Welcome!

My name is Sebastian and I am an Assistant Professor in Accountancy from the University of Illinois Urbana-Champaign, Gies College of Business. You can find more information about me and my work on this site.

My research examines how the formatting and complexity of firm disclosure influences users, preparers and auditors of financial statements in their judgment and decision making. While my research projects involve several agents, they all relate to fundamental topics in financial accounting and auditing, such as disclosure credibility, investor learning, earnings management and fraud detection. Using mostly economics based experimental methods, I capitalize on the comparative advantage of experiments at disentangling the effect of disclosure on investment decisions, measuring intervening processes and drawing strong causal inferences.

Check out the section on research projects for an overview of my work and find more information about me in my CV.

Sebastian Stirnkorb

Assistant Professor in Accountancy

University of Illinois Urbana-Champaign

Gies College of Business

Email:

stirnkor@illinois.edu

Address:

194 Wohlers Hall

1206 S Sixth Street

Champaign, IL 61820

EDUCATION

2016-2021

PhD in Accounting

ROTTERDAM SCHOOL OF MANAGEMENT,

ERASMUS UNIVERSITY

PhD in Accounting and Control

Doctoral thesis:"Changes in the Information Landscape and Capital Market Communication"

2018

Research Visit

UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGN

Research visit from August to December 2018

Invited by Jessen Hobson

2013-2016

Master's Degree

HUMBOLDT UNIVERSITY, BERLIN

Master in Economics and Management Studies

Master thesis: "Behavioral Approaches to Information Acquisition and Avoidance"

RESEARCH PROJECTS

PROJECTS

HOW INVESTOR STATUS AFFECTS JUDGMENTS OF MANAGEMENT CREDIBILITY: THE ROLE OF COMPANY IDENTIFICATION AND LOCUS OF ATTRIBUTION
with Erik Peek and Marcel van Rinsum. Contemporary Accounting Research (Forthcoming).
This study investigates the joint effects of investor status and locus of attribution on investors’ judgments of management credibility. We study these effects in the context of an adverse event disclosure. Building on social identity and ultimate attribution error theory, we predict and find that under external attribution, current investors perceive management as more credible than do prospective investors, while investor status does not affect perceived management credibility under internal attribution. We provide evidence supporting our theory that company identification explains these findings. In addition, we document that the differences in credibility are mainly driven by perceptions of management’s trustworthiness, rather than competence. Moreover, our results indicate that these differences in credibility judgments affect earnings expectations, thus inducing disagreement among investors. Our findings have important practical implications, including that company identification can be an asset to companies and that communicating adverse events with an external attribution reduces perceived management credibility for prospective investors.

COPING WITH CHANGING SKILL REQUIREMENTS: DOES (DIS)AFFIRMATION AFFECT AUDITORS' RELIANCE ON AI-SUPPORTED ADVICE FROM SPECIALISTS?

with Mark Peecher, Christian Pietsch, and Isaac Yamoah

The digital evolution in auditing has triggered a rapid shift in auditors’ required skill sets, with audit firms heavily investing in and extolling advanced data analytics and AI capabilities. However, this strong emphasis on newly required digital skills can lead many experienced auditors, who perceive these competencies as their weaker areas, to feel disaffirmed in their abilities. We predict and find, across two experiments, that auditors who feel disaffirmed in their digital skills more defensively discount specialist advice that places higher versus lower reliance on AI, but that an intervention in which auditors affirm their traditional audit skills mitigates this defensive reaction. Absent self-affirmation, higher specialist reliance on AI results in auditors denigrating the competence and the quality of advice that specialists provide. These findings suggest that disaffirmation escalates AI aversion, offering important insights into how audit firms can foster less defensive decision-making in the precipitously evolving audit environment.

TRANSACTION COST UNBUNDLING AND INVESTORS' RELIANCE ON INVESTMENT RESEARCH: EVIDENCE FROM EXPERIMENTAL ASSET MARKETS
single-authored. Accounting, Organizations and Society (2024).
Broker-dealers traditionally charge their clients for the provision of investment research with a composite fee that bundles payments for research with other variable fees, such as those for trade executions. Due to regulatory changes in Europe, US broker-dealers temporarily allowed some of their clients to pay an explicit fee for the provision of investment research. Drawing on the sunk cost literature, I examine how transaction cost unbundling influences investors’ reliance on investment research. Results from 16 experimental markets indicate that investors place greater weight on costly forecasts under a system of unbundled payments compared to bundled payments, but only if transaction costs are sufficiently high, which is consistent with the dynamics of a sunk cost fallacy. I find marginal evidence that the enhanced focus on the forecast further inhibits investors' learning, as reflected in a slower reduction of price errors over time. These results are important since investors worldwide are increasingly paying explicit charges for investment research, a trend reinforced by a recent SEC policy change.

ACTIVATING AUDITORS' WILLINGNESS TO ADDRESS RISK: EFFECTS OF FOCUSING AUDITORS ON COGNITIVE DISSONANCE AND FRAUD
with Jessen Hobson, Mark Peecher and Devin Williams
This study reports the results from a field experiment with highly experienced auditors listening live to earnings conference calls of their firm's clients. This unique setting allows us to examine our hypothesis that auditors face non-monetary disincentives to investigate fraud, such that they perceive a lower need to change testing procedures after listening to their own client's call than if they listen to calls of other clients. Based on the idea that auditors are motivated to adhere to a form status quo bias, we further predict that auditors depart from the status quo when reminded of their professional duty to investigate fraud, particularly when they are simultaneously alerted to watch for signs of cognitive dissonance in the CEO. Results are consistent with our predictions and extend beyond our controlled experiment, as reflected in two key outcomes: the size and number of actual misstatements that auditors detect and report during the audit. We offer implementable interventions that can activate auditors' willingness to address misstatement risk.

MANAGING EARNINGS TO APPEAR TRUTHFUL: THE EFFECT OF PUBLIC SCRUTINY ON EXACTLY MEETING A THRESHOLD

with Jessen Hobson
The past two decades have not eliminated managers’ willingness to manage earnings to meet and beat thresholds but have increased investors’ skepticism of earnings that exactly meet those thresholds. This increased skepticism provides perverse incentives to not meet earnings expectations exactly. Using a stylized experiment, we find that managers who are more sensitive to the scrutiny of others misreport to avoid exactly meeting a benchmark when public scrutiny increases, even though they have no financial incentive to do so. Thus, we uncover misreporting to appear truthful as a new incentive to manage earnings. We further find that this scrutiny increases managers’ belief that investors will accept their reports, consistent with managers misreporting for self-presentational goals. These results are important as managers are increasingly scrutinized by regulators, activist shareholders, social and traditional media.

INVESTOR ETHNICITY AND INVESTOR RELATIONS RESPONSIVENESS: A FIELD EXPERIMENT
with Nerissa Brown, Mark Peecher, and Isaac Yamoah
Investor relations officers (IROs) are charged with the professional responsibility to provide investors with fair and equal access to corporate information. Yet, it is unclear whether they do so as their financial incentives favor prioritizing investors of strategic importance. We test whether IROs discriminate against ethnic minority investors in a natural field experiment, sending fictitious requests to IROs of Stoxx Europe 600 companies, varying only the investor’s name. IROs respond more frequently to requests from investors having ethnic majority than minority names. An empathy-focused intervention designed to increase responsiveness to minority investors, sent prior to these investor requests, mitigates IRO favoritism, but unexpectedly only by decreasing IROs’ responsiveness to majority investors. Thus, our perspective taking intervention backfires in a way likely to decrease capital inflows to IROs’ own firms and underscores that ethnic minority investors face persistent, incremental barriers in accessing corporate information to guide their investment decisions.

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