Financial distress has a dual effect on stock pricing: it affects both investors’ expected return and stock pricing efficiency. Therefore, the estimated relation between it and realized return captures both the relation between it and expected return and the relation between it and the...

We find a positive relation between short supply and debt maturity. This positive relation holds under the instrumental variable approach. We interpret this positive relation as evidence that a vibrant short-selling environment enabled by high short supply is conducive to debt contracting by...

The stocks of firms with poor accounting information quality (AIQ) comove least, as gauged by the correlation between returns on two stocks. Only undiversifiable risk is rewarded with a premium and the undiversifiable risk of a diversified stock portfolio increases with correlations between the...

The literature offers three views on the effect of stock liquidity on accruals-based earnings management. According to the takeover threat view, stock liquidity makes a firm prone to hostile takeovers and thereby spurs its managers to use accruals-based earnings management to move stock price...

PurposeThis study aims to examine what underlies the estimated relation between idiosyncratic volatility and realized return.Design/methodology/approachIdiosyncratic volatility has a dual effect on stock pricing: it not only affects investors' expected return but also affects the efficiency of...

We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968-2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

If investors have limited attention, then accounting outcomes that saliently highlight positive aspects of a firm's performance will promote high market valuations. When cumulative accounting value added (net operating income) over time outstrips cumulative cash value added (free cash flow), it...