The cross-sectional approach that is typically used to estimate accrual models implicitly assumes that firms within the same industry have a homogeneous accrual generating process. In this paper, we examine this implicit assumption along three dimensions. First, we argue that the relation...

To test hypotheses about earnings management many studies investigate managers' manipulation of real activities (real earnings management, REM). Tests using measures of abnormal REM hinge critically on the measurement of normal real activities. Yet there is no systematic evidence on the...

We examine the information role of accounting disclosures on warranties, utilizing a database that became available due to the requirements of FIN 45. First, because firms use warranty policies as a business strategy to promote their products, a warranty reserve can serve two roles: an...

In the asymmetric cost behavior model, managers play an active role in determining cost behavior by adding or removing resources as activity changes. Cost stickiness occurs when managers deliberately retain slack resources resulting from a decline in sales activity between periods. Because both...

The critical global role of audit firms, combined with the scarcity of qualified staff and downward pressure on fees, has increased the importance of understanding efficiency in this industry. This paper examines the technical and allocative inefficiencies of audit firm staffing using data from...

The issue of asymmetric cost behavior has attracted significant interest in the managerial accounting literature. The literature has hypothesized that adjustment costs, particularly labor adjustment costs, play a significant and central role in driving empirically observed cost behavior...