Studies suggest that, pursuant to the implementation of SFAS 133, even sophisticated users of financial statements find it difficult to comprehend earnings implications of hedging derivatives. Moreover, due to stringent hedge accounting requirements under these standards, many economic hedges do...

We study the resource allocation role of voluntary disclosures when feedback from financial markets is potentially useful to managers in undertaking value maximizing actions. Managers weigh the short-term price implications of disclosure against the long-term efficiency gains due to feedback...

This study develops a theory that predicts the lower the degree to which firms' earnings are correlated with the industry the greater the probability a firm will issue a biased signal of firm performance. The theory provides for causal predictions in our empirical tests in which we examine the...

In this paper we provide new insights into the motives underlying insider participation in private investments in public equity (PIPEs) by considering the association among insider participation, pricing, and contractual terms. PIPEs are a financing choice that have become popular over the last...

We offer a theoretical framework to help isolate persistence estimates of fundamental earnings innovations from the effects of accounting measurements. We show that a downward bias results when persistence of earnings innovations is estimated using reported earnings. We show that the greater the...

Recent corporate governance reforms focus on board independence and encourage equity ownership by directors. We analyze the efficacy of these reforms in a model where both adverse selection and moral hazard are present at the level of the firm's management. Delegating governance to the board...

We analyze the voluntary disclosure decision of a manager when analysts scrutinize the quality of disclosure. We derive an equilibrium in which managers voluntarily disclose unfavorable information only if sufficiently precise, but disclose favorable news with lower levels of accuracy. We show...

Fair value estimates from external third-party sources are generally considered more reliable than internal estimates based on managerial inputs. However, even externally sourced estimates are subject to managerial opportunism, because firms can switch from one external source to another. In the...

We develop a firm-level private information index with three unique features. First, the index is a direct measure of the nature and magnitude of private information that is proprietary. Second, it is multi-dimensional. Third, it is not specific to any one setting. We conduct several tests to...

Using a setting in which an employer seeks information about talent in order to achieve a proper match between talent levels and tasks, we provide a comparative analysis of two performance evaluation systems widely used in practice ― an absolute performance evaluation system (APE) and a...