ABSTRACT Despite the growing use of subjective performance incentives used in executive bonuses, empirical evidence on their effectiveness remains inconclusive. This study explores three aspects of subjective metrics in bonus plan design: their prevalence, the goals they target, and their impact on managerial behavior and firm outcomes. First, I document 53.8 percent of CEO bonus plans include at least one subjective performance measure, and among these plans, an average of 38.9 percent of total bonus weight is allocated to these measures. Using machine learning, I show subjective metrics target incentives related to employees, firm culture, and executive performance. Second, using the Tax Cuts and Jobs Act as a quasi-exogenous shock to contract design, I find firms increase the number and weight of subjective metrics by 22.9 percent and 10.4 percent, respectively. Finally, I find the increasing prevalence of subjective performance measures positively influences CEO effort, corporate culture, and innovation. Data Availability: The data used in this study are from public sources and available upon request. JEL Classifications: M12; J33; G38; M41; H2.

ABSTRACT I examine how Accounting Standards Codification (ASC) 606 affects R&D alliance formations and innovation in the drug development industry. ASC 606 alters revenue recognition timing and increases disclosure requirements. I document that firms dependent on R&D alliance revenues accelerate revenue recognition and expand revenue-related disclosures following ASC 606 adoption. These concurrent changes reduce information asymmetry, both between firms and between managers and investors, but only when increased disclosure accompanies accelerated recognition. Consistent with these net reductions in information asymmetry, affected firms raise more equity capital and increase R&D investment. Notably, these firms, which historically acted as technology providers (principals), form more R&D alliances as technology acquirers (partners). Consequently, they exhibit higher innovation output, measured by new patents and drug candidates. This study identifies a specific mechanism through which accounting standards can stimulate innovation: reduced information asymmetry that facilitates strategic R&D alliance formation.

ABSTRACT We examine the implications of GAAP earnings forecast quality for accounting research. Using a tax law change with an estimable and material GAAP earnings impact, we find that analysts’ GAAP forecasts generally fail to incorporate this impact, whereas investors respond promptly, suggesting that GAAP forecasts omit earnings information deemed relevant by investors and are of low quality. Analyzing quarterly GAAP forecasts from 2004–2019 and classifying GAAP forecasts that equal their street counterparts when GAAP and street actuals differ as low quality, we again find widespread low GAAP forecast quality. Low quality GAAP forecasts affect research inferences: they dampen GAAP earnings response coefficient (ERC) estimates, reduce the explanatory power of GAAP surprises for returns, affect inferences regarding market rewards for meeting-or-beating via exclusions, and understate the extent that GAAP forecasts incorporate exclusion components. We propose two strategies to mitigate the adverse effects of low quality GAAP forecasts on research inferences. Data Availability: Data are from publicly available sources as identified within the manuscript. JEL Classifications: G14; M40; M41.

ABSTRACT We study how disclosures affect banks’ leverage and risk. Banks screen borrowers and originate loans, partially financed using insured deposits. The possibility to sell loans before they mature incentivizes banks to lever up using uninsured short-term debt to dilute insured deposits. If markets are opaque, good loans trade at a discount, which limits banks’ use of short-term debt. If markets are transparent, prices compound information contained in disclosures, which leads banks to issue more short-term debt to further dilute insured deposits. We identify conditions under which the increase in leverage caused by disclosures reduces banks’ screening incentives. Our analysis has important implications for prudential regulation, including minimum regulatory capital requirements and leverage-based deposit insurance premiums. JEL Classifications: D80; G21; G14.

ABSTRACT Revenue-sharing contracts allow firms that are distant from their target markets to leverage sellers' local expertise. Although these contracts align incentives in operational decisions, they also introduce the potential for sellers to underreport revenues. We analyze film-level box office data from 7,309 Chinese cinemas and find that cinemas report significantly lower revenues for foreign films than for comparable domestic films, consistent with foreign producers being less able to monitor reported revenues due to geographic distance. The underreporting of foreign films is lower in cities with widespread mobile payments, in multi-unit cinemas, and when foreign films have more predictable revenues, suggesting institutional factors that increase detection likelihood can mitigate underreporting. Further tests indicate the lower reported box office revenues of foreign films is not due to government intervention. Our findings provide novel evidence of product-level misreporting under revenue-sharing contracts and offer insights on mitigating these risks in international markets. Data availability: Data are available via the sources specified in the paper. The authors greatly appreciate the data supplied by EntGroup (http://english.entgroup.com.cn/enbase.html) but are not able to share the data based on the agreement with Entgroup. JEL Classifications: F00; L82; M40.

ABSTRACT In response to growing economic and environmental concerns, companies in a range of industries seek to repurpose products (assets) that retain functional capacity beyond their initial first life. This paper examines a generic valuation model for used capacity assets that can either be recycled immediately or repurposed for a second life application. We apply our model framework to lithium-ion batteries retired from electric vehicles, as these assets typically retain substantial energy storage capacity at the end of their first life. Our analysis focuses on two battery chemistries: lithium-iron-phosphate (LFP) and nickel-cobalt-X (NCX) based. We project their future fair market values in the United States and China. Our findings indicate that repurposing LFP batteries will be economically viable in both countries for the coming decade. In contrast, for most NCX batteries immediate recycling will soon be preferable due to their more valuable raw material content and shorter usable lives.

ABSTRACT This study examines the impact of ex ante litigation risk on auditor hiring and retention. Using employee data from LinkedIn, we find ex ante accounting-related litigation risk is associated with fewer auditors joining and more auditors leaving an audit office, whereas we fail to find any impact of nonaccounting litigation risk. Moreover, ex ante accounting-related litigation risk is associated with audit firms' hiring less experienced and less educated auditors, suggesting ex ante litigation risk impacts the quality of auditing hires. We also find that the impact of ex ante litigation risk is concentrated in audit offices with more outside job opportunities and in those that are more susceptible to changes in litigation risk. Our results highlight the impact of ex ante litigation risk on audit labor supply, providing insights concerning the unintended consequences of increasing auditors' legal liability. Data Availability: All data used in this study are based on publicly available information obtained through the services or authors cited in the manuscript. JEL Classifications: M42.

ABSTRACT Firms are facing increasing pressure to provide information about their Corporate Social Responsibility (CSR) commitment. Firms however differ in the quality of how they communicate CSR-related efforts to stakeholders as well as in the intensity of their CSR contracting. We examine the relationship between CSR disclosures and contracting and argue that the designs of the two practices are complements in signaling a CSR commitment. Using hand-collected data to capture disclosure quality of CSR reports and intensity of CSR contracting (i.e., scope, importance, and degree to which CSR metrics are incorporated) for S&P 500 firms, we show that firms indeed align the design choices of the two practices. In addition, firms using both practices intensively are associated with a stronger CSR commitment and more credible CSR disclosures. Finally, we document that firms that face higher credibility concerns show stronger complementarity between the design of these two practices. Data Availability: All data are available from public sources mentioned in the text. JEL Classifications: M14; M40.

ABSTRACT Accounting misstatements are often detected with substantial delays, leading to “look-ahead bias” in model predictions if the detection lag is not considered. Moreover, the misstatement data-generating process is evolving due to regulatory regime shifts, further complicating the evaluation of model predictions. We design an approach that accounts for detection lags and continuously updates models to adapt to the changing data-generating process. By comparing with the conventional approach that ignores detection lags, we show that the look-ahead bias can substantially inflate prediction performance. We also demonstrate that although leaving a temporal gap between training and test samples can mitigate the look-ahead bias, it sacrifices the model’s predictive power by disconnecting the dynamic data-generating process between training and test periods. We further implement a trading strategy to evaluate the practical utility of the continuously updating approach. Our study presents a new conceptual lens for understanding and evaluating misstatement prediction models. Data Availability: Data are available from the public sources identified in the study. JEL Classifications: C53; G32; G38; M41.

ABSTRACT This essay closely follows my American Accounting Association (AAA) Presidential Scholar Lecture delivered at the Annual Meeting in Chicago on August 5, 2025. In this essay, I discuss my approach to research: developing insights of various types, sharing those insights with diverse audiences, and trying to have a range of different impacts. Along the way, I discuss two “elephants in the room”: (1) our very cautious and conservative research culture, which constrains the insights we can offer; and (2) the emergence of a “Top 6 journals only” decision rule, which constrains the audiences we can reach. I hope that this essay will inspire readers to expand their insights, audiences, and impact, thereby increasing the enjoyment that they derive from an academic accounting career. I also hope that we can work together to address the two elephants in the room.