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...

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...

A principal-components analysis demonstrates that common earnings factors explain a substantial portion of rm-level earnings variation, implying earnings shocks have substantial systematic components and are not almost fully diversifiable as prior literature has concluded. Furthermore, the...