We argue that earnings management and fraudulent accounting have important economic consequences. In a model where the costs of earnings management are endogenous, we show that in equilibrium, bad managers hire and invest too much in order to pool with the good managers. This behavior distorts...

Diversified firms trade at a discount relative to similar single-segment firms. We argue in this paper that this observed discount is not per se evidence that diversification destroys value. Firms choose to diversify. Firm characteristics, which make firms diversify might also cause them to be...

We examine the determinants of debt issuance in 10 major currencies by large U.S. firms. Using the fraction of foreign subsidiaries and tests exploiting the disaggregated nature of our data, we find strong evidence that firms issue foreign currency debt to hedge their exposure both at the...

This paper argues that the documented discount on diversified firms is not per se evidence that diversification destroys value. Firms choose to diversify. We use three alternative econometric techniques to control for the endogeneity of the diversification decision, and find evidence supporting...

Several recent papers document that the magnitude of potential gains from stock-based compensation is positively related to the likelihood of misreporting. In a sample of firms that announce restatements of their financial statements from 1997 to 2002, we examine whether managers realize these...

Every year only a small fraction of Nasdaq firms that are eligible to move to the NYSE actually choose to move. This is surprising as prior literature documents significant gains to listing on NYSE. Gains in visibility and liquidity associated with a move to NYSE reduce the firm's cost of...

We find that the likelihood and severity of financial misreporting is positively related to aggregate institutional ownership and this effect can be largely attributed to ownership by institutions with short investment horizons -- those with little incentive to engage in costly monitoring of...