Research

My research interests are at the intersection of financial accounting, taxation, macro-accounting, and ESG (Environmental, Social, and Governance).


Working Papers

ESG Rating Competition (with Svenja Dube and Cai Chen).

Abstract:

This paper examines how increased competition across ESG rating agencies affects incumbents’ ESG rating quality. We exploit the impact of the entrance of Sustainalytics as an additional rating agency in 2010 on the rating quality of the incumbents, ASSET4 and KLD. We conduct a difference-in-differences analysis and find that competition decreases incumbents’ ESG rating disagreements. This relationship is stronger for firms that issue stand-alone ESG reports, which require more effort to analyze. Additionally, consistent with competition improving ratings’ predictability of future negative ESG incidents, incumbents’ ESG concerns ratings are more strongly associated with future negative ESG news for firms additionally covered by Sustainalytics. Finally, we find that KLD evaluates more total ESG metrics for firms covered by Sustainalytics, while both incumbents evaluate relatively more outcome metrics, which are more difficult to evaluate, consistent with competition inducing more effort. Overall, our findings indicate that increased competition across ESG rating agencies improves ESG rating quality, suggesting that competition serves as an implicit disciplining mechanism of rating agencies’ quality.


Aggregate Deferred Tax Asset Valuation Allowance and GDP Growth (Job Market Paper).

Abstract:

This paper examines whether deferred tax asset valuation allowance growth, as a measure of expected future performance, aggregated at the macroeconomy level, conveys information about future GDP growth. Using hand-collected tax footnote data, I find that quarterly aggregate valuation allowance growth is negatively associated with future GDP growth up to four quarters ahead. This relationship is incremental to existing accounting and macroeconomic GDP growth indicators, especially for forecast horizons longer than one quarter when other indicators are uninformative. Additionally, the findings suggest that aggregate valuation allowance growth provides unique information that cannot be obtained from other sources of management information, such as management forecasts, allowance for doubtful accounts, banks’ loan loss provision, and goodwill impairment. The findings further indicate that the documented association is driven by the corporate profit growth component of GDP growth. Collectively, the evidence indicates that aggregate valuation allowance growth provides incremental forward-looking information about GDP growth.

U.S. Import Tariffs and Domestic Corporate Performance (with Yaniv Konchitchki and Leslie Robinson).

Abstract:

This paper examines how imposing import tariffs by the U.S. government affects the accounting performance, investment activities, and valuation of U.S. firms. It shows that, subsequent to the U.S. imposing tariffs, U.S. firms experience improved profitability, capital expenditure, total investment, and valuation. Although imposing tariffs leads to both higher revenue and cost, the increased revenue outweighs the increased cost stemming from the imposed tariffs, resulting in a net positive effect on profitability. Additional analyses show that U.S. firms in highly competitive markets, low-growth firms, less innovative firms, financially distressed firms, and small firms benefit more from the imposed tariffs. Collectively, this paper shows that U.S. firms benefit from import tariffs imposed by the U.S. government. 


The Role of Accruals and Cash Flows in Forecasting GDP Growth.

 Abstract:

This paper examines the informativeness of accruals and cash flows for growth in nominal Gross Domestic Product (GDP). Konchitchki and Patatoukas (2014) document that aggregate accounting earnings growth is a significant leading indicator of future GDP growth. I further examine the role of aggregate cash flows and accruals in forecasting GDP growth, as well as the relation between aggregate accounting earnings growth and contemporaneous GDP growth. The findings suggest that decomposition of aggregate accounting earnings growth improves the predictive ability of future GDP growth for the longer forecast horizons. While aggregate cash flows growth and aggregate accruals growth are significant indicators of future GDP growth, professional macro forecasters do not incorporate their predictive content into their GDP growth forecasts. In addition, the predictive content of aggregate accruals and cash flows growth persist over longer horizons than that of contemporaneous GDP growth. The findings suggest that aggregate accruals and cash flows growth contains useful information that is not captured by contemporaneous GDP growth.


Work in Progress

The Effect of ESG Information on Innovation (with In Gyun Baek).

Aggregate Stock Returns and Short Interest over time (with Charles Wasley and Jason Xiao).

ESG Ratings and Corporate Credit Ratings.

Taxes and ESG Ratings.


Non-Refereed Publications

Vaknin-Froymovich, S., 2016. Tax Incentive for Social Investment. Jerusalem Institute for Israel Studies. Milken Innovation Center.