The push for increased transparency in financial reporting and corporate governance serves shareholders only up to a limit. The problem of assessing the value of transparency to shareholders is subtle because both the level and pattern of earnings can convey information. Even when earnings...

common explanation for why firms incur sunk costs is that technology considerations make them inescapable. This paper shows that sometimes firms may prefer to make early (less informed) investment decisions even when technology allows such decisions to be delayed. Sunk costs commit and clarify a...

Job rotation refers to the practice of routinely transferring employees between jobs. The explanations provided for job rotation are as varied as its uses.Some posit that complementarities and learning across tasks allow increased productive efficiency, while others speculate that employees'...

Though sunk costs impact future income calculations (via depreciation for example), accountants are reminded that their sunk nature makes them irrelevant for future decisions. An explanation for why firms routinely incur such costs is that technology considerations make them inescapable. This...

This paper considers the desirability of aggregate performance measures in light of the fact that many individuals' performance incentives are driven by a desire to shape external perceptions (and thus pay). In contrast to the case of explicit contracts, we find that when individuals' actions...

Prior research has estimated piecemeal the determinants of audit fees, non-audit services fees and abnormal accruals. Intuition, informal analysis, and a variety of theories of various aspects of auditor-client interaction suggest that audit fees, nonaudit fees, and abnormal accruals are jointly...

Accounting conservatism allows me to identify a previously undocumented source of predictable cross-sectional variation in Standardized Unexpected Earnings' autocorrelations viz. the sign of the most recent earnings realization and present evidence that the market ignores this variation ("loss...

We examine the effect of litigation risk on managers' decision to issue earnings forecasts. We use a new ex ante measure of litigation risk, namely, the Directors and Officers liability insurance premium. This choice bypasses significant problems associated with the estimation of ex ante...

Litigation risk has been hypothesized to affect managerial behavior in a number of ways. An understanding of the determinants of litigation risk is a necessary first step to analyzing managerial behavior. We examine the determinants of an ex-ante measure of litigation risk, namely, Directors and...

Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by...