Whether corporate diversification decreases or increases the risk of the diversifying firm is an important empirical question. We investigate this issue using a sample of diversifying acquisitions and various risk measures. We find that corporate diversification tends to decrease the risk of...

A considerable amount of research has been devoted to why R2 differs across firms or markets, although little attention has been paid to the consequences of this difference. We fill this gap by investigating how differing R2 affects investors' assessment of firm value. Using a sample of 90,111...

We investigate whether and how labor unions affect information asymmetry among investors. To account for the endogeneity of unionization, we adopt an IV 2SLS model, a differences-in-differences technique, and Heckman's (1979) two-stage procedure. We also explore an exogenous proxy for employees'...

Whether and how accounting information quality affects the cost of capital has been a matter of much debate. We contribute to this debate by linking accounting information quality to systematic risk, inspired by recent theoretical discussions. Using the universe of firms jointly listed in the...

There are substantial differences in stock market volatility across countries. This paper asks why market volatility differs across countries. Using Datastream Country Indexes covering thirty seven international markets, this paper finds that the education level of investors plays a significant...

We investigate whether and how managerial ability affects financial report complexity. After controlling for a host of firm characteristics such as firms’ financial and operating complexity, we find that managerial ability is significantly and positively related to the complexity of financial...

Credit union decisions on how funds are raised and invested and what services to provide are guided by their business models and should be reflected by credit union financial statements. We use cluster analysis to group credit unions using common size financial statement variables such that the...

Investors and analysts classify firms to conduct valuations or to evaluate performance. The industry groupings usually rely on SIC, NAIC, GICS, or Fama-French classifications. Our purpose is to form groups of companies based on the structure of their financial statements. Using cluster analysis,...

Choosing appropriate peer groups for bank research is important to evaluate safety and soundness, merger effects, and overall performance. We use commercial bank financial statements with common size variables as the inputs to a cluster analysis model to identify clusters or groups of banks with...

While financial statement analysis is a rich tool, there is no widely used holistic measure of the amount of change in corporate financial statements. Statistical decomposition analysis has been employed as an index of the amount of change, but has fallen into disuse because it does not allow...