A flagship event organised by the SMU School of Accountancy Research (SOAR) Centre, this year’s SOAR Annual Symposium was a landmark affair that aggregated cutting-edge research and innovative ideas from top accounting scholars.Held virtually from 16 to 17 December 2021, the event drew professors from SMU School of Accountancy (SoA) as well as leading global institutions to interact and share ideas through presentations of research papers and intellectual interactions.The SOAR Annual Symposium delves into a range of topics aimed at driving meaningful impact in the accounting industry, as well as the broader economy and a society in flux: The 2021 event topics ranged from the consequences of virtual shareholder meetings and the importance of governance transparency in organisations, to the social and regulatory factors of crypto-currency adoption.
How Social Connections Affect Judicial Impartiality
In an ideal world, judges are impartial decision-makers in the pursuit of justice, regardless of their personal network.However, the paper Just Friends? Managers’ Connections to Judges examines the impact of social connections between judges and executives in relation to the outcomes of Securities Class Action Litigation (SCAL), and how impartial judges truly are during evaluations.
Paper presentation by Associate Professor Sterling Huang
Presented by Dr Sterling Huang, SMU Associate Professor of Accounting and Co-Director of the Master of Science in Accounting (Data & Analytics), the paper finds that “judicial biases are related to judicial discretion, which in turn can influence judicial outcomes favourably to those firms with ‘friends’ in the courthouse”.
says Dr Huang, whose co-authors include Sugata Roychowdhury of Northwestern University, Ewa Sletten of Ohio State University and Xu Yanping of Jinan University.
Prior research on lawsuits in a corporate setting shows limited evidence of judicial biases and impartiality — apart from a finding that inexperienced judges lead to a more inefficient outcome in bankruptcy court.
To fill the gap, the authors incorporate the concept of social connections because literature has shown that social connections matter, especially in strategy, accounting, and finance.
While there are many forms of social connections, the paper focuses on school ties – for example, social networks arising from MBA, law school, medical school and other prestigious programmes, as these educational links have been established long before the students step into the workforce and are thus, “relatively exogenous”.
The paper then examines the impact of social connections of federal judges and executives alongside the outcome of class action lawsuits, and its implications — such that if social connections do impact the litigation outcome, how do such expectations alter the behaviours of the executives.
Dr Huang explained that through the study of 1,756 lawsuits and 1,425 unique firms in their final sample, the exposed litigation outcomes for lawsuits with judges that have social connections with executives tend to have “higher dismissal rate (an increase by 30 percent), shorter trial period (a decrease by 25 percent), lower payouts or reduced settlement amounts (a decrease of approximately 40 percent)”.
In short, the results demonstrate how social connections have a material impact on the judicial outcome of a lawsuit.
In addition, the authors also find that judge ideology impacts the settlement amount and that social connections continue to have incremental impacts.Though other factors such as judges holding stock in litigants can also influence the outcome of a lawsuit, Dr Huang adds.
Interestingly, the paper finds no direct evidence to show that there is an increase in misconduct among socially connected judges and executives.
In fact, the paper finds that managers in connected firms have a higher disclosure rate, and are willing to issue more long-term walk-up forecasts and more short-term walk-down forecasts.Thus, there is no evidence of increased misconduct among said connected firms, regardless of the outcome being favourable or linked.
How Corporate Tax Subsidies Bring About Increased Quantity and Improved Quality of Innovations
The paper Corporate Tax Subsidies, Local Spillover and Corporate Innovation was presented by Shaphan Ng, Assistant Professor of Accounting, SMU.He co-authored the paper with Lee Yoojin of the College of Business, California State University, Long Beach and Aruhn Venkat of McCombs School of Business, University of Texas at Austin.
Paper presentation by Assistant Professor Shaphan Ng
Its objective is to examine whether place-based, firm-specific tax subsidies can affect innovation, specifically in the spillover effect from said tax subsidies on the innovation of local firms operating within these subsidised counties.
Tax subsidies are often seen as a rather controversial measure as they can be costly and the evidence for the relationship between subsidies and business establishments are mixed.This, in turn, may lead to negative public perception as tax subsidies may come across as a form of handouts to large corporations.
But tax subsidies are becoming increasingly important as a state fiscal policy tool, as many policymakers are interested in growing innovation, which can increase economic returns for the jurisdiction and its standard of living.Studies estimate that states have spent roughly US$95 billion on tax subsidies in 2019, and the amount of subsidies has tripled over the last three decades.
To back their research hypothesis, the authors collected data consisting of megadeals (deals that are worth at least US$50 million) from 1990 to 2016, retrieved from the Global Corporate Patents Database and Patentsview.org, featuring a final sample pool of about 1.5 million firm-county-year observations.
The paper’s findings show that business tax and job grants components of corporate subsidies are positively associated with local corporate innovation.Overall, the authors have found that corporate tax subsidies provide innovative benefits to local companies, the subsidy counties and the subsidy firms themselves, proving the theory right.
This is because tax subsidies can be used to attract large firms to a county.And when these firms invest in the county, the local firms can exploit and incorporate this new knowledge into their innovation processes, which in turn drives local innovation.This reinforces prior studies that have shown that intangible spillovers can arise from employees and firms sharing information when they are in close proximity.
“This can be seen in the example of how after the state of Nevada awarded Telsa tax subsidies to build its Gigafactory in Storey County, local corporation Switch, a data provider, also benefitted through the technology and knowledge spillover from the large firm,” explains Dr Ng.
On the other hand, tax subsidies can also induce the subsidy firms to demand inputs from parties such as scientists and engineers to assist in their quest for innovation.
This “increase in demand for inputs can drive up the prices for local input, which in turn can make it expensive for local firms to innovate” as they are unable to pay the salaries that these experts command — whereas larger companies that have received subsidies have the deep coffers to do so.The result: It leads to “a decrease in local innovation”, he adds.
But more importantly, the paper expands on the existing literature on place-based firm-specific tax subsidies that typically focus on investment and employment effects.Here, the authors take a deep dive into documenting innovation consequences of tax subsidies, focusing on the different components of tax subsidies and how they can affect local corporate innovation.These components include business tax, sales tax, property tax and even cash grants.
This, in turn, begets the question of whether tax subsidies affect the quality of innovation and not just the quantity.To illustrate this, the authors use three points of measurement in the discussion: Patent novelty, economic value of the patents and patent originality.
The findings show that there is indeed a positive association between local corporate tax subsidies and the subsidy firm innovation.For instance, “job grants allow subsidy firms to train and hire local workforce” while “business tax subsidies can incentivise the subsidy firms to locate innovative input in the county”, which in turn, allows local firms to adopt and benefit from this knowledge spillover, and increase local innovation.
Thus, from a policymaking perspective, the authors can “provide policy-relevant evidence” that corporate tax subsidies can provide an important benefit to the county and local firms.
The 2021 Symposium also featured the following research presentations by other scholars from top universities around the world:
Virtual Shareholder Meetings
Authors: Francois Brochet (Boston U), Roman Chychyla (U Miami) and Fabrizio Ferri (U Miami and ECGI)
Presenter: Francois Brochet (Boston U)
Governance Transparency and Firm Value: Evidence from Korean Chaebols
Authors: Akash Chattopadhyay (U Toronto), Sa-Pyung Sean Shin (NUS) and Charles Wang (Harvard)
Presenter: Charles Wang (Harvard)
Inclusive Mangers
Authors: Wei Cai (Columbia), Ethan Rouen (Harvard) and Yuan Zou (Harvard)
Presenter: Yuan Zou (Harvard)
Anti-Corruption Laws and Geographic Segment Reporting
Authors: Donal Byard (CUNY Baruch), Heemin Lee (CUNY Baruch), Edward Xuejun Li (CUNY Baruch) and Amanda Sanseverino (Manhattan College)
Presenter: Amanda Sanseverino (Manhattan College)
Sequential Reporting Bias
Authors: Cyrus Aghamolla (Minnesota), Ilan Guttman (NYU) and Evgeny Petrov (HKUST)
Presenter: Evgeny Petrov (HKUST)
Regulation, Trust and Cryptocurrency Adoption
Author: Vicki Tang (Georgetown)
Presenter: Vicki Tang (Georgetown)
Click [here](//accountancy.smu.edu.sg/conference/soar-accounting-symposium-2021?itemid=1831) for full programme of SOAR Accounting Symposium 2021.
Last updated on 28 Dec 2021 ..
