausible explanation for the widespread use of BRS by sharing platforms such as Airbnb, Fiverr, and Turo. [ABSTRACT FROM AUTHOR]

Smart services' data-intensive nature means their convenience for users comes with privacy concerns. This poses challenges for the supply of smart services. This paper analyses the impact of user-differentiated privacy costs on smart service supply strategies. It also discusses the effects of privacy protections and data utilisation capabilities on the improvement of smart service levels. We find that providers tend to segment the market based on user privacy sensitivity to capture the maximum consumer surplus. Strict privacy protection requirements may cause providers to sacrifice service quality. Privacy protection is conducive to improving the level of smart services only when users fully recognise these services' value. Interestingly, our study finds improvements in service levels by providers are driven by two factors. On the one hand, providers choose to improve their service levels to obtain more data and create more profits. On the other hand, to reduce the opportunity costs of early investments to develop services, providers need to improve their capabilities to utilise the value of data, ultimately leading to improved service levels. This study brings a new perspective to the supply of smart services and offers suggestions for how to resolve the contradiction between smart service use and privacy preservation. [ABSTRACT FROM AUTHOR]

With the global expansion of business operations, many U.S. corporations now operate internationally. While these multinational corporations (MNCs) rely on information about their operations to allocate resources, this information is likely dispersed within the firm, leading to internal information asymmetry between top executives and divisional managers. Meanwhile, audits of these geographically dispersed MNCs are challenging, and parts of these audits are sometimes outsourced to local foreign auditors who have no experience serving as opinion-issuing auditors for U.S. issuers ("inexperienced component auditors"). In this article, we examine whether involving such inexperienced component auditors is associated with MNCs' internal information environment. We find that, relative to a matched control sample, Securities and Exchange Commission (SEC) issuers with the participation of inexperienced component auditors have higher internal information asymmetry and lower internal capital allocation efficiency. Our results suggest that audit quality matters not only to a firm's external financial statement users but also to its internal users. [ABSTRACT FROM AUTHOR]

The increasing complexity of 10-K reporting has caused difficulties for investors seeking to understand and analyze a company's financial reports. In this study, we examine whether the SEC's comment letter process, consistent with its mission to improve public company disclosure, reduces reporting complexity in subsequent filings. We find comment letter receipt has a competing impact on two distinct dimensions of reporting complexity. Specifically, reporting complexity related to accounting concepts decreases after comment letter receipt, but linguistic reporting complexity increases. Validating this competing impact, we find that both changes to complexity are associated with changes in firms' information asymmetry in the expected directions. Further analysis of the increase in linguistic reporting complexity suggests that managers obfuscate following comment letter receipt, where the increase is unnecessary and not occurring in response to changes in the firms' accounting or underlying economics/operations. Overall, results suggest that while the comment letter process simplifies the presentation of reported accounting information, it also has the unintended consequence of decreasing the readability of reports. This nuance is important to understand, given that the federal government dedicates significant resources to the comment letter process. [ABSTRACT FROM AUTHOR]

Using a sample of Chinese listed firms from 2007 to 2017, this study investigates the impact of trust on corporate innovation. We find that firms located in provinces with higher trust levels have both higher innovation inputs and outputs, indicating trust plays an important role in promoting corporate innovation. We further document that this association is more pronounced for firms with a higher degree of information asymmetry between boards and managers, and when CEOs have stronger incentives to engage in opportunistic behavior in innovation activities. In addition, we find that forced CEO turnover-performance sensitivity is lower and managers are less likely to underinvest in R&D in high trust areas, suggesting trust enhances corporate innovation through relationship alignment between shareholders and managers. We also find that trust promotes not only the quantity but also the quality of corporate innovation. Our study complements existing research that investigates factors encouraging corporate innovation and extends a growing body of literature that examines the impact of trust on corporate decisions. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between corporate site visits (CSVs) and firms' real earnings management. Using a unique dataset of site visits to Chinese firms listed on the Shenzhen Stock Exchange from 2009 to 2016, we find that such visits are negatively associated with firms' real earnings management. The results are robust to using alternative CSV measures, controlling for alternative communication channels, and using the propensity score matching method. In cross-sectional analyses, we find that the negative association between site visits and real earnings management is stronger for more complex firms and firms with greater information asymmetry. In addition, we find that CSVs are negatively associated with both management and corporate misconduct but not with accrual-based earnings management or restatements. [ABSTRACT FROM AUTHOR]

This study provides new evidence on the influential role of external auditors in enhancing the informativeness of form 10-K annual reports to shareholders. Specifically, we find that the client's choice of a Big 4 auditor (PwC, EY, KPMG, and Deloitte) versus a non-Big 4 auditor contributes to cross-sectional variations in 10-K disclosure volume. We also document that the benefit of enhanced disclosures provided by Big 4 auditors is more pronounced for audit clients with poorer accrual quality and those with higher information asymmetry. Furthermore, we introduce the portion of 10-K length unexplained by operating complexity and observable client characteristics as a new proxy for audit firm effort. Specifically, we find that abnormally long disclosures are associated with higher audit fees and longer audit report lag, which implies that an incremental level of audit effort can be inferred from the discretionary component of 10-K disclosures. As audit effort is costly, a greater volume of 10-K disclosures can be expected to be associated with an improvement in the quality of financial reporting. Overall, our findings show that auditors play more than a simple attestation role in the financial reporting process, and that the quality of financial reporting in a company's 10-K annual report is a joint product of the effort and decisions of both a company's managers and its auditors. [ABSTRACT FROM AUTHOR]

Credit default swaps (CDSs) are a major financial innovation related to debt contracting. Because CDS markets facilitate bad news being incorporated into equity prices via cross-market information spillover, CDS availability may curb firms' information hoarding. We find that CDS trading on a firm's debt reduces the future stock price crash risk. This effect is stronger in active CDS markets, when the main lenders are CDS market dealers with securities trading subsidiaries, or when managers have more motivation to hoard information. Our findings suggest that debt market financial innovations curtail the negative equity market effects of firms withholding bad news. [ABSTRACT FROM AUTHOR]

We study how derivatives (with nonlinear payoffs) affect the underlying asset's liquidity. In a rational expectations equilibrium, informed investors expect low conditional volatility and sell derivatives to the others. These derivative trades affect different investors' utility differently, possibly amplifying liquidity risk. As investors delta hedge their derivative positions, price impact in the underlying drops, suggesting improved liquidity, because informed trading is diluted. In contrast, effects on price reversal are ambiguous, depending on investors' relative delta hedging sensitivity (i.e., the gamma of the derivatives). The model cautions of potential disconnections between illiquidity measures and liquidity risk premium due to derivatives trading. [ABSTRACT FROM AUTHOR]

We test the signaling view of corporate social responsibility (CSR) engagement using two complementary quasi-natural experiments that impose exogenous negative pressure on stock prices. Firms under such adverse price pressure increase CSR activities compared to otherwise similar firms. This effect concentrates among firms with stronger signaling incentives, namely, those facing greater information asymmetry, more product market competition, higher shareholder litigation risk, and higher stock price crash risk. Firms under the exogenous negative price pressure mainly improve CSR strengths, including costly environmental investments. We also find that CSR engagement attracts socially responsible investors and lowers the cost of capital for signaling firms. [ABSTRACT FROM AUTHOR]

We examine the effects of implementing a U.S. approach to the enforcement of mandatory disclosure in China. Using a hand-collected sample of comment letters (CLs) issued by the Shanghai Stock Exchange over the period of 2013 to 2018, we show that stock price reactions to CL receipts and replies are negative and significant. Using textual analysis to match issues raised by regulators to targeted firms' changes in disclosure, we show that these firms do address CL issues point by point, but do not experience significant improvements in their information environments. Our article highlights the importance of incentives rather than regulation/enforcement in reducing information asymmetry. [ABSTRACT FROM AUTHOR]

We document a new empirical phenomenon in which the aggregate positions of money managers, who are sophisticated speculators in the commodity futures market, as disclosed by the Disaggregated Commitments of Traders reports, can predict the cross section of commodity producers' stock returns in the subsequent week. We employ a number of cross-sectional methods, including calendar-time regression analysis, single-sort, double-sort, and Fama–MacBeth regressions, to confirm the predictability results. The results are more pronounced in firms with higher information asymmetry. We thus add more empirical evidence to the literature on costly information processing, which leads to gradual information diffusion across asset markets. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper analyzes the herding behavior that characterizes lenders' lending decisions on a microloan platform and explains how rational herding behavior can resolve the information-asymmetry problem, which is a well-known reason for the failure of online microloan platforms. Using a set of panel data on individual lending decisions acquired from Paipaidai.com (PPDai), an online microloan platform, we examine the influence of the lending decisions of prominent, experienced lenders on novice lenders to identify rational herding behavior. Our empirical analysis demonstrates that rational herding behavior can in fact efficiently reduce lender loss from borrower defaults caused by limited information. Although it is typically assumed that herding behavior is irrational, we find that it can be rational in this context and can thus shed light on why PPDai has succeeded while most other microloan platforms have failed. Accordingly, we make three key contributions: 1) we use heterogeneous herding effects to empirically determine whether lenders' herding behavior on PPDai is rational based on observational learning; 2) we investigate the moderating effect of borrower credit and novice-lender experience on herding, and we leverage this heterogeneity in lender experience to better explain loan results; and 3) because PPDai publicly provides potential lenders with a transparent credit score—in contrast to platforms like Prosper.com, which leverage hidden proprietary credit information from Experian—we further analyze the credit composition of prominent lenders to better understand the crucial determinants of rational herding. In fact, our follow-up survival simulations indicate that without rational herding, the total number of successful PPDai loans would have decreased by around 46 percent during the study period—a finding that further underlines the crucial influence of rational herding and the unique contextual factors of PPDai that have fostered it. [ABSTRACT FROM AUTHOR]

This paper argues that in housing transaction with asymmetric information, sellers may signal their private information with special design of listing prices. We build a cheap-talk signalling model in which sellers strategically choose round number listing prices to signal their weakness, i.e. they are willing to accept lower prices in order to sell their houses more quickly. Using housing market transaction data in Beijing, we find that round number listings sell 0.13% lower and 0.086 months sooner than precise ones. We also show that these results are unlikely to be driven by housing unobserved attributes or round number self-attractiveness. In addition, we find that as the roundness of listing price increases, the signalling effects become more pronounced. Our results present empirical evidence that signalling helps improve negotiation efficiency under asymmetric information. [ABSTRACT FROM AUTHOR]

We examine the impact of a government-initiated CSR project on corporate misconduct using the unique setting of China's Targeted Poverty Alleviation (TPA) program. The difference-in-differences estimates show that firms participating in the TPA program engage in fewer misconduct activities than do their counterparts. This finding is robust to the parallel trends test, the placebo test, alternative regression specifications, alternative research designs, the reverse causality analysis, and the bivariate probit model with partial observability. Further analysis shows that TPA participation enhances the ability of external financial professionals to monitor performance by stimulating the dissemination of TPA-related incremental information, thereby contributing to the decline in corporate misconduct. The cross-sectional heterogeneity analysis shows that the impact of TPA participation on corporate misconduct is more pronounced in firms with higher information asymmetry, with weaker political connections, and with weaker internal governance. Furthermore, we find evidence that TPA participation improves corporate financial performance but does not deteriorate information transparency. [ABSTRACT FROM AUTHOR]

This paper examines the association between environmental, social, and governance (ESG) performance and firm value. Using a sample of 1,072 Korean listed firms from 2011 through 2019, we show that ESG performance is positively associated with firm value. This positive association almost disappears, however, for firms that fall into the below-median ROA group. Moreover, the value implications of ESG performance decrease monotonically as a firm's financial performance worsens from the highest to the lowest ROA quartile, resulting in a negative value effect of ESG performance for firms that fall into the lowest ROA quartile. Lastly, this association is more pronounced among firms that suffer from severe information asymmetry. The results suggest overall that investor valuations of ESG performance depend on financial performance. [ABSTRACT FROM AUTHOR]

Does good governance require citizens to be knowledgeable of basic facts and best policy ideas? Some scholars suggest that it does, and propose disenfranchising the most 'ignorant' voters. In contrast, we argue, political systems are complex systems inevitably exhibiting incomplete, imperfect and asymmetric information that is dynamically generated in society from actors with diverse life experiences, antagonistic interests and often profoundly dissonant views and values, generating radical uncertainty among political elites over the consequences of their decisions. Radical uncertainty, radical dissonance and power asymmetry are inescapable properties of politics. Good performance significantly depends on how political elites navigate through radical uncertainty to handle radical dissonance. Democracy, by offering citizens equal rights to participate in politics and talk freely, both enables and compels political actors to track social feedback regarding the effects of their decisions on a diverse public, and consider it in ways that mitigate these three problems. [ABSTRACT FROM AUTHOR]

In this paper, we investigate the optimal reinsurance and investment problem from joint interests of the insurer and the reinsurer in the framework of the mixed leadership game, where both of them can invest their wealth in the financial market, and the liabilities are correlated with the risky asset. More specifically, we assume that the insurer is the leader to determine the amount he/she invests into the risky asset but acts as the follower to decide the optimal reinsurance retention level, while the reinsurer is the leader to set the reinsurance premium price and acts as a follower to determine his/her investment strategy. Both the insurer and the reinsurer aim to maximize the expected utility of their terminal wealth, and the explicit Stackelberg-Nash equilibrium is derived by solving the corresponding Hamilton-Jacobi-Bellman (HJB) equations. In order to better understand the effect of the mixed leadership game on the optimal reinsurance and investment problem, we also consider the optimization problem within the framework of the stochastic Stackelberg differential game shown in [Bai, Y., Zhou, Z., Xiao, H., Gao, R. & Zhong, F. (2021). A Stackelberg reinsurance-investment game with asymmetric information and delay. Optimization70(10), 2131–2168.], where the reinsurer is the leader while the insurer acts as the follower for both the reinsurance and investment strategies. Some theoretical analyses and numerical examples are provided to show the economic intuition and insights of the results. [ABSTRACT FROM AUTHOR]

This paper studies life reinsurance as a solution to default risk in equity-linked life insurance products with surplus participation. The problem is considered under both perfect and asymmetric information about the insurer's risk profile between the reinsurer and the insurer. In both cases, we analyze the existence of proportional reinsurance and the impact of the insurer's investment strategies on optimal reinsurance. We find that the more risky the insurer's investment portfolio is, the more risk the insurer tends to transfer to the reinsurer. Further, information asymmetry leads to additional information costs and consequently to a larger reinsurance premium and a lower reinsurance share. [ABSTRACT FROM AUTHOR]

Due to the unhealthy principal-agent relationships prevalent in state-owned enterprises (SOEs), these enterprises often lack transparency in financial reporting and other critical information. Drawing on signaling theory, this study examines the impact of mixed-ownership reform (MOR) on financial constraints in Chinese SOEs. Using data from listed manufacturing SOEs between 2009 and 2019, we find that every 0.1 increase in the proportion of non-state shareholders, a proxy for MOR intensity, is associated with an average 2.34 ‰ reduction in financial constraints. This mitigation in constraints primarily arises from decreased information asymmetry between enterprises and the external capital market. Specifically, MOR promotes corporate information disclosure, which sends quality signals to investors, while simultaneously reinforcing corporate governance, which projects intention signals to capital markets. Notably, the effectiveness of MOR in alleviating financial constraints is more significant in capital-intensive and information-sensitive industries, as well as in central SOEs. These findings not only highlight the critical role of MOR in alleviating information asymmetry within SOEs, but also provide valuable insights for similar reforms aimed at advancing sustainable development of SOEs in other countries. [ABSTRACT FROM AUTHOR]

This study conducts an empirical analysis of the effect of economic policy uncertainty on executive compensation stickiness and the underlying mechanism using data on A-share main board listed companies from 2007 to 2021. This study finds that economic policy uncertainty positively relates to executive compensation stickiness. Tolerance, information, and supervision effects are important mechanisms of this impact. Further studies show that the effect of economic policy uncertainty on executive compensation stickiness is also significantly affected by political uncertainty, industry competition, nature of property rights, executive career concerns, and management power. [ABSTRACT FROM AUTHOR]

We develop a dynamic investment model with loan guarantees wherein insurers face information disadvantages and learn about borrower quality. Borrowers signal their qualities through investment timing, which is characterized by the investment threshold and elapsed time. We derive the conditions for separating or pooling equilibria. We show that the separating investment threshold is constant and determined mainly by the maximum threshold preventing mimicry. If project risk is higher (lower) than the market growth rate, the pooling investment threshold declines (increases) with elapsed time, and learning enhances (reduces) the willingness of high‐quality borrowers to wait. Learning alleviates adverse selection and reduces guarantee costs. These effects are more pronounced with a greater uncertainty of the insurer on borrower quality. We reveal dual effects of waiting. The worse the market prospect, the higher the value of waiting in pooling outcomes. Fee‐for‐guarantee swaps are superior to equity‐for‐guarantee swaps in environments with marked information asymmetry. [ABSTRACT FROM AUTHOR]

We analyze individual annuitization decisions at retirement in an environment with mandatory participation in a funded pension pillar and low average annuity price. Using administrative data from a large Swiss insurance company over the period 2011–2015, we document that, even in this favorable environment, only 42.7% of the retirees fully annuitize, against 45% taking full lump sum. We show that individual annuitization decisions strongly respond to financial incentives, measured by the Money Worth Ratio, and to the tax rates on annuity and lump‐sum payments. Lump‐sum payments are more common among French‐ and Italian‐speaking individuals. Using Survey of Health, Ageing and Retirement in Europe data, we show that French‐ and Italian‐speaking Swiss are more likely to leave inheritance—thus suggesting that preferences for bequests may affect annuitization decisions. Finally, we provide evidence of asymmetric information, using the unused observable test, to show that individuals living in high mortality municipalities are less likely to annuitize and more likely to cash out their pension wealth. [ABSTRACT FROM AUTHOR]

Previous research has debated about whether institutionalization could improve market efficiency. We develop a theoretical model under anticipated utility combined with probability weighting to study the impacts of institutionalization on market participation and market efficiency. The prudence attitude towards probability uncertainty leads to limited participation by investors. We find that institutionalization influences the market in two different ways. An increase in the total sector size of institutional investors facilitates price discovery but discourages market participation from naïve investors due to information asymmetry. However, when the top institution has high market power, this large institution trades strategically to induce more participation by naïve traders for risk-sharing at the cost of lowering information efficiency. [ABSTRACT FROM AUTHOR]

In this paper, we take a mechanism design approach to optimal assignment problems with asymmetrically informed buyers. In addition, the surplus generated by an assignment of a buyer to a seller may be adversely affected by externalities generated by other assignments. The problem is complicated by several factors. Buyers know their own valuations and externality costs but do not know this same information for other buyers. Buyers also receive private signals correlated with the state and, consequently, the implementation problem exhibits interdependent valuations. This precludes a naive application of the VCG mechanism and to overcome this interdependency problem, we construct a two-stage mechanism. In the first stage, we exploit correlation in the firms signals about the state to induce truthful reporting of observed signals. Given that buyers are honest in stage 1, we then use a VCG-like mechanism in stage 2 that induces honest reporting of valuation and externality functions. [ABSTRACT FROM AUTHOR]

We examine a supply chain with a single risk-averse manufacturer who purchases from suppliers and sells to consumers. Within this context, we focus on two channels that drive blockchain adoption by the manufacturer: manufacturer risk aversion and consumer information asymmetry. Regarding the first channel, blockchain enables efficient tracing of defective products so that the manufacturer can selectively recall defective products rather than conducting a full recall. This tracing ability reduces the risk involved in the manufacturer purchasing from multiple suppliers and thereby leads the manufacturer to endogenously diversify across suppliers when blockchain is adopted. The diversification enhances the manufacturer's welfare due to the manufacturer's risk aversion and thus drives the manufacturer to adopt blockchain. With regard to the second channel, blockchain stores details from the manufacturing process and reveals them to consumers, thereby ameliorating consumer information asymmetry. This reduction in information asymmetry improves consumer decision making that, in isolation, would enhance consumer welfare. However, the manufacturer responds by increasing the consumer price, thereby transferring potential consumer welfare gains to the manufacturer, and consequently serving as a second channel to drive blockchain adoption by the manufacturer. This paper was accepted by Lin William Cong, finance. [ABSTRACT FROM AUTHOR]

We study the used car market to understand how public enforcement that intends to increase information reliability affects disclosure, pricing, and liquidity. In 1986, federal rules mandated the creation of odometer records, and states enforced the law in a staggered fashion. We find that used car asking-price sensitivity to mileage increases by 32.6%, and mileage disclosure in classified ads increases by 23.4%. The findings suggest that strengthened law enforcement increases odometer credibility and enhances market participants' use of that information. We also show significant improvement in market outcomes: a 9.7% increase in asking price and a 13.4% increase in transaction speed, as reflected in the reduction in repeated ads. The price effect arises irrespective of whether ads contain mileage disclosure, whereas the liquidity effect arises mainly through disclosure. Our study shows public enforcement can benefit the market by improving information credibility. This paper was accepted by Suraj Srinivasan, accounting. Funding: The authors are grateful for financial support from the Olin Business School, Washington University in St. Louis. Supplemental Material: The data and online appendix are available at https://doi.org/10.1287/mnsc.2021.03758 [ABSTRACT FROM AUTHOR]

With the fast development of the digital economy, this study concentrates on the influence of digital economy development on income inequality in 97 countries. Three results are discovered. Firstly, the digital economy development contributes to improving income inequality, but this effect is weakened by the moderating effect of globalization globally. Secondly, digital economic development improves income inequality in lower‐middle‐income and low‐income countries; while the high‐income countries and upper‐middle‐income are not significant. Thirdly, the mechanisms reducing inequality are explored in terms of generating industries with low barriers to new entrants, reducing labor market information asymmetries, and promoting human capital equalization. [ABSTRACT FROM AUTHOR]

This study examines whether qualitative disclosure in tax footnotes affects the market valuation of tax avoidance activities. We predict that more disclosures in tax footnotes mitigate investors' concerns over the agency risk of managers engaging in potentially illegal tax avoidance and improve the transparency of firm performance, thus increasing firm valuation. Consistent with the prediction, we find that the market valuation of tax avoidance increases when firms' tax footnotes disclose more qualitative information related to their tax avoidance activities. We provide several tests to show mechanisms underlying our main findings and mitigate concerns about alternative explanations. Overall, our study suggests that the tax-related disclosures in tax footnotes are useful for investors assessing the value of tax avoidance. [ABSTRACT FROM AUTHOR]

We examine the effect of digital financial reporting on firm productivity. Information frictions represent a constraint that impedes efficient resource allocation and a major source of such frictions stems from the fact that firms' production functions (the conversion from inputs to outputs) are not observable to corporate outsiders. Digital communication of corporate financial data fundamentally changes how firm-specific information is disclosed, released, and disseminated by mitigating information asymmetry between corporate insiders and outsiders and facilitates the processing of such information. We use the staggered implementation of the SEC's Electronic Data Gathering and Analysis Retrieval (EDGAR) system to investigate the impact of digital financial reporting on firms' productivity. We show that the implementation of EDGAR results in an economically meaningful and statistically significant increase on firms' productivity, measured by total factor productivity (TFP). By focusing on the role of information dissemination in coordinating investments and production, our findings provide evidence on the real effects of "going digital" in corporate reporting. [ABSTRACT FROM AUTHOR]

This paper investigates how private information affects the joint determination of the payment method and the bid premium in M&As. The focus is on the uncertainty of the stand‐alone valuations of the firms involved in the transaction induced by their opacity. First, we model M&A negotiations as a signalling game with two‐sided private information and derive correlations between firm opacity and bid characteristics from equilibrium analysis. Then, we analyze a sample of U.S. deals, using an index based on market measures of adverse selection to quantify firm opacity. We find that the likelihood of stock offers and the bid premium increase with the target's opacity, while more opaque bidders are associated with fewer stock offers and smaller bid premiums. [ABSTRACT FROM AUTHOR]

Using a novel sample covering 3783 US public firms from 2007 to 2020, we examine how negative media coverage of firm‐level environmental, social, and governance (ESG) practices affects a firm's debt choice. We find that firms with higher ESG reputation risk rely more on public bond than bank loan. The social and governance components, in particular, matter. Moreover, firms that receive more negative news coverage display a higher propensity to issue new bonds as opposed to securing new bank debt. Overall, our study presents empirical evidence on the relation between firm ESG reputation risk and debt financing. [ABSTRACT FROM AUTHOR]

Research Summary: Pipeline hiring, repeatedly hiring individuals from the same external source organization, is a common recruiting practice. Yet, whether this pipeline approach improves incoming human capital quality or performance has limited empirical evidence. We argue that, in cooperative source‐hiring organization contexts, pipelines reduce the information asymmetries present in labor markets in a way that both attracts individuals with higher pre‐entry human capital and predicts postentry performance that surpasses pre‐entry expectations. In the context of particularly intense recruiting competition—American college football—we test and find support for these hypotheses. We also probe key boundary conditions, specifically discontinuity, geographic proximity, and factor market competition that highlight the limits of when the informational advantage is more or less salient. Managerial Summary: Organizations often recruit through pipelines ‐ repeatedly hiring new workers from the same sources, such as universities or supply partners. Despite how common pipeline hiring is, we have little evidence to suggest if this practice helps hire more capable workers. Using rich data from American college football, we find that players who are successfully recruited through a pipeline tend to be rated as higher potential before joining their college team and perform better, holding their potential constant, in their collegiate career than players who joined from a standalone source. We argue that these benefits come from information flows between recruiting organizations, alumni, and prospective workers. When conditions make these information flows less exclusive, more interrupted, or redundant, we find evidence that the typical pipeline recruiting benefits diminish. [ABSTRACT FROM AUTHOR]

This study investigates the real consequences of classification shifting by examining its effect on corporate investment efficiency. The underlying expectation is that the ways of reporting different profit items within the income statement should increase information asymmetry between managers and capital providers regarding the level of core and, so, more likely repeatable firm performance. We anticipate that classification shifting will aggravate agency problems and distort managers' own perceptions of their firms' sustainable profitability, resulting in imperfect investment-related information sets for them, ultimately leading to inefficient investing. We find that classification shifting strongly and significantly decreases the responsiveness of investment to growth opportunities and is, thus, associated with less efficient investing. After investigating the economic mechanisms explaining this association, our results are more pronounced when other information and agency problem-related factors that should protect against inefficient investing are weaker, and also for firms whose managers have fewer opportunities to learn from peers, which could alleviate potential classification shifting-related distortion effects on managerial perceptions. Our study provides evidence on the adverse real consequences of classification shifting, a form of earnings management without any reversing effects for bottom-line future performance, with reference to a very important firm-level outcome; namely, efficient investing. [ABSTRACT FROM AUTHOR]

As an important aspect of emergency management, materials transportation supports the emergency supply during the pandemic. However, its efficiency may be degraded due to the problem of information asymmetry, leading to confusion in materials management. This study analyses the feasibility of applying blockchain technology to the process of materials collaborative transportation. And the evolutionary game model is applied to analyse the stable evolutionary strategies of logistics enterprises. Finally, a system dynamics model is built for numerical simulations to verify the rationality of the game analysis results. In conclusion, long-term evolutionary stable equilibria of logistics enterprises are determined by multiple variables. To motivate logistics enterprises to participate in collaborative transportation, decision-making departments should focus on tax incentives, epidemic prevention subsidies, and platform construction. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Water Resources Journal / Revue Canadienne des Ressources Hydriques is the property of Taylor & Francis Ltd and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Less-informed investors face greater costs of processing earnings news into actionable information. Our findings suggest financial analysis on social media reduces less-informed investors' disclosure processing costs. We document an attenuated spike in earnings announcement (EA) information asymmetry for quarters containing more financial analysis on social media in the weeks prior to the EA. Cross-sectional evidence suggests this finding is stronger when coverage from traditional intermediaries is lower, for financial analyses written by more credible authors, and for financial analyses that are more likely relevant to evaluating the EA. Further evidence suggests retail trades, but not institutional trades, at EAs are significantly more profitable in quarters with greater financial analysis on social media, consistent with financial analysis on social media benefitting traders who are otherwise less-informed. Overall, our evidence suggests that financial analysis on social media plays an important role in aiding less-informed investors by helping them better process EA news. [ABSTRACT FROM AUTHOR]

We employ a sharp regression discontinuity design to identify the causal effects of investor-base disclosure (IB DISCLOSE) on funding outcomes and entrepreneurship success. Since February 2016, Kickstarter has disclosed IB information, namely, backer statistics including geographic locations and previous funding experience of the backers, once the number of backers for a project reaches ten. Exploiting this discontinuity, we show the disclosure increases the likelihood of funding success by 10 percent and the amount of funds pledged by 13 percent. The effect is more pronounced when the project quality is high and for projects with less credible creators, high ex ante uncertainty, high information asymmetry between creators and backers, and high financial costs to backers. We also find IB DISCLOSE increases the likelihood of product delivery. Our study highlights the importance of platform-provided disclosure in improving the efficiency of capital allocation. [ABSTRACT FROM AUTHOR]

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Considerable human judgment is involved in demand forecasting. When managers judge demands under uncertainty, they inevitably use signals to update their demand information. These signals are seldom perfect; hence, managers hold behavioral bias about the signal fidelity, that is, over‐ or under‐estimating the signal fidelity. This article models managers' behavioral bias about signal fidelity in Bayesian demand forecasting and explores its impact on competitive firms. We find that no matter whether the competitor's manager is unbiased or biased, a firm can benefit from its manager's slight overestimation, but the competitor can benefit from the firm's manager's underestimation. However, when one firm's manager is biased, improving the signal fidelity may not constantly improve firms' profits, revealing the potential risk of behavioral bias on the efficiency of the forecasting systems. We further consider the diversity of biased managers and the information asymmetry regarding the bias. Except that the benefits of behavioral bias exist, we additionally find that managers' heterogeneous behavioral bias can form a hedge effect and bring a win‐win situation. Under asymmetric information, managers' inference bias on the competitor's type may benefit firms by easing the negative impact of managers' behavioral bias about signal fidelity. We finally analyze the social welfare and consumer surplus, check the robustness of the main results and deliver additional findings by considering n$$ n $$ competing firms, different signal fidelity measures, and the signal‐dependent behavioral bias. [ABSTRACT FROM AUTHOR]

This paper explores the role of asymmetric information as a cause of Russia's 2022 invasion of Ukraine. In the classic bargaining model of war, negotiations break down when one side privately believes that it is sufficiently more likely perform better in battle than the other side expects. There is strong evidence that this mechanism was at play on the eve of the invasion. Chronic problems with Russian civil–military institutions created both an army unprepared for the conflict and a lack of awareness of this within the Kremlin. In contrast, Ukraine had reports of these problems and also had private information regarding its own resolve. Consequently, the Kremlin's demands on the eve of the conflict exceeded what Ukraine was willing to concede. Russia invaded as a result. [ABSTRACT FROM AUTHOR]

We present a competitive matching model in which indivisible assets are reallocated among many traders. The model has three features: (i) traders are heterogeneous in their prospects as buyers, sellers, and also in their stand-alone values with endowed assets, (ii) buyers do not know true values of assets sold, (iii) sellers can disclose values of their assets by paying fees. Despite its complexity, the model admits closed-form solutions. Two main results emerge. First, if full Disclosure is facilitated by a monopolist, it captures a large fraction of the welfare gains. Second, adding the option of minimum disclosure, when combined with a cap regulation on price-dependent fees for full disclosure, significantly weakens the monopolist's power. [ABSTRACT FROM AUTHOR]

Predicting future climate requires the integration of knowledge and expertise from a wide range of disciplines. Predictions must account for climate-change mitigation policies which may depend on climate predictions. This interdependency, or "circularity", means that climate predictions must be conditioned on emissions of greenhouse gases (GHGs). Long-range forecasts also suffer from information asymmetry because users cannot use track records to judge the skill of providers. The problems of aggregation, circularity, and information asymmetry can be addressed using prediction markets with joint-outcome spaces, allowing simultaneous forecasts of GHG concentrations and temperature. The viability of prediction markets with highly granular, joint-outcome spaces was tested with markets for monthly UK rainfall and temperature. The experiments demonstrate these markets can aggregate the judgments of experts with relevant expertise, and suggest similarly structured markets, with longer horizons, could provide a mechanism to produce credible forecasts of climate-related risks for policy making, planning, and risk disclosure. [ABSTRACT FROM AUTHOR]