Areas of Expertise (2)
Behavior of Financial Institutions and Intermediaries
Financial Disclosure and Regulation
Professor Wu’s research speaks to issues related to financial disclosure and regulations as well as the behavior of financial institutions and intermediaries. Her work has been published in the Journal of Accounting and Economics, Journal of Finance, Journal of Accounting Research, The Accounting Review, and Review of Financial Studies, among others. She has been named to the Simon School Dean’s Teaching Honor Roll numerous times. Professor Wu is an editor of the Journal of Accounting and Economics.
Peking University: BA, International Economics 1991
Tulane University: PhD, Business Administration 1999
Tulane University: MA, Economics 1994
Selected Articles (4)
Should I Stay or Should I Grow? Using Voluntary Disclosure to Elicit Market FeedbackReview of Financial Studies
Joanna Shuang Wu and Sudarshan Jayaraman
We explore the use of voluntary disclosure by managers to solicit market feedback. Using managerial capital expenditure forecasts, we find that managers adjust annual capital expenditures upward (downward) in response to positive (negative) stock market reactions to capital expenditure forecasts, but only for those forecast announcements that stimulate rather than discourage informed trading. These capex adjustments motivated by market feedback correlate with higher future performance and are stronger (weaker) when outsiders (managers) are more informed. Finally, we show that managers are more likely to issue and learn from capex forecasts when predisclosure stock prices are affected by transitory nonfundamental shocks.
Good Buffer, Bad Buffer: Smoothing in banks’ loan loss provisions and the response to credit supply shocksJournal of Law, Finance, and Accounting
Joanna Wu, Sudarshan Jayaraman, and Bryce Schonberger
Bank regulators and academics have long conjectured the beneficial effects of smoothing in loan loss provisions(i.e., making higher provisions during good times so as to avoid doing so during bad times) for bank lending and stability, while accounting regulators express concerns about its potential adverse impact on reporting transparency. Using the late 1990s emerging market crisis to capture an adverse supply shock to bank capital, we show, consistent with the bright-side, that ensuing contractions in bank lending are weaker for banks that built buffers via smoothing. These lending differences translate into positive real effects for the buffering banks’ small borrowers. However, consistent with the dark-side, these benefits of smoothing are absent in banks with insider lending, suggesting opportunistic smoothing. Overall, our results highlight the tradeoff between bank stability and transparency inherent in smoothing loan loss provisions– while proactive recognition of unrealized losses reduces bank transparency, it increases bank stability (if and) when losses materialize.
Is Silence Golden? Real Effects of Mandatory DisclosureReview of Financial Studies
Joanna Shuang Wu and Sudarshan Jayaraman
Mandatory disclosure provides benefits, but it also entails costs. One cost concerns managerial learning: by discouraging informed trading, disclosure could reduce managers’ ability to glean decision-relevant information from prices. Using mandatory segment reporting in the United States, we uncover a reduction in investment-q sensitivity, indicating lower investment efficiency after regulation. Consistent with learning, lower sensitivity is concentrated in firms with more informed trading and lower financing constraints. Constrained firms exhibit no change in investment-q sensitivity, suggesting that they enjoy countervailing benefits via greater financing and stronger governance. Overall, we document a novel link between mandatory disclosure and real effects.
Idiosyncratic Shocks to Firm Underlying Economics and Abnormal AccrualsThe Accounting Review
Joanna Shuang Wu, Edward L. Owens, and Jerold Zimmeerman
Economics challenge the specification of discretionary accrual models. Since rent-seeking firms pursue differentiated business strategies, firms in the same industry experience idiosyncratic shocks due to heterogeneous economic fundamentals and hence have different accrual-generating processes. We present evidence that idiosyncratic shocks are widespread, propagate through multiple years of financial statements, and reduce accrual models' goodness of fit. This not only affects abnormal accrual estimates for the firm experiencing shocks, but also affects measurement of abnormal accruals for other firms in the industry. We show that idiosyncratic shocks not only add noise to abnormal accruals, but can also exacerbate bias in both unsigned and signed abnormal accruals. We propose ways to reduce accrual model misspecification.