Topic areas: Cryptocurrency and blockchain, Voluntary disclosure, Behavioral economics, Cybersecurity

When Analysts Meet Crypto: Evidence from Corporate Disclosure

Job Market Paper

Committee: Isabel Yanyan Wang (chair), Musaib Ashraf, John Xuefeng Jiang, Ranjani Krishnan, and Jeffrey Wooldridge

Presented at Michigan State University

"Despite the surge of public interest in cryptocurrencies, the accounting standard setting is lagging behind. My findings have policy implications regarding the FASB’s current project on Accounting for and Disclosure of Crypto Assets."

Abstract: This study investigates whether financial analysts respond to disclosure about firms’ exposure to cryptocurrency. Applying textual analysis to 8-K filings, I find that the intensity of firms’ crypto-related disclosure is associated with more favorable target price revisions by analysts, but not near-term earnings forecast revisions. These findings imply that analysts perceive firms’ crypto exposure to have a long-term benefit on firm value, but no immediate impact on operational performance. My cross-sectional analyses further show that analyst target price revisions contain more optimism when: (1) firms’ crypto disclosure is related to corporate governance, and (2) firms’ stock returns comove more closely with the cryptocurrency market returns. Finally, I find that analysts’ target price revisions appear to enhance the stock market’s positive reaction to firms’ crypto-related disclosure around the 8-K filing dates, consistent with analysts producing useful research output that influences asset pricing.

Memory, Retrieved Context, and Biases in Management Earnings Forecasts

With David Koo and Isabel Yanyan Wang

Under revision for resubmission, Management Science

Presented at the 2022 Midwest Accounting Research Conference, 2022 AAA annual meeting, 2022 Washington Area Research Symposium, Boston College, Renmin University of China, Tsinghua University, Purdue University

"We shed light on how memory affects managers’ corporate decision-making."

Abstract: Building on theories in psychology and human memory research, this study examines whether memory retrieval affects the biases in management earnings forecasts. Specifically, we focus on the changes in the bias in management earnings forecasts when the 2008 financial crisis triggered managers’ memory retrieval related to economic recessions. Using a sample of annual earnings forecasts issued for fiscal years ending between 2002-2018, we find that CEOs who accumulate more memories of past recessions and those who observe higher unemployment at their headquarter locations during the financial crisis embedded more pessimism in their earnings forecasts. Further analyses show that the increased pessimism can take up to five years to return to the pre-crisis level, suggesting that learning may play a role in changes in forecast bias. This paper enhances our understanding of how memory affects managers’ corporate decision-making.

The Impact of Burning the Midnight Oil: Evidence from Analyst Herding

With Tom Cong Shang and Isabel Yanyan Wang

Presented at Michigan State University

"Our study speaks to the recent discussion in the media about the impact of burnout on financial analysts in the investment banking profession."

Abstract: We examine whether burnout affects financial analysts’ decision-making. Anecdotal and survey evidence indicates that burnout is increasingly associated with declining physical and mental health in financial analysts, but empirical evidence on the impact of burnout is scarce because analyst burnout is difficult to observe. Using a unique setting to identify a point in time when analysts are more prone to burnout, we find that analysts exhibit a stronger herding tendency when they suffer from burnout. Further analyses show that this herding tendency is more pronounced among analysts with decision fatigue or more firms to follow and analysts who work for larger brokerage houses.

Peer Firm Data Breach and the Innovation of Non-Breached Firms

With Musaib Ashraf and John Xuefeng Jiang

Work in progress

The Role of Data Providers in Information Transfers

With James Anderson and Matthew DeAngelis

Work in progress