We evaluate the influence of measurement error in analysts' forecasts on the accuracy of implied cost of capital estimates from various implementations of the ‘implied cost of capital' approach, and develop corrections for the measurement error. We document predictable error in the implied...

Investors, regulators, academics, and researchers all emphasize the importance of financial statement comparability. However, an empirical construct of comparability is typically not specified. In addition, little evidence exists on the benefits of comparability to users. This study attempts to...

The concept of conditional conservatism has provided new insight into financial reporting and has stimulated considerable research since Basu (1997) developed it. While the concept encapsulated in the adage “anticipate no profits but anticipate all losses” is reasonably clear, estimating it...

The advent of the Great Recession in 2008 was the culmination of a perfect storm of lax regulation, a growing housing bubble, rising popularity of derivatives instruments, and questionable banking practices. In addition to these causes, management incentives, as well as certain US accounting...

We show real effects in the banking sector that emanate from transparency in the industrial sector. Transparent financial reporting by industrial firms facilitates access to arm's-length financing from capital markets and diminishes these firms' reliance on banks. Banks, as a result, face...

We commemorate the 50th anniversary of Ball and Brown by chronicling its impact on capital market research in accounting. We trace the evolution of various research paths that post–Ball and Brown researchers took as they sought to build on the foundation laid by Ball and Brown to create a body...

We show that the agency theory of overvalued equity (see Jensen, 2005) rather than investors' fixation on accruals explains the accrual anomaly, i.e., abnormal returns to an accrual trading strategy (see Sloan, 1996).Under the agency theory of overvalued equity, managers of overvalued firms are...

We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is...

International differences in the demand for accounting income predictably affect the way it incorporates economic income (dividend-adjusted change in market value) over time. We characterize the quot;shareholderquot; and quot;stakeholderquot; corporate governance models of common and code law...

We examine how personal taxes affect CEOs' decision to sell their vested equity and compare it against diversification, managerial overconfidence and other determinants of CEOs' sale of equity. While CEOs frequently sell large amounts of their unrestricted firm equity, we find that the tax...