This study uses a comprehensive panel of tax returns to examine the financial reporting choices of medium-to-large private U.S. firms, a setting which controls over $9 trillion in capital, vastly out-numbers public U.S. firms across all industries, yet has no financial reporting mandates. We...

I investigate how the use and voluntary disclosure of synthetic leases is affected by incentives to defer cash outflows and keep debt off the balance sheet. I find that managers of cash-constrained firms with incentives to defer cash payments are more likely to finance asset purchases with...

A substantial literature investigates conditional conservatism, defined as asymmetric accounting recognition of economic shocks (ldquo;newsrdquo;), and how it depends on various market, political and institutional variables. Studies typically assume the Basu (1997) asymmetric timeliness...

We use equity portfolio allocation decisions to study the relevance of accounting information for investors’ demand for stocks. We document significant heterogeneity across investors in the demand relevance of profitability measures and income statement components. Although operating profit...

Trading in a secondary stock market not only redistributes wealth among investors but also generates information that guides subsequent investment. We provide a positive theory of disclosure that reflects both functions of a secondary market. By making private information public, disclosure...

In this paper, I provide two general insights that are useful in evaluating the economic trade-offs of alternative accounting measurement rules. First, when there are multiple imperfections in the world, restricting a strict subset of it need not always improve welfare. Second, a firm is not a...

We estimate the firm-level rate at which working capital accruals convert into future cash flows. These conversion rates determine the expected cash value of a dollar of working capital accruals. For firms whose accrual innovations reverse within one year, we find that, on average, a one dollar...

I develop a new approach to understanding accounting accruals. I start by introducing a model that explicitly incorporates the role of accruals in measuring firm performance. Using this model, I characterize accounting quality by the degree to which accruals fulfill their performance measurement...

We investigate the extent to which hedge fund managers smooth self‐reported returns. In contrast with prior research on the “anomalous” properties of hedge fund returns, we observe the mechanisms used to price the fund's investment positions and report the fund's performance to investors,...

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...