Extant research suggests that conditional conservatism reduces information asymmetry between a firm and its shareholders as well as its debtholders. However, there is little evidence on whether conditional conservatism reduces information asymmetry differentially for shareholders and...

We investigate the relation between tax risk and the cost of private debt. Tax risk can lead to significant negative outcomes, including penalties, interest and additional tax payments, which in turn can increase the uncertainty of future cash flows and make it costlier for a firm to borrow....

Previous research shows that accounting conservatism facilitates debt contracting. Extending this line of literature, we examine whether the role of accounting conservatism in accessing external debt to attain firm growth varies with its maturity. We find evidence of a positive relationship...

We examine whether initial loan sales in the secondary loan market relate to borrowing firms' accounting conservatism. We find that borrowing firms exhibit a significant decline in accounting conservatism after the initial loan sales. We show that the decline in borrower conservatism is more...

We propose a method of measuring the comparability of reported accounting numbers from the perspective of creditors. Our measure reflects the relationship between market variables related to default probabilities and key accounting numbers of interest to lenders. We demonstrate that this measure...

We investigate the relations between changes in the precisions of public and private information and changes in market liquidity around earnings announcements. Increases in the precision of public information reduce information asymmetry, whereas increases in the precision of private information...

The retained earnings hypothesis predicts that stock distributions accounted for by reducing retained earnings are a more credible signal of managerial optimism than stock distributions that do not reduce retained earnings. This study examines the costs of false signaling that are a necessary...

On June 27, 2002, the SEC ordered the CEOs and CFOs of public companies with revenues during their last fiscal year of greater than $1.2 billion to file written statements, under oath, regarding the accuracy of their companies' financial statements. The SEC's order required the sworn statements...

Extant theories suggest that managers may use hedging either to alleviate underinvestment problems caused by costly external financing or to promote overinvestment by circumventing the scrutiny of external capital markets. We empirically investigate this issue using a hand-collected dataset of...