Essays in Financial Accounting
The purpose of this dissertation is to examine the role of financial accounting in capital markets. In particular, I investigate three (proposed) interventions aimed at improving the financial information environment by resolving market frictions in the demand for and supply of financial information, ultimately benefiting capital market efficiency. I examine how regulators, gatekeepers and intermediaries address these market frictions, and whether these attempts are perceived as necessary, or as successful, in improving the information environment and whether they benefit capital markets.
Chapter 2 investigates regulatory proposals in the nascent crypto token market and finds that market participants react negatively to news about transparency regulation, suggesting they perceive it as costly, or burdensome, on average, but less so for crypto tokens that are more transparent and of higher quality. These results provide initial evidence on the current debate on perceived costs and benefits in the cryptocurrency market and show the value of disclosure (regulation) in alternative, emerging financial markets. Chapter 3 examines the landscape of public company auditing around the introduction of the Securities and Exchange Commission (SEC) in 1934. The results suggest that the introduction of the SEC had a limited impact on companies’ reliance on audits and investors’ trust in companies’ reports. Chapter 4 investigates whether the introduction of financial incentives to increase social media analyst coverage of previously undercovered firms on a user-generated content platform improves the information provision of the platform to users of the platform. Results show that the introduction of a minimum payment guarantee incentive, significantly increased the quality coverage of undercovered firms. Accordingly, the improvement in the information environment as a result of the increase in quality coverage, significantly improvements capital market outcomes for these previously undercovered firms. Taken together, this study sheds light on interventions, and attempts at addressing market frictions by regulators, gatekeepers and intermediaries.