We study the consequences of earnings management for the allocation of resources among firms, and we argue that fraudulent accounting has important economic consequences. We first build a model where the costs of earnings management are endogenous, and we show that, in equilibrium, bad managers...

Diversified firms trade at a discount relative to similar single-segment firms. We argue in this paper that this observed discount is not per se evidence that diversification destroys value. Firms choose to diversify. Firm characteristics, which make firms diversify, might also cause them to be...

This paper argues that the documented discount on diversified firms is not per se evidence that diversification destroys value. Firms choose to diversify. We use three alternative econometric techniques to control for the endogeneity of the diversification decision, and find evidence supporting...

We examine the impact of geographical proximity on the acquisition decisions of US public firms over the period 1990-2003. Transactions where the acquirer and target firms are located within 100km of each other are classified as local transactions. We find that acquirer returns in local...

This paper examines the effect of CEO compensation contracts on misreporting. We find that the sensitivity of the CEO's option portfolio to stock price is significantly positively related to the propensity to misreport. We do not find that the sensitivity of other components of CEO compensation,...

Recent frauds have questioned the efficacy of the SEC's enforcement program. We hypothesize that differences in firms' information sets about SEC enforcement and constraints facing the SEC affect firms' proclivity to adopt aggressive accounting practices. We find that firms located closer to the...

This paper examines the prevalence of informed trading in the corporate debt market prior to takeover announcements. Unlike target stocks, target bonds do not always gain in an acquisition. Target bonds rated higher than the acquirer's stand to lose whereas those rated lower stand to gain. We...

We examine the role of geographically proximate (local) market makers in providing liquidity and improving the quality of a dealer market. Firms with active participation of local dealers enjoy lower quoted and effective spreads, as well as more informative prices. The beneficial effects from...

We examine the role of geographically proximate (local) market makers in providing liquidity and improving the quality of a dealer market. Firms with active participation of local dealers enjoy lower quoted and effective spreads, as well as more informative prices. The beneficial effects from...

We find that fixed effects related to the location of a firm's headquarters explain variation in broad based option grants after controlling for industry effects and firm characteristics traditionally known to affect option granting. Location matters because of local labor market conditions and...