TY - JOUR
T1 - Local soldier fatalities and war profiteers
T2 - New tests of the political cost hypothesis
AU - Boland, Matthew
AU - Godsell, David
N1 - Funding Information:
☆ We are especially grateful to our editor Michelle Hanlon and an anonymous referee. We also acknowledge helpful comments on the manuscript from Scott Althaus, Spencer Anderson, Vishal Baloria, Tim Bauer, Dirk Black, Nerissa Brown, Tim Brown, Donal Byard, Andy Call, Paul Calluzzo, Kimball Chapman, Dane Christensen, Hans Christensen, David Cicero (discussant), Lieutenant Colonel Robert Dam (retired), Rich Frankel, Jon Garfinkel, Amanda Gonzales, Mahendra Gupta, Chad Ham, Bowe Hansen, Jörg-Markus Hitz, Kelly Huang, Michelle Hutchens, Justin Hopkins, Jared Jennings, Zachary Kaplan, David Koo, Phil Lamoreaux, Nico Lehmann, Ugur Lel, Yi Luo, Jeff McMullin (× 2), Devan Mescall, Johnathan Milian, Darius Miller, Michael Minnis, Jason Moschella (discussant), Tom Omer, Luke Phelps, William Quigley, Aneesh Raghunandan (discussant), Oded Rozenbaum, Delphine Samuels, Kelly Saunders, Tim Siedel, Oktay Urcan, Nathan Sharp, Hollis Skaife, Theo Sougiannis, Anne Thompson, Mike Welker, Devin Williams, Michael Williamson, Stefan Zeume, Wei Zhu, workshop participants at The Ohio State University, Washington University in Saint Louis, Queen's University, Georg-August-Universität Göttingen, Florida International University, HEC Montréal, and the University of Nebraska-Lincoln, and audience members of the 2019 AAA Financial Reporting and Accounting Section Mid-Year Meeting, the 2019 AAA International Accounting Section Mid-Year Meeting, the 2019 Canadian Academic Accounting Association Annual Conference, the 2018 Midwest Finance Association Annual Conference, the 2017 University of Illinois at Urbana-Champaign Summer Brown Bag Series and the 2017 Paris Financial Management Conference.
Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/8
Y1 - 2020/8
N2 - We test the political cost hypothesis using local soldier fatalities as a source of as-if-random variation in the threat of political costs for local defense firms. Soldier fatalities vary the threat of political costs for defense firms because the U.S. tradition of shared sacrifice during war vulgarizes war profits amid dead soldiers. Local defense firms record more income-decreasing accruals, equal to 1.17 percent of total assets, in response to a one standard deviation increase in local soldier fatalities (an additional 29 soldier fatalities in the average state-year). A wide variety of robustness tests corroborate our inferences.
AB - We test the political cost hypothesis using local soldier fatalities as a source of as-if-random variation in the threat of political costs for local defense firms. Soldier fatalities vary the threat of political costs for defense firms because the U.S. tradition of shared sacrifice during war vulgarizes war profits amid dead soldiers. Local defense firms record more income-decreasing accruals, equal to 1.17 percent of total assets, in response to a one standard deviation increase in local soldier fatalities (an additional 29 soldier fatalities in the average state-year). A wide variety of robustness tests corroborate our inferences.
KW - Earnings management
KW - Political cost hypothesis
KW - Proximate casualties hypothesis
KW - War profiteers
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U2 - 10.1016/j.jacceco.2020.101316
DO - 10.1016/j.jacceco.2020.101316
M3 - Article
AN - SCOPUS:85084073083
SN - 0165-4101
VL - 70
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
M1 - 101316
ER -