This study evaluates the impact of earnings on firm credit risk as captured by Credit Default Swaps (CDS). We find that earnings (changes) are negatively correlated with one-year swap premia (changes) after controlling for equity returns but not with longer term premia (changes). We also find...

Using the Vuolteenaho (2002) variance decomposition methodology, this study assesses the relative value relevance of cash flow, accrual (earnings) and expected return news on SEC and preliminary earnings filing dates, as measured by their contribution to the volatility of unexpected returns....

This study investigates a large sample of financial statement restatements over the period 1986-2001, and compares restatements caused by changes in accounting principles to those caused by errors. Typically, investors perceive restatements as negative signals due to three potential reasons: (i)...

This paper investigates the relation between the extent of a firm's past and expected future losses or negative cash flows and the ex ante probability that it will manipulate revenues. When a firm has a string of losses or negative cash flows, traditional valuation models do not yield reliable...

This paper extends the variance decomposition framework of Campbell (1991), Campbell and Ammer (1993) and Vuolteenhao (2002) to address the relative value relevance of accruals news, cash flow news and expected return news in driving firm-level equity returns. The extension is based on the...

This study examines the association between the office size of engagement auditors and their clients' future stock price crash risk, a consequence of managerial bad news hoarding. Using a sample of U.S. public firms with Big 4 auditors, we find robust evidence that local audit office size is...

The Enron-Andersen debacle provides a unique opportunity to investigate whether equity prices impound auditor reputation. Univariate and regression results indicate that event day abnormal returns and two-day cumulative abnormal returns are generally not significantly different from zero for...

The Enron-Andersen debacle provides a unique opportunity to investigate whether equity prices impound auditor reputation. We address this issue by comparing the daily stock returns of a sample of Andersen audit clients with those of a control sample of big five non-Andersen audit clients during...

We examine empirically the impact of ex ante competitive threats from potential foreign rivals on bad news hoarding/disclosure decisions. We find that stronger antitrust enforcement around the world causes domestic U.S. firms to exhibit lower levels of stock price crash risk. This is consistent...

We utilize the staggered adoption of the Inevitable Disclosure Doctrine (IDD) by U.S. state courts as an exogenous shock to the proprietary costs of disclosure and study the impact of the IDD on corporate financial reporting policy. We find compelling evidence that firms headquartered in states...