Veranstaltungsprogramm der VHB Jahrestagung

Committee decisions on more than two alternatives can vary widely in the adopted voting procedure. This affects how closely collective choices reflect the preferences of a given committee member. We study how well the decisions produced by pairwise majority votes, plurality voting with or without a runoff, and the Borda scoring method track preference rankings of individual decision makers when the distribution of their voting weights is skewed. Corresponding indices of voting success allow to assess the individual a priori benefit of adopting one voting rule rather than another. We validate our theoretical results for weight distributions that reflect voting shares in S&P 100 corporations. Plurality rule or the Borda method maximize a priori voting success for most shareholders. Our findings may be of interest to shareholders or committee members and potentially regulators aiming for most beneficial collective decisions.

Empirical studies on the effects of corporate political connections (CPCs) on financial reporting quality often find that political connections are associated with low reporting quality. A frequent interpretation of this association is that CPCs are a means to influence enforcement institutions. However, the effect of CPCs on auditor choice is ambiguous and does not necessarily suggest that politically connected firms are interested in low reporting quality. In line with CPCs research from the fields of economics and finance, we argue that firms possibly obtain a variety of benefits from their political connections. Some of them align the interests of corporate insiders and external addressees of financial reports while others aggravate their conflicts of interest. We propose an analytical model that incorporates two forms of benefits from CPCs, that is, direct economic benefits (e.g., procurement contracts or bailouts) and leniency benefits which diminish enforcement strictness. We show that while leniency affects the extent of the financial reporting bias, economic benefits affect both the extent and the direction of the bias. Endogenizing a reporting firm’s audit quality choice, we show that audit quality is a complement to enforcement strictness if enforcement is lax but is crowded out if enforcement becomes very strict. We identify circumstances in which more lenient enforcement leads in equilibrium to more biased audited financial reports due to the interplay of political reporting incentives and the audit quality choice.

We study the press coverage of corporate tax and accounting violations. First, we define the press as a biased watchdog that informs the public about corporate misconducts but also exhibits slanted reporting behavior that can affect the extent and sentiment of published press articles. Subsequently, we employ a difference-in-differences event study design using firm-level data on corporate violations and daily press coverage to determine whether and how the press reports on punished cases of tax and accounting violations. We find that tax and accounting violations are reported more frequently than all other types of corporate violations. In additional analyses, we detect that left-leaning press outlets tend to report more frequently on tax and accounting violations while right-leaning and financial press outlets exhibit a stronger negative sentiment. Our results suggest that tax and accounting violations are considered newsworthy events that receive substantial attention by the press. Assuming that the press aims to cater towards its readership, these results imply that there is a large public interest in corporate tax and accounting violations and their prosecution.