High-quality corporate reporting is crucial to the well-functioning of markets. Conceptually, high-quality reporting is a function of firms’ internal information provision, managers’ accounting choices, and auditors’ assurance processes. Bischof and Vetter understand these factors as resulting in bundles of tasks, each requiring distinct skills of the managers involved.

• Research Question

  How do managers arrive at their disclosure decisions and what are the economic consequences of these decisions?

• Research Motivation

  High-quality corporate reporting is crucial to the well-functioning of markets. Conceptually, high-quality reporting is a function of firms’ internal information provision, managers’ accounting choices, and auditors’ assurance processes. Building on the insights from this project’s evidence from the first funding period on the role of individual managers in corporate reporting, we understand these input factors as bundles of tasks, each requiring distinct skills of the managers involved. While it is generally acknowledged that internal tasks are a potentially limiting factor in the production of information, empirical research on the tasks and skills that map into high-quality financial (and nonfinancial) reporting remains scarce, primarily due to a general lack of data.

• Research Program

  We aim to study the revolving role of audits in response to changes in banks loan approval processes. The U.S. lending market has changed considerably over the past 25 years, both in terms of the types of lenders providing credit and the borrowers’ loan approval processes. Motivated by these developments, we examine changes in the use of verified financial statements (VFS) in this market, where borrower audits are not mandated. In the first step, we aim to estimate local lending sensitivities to CPA supply by lender type and over time. In the second step, we link the results to state-level regulatory and technological developments that raised the cost of CPA services and introduced substitute information sources, respectively. The results will help illustrate an implication of positive accounting theory—shifts in CPA service supply and innovations in banks’ loan approval processes may render VFS less efficient for contracting.

• Research Contribution

  Leveraging both the infrastructure and expertise bundled in C02 “Open Science Data Center” as well as the primary data collected in C01 “German Business Panel”, this project aims to contribute to the A-projects’ overall mission of understanding the key factors driving corporate transparency by examining the input into firms’ disclosure decisions.