Bin Li

Does a change in financial reporting frequency affect managerial decisions in the healthcare sector? The answer is yes, and notably, such decisions can have detrimental societal outcomes. Using a regulatory change that required Massachusetts hospitals to move from annual to quarterly financial reporting, we document that more frequent reporting shifts managerial attention and resource allocation toward near-term financial outcomes. Following the mandate, hospitals earn higher profitability and improve operating efficiency. Further analysis reveals that these outcomes stem from scaling back labor and capital investment, rather than from improved revenues. More importantly, these changes are accompanied by a deterioration in patient care quality, reflected in higher patient mortality rates, increased hospital readmissions, and lower patient satisfaction. Our paper highlights a negative externality associated with a well-intentioned change in the frequency of financial statement reporting.

Does audit assurance mitigate stock market crashes? We find this is not the case, contrary to conventional wisdom. Building on confirmation bias theory, we predict that audited financial statements may give investors a false sense of security regarding the firm’s fundamental value, potentially amplifying bubbles and crashes. To test this prediction, we compare stock price changes of firms with and without external audits around the Wall Street Crash of 1929––an important event that motivated the audit mandate in the Securities Exchange Act of 1934. Diverging from prevailing belief, we find that audited firms experienced more severe price declines than unaudited firms. Furthermore, we document larger bubbles for audited firms relative to unaudited firms, as reflected in higher valuation multiples, corroborating the confirmation bias view. Our evidence has important implications for audit regulation in many emerging disclosure areas, such as crowdfunding, cryptocurrencies, and ESG disclosures.

How important is equal access to mandatory disclosures? We exploit the postal strike of 1970 that caused a delay in the delivery of annual reports via mail. This strike created unequal access because certain investors (e.g., institutions) had both the incentives and ability to obtain the annual reports by other means. Theory predicts that, when differential access exists, adverse selection problems intensify, causing a decline in stock trading. Our findings support this prediction: stock trading volume decreased by approximately 28% for firms unable to deliver the annual reports to shareholders during the strike, and this trading decline gradually dissipated afterward. Further tests confirm adverse selection as the primary mechanism. Overall, our paper underscores the importance of equal access to annual reports—a key mandated disclosure—and demonstrates the value of these reports to shareholders, as evidenced by their reluctance to trade absent this information.

This paper investigates the role of corporate financial reports in the Environmental Protection Agency's (EPA) regulatory activities. By tracking the EPA's direct retrieval of SEC filings, we identify three key findings. First, the EPA retrieves a large volume of financial reports, especially from firms in high‐pollution industries. Second, the EPA is more likely to access financial reports during enforcement investigations and significant rule proposals, but less so during compliance monitoring, with patterns varying predictably across firms. Third, the EPA's reliance on financial reports is potentially driven by its demand for information on firm liquidity, solvency, and profitability. Overall, our study highlights the usefulness of financial reports for the EPA as an environmental regulator.

This paper evaluates the real effects of the new lease standard, ASC 842, on firms’ investment and operational outcomes. Using a sample of airline companies, we find that, subsequent to the promulgation of ASC 842 (2016–2018), public airlines reduce operating lease usage by about seven to ten percentage points relative to private airlines. The reduced lease usage is replaced by increased ownership, suggesting an equilibrium shift in firms’ investment due to changes in the cost-benefit tradeoffs associated with the operating lease classification. We also find evidence that the decline in lease usage hinders public airlines’ operational flexibility, as we observe more idle capacity in flights post-ASC 842. Facing excess capacity, public airlines seem to deploy their aircraft to shorter flying routes, raising the possibility of more wear and tear on the fleet. Overall, our evidence suggests that the new lease standard has intended and unintended real effects. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M48; D22; D24; D25; E22; G38.

This study investigates the role of corporate financial reports in the Environmental Protection Agency's (EPA) regulatory process. Empirically, we measure the EPA's utilization of financial reports by tracking its direct retrieval of SEC filings, leading to three key findings. First, the EPA accesses a large volume of financial reports during our sample period. Second, these financial reports serve the EPA across three distinct regulatory purposes: enforcement, monitoring, and rulemaking. Notably, the utilization of financial reports is most pronounced during enforcement investigations, compliance inspections, and significant rule proposals. Third, we find that the EPA's reliance on financial reports is influenced by its specific information demand related to firm liquidity, solvency, and profitability. Our study is the first to empirically link firm-level accounting information to environmental regulatory activities.

How does policy uncertainty influence resource extraction and its environmental consequences? We examine this question by exploiting the 2020 Supreme Court decision in McGirt v. Oklahoma, which substantially increased policy uncertainty in eastern Oklahoma while leaving the western part of the state unaffected. Using a difference-in-differences design, we find that drilling activity and oil production rose substantially following the ruling, suggesting that firms accelerated extraction under heightened uncertainty. High-resolution satellite data reveal significant environmental costs: both methane and carbon dioxide emissions increased, as did emission intensity, indicating that environmental performance deteriorated even after accounting for higher output. Despite this surge in production, local residents obtained only modest economic benefits in employment and per-capita income, while public health outcomes worsened. Our findings suggest that policy uncertainty can motivate firms to prioritize short-term economic gains over environmental performance.

We study carbon-reduction pledges of publicly traded U.S. oil exploration and production (E&P) companies. Of the 69 firms in the sample, 18 have committed to net-zero carbon targets, 14 have announced significant emissions cuts, whereas the remaining 37 firms have not announced any formal commitment to reduce emissions. We find that a firm’s energy production and ownership by BlackRock is positively associated with its decision to announce a net-zero pledge or significant emission cuts. E&P firms are likely to announce such commitments after Engine No. 1 proposed its slate of directors for Exxon’s board. The stock market reacts more negatively to net-zero pledges relative to emission-reduction pledges on average. However, the market reaction is related to the quality and credibility of these pledges. In particular, we find that the negative market reaction to net-zero pledges is mainly driven by firms with post-2030 target years relative to firms that commit to achieving net zero by 2030. We also find that the market reacts more negatively to net-zero pledges when the firm does not show the strength of its commitment via the presence of a board-level committee to monitor the company’s progress toward its emission goals or when the top management’s pay is not linked to specific emission reduction goals. This paper was accepted by Ranjani Krishnan, accounting. Funding: The research was funded by Columbia Business School. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4765 .

Could real‐time big data help unravel material firm events? How would it compare with firm disclosure and traditional media in terms of timeliness and completeness? Could big data provide incremental value‐relevant information for investors? With these questions in mind, we use a novel data set of cell phone “pings” (i.e., geolocation signals from mobile devices) to track production disruptions (outages)––material events for U.S. oil refineries. We first validate the construct by examining the effects of outages on local gas prices and firms’ accounting performance. Our main analyses show that (1) refining firms do not voluntarily disclose refinery outages identified by cell phone pings; (2) traditional media cover only a small portion of ping‐based outages; (3) the stock market finds ping‐based outages to be value relevant but incorporates the information with delay. Further analysis suggests that given the incomplete media coverage and lack of firm disclosure, investors appear to learn the financial impact of such outages through subsequent earnings announcements. Our evidence has implications for regulators such as the U.S. Energy Information Administration and the Securities and Exchange Commission as they continue to evaluate both the compliance and usefulness of disclosures for material firm events such as production disruptions.