Robert J. Bloomfield’s research while affiliated with Cornell College and other places

The papers in this volume were published through a Registration‐based Editorial Process (REP). Authors submitted proposals to gather and analyze data; successful proposals were guaranteed publication as long as the authors lived up to their commitments, regardless of whether results supported their predictions. To understand how REP differs from the Traditional Editorial Process (TEP), we analyze the papers themselves; conference comments; a survey of conference authors, reviewers, and attendees; and a survey of authors who have successfully published under TEP. We find that REP increases up‐front investment in planning, data gathering, and analysis, but reduces follow‐up investment after results are known. This shift in investment makes individual results more reproducible, but leaves articles less thorough and refined. REP could be improved by encouraging selected forms of follow‐up investment that survey respondents believe are usually used under TEP to make papers more informative, focused, and accurate at little risk of overstatement. This article is protected by copyright. All rights reserved

In the published proceedings of the first Journal of Accounting Research Conference, Vatter [1966] lamented that "Gathering direct and original facts is a tedious and difficult task, and it is not surprising that such work is avoided." For the fiftieth JAR Conference, we introduce a framework to help researchers understand the complementary value of seven empirical methods that gather data in different ways: prestructured archives, unstructured ("hand-collected") archives, field studies, field experiments, surveys, laboratory studies, and laboratory experiments. The framework spells out five goals of an empirical literature and defines the seven methods according to researchers' choices with respect to five data gathering tasks. We use the framework and examples of successful research studies in the financial reporting literature to clarify how data gathering choices affect a study's ability to achieve its goals, and conclude by showing how the complementary nature of different methods allows researchers to build a literature more effectively than they could with less diverse approaches to gathering data. © 2016 The Accounting Research Center at the University of Chicago Booth School of Business.

The stated goals of the SEC are to protect investors, maintain orderly markets and facilitate capital formation. These goals can be achieved with very light regulation if, as assumed by traditional economic theory, investors process information costlessly and protect themselves from informational disadvantages, and firms optimally balance the costs and benefits of committing to make their reports reliable. A growing body of research demonstrates that light regulation fails to achieve the SEC 's goals, because investors find information processing costly and fail to protect themselves. After reviewing theory and prior evidence, I discuss new lessons learned from Jiang, Petroni, and Wang ( ), who show that Pink Sheets ® reduced the liquidity of firms with low reporting quality and increased the liquidity of firms with high reporting quality, merely by highlighting the quality of their listed firms’ disclosure. While the Pink Sheets ® innovation might have occurred through many causal channels, all of them entail a violation of costless processing and self‐protection, and lead to the conclusion that this lightly regulated market did not initially meet the stated goals of the SEC . I conclude by arguing that markets can achieve the SEC 's goals only if they exhibit a particularly strong version of “dynamic” market efficiency, which requires that each individual trade on the path to even incomplete revelation occurs at the then‐optimal price. Because dynamic efficiency is unlikely, we should stop being surprised to see evidence that lightly regulated markets fall short on key dimensions. Instead, we should use our well‐developed understanding of market inefficiency to guide regulation.

Taylor and Verrecchia (2015) show that idiosyncratic risk can be priced in efficient but imperfectly competitive equity markets. We discuss how the model is structured, how it might apply to the pricing of financial reporting quality, and how empiricists might test its predictions.

In an environment where capital market participants collectively possess superior information about a decision faced by a firm manager, we use an experimental market to analyze the effectiveness with which the market communicates this information to the manager through stock price. We do so in a setting in which an inherent conflict exists between pricing that communicates information to the manager and pricing that accurately values the firm given the manager’s optimal response to the communicated information. Despite this conflict, we find that when the manager initially selects a low-value project, the stock price from the capital market is lower than the price that accurately values the firm given the manager’s optimal response to this price. Because managers often respond to this lower stock price by switching to a higher value project, firms with the lowest initial stock price generate the greatest future returns. Consistent with behavioral theory, we further highlight that imposing a small cost on the manager for switching projects decreases the communicative effectiveness of price leading to lower future returns in response to a low stock price. Collectively, our results potentially contribute to a better understanding of the seemingly anomalous book-to-market effect and results from the executive compensation literature.

In the published proceedings of the first Journal of Accounting Research Conference, Vatter [1966] lamented that “Gathering direct and original facts is a tedious and difficult task, and it is not surprising that such work is avoided.” For the fiftieth JAR Conference, we introduce a framework to help researchers understand the complementary value of seven empirical methods that gather data in different ways: prestructured archives, unstructured (“hand-collected”) archives, field studies, field experiments, surveys, laboratory studies, and laboratory experiments. The framework spells out five goals of an empirical literature and defines the seven methods according to researchers’ choices with respect to five data gathering tasks. We use the framework and examples of successful research studies in the financial reporting literature to clarify how data gathering choices affect a study's ability to achieve its goals, and conclude by showing how the complementary nature of different methods allows researchers to build a literature more effectively than they could with less diverse approaches to gathering data.

We present 60 experienced credit analysts with financial information for two firms: one that mainly outsources production and one that does not. We find that analysts are better able to identify firm characteristics that make an outsourcer more creditworthy when those characteristics are presented in the same general section of a financial report; either on the face of the financial statements or in the footnotes. Such coordinated presentation reduces the cognitive load necessary for integrating the related information and forming a meaningful mental model of each firm. Our results suggest that if standard setters are going to require more detailed disclosures, coordinated presentation of related decision-useful information in the same section of a firm's financial report may benefit users, regardless of whether the information is recognized on the face of the financial statements or disclosed in the notes. Supplemental analysis cautions standard setters, however, to consider whether requiring more detailed disclosures provides an incremental benefit over how firm's disclose information today. This article is protected by copyright. All rights reserved.

Two laboratory experiments on a single‐echelon inventory task show that inventory durability interacts with transit lags to create order volatility that exceeds demand volatility. Thus, inventory durability and transit lags cause managers to deviate from inventory decision optimality. Durability creates a large increase in order volatility because players adjust orders insufficiently to reflect current inventory and backlogs, much as they adjust orders insufficiently to reflect holding and backlog costs in newsvendor studies (e.g., Schweitzer and Cachon 2000). Transit lags exacerbate non‐optimal ordering by interfering with players' ability to correct prior errors. Our results suggest that non‐optimal inventory decisions can be driven by inventory and supply chain characteristics, even in the absence of the coordination and information sharing problems studied by Croson et al. (2005) and Sterman (1989a,b). We also examine the influence of features related to personality. We find little evidence that the interactive effects of durability and transit lags are altered by need for cognition, impulsiveness, or locus of control, suggesting that these features make supply chain management extremely difficult. These results imply that retailers and their upstream partners must consider the characteristics of their product and supply chains when interpreting demand signals received from downstream partners.

SYNOPSIS This paper uses a Pragmatic theory of language (drawn from philosophy and linguistics) to diagnose the causes of excessive financial disclosure and propose a regulatory solution. The diagnosis is that existing disclosure regulations are one sided, effectively encouraging firms to disclose any information that might be relevant, but failing to discourage disclosure of information that adds little to what investors already know. This one-sidedness limits investors' ability to draw inferences that items the firm chooses not to disclose are not newsworthy (an inference Pragmatic theorists call “implicature”). The solution is to encourage or require firms to supplement comprehensive disclosures with an “elevated” disclosure that is brief enough to force firms to be selective in choosing what information to include. Regulations can enhance implicature through rules that prohibit firms from elevating disclosures that are less newsworthy than disclosures that are not elevated.

type="main"> Using a laboratory market, we investigate how the ability to hide orders affects traders’ strategies and market outcomes in a limit order book environment. We find that order strategies are greatly affected by allowing hidden liquidity, with traders substituting nondisplayed for displayed shares and changing the aggressiveness of their trading. As traders adapt their behavior to the different opacity regimes, however, most aggregate market outcomes (such as liquidity and informational efficiency) are not affected as much. We also find that opacity appears to increase the profits of informed traders but only when their private information is very valuable.