A large body of accounting research finds that various contracting incentives lead managers to engage in conservative accounting practices. We extend existing research by modeling the impact of extant accounting rules on conservative accounting. Accounting rules typically require assets to be...

We examine the benefits and costs associated with foreign independent directors (FIDs) at U.S. corporations. We find that firms with FIDs make better cross-border acquisitions when the targets are from the home regions of FIDs. However, FIDs also display poor board meeting attendance records and...

This paper examines the association between ineffective internal control over financial reporting and the profitability of insider trading. We predict and find that the profitability of insider trading is significantly greater in firms disclosing material weaknesses in internal control relative...

Theory suggests that debt financing, relative to equity financing, makes managers reluctant to part with assets. Our evidence supports this theoretical prediction, revealing that the reluctance to part with a debt financed asset causes two decision errors—(1) participants forego investments...

We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968–2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

We examine the relation between corporate governance and firms' information environments. We use the passage of state antitakeover laws in the U.S. as a source of exogenous variation in an important governance mechanism to identify changes in firms' information environments. We find that...

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...

I examine the impact of state-contingent allocation of creditor control rights on financial reporting. Using a discontinuity analysis, I find that firms' financial reporting becomes more conservative immediately after covenant violations and this effect persists for at least eight quarters. The...

Recent research finds that many analyst recommendation revisions take place shortly after earnings announcements. Altinkilic and Hansen (2009) attribute the clustering of recommendations to analysts strategically piggybacking on earnings information to improve the perceived performance of their...

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...