This study investigates the relation between customer concentration and a supplier's cost of equity capital. We hypothesize that a more concentrated customer base increases a supplier's risk, which results in a higher cost of equity. Our results show a positive association between customer...

Beginning in 2005, the SEC mandated firms to include a “risk factor” section in their Form 10-K to discuss “the most significant factors that make the company speculative or risky.” This suggests that regulators believe that investors benefit from disclosures about firm risk and...

While extensive research examines the relation between option incentives in executive compensation and risk-taking by managers, the impact of capital structure on this relationship has received little empirical attention. Prior work suggests that heightened managerial career concerns arising...

In this paper, we examine the relation between auditor litigation risk and abnormal accruals over the 1989-2007 time period. We address potential endogeneity in prior studies by jointly modeling abnormal accruals and litigation risk in a simultaneous equation system. Our findings suggest that...

Exploiting a legal regime change in China in 2005 that significantly increased auditors' legal liability, we reexamine why auditors are more likely to issue modified audit opinions (MAOs) to clients who receive negative press coverage before audit report dates. We find that the probability for...