The article discusses various reports published within the issue, including one which relates how audit evidence combines with auditor knowledge and traits produce judgments that reflect professional skepticism (PS) and another which discusses the various definitions of PS in professional standards and academic research.

In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. We find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking into account unobservable firm effects, time-varying industry effects, size, and performance. The decrease in compensation is particularly pronounced in the subset of affected firms with no outside blockholder on the board and in affected firms with low concentration of institutional investors. Our results suggest that the new board requirements affected CEO compensation decisions.

Significant attention has been paid to why a durable goods producer with little or no market power would monopolize the maintenance market for its own product. This paper investigates an explanation for the practice based on consumer switching costs and the decision concerning maintaining versus replacing used units. In our explanation, if the maintenance market is not monopolized, consumers sometimes maintain used units that are more efficiently replaced. In turn, monopolizing the maintenance market avoids this inefficiency. In contrast to most previous explanations for the practice, in our explanation, the practice increases both social and consumer welfare.

OK, you've convinced me. Now go out there and bring pressure on me.
—President Franklin Delano Roosevelt
President Roosevelt allegedly issued this quip after having engaged in a lengthy exchange with a visiting business delegation. While the story (true or not) may be apocryphal, it illuminates a fundamental confusion that surrounds lobbying: What is it? How does it work? When is it used? And why do we need it? Some believe that the legislative process in this and many other countries could not function without it.
In a fascinating study of lobbying activity during and following the passage of the Sarbanes-Oxley Act of 2002 (SOX), Hochberg, Sapienza, and Vissing-Jørgensen [2009] (henceforth, HSVJ) uncover noteworthy patterns in the behavior of investors and corporate insiders toward influencing the rules to be implemented under SOX by the Securities and Exchange Commission (SEC). They collect 2,689 letters submitted by corporations, investors, lawyers, and academics to the SEC over a three-year period concerning various facets of financial disclosure, corporate responsibility, and auditor independence. Among the 379 firms whose insiders lobby the SEC, most do so by arguing against the rules they comment on. Those particular firms also tend to be characterized by agency problems. The authors further design an experiment to exploit these findings on lobbying tendency by evaluating whether the returns to shareholders over this period of analysis are measurably different for those firms that lobby against SOX relative to those that do not lobby at all. Indeed, they find that shareholders of these lobbying firms are rewarded with an economically large 7% cumulative abnormal return over this period, which they interpret as evidence that SOX provides a net benefit by improving transparency and governance and by reducing misconduct and mismanagement by insiders. Concerns over compliance costs do not seem to matter.
The study is timely and relevant not only because of the growing interest in the economic consequences of regulatory changes in corporate transparency, disclosure, and governance, like those effected around SOX, but also because of the burgeoning scholarly research on corporate political activity. The findings are surprising relative to the verdict rendered by most existing research on the impact of SOX. HSVJ's clinical study of comment letters written to the SEC around SOX also informs current research on the antecedents and consequences of various types of lobbying behavior. The authors design a clever methodology, execute their analysis in a careful and exhaustive manner, and write it in an approachable and easily understandable way.
In this discussion, I summarize the main contributions and findings of HSVJ, offer a synopsis of the conference discussion of the paper, as well as provide some broader perspectives on the two main lines of inquiry to which the paper contributes.

In this paper, we examine the dual role that social movement organizations can play in altering organizational landscapes by undermining existing organizations and creating opportunities for the growth of new types of organizations. Empirically, we investigate the impact of a variety of tactics employed by the Woman's Christian Temperance Union (WCTU), the leading organizational representative of the American temperance movement, on two sets of organizations: breweries and soft drink producers. By delegitimating alcohol consumption, altering attitudes and beliefs about drinking, and promoting temperance legislation, the WCTU contributed to brewery failures. These social changes, in turn, created opportunities for entrepreneurs to found organizations producing new kinds of beverages by creating demand for alternative beverages, providing rationales for entrepreneurial action, and increasing the availability of necessary resources.

Compared with privately held banks, publicly traded banks face greater agency costs because of greater separation of ownership and control but enjoy greater benefits from access to the equity capital market. Differences in control and capital market access influence public versus private banks’ accounting. We predict and find that public banks exhibit greater degrees of conditional conservatism (asymmetric timeliness of the recognition of losses versus gains in accounting income) than private banks. We predict and find that public banks recognize more timely earnings declines, less timely earnings increases, and larger and more timely loan losses. Although public ownership gives managers greater ability and incentive to exercise income-increasing accounting, our findings show that the demand for conservatism dominates within public banks and that the demand for conservatism is greater among public banks than private banks. Our results provide insights for accounting and finance academics, bank managers, auditors, and regulators concerning the effects of ownership structure on conditional conservatism in banks’ financial reporting.

Through a study of the emergent U.S. wind energy sector, 1978–1992, this paper examines how large-scale social movements external to an industry can influence the creation of new market opportunities and hence encourage entrepreneurship. We theorize that through the construction and propagation of cognitive frameworks, norms, values, and regulatory structures, and by offering a preexisting social structure, social movement organizations influence whether entrepreneurs attempt to start ventures in emerging sectors. We find that the direct and indirect effects of social resources (e.g., environmental groups) had a larger impact on entrepreneurial activity in this sector than the availability of natural resources such as land with high-quality wind. Greater numbers of environmental movement organization members increased nascent entrepreneurial activity, and this effect was mediated by favorable state regulatory policy. Greater membership numbers also enhanced the effects of important natural resources, market conditions, and skilled human capital on entrepreneurial activity. Taken together, these results have important implications for the study of social movements, entrepreneurship, and institutional theory.