Much attention has been paid to the large decreases in value of non-agency residential mortgage-backed securities (RMBS) during the financial crisis. Many observers have argued that the fall in prices was partly driven by decreased liquidity and fire sales. We investigate whether capital...

We demonstrate that the funding value adjustments (FVAs) of major dealers are debt-overhang costs to their shareholders. In order to maximize shareholder value, dealer quotations therefore adjust for FVAs. Our case examples include interest-rate swap FVAs and violations of covered interest...

The increase in defaults in the subprime mortgage market is widely held to be one of the causes behind the recent financial turmoil. Key issues of policy concern include quantifying the role of various factors, such as home price declines and loosened underwriting standards, in the recent...

The recent financial crisis has led to a major debate about fair-value accounting. Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity. In this paper, we...

Under Statement of Financial Accounting Standards No. 123, the grant date value of executive stock options excludes the value of any reload feature because, at the time of writing the standard in 1995, the Financial Accounting Standards Board believed it was not feasible to value a reload...

Measuring the private returns to R&D requires knowledge of its private depreciation or obsolescence rate, which is inherently variable and responds to competitive pressure. Nevertheless, most of the previous literature has used a constant depreciation rate to construct R&D capital stocks and...

This study examines the tax reporting consequences of financial reporting discretion. Using a matched sample of financial statements with tax returns, I provide estimates of the accuracy of tax return information inferred from financial statements. To examine the tradeoffs between financial and...

Numerous studies on production and cost, the sources of productivity and studies on endogenous growth have recognized the pivotal role of the physical capital stock. Also there is a clear recognition by economists and policy makers that knowledge capital approximated by R&D capital is crucial...

The purpose of this paper is to analyze the determinants of capital durability and utilization and their interdependence with investment decisions. The approach is based on the view that the flow of undepreciated capital is an output to be used in future production. At each date capital and...

Capital investment tax provisions have been changed numerous times in the last decade, with depreciation tax lives shortened in 1981 and lengthened ever since and capital gains taxation reduced in 1978 and 1981 and now increased. The first part of this paper analyzes these changes and attributes...