This paper presents a new way of measuring residual income, originally introduced by Magni (2000a,b,c, 2001a,b, 2003). Contrary to the standard residual income, the capital charge is equal to the capital lost by investors. The lost capital may be viewed as (a) the foregone capital, (b) the...

Counterfactual conditionals are cognitive tools that we incessantly use during our lives for judgments, evaluations, decisions. Counterfactuals are used for defining concepts as well; an instance of this is attested by the notions of opportunity cost and excess profit, two all-pervasive notions...

This paper investigates whether Italian companies that cross-list in the United States between 1993 and 2005 show (i) a change in their internal policies as anticipated by the bonding hypothesis, (ii) an increase in market value, or (iii) an increase in the access to capital funds. We use the...

This paper examines the effect of corporate governance on investor reactions to accounting choice in the context of accounting for business combinations. Using a sample of 324 recent stock swap acquisitions I find that, contrary to practitioners' belief that capital markets penalize purchase...

The empirical research examining the association between typical measures of corporate governance and various accounting and economic outcomes has not produced a consistent set of results. We believe that these mixed results are partially attributable to the difficulty in generating reliable and...

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced shareholder level taxes on equity income. If shareholder level taxation is a component of cost of equity capital, then the cost of equity capital should decrease after the Tax Act. We find that the cost of equity capital decreases...

Flotation costs represent a significant loss of capital to firms and are positively related to information asymmetry between managers and outside investors. We measure a firm's information asymmetry by its accounting information quality based on two extensions of the Dechow and Dichev earnings...

This paper examines the potential impacts of artificial smoothing (abnormal accruals) and real smoothing (derivatives) on firm value. We find that the value of the firm decreases with the magnitude of abnormal accruals and increases with the level of derivative use. Moreover, the accrual...