Professor Catherine Schrand, The Wharton School, University of Pennsylvania
Our paper examines when firms in an industry will collectively withhold industry-wide bad news, which is different from the type of news that traditional models consider. Using a strategic game framework, we predict that capital market pressure and externality costs associated with being the second mover to disclose could make cooperative withholding a difficult equilibrium to attain. Cooperative withholding is possible, but whether it is achievable depends on the structure of the industry, the nature of industry news, and the extent to which these factors are common knowledge. We empirically document cases of increased intra-industry opacity in annual 10-Ks, controlling for changes in firm fundamentals including complexity. Strategic withholding is more likely in industries with greater negative tailrisk, greater equity incentives, and industry trade associations that foster interpersonal connections. The results have implications for understanding when economic forces are sufficient to generate voluntary disclosure of industry-wide adverse conditions.
Catherine Schrand is the John C. Hower Professor and Professor of Accounting at the Wharton School, University of Pennsylvania, where she started her academic career in 1994. She teaches financial accounting at the undergraduate and graduate levels. She has a BBA from the University of Michigan and an MBA and PhD from the University of Chicago. She was a staff auditor and audit manager for KPMG Peat Marwick.
Catherine’s research interests are related to firms’ risk management practices, the effects of disclosure on a firm’s cost of capital, and earnings quality. She has published research articles in academic journals including The Accounting Review, Contemporary Accounting Research, Journal of Accounting and Economics, Journal of Finance, Journal of Financial Economics, and Review of Accounting Studies. She has also published practitioner-oriented articles based on her research for Risk magazine and several textbooks. She serves on the editorial boards of the Journal of Accounting and Economics, Journal of Accounting Research, and Journal of Financial Services Research, and she is an ad hoc reviewer for numerous accounting and finance journals. She is the co-author of a monograph on earnings quality for the CFA Institute (formerly the Association for Investment Management and Research (AIMR) and for the Journal of Accounting and Economics.
Catherine is the past president of the American Accounting Association (AAA) Financial Accounting Reporting Section and she has served on or chaired several committees of the AAA including the Financial Accounting Standards Committee. She has served on 16 dissertation committees at the Wharton School (Chair of nine).