Sell-side financial analysts commonly issue recommendations to buy, sell, or hold particular firms' shares. Hold recommendations do not provide investors with directional recommendations to change their investment positions. We develop and test predictions about whether users of analysts'...

In this paper, we examine whether recognizing higher option-based compensation expense leads to lower quality operating cash flows when options are exercised. FAS 123(R) changes the classification of the tax benefit from employee stock options in the statement of cash flows by splitting it into...

Several recent papers employ unsigned measures of discretionary accruals to test hypotheses that predict general classes of firms will engage in earnings management, without specifying the direction or the time period in which the earnings management occurs. We argue that the research design...

We develop a profile of overvalued equity, and show that firms meeting this profile experience abnormal stock returns net of transaction costs of -22 to -25 percent over the twelve months following portfolio formation. We show our model is distinct from predictors proposed in prior work, and our...

Although financial reporting fraud generates considerable losses, we find that investors do not fully exploit publicly available information relevant for detecting fraud. We show that firms with a high probability of overstated earnings have lower future earnings, less persistent...

The paper provides evidence that the relation between accruals and future returns is not symmetric. We find that firms with low accruals generate insignificant abnormal returns in asset pricing regressions that control for either earnings quality or operating volatility. In contrast, we find...

The paper examines the relation between the probability of manipulation, accruals, and future returns. We show that firms that have a high likelihood of earnings manipulation (as measured by the Beneish (1999)'s M-Score) experience lower future earnings, but that investors expect these firms to...