Soft Information and the Stewardship Value of Accounting Disclosure

In light of IASB’s statement to drop stewardship as a separate objective of financial accounting and the ongoing debate about increasing the disclosure of soft information, we investigate the economic consequences of publicly reported soft information from a stewardship perspective. In an LEN model we include market price as a performance measure and investigate whether the principal benefits from disclosing additional information. While the principal can only use contractible performance measures in the contract with the agent, capital market participants can only use disclosed information when pricing firm value. We find that the disclosure of information can decrease the principal’s expected net profit. This result follows from either a noisier or a less congruent market price as a consequence of disclosing additional information. Thus, we present a rationale for partial disclosure in the absence of proprietary costs or the uncertainty of information endowment

Taste, Information, and Asset Prices: Implications for the Valuation of CSR

Firms often undertake activities that do not necessarily increase cash flows (e.g., costly investments in corporate social responsibility or CSR), and some investors value these non cash activities (i.e., they have a “taste” for these activities). We develop a model to capture this phenomenon and focus on the asset-pricing implications of differences in investors’ tastes for firms’ activities and outputs. Our model shows that, first, investor taste differences provide a basis for investor clientele effects that are endogenously determined by the shares demanded by different types of investors. Second, because the market must clear at one price, investors’ demands are influenced by all dimensions of firm output even if their preferences are only over some dimensions. Third, information releases cause trading volume, even when all investors have the same information. Fourth, investor taste provides a rationale for corporate spin-offs that help firms better target their shareholder bases. Finally, individual social responsibility can lead to corporate social responsibility when managers care about stock price because price reacts to investments in CSR activities

Bias and the Commitment to Disclosure

This paper studies the propensity of firms to commit to disclose information that is subsequently biased, in the presence of other firms also issuing potentially biased information. An important aspect of such an analysis is the fact that firms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we find that as more firms issue reports or as the correlation across firms’ cash flows increases, the firm biases its report less. However, when we treat firms’ disclosure choices as endogenous, we show that the number of firms that commit to disclose decreases as the correlation across these cash flows increases, and this, in turn, offsets the direct effect of the correlation on bias

Lobbying and Uniform Disclosure Regulation

This study examines the costs and benefits of uniform accounting regulation in the presence of heterogeneous firms that can lobby the regulator. A commitment to uniform regulation reduces economic distortions caused by lobbying by creating a free-rider problem between lobbying firms at the cost of forcing the same treatment on heterogeneous firms. Resolving this tradeoff, an institutional commitment to uniformity is socially desirable when firms are sufficiently homogeneous or the costs of lobbying to society are large. We show that the regulatory intensity for a given firm can be increasing or decreasing in the degree of uniformity, even though uniformity always reduces lobbying. Our analysis sheds light on the determinants of standard-setting institutions and their effects on corporate governance and lobbying efforts

Multistage Capital Budgeting With Delayed Consumption of Slack

Capital budgeting frequently involves multiple stages at which firms can continue or abandon ongoing projects. In this paper, we study a project requiring two stages of investment. Failure to fund Stage 1 of the investment precludes investment in Stage 2, whereas failure to fund Stage 2 results in early termination. In contrast to the existing literature, we assume that the firm can limit the manager\u27s informational rents with the early termination of the project. In this setting, we find that the firm optimally commits to a capital allocation scheme whereby it forgoes positive net present value (NPV) projects at Stage 1 (capital rationing), whereas at Stage 2, depending on the manager\u27s previous report, it sometimes implements projects with a negative continuation NPV but in other situations forgoes implementing projects with positive continuation NPVs

Essays on accounting disclosure and the use of stock price in incentive contracts

This thesis studies the interplay of changes in accounting disclosure and the solution to the stewardship problem. I develop theoretical models that try to explain the different decisions managers, current shareholders, and potential shareholders face. The models incorporate different interdependent aspects of the decision to disclose information, the design of contracts between current shareholders and the corporation’s management, and the aggregation of information into price. My results indicate, for example, that the different interests current and potential shareholders have leads to far reaching impacts of the disclosure of accounting information. The simple statement that more information is always better does not hold and changes of mandatory disclosure can lead to losses for different types of current investors as well as for potential investors

Comparing Palliation Strategies for Single-ventricle Anatomy With Transposed Great Arteries and Systemic Outflow Obstruction

OBJECTIVE: Patients with complex single-ventricle anatomy with transposed great arteries and systemic outflow obstruction (SV-TGA-SOO) undergo varied initial palliation with ultimate goal of Fontan circulation. We examine a longitudinal experience with multiple techniques, including the largest published cohort following palliative arterial switch operation (pASO), to describe outcomes and decision-making factors. METHODS: Neonates with SV-TGA-SOO who underwent initial surgical palliation from 1995 to 2022 at a single institution were retrospectively reviewed. RESULTS: In total, 71 neonates with SV-TGA-SOO underwent index surgical palliation at a median age of 7 days (interquartile range, 6-10) by pASO (n = 23), pulmonary artery band (PAB) with or without arch repair (n = 25), or modified Norwood with Damus-Kaye-Stansel aortopulmonary amalgamation (n = 23). Single-ventricle pathology included double-inlet left ventricle (n = 37, 52%), tricuspid atresia (n = 27, 38%), and others (n = 7, 10%). All mortalities (n = 5, 7%) occurred in the first interstage period after PAB (n = 3) and Norwood (n = 2). Subaortic obstruction in the PAB group was addressed by operative resection (n = 10 total, 7 at index operation) and/or delayed aortopulmonary amalgamation (n = 13, 52%). Two patients with pASO (9%) had early postoperative coronary complications, 1 requiring operative revision. Median follow-up for survivors was 10.4 years (interquartile range, 4.5-16.6 years). Comparing patients by their initial palliation type, notable significant differences included size of bulboventricular foramen, weight at initial operation, operation duration, postoperative length of stay, time to second-stage palliation, multiple pulmonary artery reinterventions, and left pulmonary artery interventions. There were no significant differences in overall survival, Fontan completion, reintervention-free survival in the first interstage period, pulmonary artery reintervention-free survival, long-term systemic valve competency, or ventricular dysfunction. CONCLUSIONS: Excellent mid- to long-term outcomes are achievable following neonatal palliation for SV-TGA-SOO via pASO, PAB, and modified Norwood, with comparable survival and Fontan completion. Initial palliation strategy should be individualized to optimize anatomy and physiology for successful Fontan by ensuring an unobstructed subaortic pathway and accessible pulmonary arteries. pASO is a reasonable strategy to consider for these heterogeneous lesions

Use of Berlin EXCOR Cannulas in Both Venovenous and Venoarterial Central Extracorporeal Membrane Oxygenation Configurations Overcomes the Problem of Cannula Instability While Bridging Infants and Young Children to Lung Transplant

OBJECTIVES: Infants and young children awaiting lung transplantation present challenges that often preclude successful extracorporeal membrane oxygenation support as a bridge to transplantation. Instability of neck cannulas often results in the need for intubation, mechanical ventilation, and muscle relaxation creating a worse transplant candidate. With the use of Berlin Heart EXCOR cannulas (Berlin Heart, Inc) in both venoarterial and venovenous central cannulation configurations, 5 pediatric patients were successfully bridged to lung transplant. METHODS: We performed a single-center retrospective case review of central extracorporeal membrane oxygenation cannulation used as a bridge to lung transplantation cases performed at Texas Children\u27s Hospital between 2019 and 2021. RESULTS: Six patients, 2 with pulmonary veno-occlusive disease (15-month-old male and 8-month-old male), 1 with ABCA3 mutation (2-month-old female), 1 with surfactant protein B deficiency (2-month-old female), 1 with pulmonary arterial hypertension in the setting of D-transposition of the great arteries after repair as a neonate (13-year-old male), and 1 with cystic fibrosis and end-stage lung disease, were supported for a median of 56.3 days on extracorporeal membrane oxygenation while awaiting transplantation. All patients were extubated after initiation of extracorporeal membrane oxygenation, participating in rehabilitation until transplant. No complications due to central cannulation and use of the Berlin Heart EXCOR cannulas were observed. One patient with cystic fibrosis developed fungal mediastinitis and osteomyelitis resulting in discontinuation of mechanical support and death. CONCLUSIONS: Novel use of Berlin Heart EXCOR cannulas for central cannulation eliminates the problem of cannula instability allowing extubation, rehabilitation, and bridge to lung transplant for infants and young children