This paper demonstrates that bad news herding is actually accompanied by bad news over-reporting. By focusing on write-offs during two major recessions of 2001 and 2008 and taking advantage of a unique hand-collected dataset on reversals of restructuring charges, we document that when firms herd...

How does artificial intelligence (AI) impact audit quality and efficiency? We explore this question by leveraging a unique dataset of more than 310,000 detailed individual resumes for the 36 largest audit firms to identify audit firms’ employment of AI workers. We provide a first look into the...

We combine a fundamental property of accruals and a behavioral phenomenon to provide an explanation for the accrual anomaly. The fundamental property is: accruals that originate must subsequently reverse. The behavioral phenomenon is: individuals tend to underestimate the variance of noisy...

This paper provides a rational explanation for earnings discontinuity in the context of the agency model. A company manager often possesses private information about the project's expected return. This information is valuable to the firm because early warning that a project is unlikely to...

The current literature on earnings management around seasoned equity offerings (SEOs) mainly concentrates on discretionary accruals, and considers all SEOs as a homogenous pool of firms. The uniqueness of this paper is in linking firms' valuation to their discretionary choices and by...

This paper links valuation of different accounting items to R&D investment decisions and investigates how suboptimal R&D choices during IPO are linked to future operating and market underperformance. For firms with substantial growth opportunities, accounting net income is a poor measure of the...

This paper investigates how media coverage affects quality of accounting information for seasoned equity offering (SEO) firms. Media attention can either serve as a “watchdog” (watchdog hypothesis) and effectively reduce earnings management; or, alternatively, can create an extra pressure on...

Prior research on financial analyst' quarterly earnings forecasts has documented serial correlation in forecast errors. This paper examines the way serial correlation in quarterly earnings forecast errors varies with firm and analyst attributes such as the firm's industry and the analyst's...

The valuation of STEM (Science, Technology, Engineering and Math) firms has gained attention in the literature over the past two decades. Research has shown that for valuation of STEM firms, accounting items such as sales growth and R&D expenditures are more important than bottom-line earnings....