Accounting rules mandate that the cost of debt should be recorded as an expense, while the cost of equity does not appear in the income statement. Therefore, the amount of financing expense, and thus net income, in the income statements depends on how firms finance their business. Based on a...

We investigate the association between managerial ability and revenue-expense matching. We find that firms having managers with better ability exhibit better contemporaneous revenue-expense matching because more capable managers estimate accruals more accurately and select the projects with...