We examine the “confirmation” hypothesis that audited financial reporting and disclosure of managers' private information are complements, because independent verification of outcomes disciplines and hence enhances disclosure credibility. Committing to higher audit fees (a measure of...

We show that, contrary to popular belief, initial public offering (IPO) firms report more conservatively. We attribute this to the higher quality reporting demanded of public firms by financial statement users and consequentially higher monitoring by auditors, boards, analysts, rating agencies,...

We examine the relation between mark-to-market (MTM) accounting for securities and information asymmetry among bank investors. Relative to historical cost, MTM incorporates more timely information in financial statements. The primary effect of more timely disclosure most likely is to reduce...

In this paper, I review the role that financial accounting plays in contracts aimed at mitigating agency problems between shareholders and managers and between shareholders and debtholders. The paper discusses the reasons why and how financial accounting numbers are used in debt and stewardship...

Several prior studies have shown that cash flows have significantly greater impact on stock prices than accruals. We examine the implications of these findings for the post-earnings-announcement-drift anomaly. We argue that, if investors under-react to earnings news, then the larger price impact...