We investigate the determinants of firms' implicit insurance to employees, using a difference-indifference approach: we rely on differences between family and non-family firms to identify the supply of insurance, and exploit variation in unemployment insurance across and within countries to...

The paper provides a cost-based explanation for decision makers' reluctance to use fraud prediction models, particularly as these models have nearly doubled their success at identifying fraud (true positive rates) when compared to the initial models in Beneish (1997, 1999). We estimate the costs...

We examine the relationship between customer and supplier firms' abnormal accruals. We propose “earnings management” hypothesis and “customer demand shock” hypothesis. We find that customer firms' demand shocks link customer and supplier abnormal accruals as they propagate along the...

Corporate leverage responds differently to employees' rights in bankruptcy depending on whether it is driven by strategic concerns in wage bargaining or by credit constraints. Using novel data on employees' rights in bankruptcy, we estimate their impact on leverage, exploiting time-series,...

Accounting is imperfect, leading to errors in financial reporting. This paper links accounting errors to firms' incentives to bias reported earnings. We hypothesize that while errors discourage reporting bias by lowering earnings' value relevance, they also incentivize bias by providing...

If unemployment insurance is more generous, workers should demand less implicit insurance from their employers: firm- and government-provided insurance should be substitutes. Using a firm-level international panel dataset, we investigate this hypothesis exploiting cross-country and time-series...

We examine the response of individual investors to firms' adoptions of SFAS 109–Accounting for Income Taxes. We predict SFAS 109 (as compared to APB 11) provides new decision-useful information, reducing the information disadvantage of individual investors relative to more sophisticated...

This study examines the extent to which managerial talent plays a role in shaping the clarity of regulated financial disclosures and a firm's information environment. Consistent with the notion that clear thinking leads to clear writing, we find more able management teams produce clearer and...

We show that large public companies in the United States change the assumptions of the benefit formulas of the defined benefits pension plans for their top executives in anticipation of plan freezes and executive retirements. In particular, on average top executives receive a boost in annual...

The capital market benefits of high quality financial reporting create incentives for managers to signal the quality of their voluntary disclosure practices. Prior research focuses on the relations between observable measures of earnings quality and observable measures of voluntary disclosure...