The incremental effects of increased ICW reporting
| (1) | (2) | (3) | (4) | |
|---|---|---|---|---|
| Kacct+1 | Restatet+1 | Litigation riskt+1 | ROAt+1 | |
| Before1 | −0.001 (−0.066) | −0.015 (−0.613) | 0.030 (0.966) | −0.004 (−0.415) |
| Current&After1 | 0.011 (0.728) | 0.001 (0.058) | 0.000 (0.014) | 0.015** (2.236) |
| After2 | 0.014 (0.831) | 0.022 (1.022) | 0.001 (0.040) | 0.018** (2.318) |
| After3 | 0.027 (1.419) | −0.020 (−0.846) | −0.032 (−1.054) | 0.026*** (3.142) |
| After4 | 0.009 (0.435) | −0.027 (−1.076) | −0.023 (−0.698) | 0.012 (1.316) |
| Before1* change ICWt−1,t+1 | −0.015 (−0.501) | 0.052 (1.404) | −0.031 (−0.652) | −0.001 (−0.086) |
| Current&After1* change ICWt−1,t+1 | −0.039* (−1.818) | −0.061** (−2.290) | 0.046 (1.347) | −0.013 (−1.344) |
| After2* change ICWt−1,t+1 | 0.011 (0.149) | −0.031 (−0.374) | −0.121 (−1.134) | −0.030 (−1.040) |
| After3* change ICWt−1,t+1 | −0.029 (−0.434) | −0.041 (−0.471) | −0.018 (−0.155) | −0.034 (−1.103) |
| After4* change ICWt−1,t+1 | −0.028 (−0.498) | 0.048 (0.667) | 0.099 (1.061) | 0.004 (0.162) |
| 1/Asset | 1.846*** (3.517) | |||
| ΔRev-ΔAR | −0.029 (−1.293) | |||
| Constant | 0.263 (0.909) | −0.154 (−0.443) | 1.699*** (3.764) | −0.381*** (−3.079) |
| Adjusted R2 | 0.033 | 0.004 | 0.088 | 0.496 |
| Industry-fixed effects | Yes | Yes | Yes | Yes |
| Control variables | Yes | Yes | Yes | Yes |
| Observations | 1,030 | 1,030 | 1,030 | 1,030 |
| (1) | (2) | (3) | (4) | |
|---|---|---|---|---|
| Kacc | Restate | Litigation risk | ROA | |
| Before1 | −0.001 (−0.066) | −0.015 (−0.613) | 0.030 (0.966) | −0.004 (−0.415) |
| Current&After1 | 0.011 (0.728) | 0.001 (0.058) | 0.000 (0.014) | 0.015** (2.236) |
| After2 | 0.014 (0.831) | 0.022 (1.022) | 0.001 (0.040) | 0.018** (2.318) |
| After3 | 0.027 (1.419) | −0.020 (−0.846) | −0.032 (−1.054) | 0.026*** (3.142) |
| After4 | 0.009 (0.435) | −0.027 (−1.076) | −0.023 (−0.698) | 0.012 (1.316) |
| Before1* change ICW | −0.015 (−0.501) | 0.052 (1.404) | −0.031 (−0.652) | −0.001 (−0.086) |
| Current&After1* change ICW | −0.039* (−1.818) | −0.061** (−2.290) | 0.046 (1.347) | −0.013 (−1.344) |
| After2* change ICW | 0.011 (0.149) | −0.031 (−0.374) | −0.121 (−1.134) | −0.030 (−1.040) |
| After3* change ICW | −0.029 (−0.434) | −0.041 (−0.471) | −0.018 (−0.155) | −0.034 (−1.103) |
| After4* change ICW | −0.028 (−0.498) | 0.048 (0.667) | 0.099 (1.061) | 0.004 (0.162) |
| 1/Asset | 1.846*** (3.517) | |||
| ΔRev-ΔAR | −0.029 (−1.293) | |||
| Constant | 0.263 (0.909) | −0.154 (−0.443) | 1.699*** (3.764) | −0.381*** (−3.079) |
| Adjusted | 0.033 | 0.004 | 0.088 | 0.496 |
| Industry-fixed effects | Yes | Yes | Yes | Yes |
| Control variables | Yes | Yes | Yes | Yes |
| Observations | 1,030 | 1,030 | 1,030 | 1,030 |
Note(s): This table reports the dynamic changes of Kacc, Restate, Litigation risk and ROA around an intervention event by an activist hedge fund using the window period from two years prior to the event until four years after. Yeart-2 is benchmark year for this regression test. We interact a variable capturing the changes in reported ICW from the year prior to intervention to the year after the year intervention (Change ICWt−1,t+1). Industry-fixed effects (using Fama and French 48 industry classifications) are included in the regressions. Variable definitions can be found in Appendix 1. The superscripts ***, ** and * indicate the statistical significance at the 1, 5 and 10% levels, respectively
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