Research

“Mispricing and the Demand for Fundamental Information” (JMP)

Summary: I provide evidence that mispricing affects investors’ consumption of accounting information. Using quasi-exogenous variation in security prices due to forced mutual fund sales, I find that mispricing increases the consumption of accounting reports in subsequent periods, especially among institutional investors. I also find that information consumption following mispricing predicts both the extent and speed at which prices return to pre-shock levels, as well as price informativeness around future earnings events. Taken together, my findings suggest that mutual fund flow-induced mispricing shapes investors’ information consumption and that this consumption plays a role in price discovery for mispriced firms, highlighting the usefulness of accounting information following nonfundamental shocks to prices.

Dissertation Committee: Professors Eric So (co-chair), Joseph Weber (co-chair), and Rodrigo Verdi

Available upon request

“Costly Contract Renegotiation: The Role of Accounting Disclosures” with Meng Li, Joseph Weber, Jieying Zhang

Summary: We examine whether required disclosure of covenant violations affects the timing and extent to which debt contracts are renegotiated. Consistent with firms seeking to avoid disclosing a debt contract violation, we find that firms are three times more likely to agree to an amendment in the week before the end of the fiscal quarter. Moreover, we find that these renegotiations shift bargaining power to the lender such that they extract concessions from the borrower.

“The Information Content of Discretionary Disaggregation”

Summary: I analyze firms’ decisions to disaggregate financial statement line items into their component parts and whether this is related to firm performance. I find that the overall level of discretionary disaggregation is positively associated with both current and future performance, but that changes in discretionary disaggregation are negatively associated with performance. Investors underreact to the information content of discretionary disaggregation, resulting in predictable return patterns. Together, these findings provide preliminary evidence consistent with the idea that firms manage the information environment using disaggregation and that this is not easily unpacked by investors.