Areas of Expertise

Capital Markets, Financial Reporting, Corporate Disclosure, Information Intermediaries

Academic Degrees

• Ph.D., Accounting, University of Michigan, 2011
• M.A., Accounting, Brigham Young University, 2006
• B.S., Accounting, Brigham Young University, 2006

Professional Experience

• Conrad Prebys Professor of Accounting, Indiana University Bloomington, IN 2022 – Present
• Weimer Faculty Fellow, Indiana University Bloomington, IN 2020 – 2022
• Associate Professor, Indiana University Bloomington, IN 2018 – 2022
• Assistant Professor, Cornell University, Ithaca, NY 2011 – 2018
• Research Assistant, University of Michigan, Ann Arbor, MI 2006 – 2011
• Accounting Consultant, FrontPoint Quantitative Fund, 2005 – 2006

Awards, Honors & Certificates

• American Accounting Association/Deloitte Wildman Medal (2024)
• Kelley Accounting Department Rising Leader Award (2023-2024)
• Outstanding Reviewer Award (The Accounting Review), 2023
• Conrad Prebys Professorship, 2022 – Present
• Arthur M. Weimer Faculty Fellowship, 2020 – 2022
• Kelley School of Business Research Award 2021
• Indiana University Trustee Teaching Award (Recipient 2021; Finalist 2018)
• Johnson (Cornell) Teaching Honor Roll, 2012 – 2016
• Barry and Ann Ridings Sesquicentennial Fellow, Cornell University, 2011-2016
• Named to Top 40 Business School Professors Under 40 List, Poets & Quants, 2014
• Half Century Faculty Research Fellowship, Cornell University, 2012
• Spivey/Hall Fellowship Recipient, University of Michigan, 2010
• Close Award Recipient, University of Michigan, 2009
• Paton Accounting Fellowship, University of Michigan, 2006 – 2010
• Ross School of Business Fellowship, University of Michigan, 2006 – 2010
• Summa Cum Laude, Brigham Young University, 2006

Selected Publications

• Merkley, K., Pacelli, J., Piorkowski, M., and Williams, B. (2024). Crypto-Influencers. Review of Accounting Studies, 29(3), 2254-2297.

  Abstract

  Abstract

  This study examines the investment value of information provided by crypto-influencers, that is, social media influencers covering crypto assets on Twitter. We examine the returns associated with approximately 36,000 tweets issued by 180 of the most prominent crypto social media influencers covering over 1,600 crypto assets for the two years spanning through December 2022. Our primary results indicate that crypto-influencers’ tweets are initially associated with positive returns. However, these tweets are followed by significant negative longer-horizon returns, suggesting they generate minimal long-term investment value. These effects are most pronounced for tweets issued by crypto-influencers proclaiming to be crypto experts, for smaller cap crypto asset securities and for self-described experts with many Twitter followers. In an additional analysis, we use machine-learning methods to classify tweets and find that this pattern of results strengthens when the tweets have a more positive sentiment or relate to buy recommendations.

• Jin, H., Merkley, K., Sharma, A., and Ton, K. (2024). Customers’ Response to Firms’ Disclosure of Social Stances: Evidence from Voting Reform Laws. Review of Accounting Studies, in press.
• Kankanhalli, G., Kwan, A., and Merkley, K. (2024). The Paradox of Innovation Non-Disclosure: Evidence from Licensing Contracts. American Economic Journal: Applied Economics, 16(4), 220–256.
• Gao, J., Merkley, K. J., Pacelli, J., and Schroeder, J. H. (2023). Do Internal Control Weaknesses Affect Firms’ Demand for Accounting Skills? Evidence from U.S. Job Postings. The Accounting Review, 98(3), 203–228.
• Coleman, B., Merkley, K. J., and Pacelli, J. (2022). Human Versus Machine: A Comparison of Robo-Analyst and Traditional Research Analyst Investment Recommendations. The Accounting Review, 97(5), 221–244.

  Abstract

  Abstract

  We provide the first comprehensive analysis of the properties of investment recommendations generated by “Robo-Analysts,” which are human-analyst-assisted computer programs conducting automated research analysis. Our results indicate that Robo-Analyst recommendations differ from those produced by traditional “human” research analysts across several important dimensions. First, Robo-Analysts produce a more balanced distribution of buy, hold, and sell recommendations than do human analysts and are less likely to recommend “glamour” stocks and firms with prospective investment banking business. Second, automation allows Robo-Analysts to revise their recommendations more frequently than human analysts and incorporate information from complex periodic filings. Third, while Robo-Analysts’ recommendations exhibit weak short-window return reactions, they have long-term investment value. Specifically, portfolios formed based on the buy recommendations of Robo-Analysts significantly outperform those of human analysts. Overall, our results suggest that automation in the sell-side research industry can benefit investors.

• Choudhary, P., Merkley, K., and Schipper, K. (2022). The Cost of Waiving Audit Adjustments. Journal of Accounting Research, 60(5), 1813-1857.
• Hendricks, B., Lang, M., and Merkley, K. (2022). Through the Eyes of the Founder: CEO Characteristics and Firms' Regulatory Filings. Journal of Business Finance and Accounting, 49(3-4), 383-422.
• Coleman, B., Merkley, K. J., Miller B., and Pacelli, J. (2021). Does the Freedom of Information Act Foil the Securities and Exchange Commission’s Intent to Keep Investigations Confidential? Management Science, 67(6), 3419-3428.

  Abstract

  Abstract

  The Securities Exchange Commission (SEC) has a long-standing policy to keep formal investigations confidential. In this study, we examine the extent to which compliance with the Freedom of Information Act (FOIA) provides investors with information about on-going SEC investigations. We exploit a unique empirical setting whereby the SEC denies FOIA requests due to ongoing enforcement proceedings (hereafter, exemption denials). We find that exemption denials predict a substantial number of ongoing and future SEC investigations. Exemption denials are also associated with significant negative future abnormal returns, which is consistent with exemption denials providing a noisy public signal that allows certain sophisticated investors to earn future abnormal returns. Overall, our findings suggest that information transparency laws, such as FOIA, have the potential to limit the SEC’s ability to maintain effective and confidential investigations.

• Choudhary, P., Merkley, K., and Shipper, K. (2021). Immaterial Error Corrections and Financial Reporting Reliability. Contemporary Accounting Research, 38(4), 2423-2460.
• Allee, K., Christensen, T., Graden, B., and Merkley, K. (2021). The Genesis of Voluntary Disclosure: An Analysis of Firms’ First Earnings Guidance. Management Science, 67(3), 1329–1349.
• Merkley, K., Michaely, R., and Pacelli, J.  (2020). Cultural Diversity on Wall Street: Evidence from Consensus Earnings Forecasts. Journal of Accounting and Economics, 70(1), 101330.
• Cazier, R., Merkley, K., and Treu, J. (2020). When Are Firms Sued For Qualitative Disclosures? Implications of the Safe Harbor for Forward-Looking Statements. The Accounting Review, 95(1), 31-55.
• Choudhary, P., Merkley, K., and Bozanic, Z. (2019). Securities Law Expertise and Corporate Disclosure. The Accounting Review, 94(4), 141-172.
• Choudhury, P., Merkley, K., and Schipper, K. (2019). Auditors’ Quantitative Materiality Judgments: Properties and Implications for Financial Reporting Reliability. Journal of Accounting Research, 57(5), 1303-1351.
• Hoopes, J. L., Merkley, K. J., Pacelli, J., and Schroeder, J. H. (2018). Audit Personnel Salaries and Audit Quality. Review of Accounting Studies, 23(3), 1096-1136.

  Abstract

  Abstract

  This study examines the relation between audit personnel salaries and office-level audit quality. We measure audit personnel salaries at the associate, senior and manager ranks for Big 4 audit offices from 2004 to 2013 using unique individual auditor level data obtained from the U.S. Department of Labor. We find that offices that pay lower salaries have a higher percentage of clients that experience restatements. In related analyses, we also find lower levels of audit quality when audit employees are paid less relative to other lines of service in accounting firms (tax, consulting, etc.). Finally, we document positive and significant associations between salary and fees, suggesting that audit offices pass some of the cost of higher labor onto their clients. Overall, our findings provide important initial evidence on the role of audit salary and its relation to audit quality and audit fees.

• Merkley, K. J., Michaely, R., and Pacelli, J. (2017). Does the scope of the sell-side analyst industry matter? An examination of bias, accuracy and information content of analyst reports. Journal of Finance, 72(3), 1285-1334.

Edited on July 8, 2024