This study investigates whether a firm's cost of equity capital is influenced by the extent of a firm's real activities management. Using a large sample of U.S. firms, we find that our proxy for the cost of capital is positively associated with the extent of earnings management through the real...

Firms with internal control weakness (ICW) problems are less likely to provide managers with timely and precise information required for adjusting internal resources. The real options theory implies that managers in ICW firms, faced with information uncertainty, are more likely to postpone...

We investigate how local political corruption shapes corporate financial reporting conservatism. Using a large sample of U.S. public firms, we find that firms located in areas with higher levels of political corruption tend to adopt greater accounting conservatism. This finding is robust to...

We investigate the effect of board governance and takeover protection on real earnings management. Four types of real earnings management are considered: sales manipulation, overproduction, the abnormal reduction of research and development (R&D) expenses, and the abnormal reduction of other...

Using a large sample of both publicly traded and privately held firms in Korea, this paper investigates whether, and how, the deviation of controlling shareholders' control from ownership, business group affiliation, and listing status differentially affect the extent of earnings management. Our...

Using a large sample of both publicly traded and privately held firms in Korea, this paper investigates whether, and how, the deviation of controlling shareholders' control from ownership, business group affiliation, and listing status differentially affect the extent of earnings management. Our...

This study investigates the hitherto unexplored questions of whether and how a material weakness in internal control over financial reporting (ICW) and its disclosure influence the occurrence of extreme negative outliers in stock return distributions, which we refer to as stock price crash risk....

We examine the relation between short-sale constraints and stock price crash risk. To establish causality, we take advantage of a regulatory change from the Securities and Exchange Commission (SEC)'s Regulation SHO pilot program, which temporarily lifted short-sale constraints for randomly...

We investigate whether and how the market for corporate control affects the demand for audit service in a cross-country setting. In so doing, we exploit the staggered enactments of merger and acquisition (M&A) laws as an exogenous shock that substantially increases takeover pressure. We find...

We examine the association between real earnings management and the cost of new bond issues of U.S. corporations. We consider three types of real earnings management: sales manipulation, overproduction, and the abnormal reduction of discretionary expenditures. We find that overproduction impairs...