Media Accessibility and the Capital Market Effects of Media Dissemination: Evidence from Digital Paywalls
Job Market Paper

This paper examines the capital market implications of media accessibility. I exploit the staggered adoption of digital paywalls, which charge readers for access to previously free online news content, by major U.S. local newspapers as a negative shock to media accessibility. Focusing specifically on the disclosure dissemination role of the media, I find that after the adoption of digital paywalls, firms that receive persistent earnings announcement media coverage from their local newspaper experience reduced abnormal trading volume, which is driven by a reduction in abnormal retail trading volume. Additionally, these firms experience reduced liquidity, and slower speed of price discovery. These results are driven by low-visibility firms for which local investors, the likely readers of local newspapers, are more likely to be the marginal investor. Using a placebo test, I show it is unlikely the results are driven by an unmodeled factor. While prior literature has extensively documented the capital market effects of earnings announcement media coverage, my findings underscore that the effects of media coverage depend on the accessibility of media content.

Are SPAC Revenue Forecasts Informative?

With Michael Dambra and Omri Even-Tov
The Accounting Review (2023)
Media Mentions: Forbes, Wall Street Journal, Bloomberg Money Stuff, Harvard Law School Forum on Corporate Governance
Cited in
Proposed S7-13-22

This paper examines the informativeness of SPAC revenue forecasts. We document a positive association between the compound annual growth rate in revenue forecasts and abnormal returns, retail trading, and Twitter activity in the five-day window surrounding the disclosure of a merger announcement. In contrast, we find limited evidence that institutional investors and traditional information intermediaries respond to SPAC revenue forecasts. We also find evidence that SPAC revenue forecasts positively predict future operating underperformance, stock underperformance, and class action lawsuits. Overall, our results affirm the SEC’s concerns about the attractiveness of aggressive revenue projections to retail investors.

Fee The People: Retail Investor Behavior and Trading Commission Fees

With Omri Even-Tov, Shimon Kogan and Eric So
Under Review

We show retail investors are highly responsive to changes in trading commission fees. Using a triple-difference research design around the removal of fees for retail investors on the international retail broker platform, eToro, we show investors responded by trading approximately 30% more frequently, in smaller order sizes, and increasing portfolio turnover. Removing fees also spurred retail investors to reallocate their portfolios and diversify. Retail investors’ gross return performance did not significantly change around the fee removal despite trading more often, but retail investors earned significantly higher returns on a net basis after accounting for fees incurred in the pre-period. Finally, using demographic information, we show removing fees disproportionately affected inexperienced investors with lower deposit amounts and lesser technological sophistication both by expanding the extensive margin of investors and changing trading activity for the intensive margin of investors. Together, our results suggest commission fees play an influential role as a speed bump for retail investor participation, trading activity, and diversification.

The Blockchain Evolution and Revolution of Accounting

With Panos Patatoukas
Non-Refereed Book Chapter in Information for Efficient Decision Making: Big Data, Blockchain and Relevance (2021)

Blockchain, the technology behind digital currency, is a decentralized, distributed ledger that records transactions in digital assets. By authenticating and recording immutable transactions, decentralized blockchains perform the same function as many intermediaries in our society that establish trust and maintain integrity between transacting parties. Due to its natural relation to accounting and possible uses in accounting functions, business operations and financial services, it is important that accountants learn about blockchain technology and its opportunities and limitations. This chapter explores applications of blockchain technology in finance, auditing, financial reporting and supply chain. We first discuss the classification, characteristics and issuance of cryptoassets and the evolving regulatory environment. Then, we address potential innovative uses of blockchain in auditing and financial reporting, keeping in mind the limitations of its application. Finally, we explore how blockchain technology can enhance communication and trust between organizations in a supply chain or in contracting relationships.