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The Accounting Review, forthcoming The Securities and Exchange Commission (SEC) regulates and monitors, under the securities laws, the financial reporting and disclosure of SEC registrants (companies) to increase transparency and protect investors. The securities laws also consider the companies’ interests and allow them to make confidential treatment requests to redact certain information in SEC filings and not publicly disclose such information for a specified period of time, if the information is both proprietary and immaterial to investors - proprietary in the sense that disclosure may reveal trade secrets or information about profitability that harm companies’ competitiveness. There has been an overall uptick in confidential treatment requests in recent years. Although prior studies provide evidence that companies use redactions to protect proprietary information from their competitors, anecdotal evidence suggests otherwise. For example, Tesla, in the two fiscal quarters ending June 30 and September 30, 2017, in which the company lost $955 million, made an unusually high number of confidential treatment requests, allowing the company to generate almost 3,000 redactions. In another example, TheStreet questioned SolarCity’s redactions in 2015, speculating that the withheld information was unfavourable to investors. In yet another example, Asensio.com questioned the Universal Display Corporation’s heavy redaction in its supply and licensing agreements with Samsung, which potentially allows the company to withhold unfavourable information regarding its red emitter sales. |
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Dichu Bao, Deakin University |
This paper looks into the incentives of firms in redacting information from material contracts. The authors propose firms also redact information to conceal bad news. To capture bad news possessed by managers, they use residual short interest as a proxy measure. Residual short interest can capture managers’ private negative information because a significant overlap exists in managers’ and short sellers’ information sets, as documented by prior studies. Following Bao, Kim, Mian, and Su (2019), they estimate a residual measure of the short-interest level that is purged of factors that are not reflective of bad news.
To ensure that residual short interest captures managers’ private negative information, the authors link it to future returns and managerial actions that reflect their private information. They show that residual short interest predicts negative future abnormal returns, suggesting that it indeed captures negative information that is yet to be reflected in stock prices. They also show that residual short interest is negatively associated with net insider buying and stock repurchases and positively associated with material financial misstatements that are subsequently restated downwards. These results validate residual short interest as a proxy for managers’ private negative information, which is reflected in their actions.
Turning to their main analysis, the authors find that residual short interest is positively associated with the frequency of confidential treatment requests filed in the following quarter. Considering that redactions are also motivated by concerns of disclosure revealing proprietary information to competitors, they control for product market and technological competition. They also find that the positive association is more pronounced for firms with lower litigation risk, higher CEO equity incentives, and lower external monitoring by institutional investors, consistent with managers’ personal interests and agency conflicts increasing their tendency to withhold negative information through confidential treatment requests.
The authors also find that firms making more confidential treatment requests have greater stock price crash risk in the following year, and the greater crash risk is driven primarily by confidential treatment requests made when residual short interest is high. They also find that confidential treatment requests filed when residual short interest is high are negatively associated with future accounting and stock performance, suggesting that redacted information is bad news. By contrast, confidential treatment requests made when residual short interest is low are positively associated with future accounting and stock performance, indicating that such redactions are made to protect proprietary information. Taken together, their results suggest that not all confidential treatment requests are made to protect proprietary information, and managers redact information from material contracts to conceal bad news.
The results in this study provide important policy implications given that the FAST Act Modernization and Simplification of Regulation S-K, which became effective April 2, 2019, now permits firms to redact information from material contracts without seeking the SEC’s in-advance approval. This streamlined process may provide more opportunities for firms to conceal bad news.
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Journal of Applied Psychology, forthcoming Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678) integrative theory based on meta-analysis and model testing has served as the foundation for the authors' understanding of training motivation. However, the applicability of the theory today may be limited for several reasons. There has been significant growth in training motivation research since Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678) proposed and tested their theory. Also, advances in meta-analysis and model testing allow for a more complete and rigorous test of the theory than was previously possible. As a result, the authors propose and test a contemporary and comprehensive theory of training motivation based on Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678) and other studies conducted over the last 20 years. To do so, they conducted an updated meta-analytic review of 167 independent studies and tested a mediation model of training motivation theory using both conventional meta-analytic structural equation modeling (MASEM) and full-information MASEM (FIMASEM). The results support a partially mediated model of training motivation that includes additional antecedents (e.g., openness to experience, extroversion, agreeableness, and goal orientation) and learning outcomes (e.g., turnover intentions and job satisfaction) not included in Colquitt et al. (Journal of Applied Psychology, 2000, 85, p. 678). In addition, the authors conducted exploratory analyses to understand the relative importance of the antecedents of both motivation to learn and learning outcomes and the moderating role of training and studying characteristics on the relationships between motivation to learn and its antecedents and consequences. Finally, they discuss the implications of the results for theory, practice, and future research directions. |
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Seunghoo Chung, The Hong Kong Polytechnic University |
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Journal of Applied Psychology, forthcoming Conventional research on gratitude has focused on the benefits of expressing or experiencing gratitude for the individual. However, recent theory and research have highlighted that there may too be benefits associated with receiving others’ gratitude. Grounded in the Work-Home Resources model, the authors develop a conceptual model to understand whether, how, and for whom service providers (i.e., healthcare professionals) benefit from receiving service beneficiaries’ (i.e., patients) gratitude in their daily work. They hypothesize that perceived gratitude from service beneficiaries enhances service providers’ relational energy at work, which spills over to benefit their family lives later in the day. In addition, they hypothesize that the effect of gratitude on relational energy and its subsequent spillover effect to the family are contingent on employees’ occupational identity. Two experience sampling studies with data collected from healthcare professionals and their spouses for two consecutive weeks (each) provided support for the hypothesized model. The authors conclude by discussing the theoretical and practical implications of their work. |
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Pok Man Tang, Texas A&M University Remus Ilies, Bocconi University and National University of Singapore Sherry S. Y. Aw, James Cook University Singapore Katrina Jia Lin, The Hong Kong Polytechnic Universit Randy Lee, Lingnan University Chiara Trombini, INSEAD, Singapore |
