We show economic depreciation decreases value maximizing investment hurdle rates and encourages both maintenance and growth. Economic depreciation without maintenance decreases the upside potential of future growth opportunities upon stochastically improved profitability. Managers forestall this...

Purpose Prior literature has revealed three key earnings benchmarks: earnings level; earnings change; and analysts’ expectations. The purpose of this paper is twofold. First, the authors seek to establish which earnings benchmark induces the largest extent of earnings management. Second, the...

Purpose: This study aims to explore the audit quality supplied by the Big 4, large indigenous Chinese (LIC) and five largest second-tier international network (Tier 2) audit firms in China during the second phase of their audit market development. Design/methodology/approach: Ordinary least...

Purpose: The purpose of this paper is to investigate the relationship between corporate governance and earnings opacity in China. Design/methodology/approach: Two corporate governance mechanisms form the basis of the analysis: 1) the board of directors and 2) the external audit function. OLS...

Purpose: The purpose of this paper is to examine stock price crash risk (SPCR) as a function of meeting or missing three earnings thresholds – reporting a profit (earnings level), reporting an earnings increase (earnings change) and meeting analysts’ forecasts (earnings expectation)....