11.00h – 12-00h, Financing Diversity as an Enabler of Strategic Changes in SMEs, Tristan De Blick, University of Antwerp.
12.00h – 13.00h, Divide and Conquer: Investor Type Diversity in Entrepreneurial Ventures, Jeroen Verbouw, University of Ghent.
Financing Diversity as an Enabler of Strategic Changes in SMEs, Tristan De Blick (University of Antwerp)
It is crucial for long-term firm survival and performance that SMEs are able to introduce strategic changes in response to environmental threats and opportunities. Better understanding the effects on SMEs’ ability to introduce strategic changes is, therefore, important. Thus far, however, the effect of financial resources on strategic change has been contested. This paper aims to untangle this relation by investigating the source of the firm’s financial resources, instead of the quantity of those resources available in the firm. We hypothesize that greater financing diversity, i.e., the number of financing types from which a firm obtains financing, results in greater ability to introduce strategic changes. This, as the financing terms and conditions may get less stringent, while the firm may get more environmental insights. Self-collected survey data of 525 Belgian SMEs their strategic changes during the first COVID-19 lockdown supports this hypothesis. SMEs with greater financing diversity introduced more strategic changes in response to both environmental opportunities and environmental threats. Moreover, the positive effect of financing diversity is lesser for younger firms, due to their liability of newness.
Divide and Conquer: Investor Type Diversity in Entrepreneurial Ventures, Jeroen Verbouw (University of Ghent)
Past studies show that dependence on partners for resources also exposes firms to possible problematic partner behavior, against which firms try to defend themselves. We extend our understanding of resource dependence in entrepreneurial ventures by developing and testing a novel framework on how and which ventures can defend themselves in their first interaction with equity investors when established defenses are usually unavailable. We theorize and show that ventures with greater resource stocks (i.e., higher exante cash holdings and prior experience with multiple investor types) defend themselves by pursuing a “divide and conquer”-strategy in which they attract first round investments from different types of equity investors. This strategy also facilitates follow-on fundraising. Overall, we extend resource dependence theory by focusing on a novel “divide and conquer”-defense strategy, which limits the power of any individual investor type, and by presenting a dynamic view on resource dependence in which entrepreneurs employ defense strategies from a position of strength because they still hold greater resource stocks.
Past Research Seminars
Thursday, December 21, 2023, 11.00h, Marina Emeris (NBB) – 12.00h, Gertjan Verdickt (KULeuven)
11.00h – 12-00h, Bank Competition and Bargaining over Refinancing, Marina Emeris, NBB.
12.00h – 13.00h, Selection Neglect and the Cross-Section of Wine Returns, Gertjan Verdickt; KULeuven.
Bank Competition and Bargaining over Refinancing (Marina Emeris)
We model mortgage refinancing as a bargaining game involving the borrowing household, the incumbent lender, and an outside bank. In equilibrium, the borrower’s ability to refinance depends on the search costs in the local banking market, her cost of switching to another bank, and the average quality of the borrower pool. We find empirical support for the key predictions of our model in an administrative data set covering the universe of mortgages in Belgium. In particular, households’ refinancing propensities are positively correlated with the number of local bank branches and negatively correlated with local mortgage market concentration.
Selection Neglect and the Cross-Section of Wine Returns (Gertjan Verdickt)
We examine the concept of selection neglect – a behavioral tendency characterized by decision-making based on biased observations. By definition, the effects should be more robust for infrequently traded assets. Leveraging a novel dataset of over 3 million auction transactions, our analysis uncovers a distinct pattern: wine in the highest quintile of selection neglect exhibits higher future returns than wine in the lowest quintile. The effect is more pronounced for wines without salient features but with more time to expiration, illiquidity, and idiosyncratic risk. We document that selection neglect is driven by a failure to understand the underlying data.
Thursday, November 30, 2023, 11.00h, Bart Dierynck (Tilburg University) – 12.00h, Luca Farè, (University of Bergamo)
It Takes Two to Tango: Client Cooperation with Auditor Requests and Audit Quality (Bart Dierynck)
Auditors are fundamentally dependent on the client to obtain audit evidence. Yet clients have no obligation to present their evidence in any particular form. As a result, there is considerable variation in the extent to which clients cooperate with auditor requests. We examine the association between clients’ cooperation with auditor requests and subsequent audit quality outcomes. We combine survey data with proprietary archival data from a Big 4 auditing firm in The Netherlands. Specifically, we use a survey to measure how auditors perceive the clients to cooperate with their requests and link the survey to audit firm-provided archival data. We find that the quality of the provided evidence and the auditor’s perceptions about client competence are positively related to audit quality proxies. We do not find evidence that audits of clients that are perceived to find the audit more important are of higher quality. Overall, our analysis highlights that client cooperation in the audit is generally positively associated with audit quality, but some dimensions of client cooperation are stronger associated with audit quality than others.
Ownership of Equity Crowdfunding Platforms (Luca Farè)
This study sheds light on the dynamic evolution in Equity Crowdfunding (ECF) platform ownership structures. We assemble a novel longitudinal cross-country dataset covering a large population of ECF platforms launched between 2008 and 2023, and we trace their controlling shareholders over time. We identify three types of controlling shareholders: corporation, financial entity, and individual. Our findings unveil a remarkable evolution in ECF platform ownership structures as the market matures, with a steady decline of individuals and a noticeable surge of corporations and financial entities as controlling shareholders. Based on this evidence, we investigate the relationship between the ownership structure and the platform's survival. We document that ECF platforms controlled by a financial entity are more likely to survive over time. This beneficial effect is partially mediated by the larger number of shareholders and managers, which enhances control and managerial capabilities within financial entity-controlled platforms.
Thursday, November 9, 2023, 11.00h, Begoña Giner (University of Valencia) – 12.00h, Thomas Selleslagh (VUB)
11.00h – 12.00h, Due process as a legitimating mechanism: Participation and responsiveness in the development of IFRS 17: Insurance contracts, Begoña Giner (University of Valencia)
12.00h – 13.00h, Bankruptcy Clusters in Firm Networks: An Empirical Exploration into the Phenomenon of Contagious Defaults, Thomas Selleslagh (VUB)
Due process as a legitimating mechanism: Participation and responsiveness in the development of IFRS 17: Insurance contracts. (Begoña Giner)
This paper investigates the role of due process in legitimizing the International Accounting Standards Board (IASB) and uses the development of IFRS 17-Insurance Contracts (IASB, 2017a) as a case study. It examines stakeholders’ participation and assesses the IASB’s responsiveness to the views expressed in the comment letters. It focuses on changes in recognition, valuation, and disclosure during the 10-year process, in which the Financial Accounting Standards Board (FASB) played a relevant role. For input and through-put legitimacy analysis, we conduct content analysis of comment letters and consult additional sources to understand key concerns in insurance accounting. The IASB received substantial feedback from diverse stakeholders and geographical regions, primarily preparers and European constituents. Our findings indicate that decisions throughout the standard-setting process align with stakeholders’ interests, without preferential treatment for any groups, affirming the institution’s legitimacy was preserved. This confirms that the IASB’s due process can be seen as a shield against political and constituent pressures. Nevertheless, this study cannot definitively attribute identified changes solely to comment letters, as other channels may have been equally influential.
Bankruptcy Clusters in Firm Networks: An Empirical Exploration into the Phenomenon of Contagious Defaults. (Thomas Selleslagh)
In this paper a large network of 491,817 Belgian private firms is constructed in which firms are connected through their shared directors. The aim of this study is to empirically investigate the concept of bankruptcy contagion, a phenomenon suggesting that financial distress may propagate within this private firm/director network. To test this notion, the network includes 16,353 bankrupt firms. The core premise is that if bankruptcy indeed possesses contagious attributes, it should be possible to observe this within the network. That is, bankrupt firms should not just occur random in the network but, instead, should show signs of clustering. The findings provide compelling evidence to support the concept of bankruptcy contagion. The results show that a significant portion —30%— of bankrupt firms are connected directly to other bankrupt firms, affirming the idea of bankruptcy contagion. Additionally, the analysis reveals that the presence of bankruptcy within a firm’s network is detrimentally associated with firm outcomes. This negative impact extends to both direct and indirect connections to bankruptcy, underscoring the pervasive influence of bankruptcy within the network.
Thursday, October 12, 2023, 11.00h, Marc Deloof – 12.00h, Herman Van Brenk (Nyenrode Business Universiteit, NL)
11.00h – 12.00h, Belgian financial elites and destructive entrepreneurship in King Leopold's Congo Free State, Marc Deloof (University of Antwerp)
12.00h – 13.00h, The effects of cost allocation and technology readiness on the auditor’s use of IT specialists, Herman Van Brenk (Nyenrode Business Universiteit, NL) Abstracts:
Belgian Financial Elites and Destructive Entrepreneurship in King Leopold’s Congo Free State (Marc Deloof, UA) (no paper yet)
This paper investigates the role of financial elites in one of the worst colonial regimes in history. An analysis of director interlocks between firms operating in the Congo Free State (CFS) and Belgian firms listed on the Brussels Stock Exchange (BSE) reveals that the Belgian financial establishment was a crucial contributor to CFS entrepreneurship from the start, contradicting the idea that business in the CFS was driven by a few rogue financiers. While the number of CFS firms was small and their economic importance was limited, 40% of listed Belgian firms, accounting for more than half of the BSE stock market capitalization, had at least one CFS firm director on their board by 1900. Belgian banks including the Société Générale played a key role, often with two or more CFS firm directors on their board.
The effects of cost allocation and technology readiness on the auditor’s use of IT specialists (Herman Van Brenk, Nyenrode Business Universiteit, NL)
Increases in digitalization have caused companies’ IT environment to become a crucial element of the financial statement audit. Consequently, there is a growing need for IT specialists to support audit teams. However, utilizing these specialists is costly, and budgetary pressures can provide an incentive to auditors to restrict specialist involvement. In an experiment with 286 auditors, ranging from senior staff to audit partner, we predict and find an ordinal interaction between cost allocation method and auditors’ technology readiness on the use of IT specialists. Results indicate that auditors with lower technology readiness make more extensive use of IT specialists when the costs are allocated at the firm level rather than the engagement level. On the other hand, auditors with higher technology readiness exhibit a consistently high use of IT specialists, irrespective of the cost allocation method employed. Overall, our results suggest that, in light of prevailing budgetary pressures during audit engagements, audit firms can leverage alternative cost allocation methods to encourage auditors to increase their reliance on specialists, ultimately improving audit quality. However, the effectiveness of such strategies depends on context-specific attitudes of the auditor.
Thursday, September 7, 2023, 11.00h, Michiel Van Roy - 12.00h, Marie-Laure Vandenhaute
11.00h – 12.00h, The influence of country and board-level governance characteristics on tax transparency, Michiel Van Roy (University of Antwerp)
12.00h – 13.00h, The Effects of Prominently Disclosed Going Concern Opinions on Lender Economic Reaction, Marie-Laure Vandenhaute (VUB)
Corporate governance and tax transparency (Michiel Van Roy, UA) (Working paper)
In this study, we examine whether and which characteristics of the board of directors are related to the level of tax transparency of large listed firms in Europe. We find that women on corporate boards are negatively associated with tax transparency, contrary to our hypothesis. This effect is moderated by the national business context. Furthermore, we find that the presence of a CSR committee also increases tax transparency, with stronger effects observable in the UK and Scandinavia.
The Effects of Prominently Disclosed Going Concern Opinions on Lender Economic Reaction (Marie-Laure Vandenhaute, VUB)
This paper examines the incremental lender economic reaction to visual cues highlighting material going concern (GC) uncertainties in the audit report. To do so, we exploit a natural experiment in the Belgian audit market, provided by a change in ISA 570 requiring auditors to more prominently disclose material GC uncertainties in the audit report via a separate section under the heading “Material Uncertainty Related to Going Concern” (MURGC), rather than less prominently disclose material GC uncertainties in a more general Emphasis of Matter paragraph. Our analyses reveal that lenders react negatively to less prominently disclosed material GC uncertainties, evidenced by higher interest rates as compared to firms without material GC uncertainty disclosures. This suggests that lenders are sensitive to material GC uncertainty disclosures even when they are not saliently disclosed in the audit report. We find no evidence that the increased salience of material GC uncertainty disclosures is associated with amplified negative lender reaction. Overall, neither our study supports the notion that the standard setter's goal of enhancing user awareness of material GC uncertainty disclosures through more prominent disclosures has been achieved, nor do our results indicate any inadvertent lender economic overreaction due to the prominent disclosure of such uncertainties in the audit report.
Friday, June 23rd, 2023, 11.00h Michiel Dierckx - 12.00 Justin Leiby
11.00h – 12-00h, The impact of automation and output ambiguity on auditors’ reliance on decision support systems (working paper), Michiel Dierckx, University of Antwerp.
12.00h – 13.00h, Developing vs. Inheriting Audit Data Analytic Tests and Auditors’ Professional Skepticism, Justin Leiby, University of Illinois.
The impact of automation and output ambiguity on auditors’ reliance on decision support systems (Working paper) (Michiel Dierckx)
This study will experimentally investigate how output ambiguity and DSS automation influence auditors’ decision support systems (DSS) use. The characteristics of DSS have changed considerably; systems have become more complex, more automated, and increasingly capable of processing large quantities of varied data. However, both through overreliance and a lack of reliance, these systems can prompt decision biases, potentially impeding audit quality. When using a DSS to aggregate different sources of information into a more manageable format, auditors make a trade-off between the effort required to use the system/data and the assessed value of the output and the underlying system. On the one hand, a more automated DSS, capable of giving specific recommendations, can reduce the effort needed to process the information. On the other hand, this automation can reduce the assessed value due to algorithm aversion or prompt an overreliance based on automation bias. We expect that these effects are more pronounced in a setting with an ambiguous DSS output. We will therefore conduct an experiment where we measure the auditor’s use of a DSS, while manipulating DSS automation (automated analysis present vs. not present) and output ambiguity (ambiguous vs. consistent). Our experiment will rely on professional auditors.
Developing vs. Inheriting Audit Data Analytic Tests and Auditors’ Professional Skepticism (Justin Leiby)
As the use of audit data analytic (ADA) tests matures and becomes increasingly common in practice, auditors will transition from actively developing ADA tests to typically inheriting ADA tests developed by others (e.g., other audit team members, data specialists, or a centralized data analytics team). Despite the potential benefits of ADA, using ADA tests inherited from others could hinder auditors’ skeptical actions when the tests identify an anomaly or red flag due to their lack of psychological ownership of the ADA tests. In an experiment where a fraud red flag is present, we find that auditors who inherited an ADA test are less likely to exercise skeptical actions compared to those who were personally involved in the development of the ADA test. We also provide evidence that informing auditors who inherited ADA about the ADA test development activities (e.g., a brief memo documenting the time and effort exerted in the ADA test development process) attenuates this negative effect.
Thursday, May 11th, 2023, 11.00h, Tom Van Caneghem - 12.00h, Annelies Fievez
11.00h – 12-00h, Upward Fixed Asset Revaluation, Tom Van Caneghem, University of Antwerp.
12.00h – 13.00h, Determinants of voluntary sustainability disclosures, Annelies Fievez, University of Ghent.
Motives for upward fixed asset revaluation in nonprofit organizations: transparency versus financial disclosure management (Tom Van Caneghem)
Transparency is seen as a crucial aspect of nonprofit governance (e.g. Saxton and Guo 2011). Further, downward earnings management is widely documented in the nonprofit literature (Hofmann and McSwain 2013). Upward fixed asset revaluation is an accounting choice that can be linked to both issues. We investigate the motives of discretionary upward fixed asset revaluations in Belgian nonprofit organizations (NPOs). Our findings provide no evidence for the transparency motive behind upward revaluation, but convincing evidence for the financial disclosure management motive. Upward revaluations are found to be linked to earnings management as well as balance sheet management (an issue that hardly received research attention in the nonprofit literature until now). Specifically, we observe a positive relationship with reporting a small surplus (in the income statement), and for the sub-sample of donative NPOs, we observe a negative relationship with the level of retained surpluses (in the balance sheet).
Determinants of voluntary sustainability disclosures (Annelies Fievez, University of Ghent)
Numerous studies on voluntary sustainability disclosure in traditional for-profits and nonprofits demonstrate that disclosure is driven by both vertical pressures (e.g. government,customer, creditor) and horizontal pressures (e.g. industry peers). However, in the case of social enterprises, that blend together various goals, stakeholders and resources, what drives sustainability disclosure is still unknown. Our study investigates the determinants of sustainability disclosure of social enterprises by taking into account institutional pressures (i.e. coercive and cognitive/mimetic) that could enhance the breadth and quality of voluntary sustainability disclosure outlet. We constructed two disclosure indices, breadth and quality, by using a content analysis technique with a coding structure based on the GRI Standards (2020) applied to the website of Flemish work integration social enterprises. The findings demonstrate that social enterprises dependence on bank debts negatively affects both breadth and quality of voluntary sustainability disclosure. Furthermore, we find that, similarly to intraindustry, mimicry, the mimicking of disclosures of peers in the same network holds explanatory power. Thus, cognitive/mimetic pressures positively affect the quality of disclosure practices and the size of the effect differs between the two networks, strengthening the suggestion of intra-network mimicking. These findings advance the currently limited knowledge on voluntary sustainability disclosures in the setting of social enterprises. Furthermore the results could be perceived more broadly as a call for future research that examines more thoroughly drivers that go beyond the rationale of stakeholder salience and considering the effect of network ties.
Thursday, April 20th, 2023, 11.00h Tijmen Van Kempen - 12.00h Selien De Schryder
11.00h – 12-00h, Mandatory energy efficiency disclosure policies and house prices, Tijmen Van Kempen, University of Antwerp.
12.00h – 13.00h, Evaluating heterogeneous effects of housing-sector-specific macroprudential policy tools on Belgian house price growth, Selien De Schryder, University of Ghent
Mandatory energy efficiency disclosure policies and house prices (Tijmen Van Kempen)
Mandatory energy efficiency disclosure policies are increasingly being used by governments around the world to reduce information-driven market failures. We exploit two policy changes in Flanders to study the causal effect of mandatory energy efficiency disclosure policies on house prices. We find that the introduction of mandatory energy performance certificates with an energy efficiency score in 2008 did not affect the association between energy efficiency and sales prices, indicating that the policy change did not reduce information frictions. However, the introduction of EPC labels in 2019 affected the willingness to pay for energy efficiency.
Evaluating heterogeneous effects of housing-sector-specific macroprudential policy tools on Belgian house price growth (Selien De Schryder)
This paper sheds more light on the heterogeneity of the effects of national macroprudential policy changes on local house price growth. More specifically, we employ an extensive dataset of Belgian municipalities containing a multitude of drivers of local house price dynamics and examine the potential heterogeneity of housing-related macroprudential policy changes driven by local characteristics related to financially constrained and high-risk residents, the degree of local housing market activity, and changes in local household mortgage indebtedness. Our results point to more dampening effects of the common macroprudential policy tightenings on local house price growth for municipalities characterized by low-income and young (i.e., more risky) residents, which increase in hot housing markets. Housing-related macroprudential tools are thus found to lower house price growth in hot local housing markets characterized by more financially-constrained and high-risk households while having less drastic effects in other local markets. Our findings therefore indicate the possibility to stabilize local housing market booms.
Thursday, March 16, 2023, 11.00h, Maysam Ayoub - 12.00h, Sweta Pramanick
11.00h – 12-00h, Within-Firm Office Changes: European Evidence, Maysam Ayoub (American University in Dubai, University of Antwerp)
12.00h – 13.00h, Employment Protection, Productivity and Debt Reduction, Sweta Pramanick (Queen's University Belfast)
Within-Firm Office Changes: European Evidence (Maysam Ayoub) (working paper)
There is evidence that the quality of audits is affected by office-level characteristics. Yet, many factors are likely to influence whether within-firm office changes result in a positive or negative association with audit quality. Clients who change offices within the audit firm's network may benefit from fresh perspectives and insights from new engagement teams and audit partners. Conversely, such changes may impair audit quality due to reduced client-specific knowledge and initial cost pressures associated with engagement teams tooling up on new assignments (Greiner et al. 2021). Nevertheless, the ability of an audit office to provide a high-quality audit depends partly on how it relates to the network of offices in which it operates through knowledge sharing (Seavey et al. 2017). Given that within-firm office changes reflect the challenge of allocating audit resources efficiently, we test if audit teams from more connected offices can better handle a transition and maintain audit quality. Contrary to expectations, we did not find evidence that reduced audit quality resulting from within-firm office changes is more pronounced in audit firms with greater network connectedness. Further, we examine the impact of the changes in clients' distance from the audit office in within-firm office switches. Results of the additional testing show that office changes affect audit quality more when there is a greater distance between the auditor and the client.
Employment Protection, Productivity and Debt Reduction (Sweta Pramanick, Queen's University Belfast)
We exploit the adoption of U.S. state-level employment protection laws to study the effect of increased firing costs on the productivity of US exchange listed firms. We find that an exogenous increase in firing cost increases productivity and reduces inefficiency for those firms where financial leverage is crowded out by increased operating leverage. Firms achieve higher productivity by reducing capital expenditures, reducing employment and refocusing on innovation. Ultimately, we show that employment protection can boost productivity growth when firms choose to restructure their production process.
Thursday, February 16, 2023, 11.00h, Sahar Salehi - 12.00h, Michele Meoli
11.00h – 12-00h, The relationship between levers of control and absorptive capacity - Is there a moderating role for a firm’s human resource and financial slack, Sahar Salehi, University of Antwerp.
12.00h – 13.00h, The Dark Side of Equity Crowdfunding Platforms: Platform Member Investments and Post-Campaign Outcomes, Michele Meoli, University of Bergamo.
The relationship between levers of control and absorptive capacity Is there a moderating role for a firm’s human resource and financial slack (Sahar Salehi)
We draw on Simons' levers of control framework to investigate the relationship between the managerial use of control systems with absorptive capacity at the organizational level. Simons’ levers of control framework focus on boundary, belief, diagnostic, and interactive controls. A firm’s absorptive capacity represents a firm’s ability to acquire, assimilate, transform, and exploit new knowledge. Our model delves into the relationship of boundary, belief, diagnostic, and interactive control systems with the acquisition, assimilation (potential), transformation, and exploitation (realized) dimensions of absorptive capacity. In addition to the direct relationship between a firm’s levers of control and absorptive capacity, we investigate whether a firm’s human resource and financial slack has a moderating role in this relationship. Boundary and belief controls have a significant positive relationship with potential absorptive capacity. Moreover, human resource slack partially moderates diagnostic and interactive controls’ relation with potential absorptive capacity. Additionally, we find significant moderation of human resource slack in the relationship between interactive controls with realized absorptive capacity. Therefore, human resource slack must be included in the research model if one wants to explain the relationship between levers of control with absorptive capacity. Contrary to our prediction, financial slack does not moderate the relationship between levers of control with realized absorptive capacity. However, human resource slack has a significant moderating effect on the relationship between interactive controls and new knowledge acquisition.
The Dark Side of Equity Crowdfunding Platforms: Platform Member Investments and Post-Campaign Outcomes (Michele Meoli)
Past research has shown that equity crowdfunding platform members invest in “cold” offerings to increase these offerings’ fundraising prospects. This behavior has two possible explanations. First, platform members hold private information and support those firms that only seem to be weaker but have significant potential and eventually outperform post-campaign. Second, platform members support weaker firms, which also underperform post-campaign, to increase the platform’s fundraising success rate and revenue generation. We find evidence in line with this second perspective. Specifically, firms in which equity crowdfunding platform members invest are less likely to raise follow-on funding, have lower credit ratings, and are less likely to list on a secondary market. Moreover, firms that have raised equity crowdfunding but in which platform members withdrew their investments show even weaker post- campaign outcomes. Finally, we find that platform member investments distort the equity crowdfunding market by reducing the effectiveness of traditional quality signals for fundraising.
Thursday, December 15, 2022, 11.00h, Jo Mentens - 12.00h, Ulfert Gronewold
11.00h – 12-00h, Language and Investors’ Assessment of CSR Information, Jo Mentens, University of Antwerp.
12.00h – 13.00h, The influence of tax auditors' emotions on tax negotiations and tax compliance, Ulfert Gronewold, University of Postdam.
Language and Investors’ Assessment of CSR Information (Jo Mentens)
I will conduct a pre-registered study on the role of language on investors’ assessment of CSR information. Specifically, I am interested in whether investors react stronger to CSR information in their native language compared to a foreign language. Based on psychology research, I expect that investors will react stronger to CSR information in their native language compared to a foreign language due to the foreign language effect. Generally, research on the foreign language effect has found that reading information in a foreign language reduces people’s decision biases and leads to more utilitarian decisions. As research in accounting and finance suggests that CSR information is processed affectively by investors, I expect that this reliance on affect can be reduced when investors process the information in a foreign language. Moreover, I expect this effect to be larger for more emotional CSR information. To test my expectations, I will conduct an experiment on Prolific with a 3 (CSR information: absent/control, neutral, or emotional) x 2 (language: native or foreign) between- subjects factorial design.
The influence of tax auditors' emotions on tax negotiations and tax compliance (Ulfert Gronewold)
We study the effects of tax auditors’ emotion expressions during tax audit negotiations. A first experiment shows that auditors expressing anger obtain more concessions from taxpayers than auditors expressing happiness. Thus, taxpayers interpret auditors’ emotions strategically and do not respond affectively. A second experiment shows that the experience with an auditor who expressed either happiness or anger reduces taxpayers’ post-audit compliance compared to the experience with an emotionally neutral auditor. Apparently, taxpayers use their experience with an emotional auditor to rationalize subsequent non-compliance. Overall, our findings demonstrate potentially detrimental effects of auditors’ positive and negative emotion expressions and point to the benefits of avoiding emotion expressions: avoiding them does not result in fewer concessions from taxpayers than expressing anger, leads to a better evaluation of the relationship, and reduces taxpayers’ post-audit non-compliance.
Thursday, November 24 , 2022, 11.00h, Oscar Gelderblom– 12.00h, Begona Giner Inchausti
11.00h – 12.00h, Coping with financial fragility: Dutch households in the Great Depression, Oscar Gelderblom (University of Antwerp)
12.00h – 13.00h, The future of sustainability reporting in Europe and beyond, Begoña Giner Inchausti (Universitat de Valencia)
Coping with financial fragility: Dutch households in the Great Depression, Oscar Gelderblom.
We analyze the financial behavior of Dutch households during the Great Depression with household level data on income and expenditure from contemporary budget surveys. We find that five years into the Great Depression most Dutch households still managed to cope financially. This was even true for people who temporarily lost their jobs. They received social benefits, scaled back consumption, and used previously created financial buffers to absorb the income shock. Very low levels of household debt shielded them from bigger financial problems. Only the long-term unemployed–six per cent of all households in 1937–could not make ends meet and fell into poverty.
Thursday, October 27, 2022, 11.00h, Jonas Vandennieuwenhuyse - 12.00h, Marie Dutordoir
11.00h – 12.00h, How Companies Select an Auditor: Design Versus Practice, Jonas Vandennieuwenhuysen (University of Antwerp)
12.00h – 13.00h, Does Corporate Finance Theory Extend to the New Normal? Evidence from Security Offerings during the COVID-19 Pandemic, Marie Dutordoir (University of Manchester - Manchester Business School)
How Companies Select an Auditor: Design Versus Practice (Jonas Vandennieuwenhuysen)
Despite the alleged importance of the auditor selection and appointment process in audit quality, few studies have studied how audited companies select an auditor. We conducted semi- structured interviews on four audit firm rotations to investigate how the parties involved manage and perceive the auditor selection process. We interviewed 16 respondents in the period right before or after the final auditor selection. These respondents include audit partners, audit committee (AC) members, and managers. Our results imply that although most audit clients have a relatively rigid selection process, the eventual decision is based on their interpersonal connection with the audit partner and team, using the quantifiable results to rationalize their choices. The audit committee’s role appears to be less pronounced than prescribed by regulators, with the managers being the actual key decision-makers. Furthermore, due to cooling-off and cooling-in periods, the search for an auditor is impeded. Our study informs regulators and practitioners on how the auditor selection process is conducted in practice. In addition, our results may be of interest to researchers investigating selection criteria and the involvement of management and the AC in an audit.
Does Corporate Finance Theory Extend to the New Normal? Evidence from Security Offerings during the COVID-19 Pandemic (Marie Dutordoir)
We document substantial increases in corporate security offerings since the start of the COVID-19 pandemic. While the rise in SEOs is attributable to shifts in macroeconomic conditions, convertible and straight bond offering increases cannot be explained by standard security choice determinants or government interventions. COVID-period SEO announcements are often contaminated by positive R&D-related news, with COVID-period offering proceeds more likely to be hoarded as cash. Overall, COVID-period SEOs are consistent with market timing behavior, whilst COVID-period convertibles and straight bonds cannot be reconciled with pre-pandemic rationales. New theories may be needed to explain corporate financing decisions following long-lived multidimensional shocks.
Tuesday, October 4, 2022, 11.00h, Jacqueline Seufert – 12.00h, Chris Cunningham
11.00h – 12.00h, See how the land lies: land valuation using spatial models (work in progress), Jacqueline Seufert, KU Leuven
12.00h – 13.00h, The Good, the Bad and the Ordinary: Estimating Agency Value-Added Using Real Estate Transactions, Chris Cunningham, Federal Reserve Bank of Atlanta
The Good, the Bad and the Ordinary: Estimating Agency Value-Added Using Real Estate Transactions (Chris Cunningham)
Despite the prevalence and high cost of real estate agents, there is limited empirical evidence as to the nature or efficacy of their services. In this paper we estimate real estate agents’ value-added when both selling and buying homes using data from three large Multiple Listing Services (MLS)s. We find that homeowners who forgo a conventional real estate agent, but list their homes on the MLS via a flat fee broker, sell for between 1 and 4 percent more before commission, but take longer to sell and are less likely to complete a sale. However, these average effects mask a significant amount of real estate agent heterogeneity. Using a novel aspect of our data, which allows us to identify and track agents over time, we estimate the distributions of real estate agent fixed effects in both hedonic and time-on-the-market models. We find that exchanging a listing agent in the 25th percentile for one in the 75th would increase the final sales price by 5–6 percent, and a similar exchange for buying agents would lower purchase prices by 4–6 percent. The interquartile range of agent fixed effects from our model of time-on-the-market is 17–25 days. We do not find a significant trade-off between price and time-to-sell however as agents who obtain higher prices do not take longer to sell, suggesting that they are not simply setting higher reservation prices. We also show that agents who sell homes for more also appear to pay more for a home when serving as a buyer’s agent, indicating that the average agent does not possess exceptional negotiating skills or that such skills are overwhelmed by principal-agent problems. Finally agents do not appear to get better at bargaining; agents do sell faster with experience, but mostly by selling for lower prices.
Thursday, September 8, 2022, 11.00h, Pedro Moraya Barros – 13.00h, Jean-Laurent Cadorel
11.00h – 12.00h, Personal Territorial Taxation and Its Country Characteristics, Pedro Moraya Barros, University of Antwerp.
12.00h – 13.00h, The 1929 Crash of the New York Stock Exchange as a Liquidity Crisis, Jean-Laurent Cadorel, Paris School of EconomicsFood&Drinks:
Personal Territorial Taxation and Its Country Characteristics (Pedro Moraya Barros)
Although corporate territorial taxation has been extensively studied, research on personal territorial taxation (PTT) is scarce. This article is set to provide the first worldwide scale analysis of PTT. My goal is to understand what are the country's characteristics influencing the choice to tax residents on domestic-source income and not on foreign-source (i.e. personal territorial taxation)? Based on Collective Action Theory and Institutional Theory, I hypothesize that economic inequality and several types of institutions should be associated with PTT. To test these hypotheses, I use a cross-national analysis of 196 countries and jurisdictions with fiscal sovereignty, which finds a strong association between economic inequality and PTT. However, I find no significant relationship between democracy or rule of law and PTT. As an extension of the empirical analysis, I tested the “captured democracy” model and find some evidence that the association between regime type and PTT can change depending on the level of economic inequality in a country. The results are robust to an instrumental variable approach as well as multiple measurements of the independent variables of interest, increasing confidence in the findings. This study provides an initial step to understanding the widely unexplored topic of PTT while adding to the large literature on personal income taxation, economic inequality, and institutions.
The 1929 Crash of the New York Stock Exchange as a Liquidity Crisis (Jean-Laurent Cadorel)
What caused the 1929 crash of the New York Stock Ex- change? This paper provides the first quantitative study of liquidity in the 1929 crash of the New York Stock Exchange. I provide evidence the crash was indeed a liquidity crisis due to the liquidation of brokers’ margin loans. Applying recent estimators of effective spreads and liquidity conditions from the modern finance literature suggests a 4 to 10-fold increase in spreads during the crash at the aggregate level. At the individual stock level, quoted bid-ask spreads suggest liquidity explains a fifth of the variance in daily stock returns in the crash.
Thursday, June 16, 2022, 11.00h Tristan De Blick – 13.00h Simon Dekeyser
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11.00h – 12.00h, The effect of bundles of slack and family ownership on SME strategic change, Tristan De Blick, University of Antwerp.
12.00h – 13.00h, Auditor Industry Range and Professional Skepticism, Simon Dekeyser, KU Leuven.
(papers are in the ‘files’ folder on Teams, channel Research seminars)
We like to support the FBE Green impact team, so in order to reduce food waste: place your order for food & drinks before 15/06 in this form (a water fountain is installed in the kitchen of the meeting room (A.108)).
The effect of bundles of slack and family ownership on SME strategic change (Tristan De Blick)
Do slack resources facilitate or constrain strategic change? We follow the “bundles of slack” approach, and investigate how different bundles of financial slack and HR slack relate to strategic change. Drawing on behavioral theory, we argue that parallel resource constraints in HR slack and financial slack should result in the lowest level of strategic change, except if the firm is family-owned. In family-owned firms, selective resource constraints in HR slack combined with high levels of financial slack should result in the lowest level of strategic change. Analyses performed on a unique sample of 673 survey responses of private Belgian SMEs confirm our hypotheses.
Auditor Industry Range and Professional Skepticism (Simon Dekeyser)
We develop the concept of auditor industry range as the extent to which an auditor has experiences in auditing clients from different industries, and we link this construct to auditor judgment based on prior research in psychology and cognitive science. We find that auditors with a wide range of industry experiences are more likely to require audit adjustments than auditors with a narrow range. This positive relation between auditor industry range and audit adjustments is stronger for more complex clients and in more uncertain environments. The effect of industry range on audit adjustments is also more pronounced for industry specialists than for non-specialists, consistent with the idea that industry specialization and industry range are complementary. Overall, our findings suggest that an auditor’s diverse experiences in different industries can facilitate the development of professional skepticism.
Thursday, June 9, 2022, 11.00h – 12.00h Maria Roszkowska-Menkes
11.00h – 12.00h, Transparency, Money and Institutions: Institution-based view on the sustainability-linked compensation and sustainability reporting, Maria Roszkowska-Menkes, Warsaw School of Economics.
(working paper in the ‘files’ folder on Teams, channel Research seminars)
We like to support the FBE Green impact team, so in order to reduce food waste: place your order for food & drinks before 07/06 in this form (water fountain is installed in the kitchen of the meeting room (A.108)).
Monday, May 30, 2022, 11.00h Stef Schildermans – 12.00h Nils Kok
Monday, May 30, 2022, 11.00h – 13.00h
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11.00h – 12.00h, Split incentives, asymmetric information and energy efficiency subsidies, Stef Schildermans, KU Leuven.
12.00h – 13.00h, Indoor Air Quality and Student Performance, Nils Kok, Maastricht University.
(papers are in the ‘files’ folder on Teams, channel Research seminars)
We like to support the FBE Green impact team, so in order to reduce food waste: place your order for food & drinks before 26/05 in this form (water fountain is installed in the kitchen of the meeting room (A.108)).
Split incentives, asymmetric information and energy efficiency subsidies. (Stef Schildermans)
We examine whether agency issues due to asymmetric information affect the cost-effectiveness of subsidy programs for energy efficiency investments. In 2009, the Flemish government introduced a reduction in the property tax of 20% to 40% for energy efficient houses. Exploiting the notch to identify the effect on energy use, we find that the cost per kWh saved is two to seven times larger for developer-built housing units than owner-built units. The difference in the cost-effectiveness is the result of a ten times smaller response in the developer-buyer regime. A counterfactual exercise suggests that the cost-effectiveness improves 33% when information is perfect.
Indoor Air Quality and Student Performance (Nils Kok)
Governments devote a large share of public budgets to construct, repair and modernize school facilities. However, little is known about whether investments in the physical condition of schools translate into student achievements. In this study, we report the results of a large field study, providing quasi-experimental evidence on the implications for student performance of environmental quality inside classrooms - key performance measure of school infrastructure, and a common indicator guiding investments in school facilities. We continuously monitor the environmental conditions (i.e. temperature, CO2, fine particles, humidity) in the classrooms of 3,000 children over three entire school years, and link them to their scores in over 22,000 nationally standardized tests. Using a fixed-effects strategy, relying on within-pupil changes in environmental conditions, we find that kids who have been chronically exposed to poor environmental conditions during the school term preceding the test tend to significantly under-perform in the test. We document changes in teaching time as a potential mechanism of drops in performance. Classes exposed to poor indoor conditions in a given day tend to have significantly longer breaks, leading to a shorter time in the classroom. Our results add to the ongoing debate on the determinants of student human capital accumulation, highlighting the role of physical capital in affecting learning outcomes.
Thursday, April 21, 2022, 11.00h Jovana Cadenovic– 12.00h Victor van Pelt
Thursday, April 21, 2022, 11.00h - 13.00h
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11.00h – 12.00h, Dividend Policy of SMEs: A Variance Decomposition Approach, Jovana Cadenovic, Doctoral Researcher, University of Antwerp.
12.00h – 13.00h, Motivating Low Performers with Input-based Relative Performance Feedback: Evidence from a Field Experiment, Victor van Pelt, Assistant Professor of Management Accounting, WHU – Otto Beisheim School of Management.
(paper of Victor is in attachment and in the ‘files’ folder on Teams, channel Research seminars
Paper of Jovana will be send next week)
Food & Drinks:
We like to support the FBE Green impact team, so in order to reduce food waste: place your order for food & drinks for this meeting in this form (water fountain is installed in the kitchen of the meeting room (A.108)).
Dividend Policy of SMEs: A Variance Decomposition Approach. (Jovana Cadenovic)
We conduct a variance decomposition analysis to explore the contribution of firm, industry and region-level factors to dividend policies of Small and Medium Sized Enterprises (SMEs). Based on a sample of 110,050 Belgian SMEs, relative to industry and region differences, firm-level differences explain most of the variance of dividend policies which is in line with the resource based theory. Industry-level differences and region differences matter very little for dividend policy.
Motivating Low Performers with Input-based Relative Performance Feedback: Evidence from a Field Experiment. (Victor van Pelt) A common challenge for firms is delivering performance feedback so that underperforming employees get back on track. In this field experiment, we test whether this can be achieved by providing relative performance feedback based on inputs, which is relative performance feedback that is strongly linked to differences in effort exertion and less affected by differences in experienced luck and ability. Input-based relative performance feedback should help un- derperforming employees internalize the ”bad” news that they exerted less effort than their peers, which, in turn, should direct their future concerns toward exerting more effort and realizing higher input-based performance. Our findings support our predictions by showing that input-based relative performance feedback increases input-based performance among low performers. We also find it eventually increases low performers’ contributions to the firm’s outputs. Consistent with social loss aversion, we find that the performance-enhancing effect of input-based relative performance feedback is less pronounced for high performers. Our find- ings have implications for firms that face employee turnover restrictions or otherwise seek to motivate low performers in their workforce
Thursday, March 17, 2022, 11.00h Michiel Van Roy, - 12.00h Therese Grohnert
Thursday, March 17, 2021, 11.00h – 13.00h
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11.00h – 12.00h, Tax Transparency of Listed Companies in Europe: Do corporate stakeholders have an influence?, Michiel Van Roy, Doctoral Researcher, University of Antwerp.
12.00h – 13.00h, Uninformed and Unaware – The Dunning-Kruger Effect’s Role in Auditors’ Insufficiently Supported Judgments, Therese Grohnert, Assistant Professor, School of Business and Economics, Maastricht University.
(papers in attachment are in the ‘files’ folder on Teams, channel Research seminars)
We like to support the FBE Green impact team, so in order to reduce food waste: place your order for food & drinks for this meeting in this form (from know on there is a water fountain installed in the kitchen of the meeting room (A.108)).
Tax Transparency of Listed Companies in Europe: Do corporate stakeholders have an influence? (Michiel Van Roy)
Tax transparency and tax fairness have moved up on the priority list of regulators (OECD and EU) and recently attract the attention of the public as well. Despite the regulatory and public interest for tax transparency, previous research has often only examined particular aspects of tax disclosures. Therefore, this paper examines the influence of different stakeholders on the general level of tax disclosures made by large listed companies in Europe. We account for qualitative and quantitative disclosures made in both mandatory and voluntary reports. We predict that institutional owners demand more transparency to lower monitoring costs, and that consumers and employees pressure firms into being more transparent on their tax behavior. Results indicate that the presence of institutional ownership is significantly positively associated with the level of tax transparency. We find that this outcome is mainly driven by qualitative disclosures. In contrast, we do not find any significant relationship between employee importance in a company and tax transparency, nor do we find a significant relationship between the general level of tax transparency and consumer-facing industries. However, we do find that companies from the consumer-facing industries provide more quantitative tax disclosures. Additionally, companies with more sustainable tax behavior also make significantly more quantitative tax disclosures. Finally, we document large differences between countries with respect to the level of tax disclosures made by companies, confirming findings from previous research. This study contributes to the understanding of the determinants of tax transparency, which received growing attention over the past decade.
Uninformed and Unaware – The Dunning-Kruger Effect’s Role in Auditors’ Insufficiently Supported Judgments. (Therese Grohnert)
Overconfidence is a bias in judgment and decision-making that is recognized by practitioners and researchers as a threat to audit quality. When individuals are overly confident in their performance, they tend to collect too little evidence and fail to correct wrong judgments. The Dunning-Kruger Effect (DKE) describes that not all individuals are affected equally by overconfidence: rather, poor performers are more likely to be overconfident because they lack the necessary insight to display appropriate confidence. We explore whether auditors are subject to the DKE, testing two interventions to increase self-insight as a means of mitigating the bias. Through two experimental studies with 350 auditors, we establish that (I) auditors indeed display the DKE: auditors who formed inaccurate and insufficiently supported judgment overestimated their performance, affecting close to half of all participants, and (II) overconfidence can be mitigated by fostering self-insight through a hypothesis generation intervention. We find that auditors are susceptible to the DKE regardless of experience, audit firm, or gender. These findings add to existing research on auditor judgment and the DKE, foster ecological validity and generalizability of the phenomenon, and afford implications improving auditors’ performance in practice.
Thursday, February 17, 2022, 11.00h Dave Goyvaerts, 12.00h Hans Vanoorbeek
Thursday, February 17, 2021, 11.00h – 13.00h
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11.00h – 12.00h, The Impact of Earnings Stripping Rules in Europe, Dave Goyvaerts, Doctor-Assistant, UGent.
12.00h – 13.00h, The Impact of Financial, Human and Social Capital on Becoming an Entrepreneur through Acquisition, Hans Vanoorbeek, Phd-student Antwerp Management School.
(papers in attachment are in the ‘files’ folder on Teams, channel Research seminars)
We like to support the FBE Green impact team, so in order to reduce food waste: place your order for food & drinks for this meeting in this sheet.
The Impact of Earnings Stripping Rules in Europe (Dave Goyvaerts)
Earnings stripping rules aim to reduce international profit shifting through the strategic placement of debt, by disallowing the tax deductibility of interest above a certain percentage of a firm’s EBITDA. Following the OECD Base Erosion and Profit Shifting project and the EU Anti-Tax Avoidance Directive, these rules have recently been introduced in most EU Member States. We develop a new theoretical model to predict firms’ responses to earnings stripping rules’ introductions. A reduction in their net finance expense and increases in their EBITDA and corporate tax liabilities are hypothesised. These hypotheses are tested empirically using a firm-level dataset of German, Italian and Spanish firms. The results indicate that firms affected by earnings stripping rules reduce the net finance expense, while their EBITDA appears to be unaffected. The effect on tax liabilities appears to be limited, and seems to depend on the country-specific implementation.
The Impact of Financial, Human and Social Capital on Becoming an Entrepreneur through Acquisition (Hans Vanoorbeek)
While studies on successful entrepreneurship are abundant, this stream of research focused predominantly on start-up entrepreneurship. Acquiring an existing firm, or entrepreneurship through acquisition (ETA), is an alternative form of entrepreneurial entry. Using a unique sample of nascent ETA entrepreneurs, in particular middle-aged senior experienced individuals, collected through online surveys, we test the importance of three forms of capital on the odds of successfully acquiring a business: financial, human, and social capital. Human capital or the experience and expertise of the ETA entrepreneur significantly increases the chances of success. However, contrary to our knowledge of start-up entrepreneurs, financial capital is another vital predictor, while social capital seems to have no significant impact. Our findings suggest that start-up and ETA entrepreneurship require different resources to be successfully completed due to their inherent differences.