The current methodology to evaluate default and bankruptcy prediction models is to determine their precision - the percentage of firms predicted correctly. In this study we develop a framework for incorporating Type I (the amount lost from lending to a firm which goes bankrupt) and Type II (the...

This paper analyzes a sample of 1,722 European firms during their mandatory transition from local country accounting rules (Local GAAP) to International Financial Reporting Standards (IFRS) in 2004 and 2005 using the same set of firm-year observations. We use this unique transition period to...

The venerable case of Hadley v. Baxendale serves as the prototype for default rules designed to penalize, and thus encourage disclosure by, an undesirable contractual counterpart. Penalty-default analysis is now widely accepted as a plausible approach to the issues presented by incomplete...

Class action lawyers do not merely represent clients, they also make law, an observation explored by Kobayashi and Ribstein in “Class Action Lawyers as Lawmakers.” Kobayashi and Ribstein observe that a class action lawyer's inability to internalize all the benefits of her innovation may lead...

Leading scholars in the field of law and economics contribute their original theoretical and empirical research to this major Handbook. Each chapter analyzes the basic architecture and important features of the institutions of property law from an economic point of view, while also providing an...

The rules of bankruptcy reorganization in the United States permit a debtor to retain a secured claim’s collateral in exchange for judicially approved compensation even over the objection of the secured creditor. An alternative would grant a secured creditor the right to recover its collateral...

We use a unique and confidential database of 15,392 tax audits performed by the Croatian Tax Administration during the 2002–2006 period to examine the impact of task complexity, auditor experience, and auditor effort on audit performance. We provide external validation to prior experimental...

While it is generally maintained that earnings management can occur to inform as well as to mislead, evidence that earnings management informs has been scarce, and evidence that credibility increases with signal costliness inexistent. We provide evidence that firms use discretion over financial...