Prior studies suggest that equity incentives inherently have both an interest alignment effect and an opportunistic financial reporting effect. Using three distinct proxies for earnings management we find evidence consistent with the incentive alignment (opportunistic financial reporting) effect...

We present evidence on the benefits of accounting conservatism of the target firm in a merger and acquisition transaction. The use of conservative accounting serves as a mechanism that reduces the likelihood of acquiring underperforming assets for the acquirer, making the target more valuable...

Using three different measures of conservatism, we document that (i) the percentage of inside directors is negatively related to conservatism, and (ii) the percentage of outside directors' shareholdings is positively related to conservatism. Our results hold after controlling for industry, firm...

We provide evidence on the relation between office-level client importance and abnormal accruals in a pre-SOX period and a post-SOX period. We find that in the pre-SOX period the relation is not significant for the overall sample. However, it is significantly positive for the sub-sample of firms...

We provide evidence on the effects of corporate lobbying on earnings management (EM). We argue that corporate lobbying provides firms with some degree of political protection from enforcement of laws and regulations. Thus, lobbying firms face a lower threat of enforcement which in turn reduces...

Research on the association between abnormal audit fees (measuring audit effort) and financial misconduct has produced mixed results. The use of actual misstatements in this research creates small-sample inferences, introduces systematic selection bias, and reduces the scope of sample coverage....

Sarbanes Oxley Act (SOX) Section 407 requires firms to disclose if there is a financial expert serving on their audit committees. The extant literature has largely documented SOX 407 benefits, ranging from controlling earning management to reducing internal control weaknesses. Our paper...

Standard setters have expressed concern over the impact of complex accounting standards on the information gap between firm insiders and financial statement users. We address this issue by examining the relationship between accounting reporting complexity (ARC) and the market response to...

We investigate the association between managerial overconfidence and audit fees, as well as the effect of a strong audit committee on this relation. Overconfident managers tend to overestimate their ability and the future payouts of projects but underestimate the likelihood and impact of adverse...

This study examines revenue recognition methods used by high technology firms for sales to distributors. Revenue is either recognized when products are delivered to distributors (sell-in) or when distributors resell products to end-users (sell-through). This is the first empirical study to...