Using an equity valuation model characterized by periodic imperfect accounting information, we examine how financial leverage affects a firm's accounting quality choice (i.e., precision). We find that the existence of financial leverage motivates firms with average to good performance to prepare...

This article looks at how U.S. managers supplement GAAP earnings with pro forma reporting. Pro forma measures, which are not audited, are typically determined through an adjustment to GAAP-based earnings. For example, a manager may choose to present an alternative to GAAP earnings that excludes...

The Sarbanes–Oxley (SOX) Act was passed in 2002 in response to various instances of corporate malfeasance. The Act, designed to protect investors, led to wide-ranging regulation over various actions of managers, auditors and investment analysts. Part of SOX, and the focus of this study,...