Mattias Nilsson

Why Agency Costs Explain Diversification Discounts

We study diversification within the real estate industry because of its relative transparency: portfolio management of assets with well-defined market prices. Diversification is over property types and geographical regions. The major cause of the diversification discount is not diversification per se but anticipated costs due to rent dissipation in future diversifying acquisitions. Firms expected to pursue non-focusing strategies do indeed diversify more, are valued ex ante at a 20% discount over firms anticipated to follow a focusing strategy, are predominantly privately controlled and extensively using dual-class shares. The ex ante diversification discount is, therefore, a measure of agency costs.

The Euro and Corporate Financing

In this paper we study how the introduction of the euro has affected corporate financing in Europe. We use firm level data from eleven euro-countries as well as from a control group of five other European countries spanning the years 1991-2006. We show that firms from euro-countries that previously had weak currencies have increased both their equity and debt financing compared to the control group. We also show that results are stronger for firms that hail from less financially developed euro-countries, and that large firms from industries that are dependent on external financing have increased their debt financing more. These results support the hypothesis that improved access to capital markets in the euro-area has enabled increased external financing, especially debt financing.

Information Production and the Duration of Accounting Fraud

We evaluate the determinants of the duration of accounting misconduct for …rms which were issued an Accounting and Auditing Enforcement Release (AAER) by the SEC. We …nd a strong role for the …nancial reporting and auditing process in limiting the duration of frauds. Frauds are more likely to be terminated following the release of the audited annual statements in the 4 th …scal quarter rather than following any of the interim period reports, suggesting scrutiny and monitoring pressures are particularly large in this period. Managers more skilled at fraud appear to anticipate this increased scrutiny since frauds starting in the 1 st …scal quarter (i.e., as far away from the 4 th quarter as possible) tend to be longer than the ones starting in other …scal quarters. We also …nd that the presence of a new auditor as well as any form of explanation in the auditor’s statement increases the likelihood of termination. Moreover, we …nd that …nancial analyst following matter as analyst coverage reduce the chance of a longer misconduct spell, especially if the analyst is a specialist in the industry. However, the presence of too many analysts covering the same …rm signi…cantly reduce the value of analyst coverage at the margin, independent of the analysts’industry knowledge. In terms of …rm characteristics, we show that pro…table and high stock return …rms are able to maintain accounting misconduct over longer time periods. In terms of misconduct characteristics, we …nd that

Information Production, Misconduct Effort, and the Duration of Financial Misrepresentation

We evaluate the determinants of the duration of accounting misconduct for …rms which were issued an Accounting and Auditing Enforcement Release (AAER) by the SEC. We …nd a strong role for the …nancial reporting and auditing process in limiting the duration of frauds. Frauds are more likely to be terminated following the release of the audited annual statements in the 4 th …scal quarter rather than following any of the interim period reports, suggesting scrutiny and monitoring pressures are particularly large in this period. Managers more skilled at fraud appear to anticipate this increased scrutiny since frauds starting in the 1 st …scal quarter (i.e., as far away from the 4 th quarter as possible) tend to be longer than the ones starting in other …scal quarters. We also …nd that the presence of a new auditor as well as any form of explanation in the auditor’s statement increases the likelihood of termination. Moreover, we …nd that …nancial analyst following matter as analyst coverage reduce the chance of a longer misconduct spell, especially if the analyst is a specialist in the industry. However, the presence of too many analysts covering the same …rm signi…cantly reduce the value of analyst coverage at the margin, independent of the analysts’industry knowledge. In terms of …rm characteristics, we show that pro…table and high stock return …rms are able to maintain accounting misconduct over longer time periods. In terms of misconduct characteristics, we …nd that

Information Production, Misconduct Effort, and the Duration of Corporate Fraud

We evaluate the determinants of the duration of accounting misconduct for …rms which were issued an Accounting and Auditing Enforcement Release (AAER) by the SEC. We …nd a strong role for the …nancial reporting and auditing process in limiting the duration of frauds. Frauds are more likely to be terminated following the release of the audited annual statements in the 4 th …scal quarter rather than following any of the interim period reports, suggesting scrutiny and monitoring pressures are particularly large in this period. Managers more skilled at fraud appear to anticipate this increased scrutiny since frauds starting in the 1 st …scal quarter (i.e., as far away from the 4 th quarter as possible) tend to be longer than the ones starting in other …scal quarters. We also …nd that the presence of a new auditor as well as any form of explanation in the auditor’s statement increases the likelihood of termination. Moreover, we …nd that …nancial analyst following matter as analyst coverage reduce the chance of a longer misconduct spell, especially if the analyst is a specialist in the industry. However, the presence of too many analysts covering the same …rm signi…cantly reduce the value of analyst coverage at the margin, independent of the analysts’industry knowledge. In terms of …rm characteristics, we show that pro…table and high stock return …rms are able to maintain accounting misconduct over longer time periods. In terms of misconduct characteristics, we …nd that