This dissertation is comprised of three essays relating to empirical corporate disclosure and compensation contracting. The first essay examines peer effects in corporate disclosure decisions. I define peer effects as the average behavior of a group influencing an individual group members behavior. Using instrumental variable estimation to eliminate the effects of common shocks, I find that firms are more likely to make disclosures when more peer firms do so, and the marginal effect exceeds that of most firm-specific disclosure determinants studied in the prior literature. I corroborate the existence of peer effects by providing evidence that peer effects are absent when the disclosure is non-discretionary. In cross-sectional tests, I find that peer firm disclosure has a stronger impact on a firms disclosure decisions when the degree of strategic interactions between the firm and its industry peers is higher. I also provide evidence that industry followers respond to industry leaders disclosures but not vice versa. Finally, I examine capital-market effects and find that disclosure motivated by peers is associated with improved stock liquidity. Overall, this study highlights an important disclosure determinant and suggests that peer firm disclosure shapes the corporate information environment. The second essay empirically investigates the Relative Performance Evaluation (RPE) hypothesis in CEO compensation contracts (co-authored with Sudarshan Jayaraman and Todd Milbourn). RPE theory predicts that firms filter out common performance while evaluating CEOs, and that the extent of filtering increases with the number of peers. We hypothesize that inaccurate classification of peers explains prior inconclusive evidence. Following Hoberg and Phillips (2015), we define peers based on 10-K product descriptions and find consistent evidence (i) firms on average filter out common performance, (ii) filtering increases with the number of peers, and (iii) firms completely filter out common performance in the presence of many peers. We conclude that a key identification strategy to testing RPE lies in accurately defining peers. Lastly, the third essay examines the characteristics of management earnings guidance issued right before the compensation committee meetings (co-authored with Xiumin Martin and Jun Yang). Corporate boards determine performance metric for CEOs annual incentive plans at compensation committee meetings at the beginning of a fiscal year. We find that management earnings guidance issued immediately before the meetings tends to be lower than the prevailing consensus analyst forecasts. This downward bias is only present when the performance metric is linked to earnings such as earnings-per-share (EPS). We do not observe downward bias when revenue serves as the performance metric. Also, pessimistic earnings guidance is more pronounced when the prevailing consensus analyst forecast is much more opportunistic. The downward bias is also greater when institutional ownership is more concentrated. Taken together, our findings suggest that managers have incentives to issue pessimistic earnings guidance before compensation committee meetings and that analyst earnings forecasts might serve as an anchor for the compensation committee to defend its choice of performance metric under shareholder pressures.

We posit and find an effect of disclosure and analyst reporting regulations implemented from 2000 through 2003 (including Regulation Fair Disclosure, the Sarbanes-Oxley Act, and the Global Settlement Act) on the importance of analyst and forecast characteristics for analyst forecast accuracy. Following the enactment of these regulations, more experienced analysts and All-Star analysts do not maintain their superior forecast accuracy, and analysts employed by large brokerage houses perform worse than other analysts. In addition, we find a decrease in the importance of analyst effort, the number of industries and firms followed, days elapsed since the last forecast, and forecast horizon. While the importance of bold upward forecast revisions does not change, bold downward revisions lose their relevance for forecast accuracy after 2003. Finally, we find an increase in the important of prior forecast accuracy. We find that the importance of these characteristics varies with the precision of publicly available information. Specifically, the decrease in the importance of most analyst and forecast characteristics and the increase in the importance of prior forecast accuracy are greater when the precision of publicly available information is low. Overall, our results suggest that the positive effects of experience, effort, brokerage house size, and All-Star status on forecast accuracy in the pre-regulation period were because of the information advantages that these analysts enjoyed (rather than their ability to generate private information). In contrast, our results suggest that prior forecast accuracy is related to analysts' ability to generate private information.

This paper examines if the level of voluntary disclosure affects the association between current returns and future earnings. Economic theory suggests that firms might find it advantageous to provide additional pieces of information (i.e., voluntary disclosure) to investors and analysts (Verrecchia 1983). Our results indicate that more voluntary disclosure does not improve the association between current returns and future earnings; i.e. current returns do not reflect more future earnings news. This finding raises the question whether voluntary information in the annual report contains value relevant information about future earnings or if investors are simply not capable of incorporating voluntary information in the firm value estimates. Key words: Disclosure, future earnings, informativeness.