We examine how shareholders' trust in managers is affected by (1) the outcome of earnings management (inconsistent vs. consistent with shareholders' interests) and (2) the method of earnings management (accruals vs. real methods). Using a controlled experiment, we predict and find that trust is...

In this study we conduct a field experiment to examine how qualifying an income-decreasing accounting change in years of strong financial performance affects user assessments of strategic reporting, current financial performance, and financial performance over the next three years (future...

In this study we report the results of an experiment that examines how relatively sophisticated financial statement users interpret management stock option compensation disclosures under SFAS No. 123 and SFAS No. 123R. We predict and find that mandated income statement recognition, as required...

In this study we report the results of a laboratory experiment in which we examine whether the credibility of management's balance-sheet classification of hybrid securities as liabilities or equity is a joint function of (1) the level of classification discretion in the reporting environment,...

Researchers, practitioners, and standard setters emphasize the importance of disaggregating financial statements into operating and financial activities. However, there is a lack of research demonstrating that this disaggregation improves forecasts of profitability. In this study, we consider...

Research suggests that investors fail to fully process changes in return on assets due to their incomplete processing of changes in asset turnover. We propose that investors do not fully process changes in return on assets—stemming from changes in asset turnover—because of their (1) fixation...

I/B/E/S is a common source of analyst earnings forecast data, and the reliability of these data is important for practice and academic research. Examining a common sample period, we compare annual earnings forecasts across two versions of the I/B/E/S detail file, one made available in 2009 and...

In order to reduce costs, audit firms have begun transferring audit tasks to offshore locations in countries such as India. Consequently, new audit associates no longer perform these tasks. They are, however, asked to review them. If gaining experience completing audit tasks is an important...

We examine if investor expectations of two common disclosure mediums (conference calls and Twitter) interact with a CEO's communication style to influence investor judgments. Consistent with theory, results show that when the disclosure medium is a conference call, investors are less willing to...

The Dodd-Frank Act requires firms to include a clawback or holdback clause in executive compensation contracts. Using an experiment, we examine how executives react to the enforcement of these clauses after a restatement. We find that executives generally reduced the riskiness of their financial...