We investigate the impact of earning asset diversification on Chinese bank efficiency from by allowing for technology change. Regressions reveal that increasing the asset share of other earning assets is positively associated with bank efficiency. Decreasing the share of nonearning assets in...

We propose a simple framework for understanding accounting-based stock return regularities. A firm's accounting reports provide noisy information about hidden economic states that evolve according to a Markov process. In response to the accounting reports, a representative Bayesian investor...

We examine firms' financial reporting practices during the missing months that are induced by fiscal year changes and not covered by regular quarters. We find that firms tend to report much lower income for the missing months than for adjacent quarters, mainly by recording higher operating...

This study examines the credibility of corporate social responsibility (CSR) reports and the role of external assurance on CSR reports. Based on a sample of listed firms in Taiwan, we find that the issuance of CSR reports is not associated with a lower incidence, or frequency, of future...

We study how information disclosure affects financial intermediation when the payoff to the long-term investment is risky. The analysis is based on a business-cycle version of the bank run model wherein a bank provides risk sharing to demand depositors who experience unobservable shocks to their...

We propose and validate a new measure of earnings quality based on a hidden Markov model. This measure, termed earnings fidelity, captures how faithful earnings signals are in revealing the true economic state of the firm. We estimate the measure using a Markov chain Monte Carlo procedure in a...

This paper examines the implications of investor expectations for the joint determination of earnings manipulation and asset prices. Three alternative models of investor expectations are studied: constant-gain learning, regime-shifting beliefs, and accounting-information-system (AIS) beliefs. I...