We examine whether the adoption of clawback provisions in executive compensation contracts improves the informativeness of accounting information. Contrary to conventional wisdom we find that clawbacks do not lead to improved financial reporting. Specifically, we document a significant decline...

Since the 1939 Revenue Act requires a firm using LIFO for taxes to use LIFO for financial reporting, a firm wishing to minimize its tax payments by the use of LIFO must use LIFO as a reporting method. The tax savings to the firm adopting LIFO equals the difference between FIFO cost of goods sold...

This paper analyzes the relationship between a firm's demand for different quality auditors and opportunities for earnings management.In our model, the firm simultaneously chooses the bias it introduces into its pre-audited earnings and the quality of its auditor. We show that firms that choose...

A corollary to Murphy's Law is: The other lane always moves faster than my lane. We show that even when the law is objectively untrue, because of sampling bias, people perceive the law as true. A manager who is aware of this perceptual bias will try to structure her budget cutbacks and all other...

Lev and Zarowin (1999) argue that the there has been a decline in the usefulness of financial information in the U.S. resulting from the inability of the current financial reporting system to contemporaneously capture changes in firms' operations and economic conditions. As a result, it appears...

We examine whether U.S. firms' M&A decisions influence the likelihood of voluntary adoption of clawback provisions in executive compensation contracts and whether clawback adoption improves subsequent M&A decisions. Because prior research finds that poor M&A decisions are associated with future...

Statement of Financial Accounting Standards No. 87 - Employers' Accounting for Pensions (SFAS No. 87) and Statement of Financial Accounting Standards No. 106 - Employers' Accounting for Postretirement Benefits other than Pensions (SFAS No. 106) allow firms to compute the expected return on plan...

This paper examines a fundamental question of interest to researchers and regulators: Does the market treat disclosed financial statement information as if it is less reliable than information recognized in the body of the financial statements? Specifically, we compare the perceived reliability...

This study investigates the relation between the market value of publicly traded Mexican firms and their disclosures of accounting information adjusted for changing prices. The volatile hyperinflationary environment in Mexico provides an ideal setting for investigating the value relevance of...