Join us Tuesday, March 9 at 4pm when Scott Dyreng of Duke University discusses his recent research on the cost of violating covenants on private debt.  The key message of the paper is that firms are willing to pay extra taxes in order to avoid debt covenant violations.  The study uses a somewhat unfamiliar data set (Loan Pricing Corporation’s DealScan database), and has an interesting policy twist — it applies to private firms as well as public firms.  This is timely given the recent announcement of a Blue Ribbon Panel to address accounting standards for private companies. ( Congratulations to Teri Yohn, who is a member of the panel!)

FASRI Roundtables tend to be rather informal and broad affairs, so you can expect us to talk about some of Scott’s other research.  I’m hoping we will also find time to talk about a more unusual paper of Scott’s, written with Bill Mayew and Christopher Williams on religious norms and financial reporting. From the abstract:

Social norms have been shown to influence economic decisions in a variety of contexts. We investigate how social norms stemming from religious adherence surrounding a firm’s headquarters affect financial reporting choices. We hypothesize and find that religious social norms are negatively associated with financial reporting aggressiveness. Relative to counties exhibiting low levels of religious adherence, firms operating in counties with high levels of religious adherence (1) are less likely to meet or beat analyst forecasted quarterly earnings, (2) have higher accrual quality, (3) have lower risk of fraudulent accounting, and (4) are less likely to restate their financial statements. Corroborating these results, we find that capital market participants respond to reported good news earnings in manor consistent with investor acknowledgement of the role of religious social norms curbing aggressive financial reporting. Finally, we extend our inferences to tax planning and find that religious social norms are also inversely associated with tax avoidance, where cash effective tax rates and tax haven usage act as proxies.

Please join us for what promises to be a very interesting conversation.  Details on participating are here.