Pengkai Lin

Assistant Professor of Accounting (2021 - present)

School of Accountancy

Singapore Management University

Email: pklin at smu.edu.sg

Google Scholar CV

Research Interests

Corporate Disclosure, Information Processing, Capital Markets

Publications

Marijuana Liberalization and Public Finance: A Capital Market Perspective on the Passage of Medical Use Laws, with Stephanie F. Cheng and Gus De Franco, 2023, Journal of Accounting and Economics.  

“High” Innovators? Marijuana Legalization and Regional Innovation, with Stephanie F. Cheng, Yinliang (Ricky) Tan, and Yuchen Zhang, 2023, Production and Operations Management.

Riding the Blockchain Mania: Public Firms’ Speculative 8-K Disclosures, with Stephanie F. Cheng, Gus De Franco, and Haibo Jiang, 2019, Management Science.

Working Papers

Prompting Information Acquisition as a Newswire Journalist: Evidence from Newswire Stories around Earnings Announcements, with Jeremiah Green and Nina Xu, R&R.

We study how human newswire journalists write earnings announcement stories to prompt information acquisition. Because managers tend to hide or withhold bad news, we hypothesize that human newswire journalists find and report potential negative information to alert their customers about bad news particularly when managers report positive earnings surprises. Consistent with journalists deviating from positive reported performance and including negative information in their stories, we find that newswire story tone is less correlated with positive earnings surprises than it is with negative earnings surprises (tone concavity). This tone concavity is stronger when newswire customers have greater demand for relevant negative information; for firms with weaker information environments and worse earnings quality, and when managers are more optimistic. Furthermore, consistent with negative information being incomplete and prompting information acquisition, we find that negative newswire tone is associated with a higher probability of news coverage by other journalists and more information search activity by sophisticated investors, especially when managers report positive earnings surprises. Additional analyses suggest that our results are not likely driven by managers’ disclosures and are robust to the use of additional identification strategies. Overall, we provide evidence that human newswire journalists not only disseminate news reported by managers but also play an informational role in the news discovery process.

Breaking the Language Barriers? Machine Translation Technology and Analysts’ Forecasts for Multinational Firms, with Bingxu Fang, R&R.

We study the impact of machine translation technology on analysts’ forecasts for multinational firms. Exploiting the staggered rollout of Google Translate’s support to translate foreign languages into English, we find that U.S. analysts improve their forecast accuracy for firms with substantial business exposure in the corresponding foreign countries. The improvement is greater for analysts with limited language skills or brokerage resources to process foreign information. We further find that analysts raise more questions about firms’ foreign exposure during conference calls and incorporate more foreign economic information into their forecasts after the rollout of Google Translate. Our findings highlight the complementary role of publicly accessible technology in supplementing analysts’ skills and resources.  

Do Emotions Affect Audit Practice? Terrorist Attacks and Accounting Misstatements (Solo-authored).

Psychology and neuroscience research shows that individuals with negative emotions (e.g., fear) are more sensitive to negative signals and exhibit a higher degree of risk aversion. Using local terrorist attacks as exogenous shocks that cause auditors to experience more negative emotions in the audit period, I empirically study the impact of negative emotions on audit practice. I find that accounting misstatements are less likely to occur for firms when there is a local terrorist attack in the audit period. The reduction in misstatements is stronger for auditors who are located closer to the terrorist attacks. Further evidence suggests that affected auditors are more likely to issue going concern opinions, spend more time on the audit, and charge higher audit fees. I obtain a similar set of results using airplane crashes as an alternative source of emotional shocks. Overall, the evidence is consistent with the idea that auditors with more negative emotions exert greater effort to lower misstatement risks. My findings provide large-scale archival causal evidence that emotions can affect audit outcomes.

The Role of Exhibits in Form 10-K: Evidence from Information Acquisition within the 10-K Bundle, with Stephanie F. Cheng and Yimeng Li.

We document information users’ sequential acquisition process within the 10-K bundle, which contains a main file and a separate set of exhibits. While users prioritize acquiring the 10-K’s main file in the short term, they further acquire information from exhibits to mitigate the main file’s inherent information loss that arises from managers’ summarization process. Further, users’ acquisition is more concentrated among exhibits that intend to provide new information, which in turn strengthens the stock market reaction to the main file. The evidence reveals users’ rational information choice when processing the 10-K bundle, and supports the informational role of exhibits in supplementing the main file.

The Primacy Effect in Information Acquisition: Evidence from 10-K Exhibits, with Stephanie F. Cheng and Yimeng Li.

Form 10-K is an information bundle that contains a main file and separately enclosed files of exhibits covering a wide range of SEC-mandated topics. Exploiting a unique display feature on the SEC’s EDGAR index page where exhibits are listed sequentially based on their pre-designated item numbers, we examine whether the presentation order of information affects information acquisition in capital markets. We find that information users are more likely to acquire exhibits that are listed on the top of the index page. This order effect is stronger when the main file is lengthier and less readable, and when the exhibits lack detailed descriptions. The order effect is observed among several groups of professionals and has become more prominent in recent years. We find some evidence that market reaction is faster and stronger to the exhibits listed on the top. Our collective evidence indicates that the order in which information is presented in disclosure affects how users acquire and integrate information, consistent with the idea that individuals fall back to cognitive heuristics when constrained by cognitive capacity.