Joseph Pacelli

About

Research

Published Papers

• “Common Media Holding Companies and the Uniqueness of Business Press Content” [2024] (with Kenneth Merkley, Flora Sun, and Brady Twedt) The Accounting Review 100: 381–405. [PDF]
  Abstract

  We examine how common media holding companies impact the uniqueness of business press content. Consistent with common media holding companies reducing the diversity of perspectives among journalists, we find that media outlets are more likely to cover the same earnings announcement and utilize more similar tone and content when they belong to a common holding company. We provide evidence that these effects are enhanced by outlet reach and economic incentives to share content. Finally, we provide evidence consistent with coverage by common media holding companies impeding price formation. Overall, our findings suggest that content within common media holding companies is less diverse and that this may have negative implications for markets.
• “Crypto-influencers” [2024] (with Kenneth Merkley, Mark Piorkowski, and Brian Williams) Review of Accounting Studies 29: 2254–2297. [PDF]
  Abstract

  This study examines the investment value of information provided by crypto-influencers, that is, social media influencers covering crypto assets on Twitter. We examine the returns associated with approximately 36,000 tweets issued by 180 of the most prominent crypto social media influencers covering over 1,600 crypto assets for the two years spanning through December 2022. Our primary results indicate that crypto-influencers' tweets are initially associated with positive returns. However, these tweets are followed by significant negative longer-horizon returns, suggesting they generate minimal long-term investment value. These effects are most pronounced for tweets issued by crypto-influencers proclaiming to be crypto experts, for smaller cap crypto asset securities and for self-described experts with many Twitter followers. In an additional analysis, we use machine-learning methods to classify tweets and find that this pattern of results strengthens when the tweets have a more positive sentiment or relate to buy recommendations.
• “Enterprise Resource Planning (ERP) System Implementations and Corporate Misconduct” [2024] (with Jonas Heese) The Accounting Review 100: 291–315. Runner-up Best Paper Award, International Corporate Governance Society (ICGS) Annual Conference (November 2022) [PDF]
  Abstract

  This study examines whether enterprise resource planning (ERP) implementations are associated with reductions in corporate misconduct. Specifically, we study the relation between staggered facility-level rollouts of ERP systems and facility-level regulatory violations across a large sample of U.S. firms. Our results indicate that facility-level ERP adoptions are associated with substantial reductions in local violations and penalties. Additional analyses suggest that the effects are more pronounced among facilities incorporating advanced analytics into their systems and among workforces that are less resistant to technology change. Overall, our results suggest that ERP systems generate indirect effects that enhance compliance outcomes across a wide range of violations.
• “The Monitoring Role of Social Media” [2023] (with Jonas Heese) Review of Accounting Studies 29: 1666–1706. [PDF]
  Abstract

  We examine whether social media activity can reduce corporate misconduct. We use the staggered introduction of 3G mobile broadband access across the United States to identify exogenous increases in social media activity and test whether access to 3G reduces misconduct. We find that facilities substantially reduce both violations and penalties following the introduction of 3G in a local area. To validate social media activity as the mechanism, we show that 3G access results in sharp increases in Tweet volume and that facilities located in areas with high Tweet volume misbehave less. The effect of 3G access on misconduct is stronger for facilities of more visible firms and concentrated in nonfinancial violations, such as those involving unsafe workplace conditions and inappropriate treatment of employees and customers. Overall our results demonstrate that social media plays an important role in monitoring corporate misconduct.
• “Do Job Seekers Value Diversity Information? Evidence from a Field Experiment” [2023] (with Jung Ho Choi, Kristina M. Rennekamp, and Sorabh Tomar) Journal of Accounting Research 61: 695–735. [PDF]
  Abstract

  We examine how information about the diversity of a potential employer's workforce affects individuals' job-seeking behavior, and whether workers' preferences explain corporate disclosure decisions. We embed a field experiment in job recommendation emails sent from a leading career advice agency in the US. The experimental treatment involves highlighting a diversity metric to jobseekers. Studying 267,494 unique jobseekers, we find that disclosing diversity scores in job postings increases the click-through rate of jobseekers for firms with higher diversity scores. These effects are more pronounced for female and entry-level jobseekers. We estimate that jobseekers update their willingness to pay (WTP) for a firm's diversity by $1,463 when faced with a 10% increase in diversity scores relative to the interquartile range. We conduct a follow-up survey with jobseekers to better understand why diversity information was useful to them. Finally, we document that firms in industries characterized by higher jobseeker responsiveness to diversity information tend to voluntarily disclose diversity metrics in their 10-Ks under new SEC disclosure requirements.
• “Brokerage House IPOs and Analyst Forecast Quality” [2022] (with Mark Bradshaw, Mike Drake, and Brady Twedt) Management Science 69: 6417–7150. FARS Best Picks of Editors Plenary Session (January 2019) [PDF]
  Abstract

  We examine how brokerage firm initial public offerings (IPOs) influence the research quality of sell-side analysts employed by the brokerage. Our main results focus on earnings forecast bias and absolute forecast errors as proxies for research quality. Using a staggered difference-in-differences analysis, we document significant decreases in forecast bias and absolute forecast error during the two-year period centered on the analysts' brokerage house IPO. In additional analyses, we explore several potential explanations for the short-term benefits of brokerage house IPOs. We find some evidence that IPOs delay the departure of more talented analysts and that the effects are more concentrated among analysts and brokers that face more scrutiny.
• “Man Versus Machine: Do Robo-Analysts Outperform Traditional Research Analysts” [2022] (with Braiden Coleman and Kenneth Merkley) The Accounting Review 97: 221–245. FARS Plenary Session (January 2020) [PDF]
  Abstract

  We provide the first comprehensive analysis of the properties of investment recommendations generated by "Robo-Analysts," which are human analyst-assisted computer programs conducting automated research analysis. Our results indicate that Robo-Analyst recommendations differ from those produced by traditional "human" research analysts across several important dimensions. First, Robo-Analysts produce a more balanced distribution of buy, hold, and sell recommendations than do human analysts and are less likely to recommend "glamour" stocks and firms with prospective investment banking business. Second, automation allows Robo-Analysts to revise their recommendations more frequently than human analysts and incorporate information from complex periodic filings. Third, while Robo-Analysts' recommendations exhibit weak short-window return reactions, they have long-term investment value. Specifically, portfolios formed based on the buy recommendations of Robo-Analysts significantly outperform those of human analysts.
• “Brokerage Incentives and Analyst Forecast Optimism: Evidence from the Protocol for Broker Recruiting” [2022] (with Braiden Coleman, Michael Drake, and Brady Twedt) Review of Accounting Studies 1–29. [PDF]
  Abstract

  We offer novel evidence on how the nature of brokerage-client relationships can influence the quality of equity research. We exploit a unique setting provided by the Protocol for Broker Recruiting to examine whether relaxed broker noncompete agreement enforcement generates spillover effects on sell-side analysts. Entry into this agreement reassigns ownership of the client relationship from the brokerage to individual brokers, potentially generating a greater standard of care. Using a generalized difference-in-differences research design, we provide evidence consistent with brokers reducing pressure on analysts to produce optimistic research following protocol entry. This effect is concentrated among less experienced and non-All Star analysts, who previously may have faced the greatest pressures to sacrifice objectivity. Additionally, we find that analysts issue more accurate forecasts and generate reports with heightened market reactions following protocol entry.
• “Internal Control Weaknesses and Financial Upskilling: Evidence from U.S. Job Postings” [2022] (with Janet Gao, Joe Schroeder, and Kenneth Merkley) The Accounting Review 98: 203–228. [PDF]
  Abstract

  In this study, we examine whether firms respond to internal control weaknesses (ICWs) by requiring accounting-specific skills when hiring rank-and-file employees. Using unique data containing an extensive collection of job postings, we document significant increases in firms' job postings that list accounting skills after the disclosure of an ICW. This effect is more pronounced for firms with better financial resources and when ICWs are more severe or personnel-related. In addition, our results extend to employees that are not specifically designated as accountants, suggesting a broader role for rank-and-file employees in influencing internal control quality. Finally, we find that increases in job postings with accounting skill requirements are associated with improvements in internal controls and a higher likelihood of ICW remediation.
• “The Influence of Loan Officers on Debt Contract Design and Performance” [2021] (with Robert Bushman, Janet Gao, and Xiumin Martin) Journal of Accounting and Economics 71: 101384. [PDF]
  Abstract

  We investigate the extent to which loan officers generate independent, individual effects on the design and performance of syndicated loans. We construct a large database containing the identities of loan officers involved in structuring syndicated loan deals, allowing us to systematically disentangle borrower, bank, and loan officer fixed effects. We find that loan officers have significant influence on interest spreads, loan covenant design, and loan performance. Inclusion of borrower fixed effects increases our power to rule out the alternative that loan officer fixed effects reflect the matching of officers to borrowers based on time-invariant borrower characteristics. We document heterogeneity in loan officers' influence across loan contract terms, with loan officers exerting stronger influence over covenant package design than over interest spreads, but marginal influence on loan maturity.
• “Cultural Diversity on Wall Street: Evidence from Consensus Earnings Forecasts” [2020] (with Kenneth Merkley and Roni Michaely) Journal of Accounting and Economics 70: 101330. [PDF]
  Abstract

  We examine how cultural differences among agents influence the aggregate outcome of a common forecasting task. Using both exogenous shocks to sell-side analyst diversity and panel regression methods, we find that increases in analyst cultural diversity positively affect the quality of the consensus earnings forecast. We further provide evidence on the potential mechanisms underlying this result by showing that cultural diversity is associated with improvements in individual analyst forecasts, greater analyst conference call participation and interaction, and greater diversity in analyst education backgrounds and professional interests. Overall, our results indicate that greater cultural differences among agents producing an aggregate forecast are associated with a higher quality consensus forecast.
• “Does FOIA Foil the SEC’s Intent to Keep Investigations Private” [2020] (with Braiden Coleman, Kenneth Merkley, and Brian Miller) Management Science 67: 3419–3428. [PDF]
  Abstract

  The Securities and Exchange Commission (SEC) has a long-standing policy to keep formal investigations confidential. In this study, we examine the extent to which compliance with the Freedom of Information Act (FOIA) provides investors with information about ongoing SEC investigations. We exploit a unique empirical setting whereby the SEC denies FOIA requests because of ongoing enforcement proceedings (hereafter, exemption denials). We find that exemption denials predict a substantial number of ongoing and future SEC investigations. Exemption denials are also associated with significant negative future abnormal returns, which is consistent with exemption denials providing a noisy public signal that allows certain sophisticated investors to earn future abnormal returns. Overall, our findings suggest that information transparency laws such as FOIA have the potential to limit the SEC's ability to maintain effective and confidential investigations.
• “Analyst Forecast Bundling” [2020] (with Michael Drake, Peter Joos, and Brady Twedt) Management Science 66: 4024–4046. [PDF]
  Abstract

  Changing economic conditions over the past two decades have created incentives for sell-side analysts to both provide their institutional clients tiered services and to streamline their written research process. One manifestation of these changes is an increased likelihood of analysts' issuing earnings forecasts for multiple firms on the same day. We identify this bundling property and show that bundling has increased steadily over time. We provide field evidence that the practice is a cost-saving measure, a natural by-product of analysts focusing on thematic research, and a reflection of forecast updating that occurs in advance of important events. Our empirical analyses show that bundled forecasts are less accurate, less bold, and less informative to investors than nonbundled forecasts. We also find that analysts who produce bundled forecasts provide valuable specialized services to their institutional clients.
• “Credit and Punishment: Are Corporate Bankers Disciplined for Risk Taking?” [2020] (with Janet Gao and Kristoph Kleiner) Review of Financial Studies 12: 5706–5749. [PDF]
  Abstract

  We examine whether bankers face disciplining consequences for structuring poorly performing corporate loans. We construct a novel data set containing the employment histories and loan portfolios of a large sample of corporate bankers and find that corporate credit events (i.e., downgrades, defaults, bankruptcies) increase banker turnover. The effect is pronounced when bankers issue loans with loose terms or experience severe losses. Credit events prompt bankers to adopt stricter future risk management practices, such as offering restrictive covenant packages. Overall, our findings are consistent with banks disciplining employees as a means to manage their own risk exposure.
• “Corporate Culture and Analyst Catering” [2019] Journal of Accounting and Economics 67: 120–143. Best Paper Award, CAPANA/CJAR Conference (July 2016) [PDF]
  Abstract

  This study examines the relation between financial institutions' corporate culture and the quality of analysts' research services. Using data collected from the Financial Industry Regulatory Authority, I measure the weakness of financial institutions' corporate culture based on violations observed in securities activities unrelated to equity research. I find evidence demonstrating an association between weak corporate culture and analysts' providing research products catered to institutional clients at the expense of individual investors. Specifically, FINRA violations are associated with both (i) less accurate forecasts and less informative reports, and (ii) higher institutional commission revenues and more broker-hosted conferences for select institutional clients.
• “Audit Personnel Salaries and Audit Quality” [2018] (with Jeff Hoopes, Joe Schroeder, and Kenneth Merkley) Review of Accounting Studies 23: 1096–1136. [PDF]
  Abstract

  This study examines the relation between audit personnel salaries and office-level audit quality. We measure audit personnel salaries at the associate, senior, and manager ranks for Big 4 audit offices from 2004 to 2013, using unique individual-auditor-level data obtained from the U.S. Department of Labor. We find that offices that pay lower salaries have a higher percentage of clients that experience restatements. In related analyses, we also find lower levels of audit quality when audit employees are paid less, relative to other lines of service in accounting firms. Finally, we document positive and significant associations between salary and fees, suggesting that audit offices pass some of the cost of higher labor onto their clients.
• “Does the Scope of the Sell-Side Analyst Industry Matter? An Examination of Bias, Accuracy and Information Content of Analyst Reports” [2017] (with Kenneth Merkley and Roni Michaely) Journal of Finance 72: 1285–1334. [PDF]
  Abstract

  We examine changes in the scope of the sell-side analyst industry and whether these changes impact information dissemination and the quality of analysts' reports. Our findings suggest that changes in the number of analysts covering an industry impact analyst competition and have significant spillover effects on other analysts' forecast accuracy, bias, report informativeness, and effort. These spillover industry effects are incremental to the effects of firm level changes in analyst coverage. Overall, a more significant sell-side analyst industry presence has positive externalities that can result in better functioning capital markets.

Working Papers

• “Generative AI and Investor Processing of Financial Media” (with Tony Cho, Allen H. Huang, and Kristina M. Rennekamp)
• “Geopolitical Tensions and the Audit Workforce: Evidence from Immigrant Auditors” (with Ruining (Grace) Li, Joseph Schroeder, and Yucheng (John) Yang)
• “Expert Networks as Information Intermediaries in Private Markets” (with Betty Liu, Kenneth Merkley, and David Volant)
• “Dirty Money: How Banks Influence Financial Crime” (with Janet Gao, Jan Schneemeier, and Yufeng Wu) [PDF]
  Abstract

  Bank employees face discretion in investigating and reporting money laundering activities via suspicious activity reports (SARs), a primary tool to combat financial crimes. We investigate the incentives banks face to initiate SARs and the implications for criminal activity. We document that banks facing profit pressure adopt more lax compliance policies, despite facing heightened regulatory risk. These policies admit more criminal customers and lead to higher SAR volume. A structural estimation approach helps us uncover the relation between bank profitability, reporting stringency, and the demand from criminal customers. Our results also suggest an assortative matching between lax banks and criminal clientele.
• “The Effect of Penalty Salience on Insider Trading: Evidence from Prison Closures” (with Markus Frank and Jonas Heese)
• “Communicating Culture in Labor Markets: Evidence from Job Postings” (with Allen Huang, Tianshuo Shi, and Yuan Zou) Best Paper Award, MIT Asia Conference (July 2022) [PDF]
  Abstract

  We examine how firms craft their job postings to convey information about their culture and whether doing so helps attract employees. We utilize state-of-the-art machine learning methods to develop a comprehensive dictionary of key corporate values across the near universe of job postings. Our analyses demonstrate that culture information in job postings helps firms better attract job seekers, as it is associated with higher worker inflows, shorter job posting vacancies, and lower subsequent worker outflows. Culture information has a more pronounced effect on worker inflows when job seekers face information frictions in learning about culture through other sources. Additional analyses indicate that interviews are more likely to lead to job offers for firms highlighting culture in their job postings, indicating that culture information helps job seekers sort into culturally fit companies.
• “Employee Use of Financial Reporting in Labor Market Decisions: Survey Evidence” (with Charles Ham, Christian M. Hutzler, and David Volant)
• “Labor and the Corporate Information Environment” (with John M. Barrios, Jung Ho Choi, Carolyn Deller, and Heidi Packard)
• “Does Mandatory Disclosure Affect Labor Mobility?” (with Zhao Jin, Jinhwan Kim, and Yucheng (John) Yang)

Practitioner Publications

• “Crypto-Influencers Give Poor Investment Advice — and the SEC is Taking Notice” [2023] ProMarket. [PDF]
• “Can Twitter Be a Force for Good? Social Media Helps Curb Corporate Misconduct” [2023] (with Jonas Heese) ProMarket. [PDF]
• “Workplace Gender Diversity and Employee Turnover” [2023] (with Aiyesha Dey, George Serafeim, and Fangzhong Liu) Journal of Applied Corporate Finance. [PDF]
• “Cautious Adoption of AI Can Create Positive Company Culture” [2023] (with Jonas Heese) California Management Review Insights. [PDF]
• “Click-by-click: Using Alternative Data to Make a Business Case for Culture” [2023] (with Jillian Grennan) California Management Review Insights. [PDF]

Labor & Accounting Group

Courses

Harvard Business School

• Business Analysis and Valuation (MBA Elective), 2023–Present
• Financial Reporting and Control (MBA Required Curriculum), 2021–2022
• Frontier Research in Financial Reporting and Corporate Governance (Doctoral Seminar), 2022
• Rising Generation in the Family Enterprise (Executive Education), 2023

Indiana University, Kelley School of Business

• Financial Accounting, Honors, 2015–2020

Cornell University

• Financial Accounting, 2013

Cases

1. “WallStreetBets: Democratizing Retail Investment” (with Alexis Lefort). Harvard Business School Case 125-002. March 2025.
2. “Managing EPS at Stanley Black & Decker?” (with Jonas Heese, Yuan Zou, and James Barnett). Harvard Business School Case 125-016. February 2025.
3. “Forecasting at CAVA Group Inc.” Harvard Business School Case 125-073. March 2025.
4. “Intel: Residual Income Valuation.” Harvard Business School Case 125-035. August 2024.
5. “The Walt Disney Company: Management Guidance” (with James Weber). Harvard Business School Case 125-027. August 2024.
6. “Ranger Energy Services: Bridging Public & Private Markets” (with Ravi Ramniklal Gondalia and James Weber). Harvard Business School Case 125-023. October 2024.
7. “Pricing an IPO at Allbirds, Inc.” (with Yuan Zou and Andre Luk). Harvard Business School Case 124-100. August 2024.
8. “Arete Research on Unity Software” (with Tonia Labruyere). Harvard Business School Case 124-086. July 2024.
9. “Titan: OceanGate’s Tragedy of Titanic Proportions” (with James Barnett and ZeSean Ali). Harvard Business School Case 124-016. July 2024.
10. “Accounting for Loans at SoFi Technologies” (with Michael Norris). Harvard Business School Case 124-057. June 2024.
11. “A New Aiera for Equity Research” (with Charles C.Y. Wang and James Barnett). Harvard Business School Case 124-068. May 2024.
12. “Accounting Red Flags or Red Herrings at Catalent? (A)” (with ZeSean Ali and Tom Quinn). Harvard Business School Case 124-024. October 2023.
13. “Accounting Red Flags or Red Herrings at Catalent? (B)” (with ZeSean Ali and Tom Quinn). Harvard Business School Case 124-055. December 2023.
14. “The Rise and Fall of FTX” (with Aiyesha Dey, Jonas Heese, and Max Hancock). Harvard Business School Case 124-014. September 2023.
15. “Viceroy Research Versus Medical Properties Trust” (with Jonas Heese, Emilie Billaud, and Carlota Moniz). Harvard Business School Case 124-027. September 2023.
16. “GameStop: Social Media Finds a Cheat Code (A)” (with Sarah Mehta). Harvard Business School Case 124-005. October 2023.
17. “GameStop: Social Media Finds a Cheat Code (B)” (with Sarah Mehta). Harvard Business School Case 124-005. October 2023.
18. “Accounting Outages at Plug Power? (A)” (with Jonas Heese and James Barnett). Harvard Business School Case 124-009. August 2023.
19. “Accounting Outages at Plug Power? (B)” (with Jonas Heese and James Barnett). Harvard Business School Case 124-018. August 2023.
20. “Accounting Outages at Plug Power? (C)” (with Jonas Heese and James Barnett). Harvard Business School Case 124-019. November 2023.
21. “Social Media Background Screening at Fama Technologies (A)” (with Jillian Grennan and Alexis Lefort). Harvard Business School Case 123-010. June 2023.
22. “Social Media Background Screening at Fama Technologies (B)” (with Jillian Grennan and Alexis Lefort). Harvard Business School Case 123-086. June 2023.
23. “Call of Fiduciary Duty: Microsoft Acquires Activision Blizzard” (with Jonas Heese and James Barnett). Harvard Business School Case 123-011. November 2022.
24. “Bear to Bull: An Analyst’s Journey with Netflix” (with Aiyesha Dey, Jennifer G. Lawson, and Tom Quinn). Harvard Business School Case 123-001. October 2022.

Selected Media Coverage

• “News Media Conglomeration and Financial Markets” — The Academic Minute (April 2025)
• “Financial Advice on Social Media Is Growing. And Risky.” — The New York Times (January 2025)
• “Not Enough Accountants? The CFO’s Tenure Might Get a Little Shakier” — Wall Street Journal (August 2024)
• “When Twitter’s Watching, Companies Behave Better” — Wall Street Journal (May 2023)
• “When Celebrity ‘Crypto-Influencers’ Rake in Cash, Investors Lose Big” — HBS Working Knowledge (April 2023)
• “How to Write a Better Job Listing” — Charter (March 2023)
• “Why We Still Need Twitter: How Social Media Holds Companies Accountable” — HBS Working Knowledge (February 2023)
• “How Will Gamers and Investors Respond to Microsoft’s Acquisition of Activision Blizzard?” — HBS Cold Call Podcast (November 2022)
• “Do Diverse Directors Influence DEI Outcomes?” — Harvard Law School Forum on Corporate Governance (November 2022)
• “The Monitoring Role of Social Media” — Columbia Law School Blue Sky Blog (December 2022)
• “Reading Corporate Culture from the Outside” — The Economist (July 2022)
• “Do Jobseekers Value Diversity Information: Evidence from a Field Experiment and Human Capital Disclosures” — Insights by Stanford Business (March 2022)
• “Do Jobseekers Value Diversity Information?” — Columbia Law School Blue Sky Blog (February 2022)
• “Stock-Picking Robots Take on Humans in New Study” — Wall Street Journal (May 2020)
• “Robot Analysts Outwit Humans in Study of Profit From Stock Calls” — BQ Prime (February 2020)
• “Robot Analysts Are Better Than Humans at Picking Stocks, a New Study Found” — Business Insider (February 2020)
• “Money Stuff: Banking Is About Relationships” — Bloomberg (February 2020)
• “Does FOIA Foil the SEC’s Intent to Keep Investigations Confidential?” — Duke Law Global Financial Markets Center, The FinReg Blog (March 2020)
• “Out of Balance: Do Analysts Issue Sell Recommendations to Manage their Recommendation Distributions?” — Duke Law Global Financial Markets Center, The FinReg Blog (June 2020)
• “Overtaxed” — The Verge (January 2022)
• “Higher Pay for Auditors Leads to Fewer Restatements” — CFO.com (April 2017)
• “The Human Factor in Corporate Loan Quality” — Columbia Law School Blue Sky Blog (December 2016)