Faculty & Research

Hans B. Christensen

Professor of Accounting

Phone :
1-773-834-7633
Address :
5807 South Woodlawn Avenue
Chicago, IL 60637

Hans Christensen studies international accounting harmonization, debt contracting, and transparency regulation in financial and non-financial markets. His papers have been published in the Journal of Accounting & Economics, the Journal of Accounting Research, Review of Accounting Studies, and Review of Financial Studies.

Within the corporate world, Christensen previously worked with the firm PricewaterhouseCoopers (PwC). At PwC, he audited financial statements which were prepared according to US-GAAP, IFRS, and various national European accounting standards, as well as worked on complex deals such as M&A transactions.

"During my work with PricewaterhouseCoopers, I observed how firms choose to account for similar events in very different ways, particularly when comparing them across countries," he said. "My research now focuses on why firms make these different choices and what the consequences are."

Christensen earned a PhD in accounting from Manchester Business School in the United Kingdom and joined the Chicago Booth faculty in 2008. He hopes that his students take away an understanding of accounting that allows them to read and understand financial reports and make better decisions based on the information in them.

Outside of academia, Christensen has been preparing for the Chicago Marathon for the past ten years and he hopes he will be able to run it soon. He also enjoys traveling.

 

2017 - 2018 Course Schedule

Number Name Quarter
30116 Accounting and Financial Analysis I 2018 (Spring)

Research Activities

International accounting harmonization; mandatory IFRS; disclosure behavior.

REVISION: The Real Effects of Mandated Information on Social Responsibility in Financial Reports: Evidence from Mine-Safety Records
Date Posted: Sep  07, 2017
We examine the real effects of mandatory-social-responsibility disclosures, which require SEC-registered mine owners to include their mine-safety records in their financial reports. These safety records are already publicly available elsewhere, which allows us to isolate and estimate the incremental real effects of including this information in financial reports. Comparing mines owned by SEC-registered issuers with mines that are not, we document that including safety records in financial reports decreases mining-related citations and injuries, and reduces labor productivity. Evidence from stock-market reactions and mutual-fund holdings suggests that increased awareness of safety issues is a likely explanation for the observed real effects.

New: The Effect of Regulatory Harmonization on Cross-Border Labor Migration: Evidence from the Accounting Profession
Date Posted: Jul  25, 2017
The paper examines whether international regulatory harmonization increases cross-border labor migration. To study this question, we analyze European Union initiatives that harmonized accounting and auditing standards. Regulatory harmonization should reduce economic mobility barriers, essentially making it easier for accounting professionals to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly matched other professionals before and after regulatory harmonization. We find that international labor migration in the accounting profession increases significantly relative to other professions. We provide evidence that this effect is due to harmonization, rather than increases in the demand for accounting services during the implementation of the rule changes. The findings illustrate that diversity in rules constitutes an economic barrier to cross-border labor mobility and, more specifically, that accounting ...

REVISION: Proactive Financial Reporting Enforcement and Firm Value
Date Posted: Jun  13, 2017
We examine the effect of increasing the intensity of proactive enforcement of financial reporting regulation on equity values. Using a setting in the United Kingdom where a securities regulator periodically selects specific market sectors for increased scrutiny, we find that an approximately fourfold increase in the likelihood of regulator-initiated reviews of financial reports reduces equity values by 1.5%. This reduction in equity values occurs despite a subsequent increase in stock market liquidity of approximately 5%. Our study provides evidence of an instance in which, despite significant capital market benefits, increasing proactive financial reporting enforcement intensity has an overall negative effect on shareholder wealth.

REVISION: The Effects of Charge-Price Transparency Regulation on Prices in the Healthcare Industry
Date Posted: Apr  11, 2017
Using micro data on actual healthcare purchases, we provide evidence on the causal effects of charge-price transparency regulation (PTR). We find that, although PTR causes providers to reduce charges by approximately 6%, these reductions do not lead to lower actual payments. Variation in the estimated treatment effect across hospitals suggests that reputational costs of perceived overcharging, rather than increased consumer search, explain the observed reduction in charges. Taken together, our results indicate that providers can avoid the potential impact of PTR on profitability by altering charges without affecting payments, which suggests that price transparency regulation based only on charges could be a way for policy makers to give the appearance they are addressing rising healthcare costs without imposing significant costs on providers.

REVISION: Contracting on GAAP Changes: Large Sample Evidence
Date Posted: Mar  01, 2017
We explore revealed preferences for the contractual treatment of changes to GAAP in a large sample of private credit agreements issued by publicly held U.S. firms. We document a significant time-trend towards excluding GAAP changes from the determination of covenant compliance over the period from 1994 to 2012. This trend is positively associated with proxies for standard setters’ shift in focus towards relevance and international accounting harmonization. At the firm level, borrowers facing higher uncertainty are more likely to write contracts that include GAAP changes, but these firms also show a more pronounced time-trend towards excluding GAAP changes. While this evidence is broadly consistent with an efficiency role for GAAP changes in debt contracting, it is also consistent with a shift in standard setters’ focus offering a partial explanation of why fewer contracts rely on GAAP changes in 2012 than in 1994.

New: The Effect of Regulatory Harmonization on Cross-Border Labor Migration: Evidence from the Accounting Profession
Date Posted: Dec  23, 2016
The paper examines whether international regulatory harmonization increases cross-border labor migration. To study this question, we analyze European Union initiatives that harmonized accounting and auditing standards. Regulatory harmonization should reduce economic mobility barriers, essentially making it easier for accounting professionals to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly matched other professionals before and after regulatory harmonization. We find that international labor migration in the accounting profession increases significantly relative to other professions. We provide evidence that this effect is due to harmonization, rather than increases in the demand for accounting services during the implementation of the rule changes. The findings illustrate that diversity in rules constitutes an economic barrier to cross-border labor mobility and, more specifically, that accounting ...

REVISION: The Effect of Regulatory Harmonization on Cross-Border Labor Migration: Evidence from the Accounting Profession
Date Posted: Dec  22, 2016
The paper examines whether international regulatory harmonization increases cross-border labor migration. To study this question, we analyze European Union (EU) initiatives that harmonized accounting and auditing standards. Regulatory harmonization should reduce economic mobility barriers, essentially making it easier for accounting professionals to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly-matched other professionals before and after regulatory harmonization. We find that international labor migration in the accounting profession increases significantly relative to other professions. We provide evidence that this effect is due to harmonization, rather than increases in the demand for accounting services during the implementation of the rule changes. The findings illustrate that diversity in rules constitutes an economic barrier to cross-border labor mobility and, more specifically, that accounting ...

New: Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement
Date Posted: Oct  15, 2016
We examine the capital-market effects of changes in securities regulation in the European Union (EU) aimed at reducing market abuse and increasing transparency. To estimate causal effects for the population of EU firms, we exploit that for plausibly exogenous reasons, like national legislative procedures, EU countries adopted these directives at different times. We find significant increases in market liquidity, but the effects are stronger in countries with stricter implementation and traditionally more stringent securities regulation. The findings suggest that countries with initially weaker regulation do not catch up with stronger countries, and that countries diverge more upon harmonizing regulation.

Update: The Effect of Regulatory Harmonization on Cross-Border Labor Migration: Evidence from the Accounting Profession
Date Posted: Oct  04, 2016
The paper examines whether international regulatory harmonization increases cross-border labor migration. To study this question, we analyze European Union (EU) initiatives that harmonized accounting and auditing standards. Regulatory harmonization should reduce economic mobility barriers, essentially making it easier for accounting professionals to move across countries. Our research design compares the cross-border migration of accounting professionals relative to tightly-matched other professionals before and after regulatory harmonization. We find that international labor migration in the accounting profession increases significantly relative to other professions. We provide evidence that this effect is due to harmonization, rather than increases in the demand for accounting services during the implementation of the rule changes. The findings illustrate that diversity in rules constitutes an economic barrier to cross-border labor mobility and, more specifically, that accounting ...
New PDF Uploaded

REVISION: Accounting Information in Financial Contracting: The Incomplete Contract Theory Perspective
Date Posted: Jun  10, 2016
This paper reviews theoretical and empirical work on financial contracting that is relevant to accounting researchers. Its primary objective is to discuss how the use of accounting information in contracts enhances contracting efficiency and to suggest avenues for future research. We argue that incomplete contract theory broadens our understanding of both the role accounting information plays in contracting and the mechanisms through which efficiency gains are achieved. By discussing its rich theoretical implications, we expect incomplete contract theory to prove useful in motivating future research and in offering directions to advance our knowledge of how accounting information affects contract efficiency.

REVISION: Capital-Market Effects of Securities Regulation: Prior Conditions, Implementation, and Enforcement
Date Posted: Apr  06, 2016
We examine the capital-market effects of changes in securities regulation in the European Union (EU) aimed at reducing market abuse and increasing transparency. To estimate causal effects for the population of EU firms, we exploit that for plausibly exogenous reasons, like national legislative procedures, EU countries adopted these directives at different times. We find significant increases in market liquidity, but the effects are stronger in countries with stricter implementation and traditionally more stringent securities regulation. The findings suggest that countries with initially weaker regulation do not catch up with stronger countries, and that countries diverge more upon harmonizing regulation.

REVISION: Incentives or Standards: What Determines Accounting Quality Changes Around IFRS Adoption?
Date Posted: Feb  23, 2015
We examine the impact of managerial financial reporting incentives on accounting quality changes around International Financial Reporting Standards (IFRS) adoption. A novel feature of our single-country setting based on Germany is that voluntary IFRS adoption was allowed and common before IFRS became mandatory. We exploit the revealed preferences in the choice to (not) adopt IFRS voluntarily to determine whether the management of individual firms had incentives to adopt IFRS. For comparability with previous studies, we assess accounting quality through multiple constructs such as earnings management, timely loss recognition, and value relevance. While most existing literature documents accounting quality improvements following IFRS adoption, we find that improvements are confined to firms with incentives to adopt, that is, voluntary adopters. We also find that firms that resist IFRS adoption have closer connections with banks and inside shareholders, consistent with lower incentives ...

REVISION: Do IFRS Reconciliations Convey Information? The Effect of Debt Contracting
Date Posted: Aug  12, 2014
We examine whether UK GAAP to IFRS earnings reconciliations convey information. As a result of debt contracting, mandatory accounting changes are expected to affect the likelihood of violating existing covenants based on rolling GAAP, leading to a redistribution of wealth between shareholders and lenders. Consistent with this prediction, we find significant market reactions to IFRS reconciliation announcements. These market reactions are more pronounced among firms that face a greater likelihood and costs of covenant violation and early announcements. While the association between later announcements and weaker market reactions is consistent with contractual implications of technical changes to earnings, which investors quickly learn to predict, it is inconsistent with IFRS forcing all firms in the sample to reveal firm-specific information through accruals. Thus, by showing that mandatory IFRS also affects debt contracting, we expand on existing IFRS research that focuses on how ...

New: Mandatory IFRS Reporting and Changes in Enforcement
Date Posted: Dec  07, 2013
In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood. This study aims to distinguish between several potential explanations for the observed capital-market effects. We find that, across all countries, mandatory IFRS reporting had little impact on liquidity. The liquidity effects around IFRS introduction are concentrated in the European Union (EU) and limited to five EU countries that concurrently made substantive changes in reporting enforcement. There is little evidence of liquidity benefits in IFRS countries without substantive enforcement changes even when they have strong legal and regulatory systems. Moreover, we find similar liquidity effects for firms that experience enforcement changes but do not concurrently switch to IFRS. Thus, changes in reporting enforcement or (unobserved) factors ...

REVISION: Mandatory IFRS Reporting and Changes in Enforcement
Date Posted: Nov  04, 2013
In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood. This study aims to distinguish between several potential explanations for the observed capital-market effects. We find that, across all countries, mandatory IFRS reporting had little impact on liquidity. The liquidity effects around IFRS introduction are concentrated in the European Union (EU) and limited to five EU countries that concurrently made substantive changes in reporting enforcement. There is little evidence of liquidity benefits in IFRS countries without substantive enforcement changes even when they have strong legal and regulatory systems. Moreover, we find similar liquidity effects for firms that experience enforcement changes but do not concurrently switch to IFRS. Thus, changes in reporting enforcement or (unobserved) factors ...

REVISION: Proper Inferences or a Market for Excuses? The Capital-Market Effects of Mandatory IFRS Adoption
Date Posted: Oct  12, 2013
Barth and Israeli (2013) raise five serious concerns regarding the research design and interpretation of Christensen, Hail, and Leuz (2013). They claim: (i) the evidence stands in stark contrast to Daske, Hail, Leuz, and Verdi (2008) and fails to replicate its prior findings; (ii) the research design using fixed effects leaves out main effects and two-way interactions which likely biases the estimated liquidity effects around IFRS adoption and changes in enforcement; (iii) the vast majority of sample observations do not contribute to the identification which is misleading in terms of the scope and the conclusions that can be drawn from the study; (iv) the timing of IFRS adoption and enforcement changes is measured imprecisely leading to low power tests; and (v) the evidence from Japan is irrelevant to the study. In this note, we show that all five claims are incorrect or misleading. Our discussion also more broadly describes how to properly interpret the fixed-effect specifications ...

REVISION: Does Fair Value Accounting for Non-Financial Assets Pass the Market Test?
Date Posted: Jun  07, 2013
The choice between fair value and historical cost accounting is the subject of long-standing controversy among accounting academics and regulators. Nevertheless, the market-based evidence on this subject is very limited. We study the choice of fair value versus historical cost accounting for non-financial assets in setting where market forces rather than regulators determine the outcome. In general, we find a very limited use of fair value accounting. However, the observed variation is ...

REVISION: Does Fair Value Accounting for Non-Financial Assets Pass the Market Test?
Date Posted: Feb  27, 2013
The choice between fair value and historical cost accounting is the subject of long-standing controversy among accounting academics and regulators. Nevertheless, the market-based evidence on this subject is very limited. We study the choice of fair value versus historical cost accounting for non-financial assets in a setting where market forces rather than regulators determine the outcome. In general, we find a very limited use of fair value accounting. However, the observed variation is ...

REVISION: Why Do Firms Rarely Adopt IFRS Voluntarily? Academics Find Significant Benefits and the Costs Appear
Date Posted: May  28, 2012
Kim and Shi (this issue) document that voluntary IFRS adoption is associated with significant benefits and argue that the effect is causal – a conclusion that is similar to many published papers on IFRS adoption. Yet voluntary IFRS adopters constitute only a small percentage of the global population of firms, which implies that either practitioners behave irrationally or the benefits are incorrectly estimated by academics. In this discussion I argue that the error is on the part of academics, ...

REVISION: Capital Versus Performance Covenants in Debt Contracts
Date Posted: Sep  26, 2011
Building on contracting theory, we argue that financial covenants control the conflicts of interest between lenders and borrowers via two different mechanisms. Capital covenants control agency problems by aligning debtholder-shareholder interests. Performance covenants serve as tripwires that limit agency problems via the transfer of control to lenders in states where the value of their claim is at risk. Companies trade off these mechanisms. Capital covenants impose costly restrictions on ...