The Unintended Effects of <scp>US</scp> Regulations on the Value of Cash Holdings of Non‐<scp>US</scp> Companies: Evidence from the Public Company Accounting Oversight Board's International Inspection Access
Bibliographic record
Abstract
We investigate the effects of the Public Company Accounting Oversight Board's (PCAOB) international inspection access on the value of cash holdings for non‐US companies. Utilizing a difference‐in‐differences (DiD) research design, we find that investors assign significantly higher value to a non‐US company's cash holdings when the company's non‐US auditor becomes subject to PCAOB inspections. We employ several tests to strengthen our causal inferences. First, parallel trend analyses reveal no differential pre‐treatment trends prior to the granting of PCAOB inspection access. Second, placebo tests using clients of non‐US auditors not registered with the PCAOB show no significant changes in the value of cash holdings. Third, the value of cash holdings does not change around hypothetical years of inspection access. Cross‐sectional analyses reveal that the positive effects of PCAOB inspection access are more pronounced in countries with (i) strong shareholder protection laws, (ii) stringent auditor regulations, and (iii) greater convergence between local generally accepted accounting principles (GAAP) and US GAAP. Lastly, we show that PCAOB inspection access strengthens the positive relationship between excess cash and future operating performance and reduces cash flow‐investment sensitivity, supporting the interpretation that the positive valuation effects are driven by increased monitoring of corporate cash usage. Our findings remain robust using an alternative cash valuation model.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.023 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.001 | 0.001 |
| Scholarly communication | 0.001 | 0.002 |
| Open science | 0.002 | 0.001 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".