Mirko Heinz

Mirko Heinle teaches Managerial Accounting in the undergraduate program. He joined the Wharton School in 2011 after receiving his doctoral degree from the University of Mannheim, Germany. Mirko's research interests concern accounting disclosure in capital markets, the regulatory process of such disclosure, and internal capital allocation. Current research includes the disclosure of risk related information, the effect of regulatory uniformity on lobbying incentives, and the optimal allocation of nonmonetary resources.

Mirko S. Heinle and Kevin Smith (2017), A Theory of Risk Disclosure, Review of Accounting Studies, forthcoming.

Abstract: In this paper, we consider the price effects of risk disclosure. We develop a model in which investors are uncertain about the variance of a firm’s cash flows and the firm releases an imperfect signal regarding this variance. In our model, uncertainty over the riskiness of a firm’s cash flows leads to a variance uncertainty premium in its price. We demonstrate that risk disclosure decreases the firm’s cost of capital by reducing this premium and that the market response to risk disclosure is small when the expected level of risk is high. Moreover, we find that firms acquire and disclose more risk information when their cash flow risk is greater than expected. Finally, we demonstrate that in a multiasset setting, only risk disclosure concerning systematic risks will impact the cost of capital.

Henry Friedman and Mirko S. Heinle (2016), Taste, Information, and Asset Prices: Implications for the Valuation of CSR, Review of Accounting Studies, 21 (3), pp. 740767.

Abstract: Firms often undertake activities that do not necessarily increase cash flows (e.g., costly investments in corporate social responsibility, or CSR), and some investors value these noncash activities (i.e., they have a "taste" for these activities). We develop a model to capture this phenomenon and focus on the assetpricing implications of differences in investors' tastes for firms' activities and outputs. Our model shows that, first, investor taste differences provide a basis for investor clientele effects that are endogenously determined by the shares demanded by different types of investors. Second, because the market must clear at one price, investors' demands are influenced by all dimensions of firm output even if their preferences are only over some dimensions. Third, information releases cause trading volume, even when all investors have the same information. Fourth, investor taste provides a rationale for corporate spinoffs that help firms better target their shareholder bases. Finally, individual social responsibility can lead to corporate social responsibility when managers care about stock price because price reacts to investments in CSR activities.

Alex Edmans, Mirko S. Heinle, Chong Huang (2016), The Real Costs of Financial Efficiency When Some Information Is Soft, Review of Finance, 20 (6), pp. 21512182.

Abstract: This article shows that improving financial efficiency may reduce real efficiency. While the former depends on the total amount of information available, the latter depends on the relative amounts of hard and soft information. Disclosing more hard information (e.g., earnings) increases total information, raising financial efficiency and reducing the cost of capital. However, it induces the manager to prioritize hard information over soft by cutting intangible investment to boost earnings, lowering real efficiency. The optimal level of financial efficiency is nonmonotonic in investment opportunities. Even if low financial efficiency is desirable to induce investment, the manager may be unable to commit to it. Optimal government policy may involve upper, not lower, bounds on financial efficiency.

Henry Friedman and Mirko S. Heinle (Work In Progress), Influence activities, coalitions, and uniform policies.

Paul Fischer, Mirko S. Heinle, Kevin Smith (Work In Progress), Strategic Listening.

Mirko S. Heinle and Henry Friedman (2016), Lobbying and uniform disclosure regulation, Journal of Accounting Research, 54 (3), pp. 863893.

Abstract: This study examines the costs and benefits of uniform accounting regulation in the presence of heterogeneous firms who can lobby the regulator. A commitment to uniform regulation reduces economic distortions caused by lobbying by creating a freerider problem between lobbying firms at the cost of forcing the same treatment on heterogeneous firms. Resolving this tradeoff, an institutional commitment to uniformity is socially desirable when firms are sufficiently homogeneous or the costs of lobbying to society are large. We show that regulatory intensity for a given firm can be increasing or decreasing in the degree of uniformity, even though uniformity always reduces lobbying. Our analysis sheds light on the determinants of standardsetting institutions and their effects on corporate governance and lobbying efforts.

Paul Fischer, Mirko S. Heinle, Robert E. Verrecchia (2016), Beliefsdriven price association, Journal of Accounting and Economics, 61 (23), pp. 563583.

Abstract: In addition to being a function of traditional fundamentals such as cashflow persistence and the discount rate, the equilibrium association between a security price and a valuerelevant statistic can simply be a function of what rational investors believe the association will be. We refer to this phenomenon as beliefsdriven price association (BPA). By explicitly considering the phenomenon of BPA, we show that the price response to information releases can vary over time even if the riskfree interest rate and investor preferences are static and the earnings/cash flow generating process is stable. This observation suggests, for example, that pricetoearnings associations and price volatility can vary over time even if a stable pattern of economic fundamentals suggests otherwise. The possibility of BPA suggests that measures of the cost of capital, information content, and growth prospects inferred from observed market prices will be confounded. While we do not predict when periods of BPA will arise, we provide empirically testable predictions about how prices should behave during periods of BPA. In particular, we predict that, during sufficiently long periods of high (positive or negative) BPA, price volatility, price levels, and expected returns will be higher than would be implied by a fundamental valuation framework. Finally, while BPA in the pricing of one security does not cause BPA in the pricing of other securities, the price levels of those other securities will be affected if the securities with BPA are sufficiently large relative to the market as a whole.

Mirko S. Heinle and Robert E. Verrecchia (2016), Bias and the Commitment to Disclosure, Management Science, 62 (10), pp. 28592870.

Abstract: This paper studies the propensity of firms to commit to disclose information that is subsequently biased, in the presence of other firms also issuing potentially biased information. An important aspect of such an analysis is the fact that firms can choose whether to disclose or withhold information. We show that allowing the number of disclosed reports to be endogenous introduces a countervailing force to some of the empirical predictions from the prior literature. For example, we find that as more firms issue reports or as the correlation across firms’ cash flows increases, the firm biases its report less. However, when we treat firms’ disclosure choices as endogenous, we show that the number of firms that commit to disclose decreases as the correlation across these cash flows increases, and this, in turn, offsets the direct effect of the correlation on bias.

Mirko S. Heinle, Richard Saouma, Nicholas Ross (2014), A Theory of Participative Budgeting, The Accounting Review, 89, pp. 10251050.

Abstract: This paper complements the ongoing empirical discussion surrounding participative budgeting by comparing its economic merits relative to a topdown budgeting alternative. In both budgeting regimes, private information is communicated vertically between a principal and a manager. We show that topdown budgeting incurs fewer agency costs than bottomup budgeting whenever the level of information asymmetry is relatively low. Although the choice between topdown and bottomup budgeting ultimately determines who receives private information within the firm, we find that both the principal and manager's preferences over the allocation of private information remain qualitatively similar across the two budgeting paradigms. Specifically, while the principal always prefers either minimal or maximal private information, the manager prefers an interim or maximal level of private information regardless of who is privately informed. Last, we use our model to address empirical inconsistencies relating the firm's choice of budgeting process, the resulting budgetary slack, and performance.

Stanley Baiman, Mirko S. Heinle, Richard Saouma (2013), Multistage Capital Budgeting with Delayed Consumption of Slack, Management Science, 59, pp. 869881.

Abstract: Capital budgeting frequently involves multiple stages at which firms can continue or abandon ongoing projects. In this paper, we study a project requiring two stages of investment. Failure to fund Stage 1 of the investment precludes investment in Stage 2, whereas failure to fund Stage 2 results in early termination. In contrast to the existing literature, we assume that the firm can limit the manager's informational rents with the early termination of the project. In this setting, we find that the firm optimally commits to a capital allocation scheme whereby it forgoes positive net present value (NPV) projects at Stage 1 (capital rationing), whereas at Stage 2, depending on the manager's previous report, it sometimes implements projects with a negative continuation NPV but in other situations forgoes implementing projects with positive continuation NPVs.

Past Courses

ACCT102 MANAGERIAL ACCOUNTING

The first part of the course presents alternative methods of preparing managerial accounting information, and the remainder of the course examines how these methods are used by companies. Managerial accounting is a company's internal language, and is used for decisionmaking, production management, product design and pricing and for motivating and evaluating employees. Unless you understand managerial accounting, you cannot have a thorough understanding of a company's internal operations. What you learn in this course will help you understand the operations of your future employer (and enable you to be more successful at your job), and help you understand other companies you encounter in your role as competitor, consultant, or investor.

ACCT910 ACCT THEORY RESEARCH

The course includes an introduction to various analytical models and modeling/mathematical techniques that are commonly used in accounting research as well as related empirical applications.