This study examines the relevance of "Financial Accounting Standards (SFAS) No. 95" operating cash flow disclosures for assessing a primary component of firm risk, namely credit risk. We find that "SFAS No. 95" operating cash flows is an important determinant of credit risk, measured by debt...

Khan and Watts (2009) develop a firm-year measure of conditional conservatism, labeled C_Score, that builds on the Basu (1997) asymmetric timeliness (AT) measure. However, recent research documents an asymmetric relation between lagged earnings and current returns, indicative of bias in the Basu...

Traditional finance theory suggests that riskier investments should yield higher returns. Challenging this notion, anecdotal and empirical evidence suggests that highly-incented managers may take on excessive risk, leading to greater losses, while other theoretical research argues that high...

Extreme accruals are commonly viewed as tainted by earnings management, contributing to lower quality earnings. We refer to this presumption as the earnings management/quality hypothesis. We directly examine three aspects of the presumed relation between the level of accruals and earnings...

This study provides evidence on the role of accounting conservatism in mitigating bondholder/shareholder conflicts over dividend policy. In particular, we document that firms that face more severe conflicts over dividend policy tend to use more conservative accounting. Furthermore, we also...

We investigate (1) whether investors' earnings expectations include dividend information that is incremental to information in earnings components and (2) whether investors correctly weight the incremental information reflected in dividends. We find that both dividends and dividend changes are...