We address banks' use of available-for-sale (AFS) securities to manage earnings and regulatory capital. Although prior research investigates banks' use of realized securities gains and losses to smooth earnings and regulatory capital, results are mixed. Creation of AFS securities and enhanced...

This study finds that more conservative earnings have lower information content in that higher conditional conservatism decreases the speed with which equity investor disagreement and uncertainty resolve at earnings announcements. We find that a firm-year measure of conditional conservatism we...

We describe analytically commercial bank behavior focusing on actions banks take in response to economic gains and losses on their assets to meet regulatory leverage requirements. Our analysis shows that absent differences in regulatory risk weights across assets, leverage cannot be procyclical....

This study examines how key market participants-managers and analysts-responded to SFAS 1 23R's controversial requirement that firms recognize stock-based compensation expense. Despite mandated recognition of the expense, some firms' managers exclude it from non-GAAP earnings and some firms'...

This study investigates factors associated with firms' decisions in 2002 and early 2003 to recognize stock-based compensation expense under Statement of Financial Accounting Standards (SFAS) No. 123. We find that the likelihood of SFAS 123 expense recognition is significantly related to the...

We investigate the relation between two market anomalies to provide insights into analysts' role as information intermediaries. Prior research finds that accruals and analyst earnings forecast revisions predict future returns. We find that the accrual and forecast revision strategies generate...

Building on the Dechow, Kothari, and Watts (1998) model of the accrual process, this study provides insights into the role of accruals in predicting future cash flows. The model shows that each accrual component reflects different information relating to future cash flows; aggregate earnings...

We examine whether application of International Accounting Standards is associated with higher accounting quality. The application of IAS reflects the combined effects of features of the financial reporting system, including standards, their interpretation, enforcement, and litigation. We find...

This study investigates the relation between share price and stock-based compensation expense that is disclosed but not recognized under SFAS 123, after controlling for net income, equity book value, and expected earnings growth. Our instrumental variables approach controls for the mechanical...

We provide evidence that firms with more transparent earnings enjoy a lower cost of capital. We develop an earnings transparency measure that captures cross-sectional and intertemporal variation in the extent to which earnings and change in earnings covary contemporaneously with stock returns....