In this study we report the results of a laboratory experiment in which we examine whether the credibility of management's balance-sheet classification of hybrid securities as liabilities or equity is a joint function of (1) the level of classification discretion in the reporting environment,...

Research suggests that investors fail to fully process changes in return on assets due to their incomplete processing of changes in asset turnover. We propose that investors do not fully process changes in return on assets—stemming from changes in asset turnover—because of their (1) fixation...

A fundamental accounting question is whether investors perceive low risk when earnings are smooth relative to the volatility of operating cash flows. We conduct two experiments to examine this question. Absent additional information concerning the likelihood of earnings management, our first...