Logan B. Steele Curriculum Vitae

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1 Logan B. Steele Curriculum Vitae Work: Home: Cell: Fax: Tucson, AZ Education Ph.D., Accounting, 2011 (anticipated), Dissertation: Essays on Conservatism Committee: Daniel Bens (Chair), Dan Dhaliwal and Mark Trombley MBA, 2004 Western Washington University BA, Accounting, 2003 Western Washington University Research Working Papers: On the Asymmetric Timeliness of Operating Cash Flows Job Market Paper and Chapter One of Dissertation Accounting Conservatism and the Smoothness of Earnings Chapter Two of Dissertation Intra-Firm Income Offsetting and Accounting Conservatism with Daniel Bens and Steven Monahan Accepted at 2009 American Accounting Association Meeting The Information Content of Mandatory Risk Factor Disclosures in Corporate Filings with John Campbell, Hsinchun Chen, Dan Dhaliwal and HsinMin Lu Book-tax differences, uncertainty about information quality, and cost of capital with Dan Dhaliwal, Hye Seung Grace Lee and Morton Pincus Teaching Experience Instructor: SAS Programming Boot-Camp Coordinator (Accounting & Finance), Summer 2010 Introduction to SAS programming for 1st year PhD students in accounting and finance Cost and Managerial Accounting, ACCT 310 Rating: 4.8/5.0, Summer 2010 Course Mean: 4.2/5.0 Page 1 of 5

Western Washington University Research Working Papers: On the Asymmetric Timeliness of Operating Cash Flows Job Market Paper and Chapter One of Dissertation Accounting Conservatism and the Smoothness

2 SAS Programming Boot-Camp Coordinator (Accounting), Summer 2008 and Summer 2009 Introduction to SAS programming for 1st year PhD students in accounting Introduction to Financial Accounting (Large-Size), ACCT 200 Rating: 3.9/5.0, Fall 2008 Course Mean: 4.0/5.0 Accounting Lab Instructor Introduction to Financial Accounting, ACCT 200, Spring 2007, Fall 2007 and Spring 2008 Assistant: Teaching Assistant Financial Statement Analysis, ACCT 554, Fall 2010 Teaching Assistant Intermediate Financial Accounting, ACCT 400B, Fall 2006 Conferences Refereed Participation: Intra-Firm Income Offsetting and Accounting Conservatism (with Daniel Bens and Steven Monahan) Presented at the American Accounting Association Annual Meeting 2009 Participation: AAA-Deloitte-J. Michael Cook Doctoral Consortium 2009 Pac-10 Doctoral Consortium 2009 Teaching/Research Interests Teaching: Managerial Accounting, Financial Accounting Research: Financial Accounting Industry Experience Staff Accountant Moss Adams, CPAs, LLP Tax Preparer 2003 Stevenson, McColluch Inc. PS. CPAs Accounting Intern 2002 Metcalf, Hodges & Co., CPAs, PS Page 2 of 5

0 Accounting Lab Instructor Introduction to Financial Accounting, ACCT 200, Spring 2007, Fall 2007 and Spring 2008 Assistant: Teaching Assistant Financial Statement Analysis, ACCT 554, Fall 2010

3 References Daniel Bens (Chair) Associate Dean & Director, Eller MBA Programs Associate Professor of Accounting Frank and Susan Parise Fellow Phone: (520) Dan Dhaliwal Accounting Department Head Lou Myers Professor of Accounting Phone: (520) Steven Monahan Coordinator, Accounting and Control Area Associate Professor INSEAD Boulevard de Constance PMLS 1.24 F-7705 Fontainebleau Cedex France Phone: 33(0) Mark Trombley Beach Fleischman Professor of Accounting Phone: (520) Page 3 of 5

24 F-7705 Fontainebleau Cedex 77305 France Phone: 33(0)1 60 72 92 14 Email: steven.monahan@insead.

4 Abstracts On the Asymmetric Timeliness of Operating Cash Flows Job Market Paper and Chapter One of Dissertation I examine why operating cash flows exhibit asymmetric timeliness with respect to stock returns and, given this understanding, address the consequences for research into conditional accounting conservatism. Numerous studies document that operating cash flows are more sensitive to negative stock returns relative to positive returns. Because the properties of cash flows are defined largely by the operating (rather than reporting) decisions taken by management, the asymmetric relation with returns cannot be explained by conditional conservatism. I find that the asymmetric timeliness of cash flows is primarily driven by product pricing, whereby managers are quick to cut prices in response to bad economic news, but do not appear to increase prices in response to good economic news. Consistent with this reasoning, I find that firms with greater pricing power exhibit lower asymmetric timeliness in operating cash flows as well as in earnings. Variation in earnings asymmetric timeliness induced by operating cash flows should not be interpreted as evidence of conditional conservatism. With this in mind, I revisit several existing inferences regarding conditional conservatism. I conclude that researchers should employ a specification of the Basu [1997] model that (1) avoids the confounding effect of cash flow asymmetry and (2) addresses the matching role of accruals. Accounting Conservatism and the Smoothness of Earnings Chapter Two of Dissertation Numerous studies examine the determinants and desirability of a reporting strategy that reduces earnings volatility. Managers can dampen the volatility of earnings relative to cash flows by (1) engaging in accruals management designed to offset short-term fluctuations in operating cash flows and/or (2) avoiding the timely recognition of economic losses in earnings. I argue that it is important to distinguish between these reporting strategies. For instance, LaFond and Watts [2009] find that the timely recognition of economic losses plays an important role in mitigating information asymmetry between firm insiders and investors. Consequently, firms provide more timely recognition of economic losses when information asymmetry is high. I provide evidence that a smoother income stream achieved through the strategic use of accruals to offset cash flows can be associated with increased information asymmetry. However, a smoother income stream resulting from less timely recognition of economic losses is associated with decreased information asymmetry. This is consistent with the positive association between timely loss recognition and information asymmetry documented by LaFond and Watts. This evidence illustrates that taking into account how income smoothing is achieved can result in different conclusions about the consequences of income smoothing. Intra-Firm Income Offsetting and Accounting Conservatism (with Dan Bens and Steve Monahan) We study the relation between intra-firm income offsetting and asymmetric timely loss recognition (i.e., ATLR). Intra-firm income offsetting occurs when gain reserves are used to eliminate or mitigate income-effects arising from the underperformance of a particular set of assets or activities. For example, if an asset that has appreciated in value is sold during a period when some of a firm s operations are underperforming, a gain is recognized in income and it either partially or completely offsets the income-effects related to the underperformance; hence, the name intra-firm income offsetting. ATLR reflects the extent to which bad economic news is manifest in contemporaneous accounting income. We hypothesize and show that intra-firm income offsetting and ATLR are negatively related. Page 4 of 5

Numerous studies document that operating cash flows are more sensitive to negative stock returns relative to positive returns.

5 The Information Content of Mandatory Risk Factor Disclosures in Corporate Filings (with John Campbell, Hsinchun Chen, Dan Dhaliwal and HsinMin Lu) Beginning in 2005, the SEC mandated firms to include a risk factor section in their Form 10-K to discuss the most significant factors that make the company speculative or risky. This suggests that regulators believe that investors benefit from disclosures about firm risk and uncertainties. Critics argue that the disclosures are qualitative and boilerplate, and thus uninformative. In this study, we examine the information content of this newly-created risk factor section and offer two main results. First, we find that firms that face greater risk disclose more risk factors, and that the type of risk that a firm faces (i.e. systematic, idiosyncratic, financial, legal, or tax) determines whether they devote a greater portion of their disclosures towards describing that risk type. In other words, managers provide informative risk factor disclosures. Second, we find that market participants incorporate the information conveyed by risk factor disclosures into their assessments of firm risk and stock price, and that the disclosures decrease information asymmetry amongst firms shareholders. We are the first study to document that when managers increase negative/pessimistic qualitative disclosure, market-based measures of firm risk increase. These results provide further insight into the relationship between disclosure and firm risk, and may inform current policy decisions of the SEC. Book-tax differences, uncertainty about information quality, and cost of capital (with Dan Dhaliwal, Hye Seung Grace Lee and Morton Pincus) We investigate whether differences in implied cost of equity capital across firms are associated with (1) differences between book and taxable incomes (BTDs) and (2) an earnings quality measure derived from BTDs. Prior research suggests BTDs reflect firms earnings management and tax planning activities and economic fundamentals (including credit risk). We conjecture a link to cost of capital if BTDs capture information uncertainty. Our initial analysis indicates that several BTD variables, especially the standard deviation of BTDs over time, are positively related to cost of capital. We then estimate a model to predict BTDs and focus on the residual, the portion not predicted by fundamentals and tax aggressiveness, which should capture information uncertainty due to managerial discretion over financial reporting. The standard deviation of the residuals over time is our BTD-based earnings quality measure, and it is positively related to cost of capital. The results are robust to sensitivity analyses, including the use of deferred tax expense, controlling for alternative earnings quality measures, and estimating cost of capital at the portfolio level. Given the framework of Lambert et al. s (2007) CAPM-based model, our research examines whether our BTD-derived earnings quality measure reflects information effects related to cost of capital, consistent with empirical estimates of beta using historical returns not fully capturing information effects. If multiple risk factors are allowed (e.g., Indjejikian 2007), then our research can be viewed as an attempt to separately identify firm innate characteristics and discretionary information effects and contributes to research seeking to determine whether there is an information risk factor (e.g., Francis et al. 2004, 2005; Yee 2006). Page 5 of 5

This suggests that regulators believe that investors benefit from disclosures about firm risk and uncertainties.

Daniel A. Bens, Ph.D.

Daniel A. Bens, Ph.D. INSEAD e-mail: daniel.bens@insead.edu Boulevard de Constance phone: +33 (0)1 60 72 92 07 77305 Fontainebleau Cedex, France fax: +33 (0)1 60 72 92 53 Education University of Pennsylvania,