In recent years, reporting under International Financial Reporting Standards (IFRS) became mandatory in many countries. The capital-market effects around this change have been extensively studied, but their sources are not yet well understood. This study aims to distinguish between several...

This paper formalizes a two-step representation of accounting measurement and uses it to formalize a general rationale for conservatism as a measurement principle. A transaction's economic substance manifests itself in characteristics of the transaction, and an accounting rule is a mapping from...

This paper examines how financial reporting regulations affect, and respond to, macroeconomic cycles by exploring a positive framework in which regulators subject to political pressures respond to cyclical demands by borrowers and lenders. We establish that, as economic conditions initially...

Consistent with the economics of crime approach, this paper finds that insider selling is decreasing in the perceived costs of potential private and public enforcement upon discovery of GAAP misstatements, and increasing in managerial private benefits as measured by the market reaction to the...

This paper examines why CFOs become involved in material accounting manipulations. We find that while CFOs bear substantial legal costs when involved in accounting manipulations, these CFOs have similar equity incentives to the CFOs of matched non-manipulation firms. In contrast, CEOs of...

Extant research commonly uses indicator variables for industry membership to proxy for securities litigation risk. We provide evidence on the construct validity of this measure by reporting on the predictive ability of alternative models of litigation risk. While the industry measure alone does...

We discuss “Mandatory IFRS Reporting and Changes in Enforcement” by Christensen, Hail, and Leuz (CHL, in this issue). We begin by discussing CHL in the context of prior literature, and subsequently discuss the research design, results, and inferences. CHL seeks to contribute to the...

We investigate the effect of standard setters in standard setting. We examine how certain professional and political characteristics of FASB members and SEC commissioners predict the accounting “reliability” and “relevance” of proposed standards. Notably, we find FASB members with...

Prior work finds that managers beneficially time their purchases, but not sales, prior to forecasts. Focusing on if (as opposed to when) a forecast is given, we link insider selling to silence in advance of earnings disappointments. This raises the question of whether the absence of...

We use survey responses from 2,901 corporate insiders to assess the costs and benefits of compliance with Section 404 of the Sarbanes-Oxley Act. The majority of respondents recognize compliance benefits, but they do not perceive these benefits to outweigh the costs, on average. This is...