We assess the impact of the Sarbanes-Oxley Act of 2002 on corporate investment in an investment Euler equation framework, where a dummy for the passage of the Act is allowed to affect the rate at which managers discount future investment payoffs. Using generalized method of moments estimators,...

We document that the value-weighted aggregate discretionary accruals have significant power in predicting the one-year-ahead stock market returns between 1965 and 2004. The predictive relation is stable and robust to different ways to measure market returns and discretionary accruals as well as...

We find that the positive relation between aggregate accruals and one-year-ahead market returns documented in Hirshleifer, Hou and Teoh [2009] is driven by discretionary accruals but not normal accruals. The return forecasting power of aggregate discretionary accruals is robust to choices of...

We use a simple information-based model of corporate investment to determine when investment will be sensitive to cash flow. The key cross-sectional prediction of the model is that investment-cash flow sensitivity will be stronger for firms with more informative stock prices, higher cash flow...

This paper offers an information-based explanation for the well-documented diversification discount. While explicitly assuming that the stock prices convey valuable information to the management, our model shows that the value loss from diversification is due to the insufficient information...