Financial distress has a dual effect on stock pricing: it affects both investors’ expected return and stock pricing efficiency. Therefore, the estimated relation between it and realized return captures both the relation between it and expected return and the relation between it and the...

We find a positive relation between short supply and debt maturity. This positive relation holds under the instrumental variable approach. We interpret this positive relation as evidence that a vibrant short-selling environment enabled by high short supply is conducive to debt contracting by...

The estimated relation between idiosyncratic volatility and realized return captures its relations with both expected return and the mispricing-related component due to its dual effect on stock pricing. The sign of its relation with the mispricing-related component is indeterminate. Empirically,...

The stocks of firms with poor accounting information quality (AIQ) comove least, as gauged by the correlation between returns on two stocks. Only undiversifiable risk is rewarded with a premium and the undiversifiable risk of a diversified stock portfolio increases with correlations between the...

The literature offers three views on the effect of stock liquidity on accruals-based earnings management. According to the takeover threat view, stock liquidity makes a firm prone to hostile takeovers and thereby spurs its managers to use accruals-based earnings management to move stock price...

We find a positive effect of quasi-indexer ownership on financial statements comparability. Using the annual Russell 1000/2000 index reconstitution as an exogenous variation in quasi-indexer ownership, we show that the positive effect seems to be causal. We interpret our finding as evidence...

PurposeThis study aims to examine what underlies the estimated relation between idiosyncratic volatility and realized return.Design/methodology/approachIdiosyncratic volatility has a dual effect on stock pricing: it not only affects investors' expected return but also affects the efficiency of...