We examine whether changes in national accounting methods affect equity investors’ perceptions of economic conditions. Our analysis focuses on the 2013 revision in the National Income and Product Accounts that changed the accounting treatment of intellectual property products (IPP) from expensing to capitalizing. We find that equity investors incorporate IPP information into their reactions to industry-level GDP announcements only after the shift to IPP capitalization. We also find that investors adjust their valuation of research and development data from the National Science Foundation (NSF) after IPP capitalization, despite the data being publicly available throughout our sample period. Our findings suggest that national accounting methods influence how investors interpret and react to macroeconomic information.
Revising for third-round review at the Journal of Accounting and Economics
In November 2023, the FASB issued a new segment reporting standard to improve segment disclosures. The new standard features a significant expense principle which requires firms to disclose any expenses meeting a set of criteria that afford firms substantial discretion. We examine the extent to which this principle resulted in more useful segment expense information. We find that the majority of firms disclose additional significant expenses; the amount of income-related segment information increases by approximately 61 percent. However, firms frequently make other concurrent changes to segment reporting, the additional significant expenses that firms provide are often redundant with other disclosures, and the comparability of segment expense information within industries generally declines. We find no change in equity analysts’ earnings forecast accuracy after adoption of the new standard, even when the additional expense information is most likely to be useful. Overall, our evidence suggests that firms comply with the standard but largely exercise discretion in doing so, limiting the usefulness of what is ultimately disclosed.
Collecting feedback and revising for journal submission
Before 2023, data breaches were subject only to the SEC’s general requirement to disclose material information. The SEC’s 2023 cybersecurity disclosure rule introduced a targeted requirement, Form 8-K Item 1.05, which requires firms to report key information about breaches within four business days of determining they are material. I examine how this requirement affects the informativeness of data breach disclosures. Using disclosures from 2021 to 2025, I find that market reactions to 8-K disclosures become significantly more negative after the rule’s compliance date, relative to pre-rule 8-Ks and to disclosures through other channels. The stronger reaction does not reverse, consistent with greater informativeness rather than overreaction. Further, the primary improvement in post-rule 8-Ks is more investor-oriented content, not changes in timeliness or the likelihood of disclosure. Taken together, my findings suggest that a targeted requirement elicits more informative disclosure than a general materiality standard, informing the debate over rescinding Item 1.05 and the SEC’s broader review of its disclosure requirements.
Committee: Elizabeth Blankespoor (Chair), Jonathan Karpoff, Dawn Matsumoto, Sarah McVay
Data analysis stage
Proposal with preliminary results