Prior literature is mixed as to whether smoothing through accruals indicates higher or lower financial reporting quality (Tucker and Zarowin 2006; Jayaraman 2008; Dechow et al. 2010). Motivated by the unique inter-temporal features and reporting incentives of tax expense, we provide new evidence on this...

Lenders can transfer credit risk by purchasing credit default swaps (CDS), but holding swaps can diminish their incentives to monitor borrowers. Contracting theory predicts that lenders demand conservatism, in particular asymmetric timeliness of loss recognition, to effectively monitor...

Purpose – The purpose of this paper is to investigate whether the special items (SI) mispricing reported in Burgstahler et al. is distinct from the accruals (ACC) mispricing documented in Sloan. Design/methodology/approach – This paper employs the control hedge‐portfolio test,...

Psychological and upper echelons theories suggest that CEOs with the personality trait of sensation seeking shape corporate policies. In gauging sensation seeking with whether the CEO holds a pilot license, we examine its importance to firms' accounting conservatism. Our evidence implies that...