October 25, 2005
Corporate Law Paper Downloads
Posted by Gordon Smith

I have been neglecting the top corporate law paper downloads, so let me try to restart this train. The top papers for this week are listed below, with the number of downloads over the past 60 days in parentheses. Ron Gilson seems to have a stranglehold on the top position, and Vic has been locked in the Top 5 since we started this feature. A tie at #5 features Steve Bainbridge and an interesting paper by my wife's cousin's husband, Jeff Doyle. (Hi, Jeff!)

That paper deals with the quality of accounting accruals and concludes, "internal control appears to be one of the fundamental drivers of accruals quality, with weaknesses indicating poorly estimated accruals that are not realized as cash flows." By the way, this paper was made possible by Sarbanes-Oxley, which forced firms to report weaknesses in internal controls. Back in April, I caught a lot of grief for this post, in which I criticized the accounting profession for dragging its feet on internal controls. This paper confirms what we all suspected, namely, that the accounting numbers are importantly influenced by the quality of internal controls:

[O]ur paper provides evidence on the effectiveness of Sarbanes-Oxley, specifically Sections 302 and 404. These sections have been among the most cumbersome sections of the new legislation, with many critics alleging that the compliance costs far exceed any benefits. This paper provides evidence of a potential benefit of these sections by showing that material weakness disclosures are associated with real economic events (i.e., higher accruals quality). Moreover, these required disclosures point out to investors and regulators which firms may have lower accrual quality—beyond that predicted by innate firm characteristics. This finding complements recent studies that show significant market reactions to these disclosures ... and provides evidence on one element these disclosures might be conveying—that these firms are more likely to have poor accruals quality.

Obviously, this does not resolve the issue of the proper level of regulation of internal controls, but it does highlight the importance of the issue.

Ok, here are the papers for this week:

1. (331) Controlling Shareholders and Corporate Governance: Complicating the Comparative Taxonomy, Ronald J. Gilson, Stanford Law School.

2. (237) Do Managers Withhold Bad News?, S.P. Kothari, Massachusetts Institute of Technology (MIT) Sloan School of Management; Susan Shu, Boston College; Peter D. Wysocki, MIT Sloan School of Management.

3. (205) Brand New Deal: The Google IPO and the Branding Effect of Corporate Deal Structures, Victor Fleischer, University of California, Los Angeles School of Law.

4. (181) Insider Trading, News Releases and Ownership Concentration, Jana P. Fidrmuc, Finance Group, Warwick Business School; Marc Goergen, Sheffield University Management School; Luc Renneboog, Tilburg University - Department of Finance.

5. (176) Accruals Quality and Internal Control over Financial Reporting, Jeffrey T. Doyle, University of Utah - David Eccles School of Business; Weili Ge, University of Michigan - Ross School of Business; Sarah E. McVay, New York University - Leonard N. Stern School of Business.

5. (176) Shareholder Activism and Institutional Investors, Stephen M. Bainbridge, University of California, Los Angeles School of Law.

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