Jenny Zha Giedt, CPA, PhD

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Research Interests

Potential changes in corporate control; the preliminary sale process in mergers & acquisitions
Financial accounting and reporting quality, which includes accruals quality and disclosure choice

Working Papers

[8] Rim, H. and J. Zha Giedt. (2023) "Mistaking Bad News for Good News: Mispricing of a Voluntary Disclosure" Link

Motivation: We challenge the prevailing belief among investors that a corporate disclosure about strategic alternatives is good news. Stock prices rise more than +5% on the announcement, yet the future returns are <-9%, making this an unusual puzzle for the efficient market hypothesis. We propose that investors' susceptibility to the "availability heuristic" behavioral bias (Kahneman and Tversky, 1973) causes overoptimistic expectations, when investors overweight salient M&A outcomes and underweight the signal for declining fundamentals. To corroborate this overoptimism story, we document: (i) future returns clustering around future negative earnings announcements; (ii) analysts' overoptimistic EPS and target price forecasts; (iii) a negative association between the strategic alternatives announcement returns and merger announcement returns; and (iv) that even the firms with the greatest expectations (i.e., highest announcement returns) experience negative future returns. (In Progress) In addition, an experiment manipulating subjects' reliance on the availability heuristic provides evidence of internal validity.

[7] Zha Giedt, J. (2022) "Economic Consequences of Announcing Strategic Alternatives: Costs and Benefits of a Voluntary Disclosure" Link

Conditionally accepted, Contemporary Accounting Research. Motivation: Little is known about the consequences of publicly revealing that a company is exploring strategic alternatives, yet managers and directors face this potentially disruptive disclosure decision when their company seeks to sell itself in the M&A market. What are the costs and benefits to the firm of publicly revealing its review of strategic alternatives? The benefits: The announcement leads to greater investor attention and a more robust M&A sales process, and ultimately, a valuation premium if a transaction is consumated. The costs: The public revelation alienates stakeholders such as customers and employees (these stakeholders withdraw their support when they realize the company may cease to exist), leading to worse operating performance and lower employee growth. Although the negative consequences affect all anouncing firms, the associated negative impact on firm value is observed when the announcing firm is not acquired.

[6] Zha Giedt, J. (2022) "Disentangling Target Motives and Bidders' Selection of Targets in M&A" Link

Motivation: Academics and practitioners have long been interested in predicting takeover targets and understanding target motives. The usual approach of extant M&A studies is to compare ex-post target firms to non-target firms. However, this study aims to disentangle two selection processes: (1) firms self-select to become potential target firms and (2) the bidders choose their targets from the sample of available targets. I find that low performing firms volitionally seek their own sale or merger whereas bidders appear to select the relatively better performing and more efficient firms. In addition, this study compares and contrasts firms that voluntarily disclose their strategic alternatives evaluation with firms that experience a media leak of the process.

Published Papers

[5] Nezlobin, A., R. G. Sloan, and J. Zha Giedt. (2022) "Construct Validity in Accruals Quality Research" The Accounting Review. Link

Motivation: This study provides a analytical and numerical assessment of the most commonly-used measures of accruals quality. An ideal empirical measure of AQ would not be associated with underlying economic parameters of a firm's earnings; moreover, it would also be monotonically increasing or decreasing in the presence of various types of accruals errors and have significant test power to detect lower AQ in the treatment versus control firms. While none of the 5 extant or 2 new measures we analyze provide a panacea, they vary in how close they come to achieving the ideal characteristics. Our results should be useful to researchers in choosing which combination of accrual quality proxies to use and in interpreting research findings.

[4] Larson, C. R., R. Sloan, and J. Zha Giedt. (2018) "Defining, Measuring and Modeling Accruals: A Guide for Researchers" Review of Accounting Studies. Link

Motivation: Measures of accruals and models of discretionary accruals are widely used in financial accounting research. Yet, empirical researchers are faced with many measures and models to choose from, where some of popular choices are incomplete and fragmented. To guide researchers, this paper provides a comprehensive definition and measure of accruals, and shows how some of the extant measures of accruals fit in as a component of "comprehensive accruals." For researchers interested in modeling non-discretionary accruals, this paper provides a more comprehensive model specification that takes into account the normal properties of accruals. Overall, we urge researchers to carefully consider which measure of accruals to use and how to model normal variation in accruals.

[3] Zha Giedt, J. (2018) "Modelling Receivables and Deferred Revenues to Detect Revenue Management" Abacus (Special Issue on Earnings Management). Link | PDF

Motivation: Researchers and regulators interested in detecting managerial discretion in revenue recognition should examine specific revenue-related accruals, specifically accounts receivables and deferred revenues. The proposed revenue accruals model combines and extends Caylor's (2010) and Stubben's (2010) models. This new model exhibits greater goodness-of-fit, greater power, and less misspecification than extant models. The intuition is as follows: First, the origination of an accounts receivable accrual is explained by contemporaneous revenue, and the reversal is explained by future cash collections from customers. Second, the origination of a deferred revenue accrual is explained by contemporaneous cash collections from customers, and the reversal is explained by future recognized revenue.
ΔAccounts receivable_t = α₀ + α₁*1/Avg assets_t + α₂*ΔRevenueQ123_t + α₃*ΔRevenueQ4_t + α₄*ΔCash flow from sales_t+1 + e_t
ΔDeferred revenue_t = α₀ + α₁*1/Avg assets_t + α₂*ΔCash flow from sales_t + α₃*ΔRevenue_t+1 + e_t

[2] Patatoukas, P. N., R. G. Sloan, and J. Zha. (2015) "On the Pricing of Mandatory DCF Disclosures: Evidence from Oil and Gas Royalty Trusts" The Accounting Review. Link

Motivation: In the value-relevance literature, tests of the relation between an asset's value on the financial statements and the asset's market value are typically plagued by measurement issues, from imputing the asset's market value, and model misspecification issues, from imperfectly controlling for the company's other assets and liabilities. Oil and gas royalty trusts, however, provide a cleaner setting to conduct a value-relevance test because the primary assets of these trusts are mature oil and gas reserves, their other assets and liabilities are negligible, and the asset's estimated value is clearly disclosed in 10-Ks. We find that managerial DCF estimates of oil and gas reserves are priced by investors, yet investors may buoyantly overlook the finite nature of these reserves until media converage prompts the stock price to coverge with the DCF estimate.

[1] Dechow, P. M., R. G. Sloan, and J. Zha. (2014) "Stock Prices and Earnings: A History of Research" Annual Review of Financial Economics. Link | PDF

Motivation: The financial accounting and capital markets literature is storied and vast. This paper summarizes the main properties of earnings and its components, and how they are useful to investors and relate to stock prices. Select empirical findings in this area are extended to the present period, including price and volume reactions to accounting information, the value-relevance of various earnings measures, and portfolio returns to accounting-based trading strategies.

Other Articles

[9] Zha Giedt, J. (2021) "Should A Company Reveal That It Is Evaluating 'Strategic Alternatives'?" Duke University School of Law FinReg Blog. Link

Motivation: Before publicly revealing that the company is evaluating strategic alternatives, the executive leadership should consider the potential benefits and drawbacks of the news affecting share prices, the M&A sales process, employees and customers. There is no correct 'one size fits all' approach, but the decision should weigh the individual company's circumstances. This article describes some key considerations.

About Me

Jenny is an Assistant Professor at the George Washington University School of Business. Her research examines financial accounting quality and disclosure choices made by corporations and their effects on the stock market and the market for corporate control. She currently teaches the financial accounting core class in the undergraduate business curriculum and has previously taught a research seminar for doctoral students. Her research has been published in various academic journals including The Accounting Review, Review of Accounting Studies, Abacus, and Annual Review of Financial Economics, and practitioner outlets, such as Duke University School of Law's FinReg Blog. She is involved in academic and professional service activities, including serving as a reviewer for journals and conferences, as a moderator for industry panel events hosted by Bloomberg and the School of Business, and as a conference organizer for the accounting department's annual research conference.

Jenny graduated with a PhD in Business Administration with an Accounting emphasis from the Haas School of Business at UC Berkeley in 2016 and was a Deloitte Foundation doctoral fellow during her studies. Her UC Berkeley dissertation explores why certain companies voluntarily announce that they are seeking strategic alternatives, and documents the costs and benefits associated with the announcement. Her dissertation is titled, "Voluntary Disclosure of Strategic Alternatives: A Cost-Benefit Analysis" (2016). Link

Prior to Berkeley, she worked as an auditor and forensic accountant at KPMG in Los Angeles, CA, and obtained her CPA license. She also has prior experience in the mutual fund and hedge fund industries, with US Bank and Dorchester Capital, respectively. She earned her Bachelor's degrees in Accounting and Business Administration (Finance emphasis) and minored in Mathematics at the University of Southern California.

In her spare time, Jenny enjoys figure skating, skiing, classical ballet, theatre and spending time with her young family.

Contact

Email: zhagiedt@gwu.edu