Brian Miller

Areas of Expertise

Capital Markets, Financial Disclosure, Managerial Reputation, Corporate Governance

Academic Degrees

• Ph.D., Accounting, The Pennsylvania State University, 2008
• M.B.A., Finance and International Business, University of Cincinnati, 1998
• B.A., Accounting and Finance, Cedarville University, 1994
• Certified Public Accountant, Ohio

Professional Experience

• Associate Professor, Indiana University, Bloomington, IN 2015 – Present
• Assistant Professor, Indiana University, Bloomington Indiana, 2008 - 2015
• Research and Teaching Assistant, Smeal College of Business, The Pennsylvania State University, 2003-2008
• Accounting Lecturer, Cedarville University, 2001-2003
• Accounting Lecturer, The Masters College, 2000-2001
• Financial Cost Forecast Manager, N.A. Fabric Care, The Procter and Gamble Co. 2000
• Cost Analyst, New Business Development, The Procter and Gamble Co. 1999
• Financial Analyst, N.A. Fabric Care, The Procter and Gamble Co. 1998
• Auditor, BKD LLP (Formerly Olive LLP), 1994-1997

Awards, Honors & Certificates

• PwC Faculty Fellow, 2017 – Present
• Weimer Faculty Fellow, 2011 – 2017
• American Accounting Association Notable Contribution to the Accounting Literature Award, 2013
• Recipient, Indiana University Trustees Teaching Award, 2013
• Emerald Management Reviews Citations of Excellence Award, 2012 (awarded to top 50 peer-reviewed management research papers, out of 15,000 papers evaluated)
• Nominee, Indiana University Sauvain Teaching Award, 2012 and 2013
• Finalist, Indiana University Trustees Teaching Award, 2011 and 2012
• Nominee, Student Choice Award for Outstanding Faculty Member, 2010 and 2012
• Smeal Dissertation Research Award, 2008
• AAA / Deloitte / J. Michael Cook Doctoral Consortium Fellow, 2007
• Ossian R. MacKenzie Teaching Award nominee, 2007
• G. Kenneth Nelson Scholarship, 2005-2008
• Robert B. Graham Graduate Scholarship, 2003-2005

Selected Publications

• McMullin, Jeff, Brian Miller, and Brady Twedt (2019), "Increased Mandated Disclosure Frequency and Price Formation: Evidence from the 8-K Expansion Regulation," The Review of Accounting Studies, forthcoming.

Abstract Regulators claim that increased mandated disclosure frequency should lead to more efficient price formation. However, analytical models suggest that mandating disclosure may actually impede the price formation process, and prior empirical studies have been unable to document a relation between mandatory disclosure and improved price fonnation. We re-examine this relationship using a recent SEC regulation that increased the frequency of mandated event disclosures in form 8-K. We show that price formation improves after the mandate, where firms with the largest increases in mandatory disclosure experience the greatest improvements in price formation. Our evidence is consistent with the idea that mandating an increase in the frequency that material events must be disclosed is associated with improved price formation.

• Bonsall, S., E. Holzman, and B. Miller (2017), "Managerial Ability and Credit Risk Assessment," Management Science, 63(5): 1425-1449.

Abstract Research on the credit rating process has primarily focused on how rating agencies incorporate firm characteristics into their rating opinions. We contribute to this literature by examining the impact of managerial ability on the credit rating process. Given debt market participants’ interest in assessing default risk, we begin by documenting that higher managerial ability is associated with lower variability in future earnings and stock returns. We then show that higher managerial ability is associated with higher credit ratings (i.e., lower assessments of credit risk). To provide more direct identification of the impact of managerial ability, we examine CEO replacements and document that ratings increase (decrease) when CEOs are replaced with more (less) able CEOs. Finally, we show that managerial ability also has capital market implications by documenting that managerial ability is associated with bond offering credit spreads. Collectively, our evidence suggests that managerial ability is an important factor that bond market participants impound into their assessments of firm credit risk.

• Bonsall, S. and B. Miller (2017), "The Impact of Narrative Disclosure Readability on Bond Ratings and the Cost of Debt Capital," Review of Accounting Studies, 22(2): 608-643.

Abstract Prior research on the determinants of credit ratings has focused primarily on rating agencies’ use of quantitative accounting information, but the impact of financial disclosures, particularly textual attributes, on the bond rating process has gone relatively unexplored. This study examines the potential impact of the financial disclosure narrative on various bond market outcomes. We find that less readable financial disclosures are associated with less favorable ratings (higher default risk), greater bond rating agency disagreement, and a higher cost of debt capital. To address the potential confound that our results may be influenced by some underlying firm characteristic (e.g., firm complexity), we take advantage of a regulatory intervention provided by the 1998 Plain English Mandate requiring a subset of firms to exogenously improve the readability of their filings. Using a difference-in-differences design, we find that the firms required to improve the readability of their filings experience more favorable ratings (lower default risk), lower bond rating disagreement, and lower cost of debt capital. Collectively, our evidence suggests that textual financial disclosure attributes appear to not only influence bond market intermediaries’ opinions, but also firms’ cost of debt capital.

• Bonsall, S., A. Leone, B. Miller. And K. Rennekamp (2017) “A Plain English Measure of Financial Reporting Readability,” Journal of Accounting and Economics, 63 (2-3): 329-357.

Abstract We propose a new measure of readability, the Bog Index, which captures the plain English attributes of disclosure (e.g., active voice, fewer hidden verbs, etc.). We validate this measure using a series of controlled experiments and an archival-based regulatory intervention to prospectus filing readability. We also demonstrate the importance of understanding the underlying drivers of quantity-based measures of readability. In particular, we caution researchers that a vast amount of the variation in Form 10-K file size over time is driven by the inclusion of content unrelated to the underlying text in the 10-K (e.g., HTML, XML, PDFs).

• Beneish, Messod D., Brian P. Miller and Teri L. Yohn (2015), “Macroeconomic Evidence on the Impact of Mandatory IFRS Adoption on Equity and Debt Markets,” Journal of Accounting and Public Policy, Jan.-Feb. 2015:1-27.
  

Abstract This study investigates whether mandatory IFRS adoption is associated with increased foreign portfolio investment into the adopting country’s debt and equity markets. Using macroeconomic data and a pre–post design centered in 2005, we find that IFRS adoption has a significantly greater effect on foreign debt than on foreign equity investment flows. This result is consistent with the notion that debt investors are greater consumers of financial statement information. We find that the increase in foreign equity investment around IFRS adoption is limited to countries that had higher governance quality, economic development, and creditor rights prior to adoption. In contrast, the increase in foreign debt investment around IFRS adoption is significant for all adopting countries independent of these characteristics. Finally, we find that the increase in foreign equity investment derives primarily from the U.S., whereas the increase in foreign debt investment derives from the U.S. and other non-adopting countries. The evidence that increases in foreign investment originate from non-adopting countries rather than other adopting countries suggests that the benefits from mandatory IFRS adoption more likely reflect improved financial reporting quality rather than greater financial statement comparability.

• Hennes, K,. A. Leone, and B. Miller (2014), “Determinants and Market Consequences of Auditor Dismissals after Accounting Restatements,” The Accounting Review, 89 (3).

Abstract This study examines the conditions under which financial restatements lead corporate boards to dismiss external auditors and how the market responds to those dismissal announcements. We find that auditors are more likely to be dismissed after more severe restatements but that the severity effect is primarily attributable to the dismissal of non-Big 4 auditors rather than Big 4 auditors. We also document that among corporations with Big 4 auditors, those that are larger and more complex operationally are less likely to dismiss their auditors. Combined, this evidence suggests that firms with higher switching costs and fewer replacement auditor choices are less likely to dismiss their auditors after a restatement, which is informative to the debates about the costs and benefits of mandatory auditor rotation and limited competition in the audit market. Additionally, we examine contemporaneous executive turnover and find evidence that boards view auditor dismissals as complementary rather than substitute responses to restatements. Finally, we investigate the market reaction to auditor dismissals after restatements. The market reaction to the dismissal is significantly more positive following more severe restatements (5.9%) relative to less severe restatements (0.6%) when the client engages a comparably sized auditor. This positive market reaction is consistent with firms restoring financial reporting credibility by replacing their auditors and highlights the important role that auditors play in the financial markets.

• Blankespoor, E., B. Miller, and H. White (2014), “Initial Evidence on the Market Impact of the XBRL Mandate,” The Review of Accounting Studies, 19(4): 1468-1503.

Abstract In 2009, the SEC mandated that financial statements be filed using eXtensible Business Reporting Language (XBRL). The SEC contends that this new search-facilitating technology will reduce informational barriers that separate smaller, less-sophisticated investors from larger, more sophisticated investors, thereby reducing information asymmetry. However, if some larger investors are able to leverage their superior resources and abilities to garner greater benefits from XBRL than smaller investors, information asymmetry is likely to increase. Using a difference-in-difference design, we find evidence of higher abnormal bid-ask spreads for XBRL adopting firms around 10-K filings in the initial year after the mandate, consistent with increased concerns of adverse selection. We also find a reduction in abnormal liquidity and a decrease in abnormal trading volume, particularly for small trades. Additional analyses suggest, however, that these effects may be declining somewhat in more recent years. Collectively, our evidence suggests that a reduction in investors’ data aggregation costs may not have served its intended purpose of leveling the informational playing field, at least during the initial years after mandatory adoption.

• Miller, B. (2010), “The Effects of Reporting Complexity on Small and Large Investor Trading,” The Accounting Review, Vol. 85, No. 6, November, pp. 2107-2143.

Abstract This study examines the effects of financial reporting complexity on investors’ trading behavior. I find that more complex (longer and less readable) filings are associated with lower overall trading, and that this relationship appears due to a reduction in small investors’ trading activity. Additional evidence suggests that the association between report complexity and lower abnormal trading is driven by both cross-sectional variation in firms’ disclosure attributes and variations in disclosure complexity over time. Given regulatory concerns over plain English disclosures and the trend toward more disclosure, my investigation into the effects of reporting complexity on small and large investors should be of interest to regulators concerned with reporting clarity and leveling the playing field across classes of investors.

• Fischer, P., J. Gramlich, B. Miller, and H. White (2009), “Investor Perceptions of Board Performance: Evidence from Uncontested Director Elections,” Journal of Accounting and Economics, Vol. 48, No. 2-3, pp. 172-189.

Abstract This paper provides evidence that uncontested director elections provide informative polls of investor perceptions regarding board performance. We find that higher (lower) vote approval is associated with lower (higher) stock price reactions to subsequent announcements of management turnovers. In addition, firms with low vote approval are more likely to experience CEO turnover, greater board turnover, lower CEO compensation, fewer and better received acquisitions, and more and better received divestitures in the future. These findings hold after controlling for other variables reflecting or determining investor perceptions, suggesting that elections not only inform as a summary statistic, but incrementally inform as well.

• Hennes, K., A. Leone, and B. Miller (2008), "The Importance of Distinguishing Errors from Irregularities in Restatement Research: The Case of Restatements and CEO/CFO Turnover," The Accounting Review, Vol. 83, No. 6, pp. 1487-1519. 

Abstract Research on restatements has grown significantly in recent years. Many of these studies test hypotheses about the causes and consequences of intentional managerial misreporting but rely on restatement data (such as the GAO database) that contains both irregularities (intentional misstatements) and errors (unintentional misstatements). We argue that researchers can significantly enhance the power of tests related to restatements by distinguishing between errors and irregularities, particularly in recent periods when the relative frequency of error-related restatements is increasing. Based on prior research, the reading of numerous restatement announcements, and the guidance boards receive from lawyers, auditors, and the SEC on how to respond to suspicions of deliberate misreporting, we propose a straightforward procedure for classifying restatements as either errors or irregularities. We validate our procedure by showing that most of the restatements we classify as irregularities are followed by fraud-related class action lawsuits compared to only one lawsuit in the group of restatements classified as errors. As further validation of our proxy, we report that the market reaction to the restatement announcement for our irregularities sample (-14%) is also significantly more negative than it is for our errors sample (-2%). Finally, we demonstrate the importance of distinguishing errors from irregularities by showing the impact it has on inferences about the relation between restatements and CEO/CFO turnover even when controlling for the magnitude of the restatement.