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This teaching guide is based on a comprehensive survey as well as in-depth interviews of Chief Financial Officers (CFOs). We ask the CFOs about the definition and drivers of earnings quality, with a special emphasis on the prevalence and detection of earnings misrepresentation. CFOs believe that...
Persistent link: https://www.econbiz.de/10013073661
We ask nearly 400 CFOs about the definition and drivers of earnings quality, with a special emphasis on the prevalence and detection of earnings misrepresentation. CFOs believe that the hallmarks of earnings quality are sustainability, absence of one-time items, and backing by actual cash flows....
Persistent link: https://www.econbiz.de/10013034441
In 2013, a new law required Indian firms, which satisfy certain profitability, net worth, and size thresholds, to spend at least 2% of their net income on corporate social responsibility (CSR). We exploit this regulatory change to isolate the shareholder value implications of CSR activities....
Persistent link: https://www.econbiz.de/10012925662
We examine the cost-effectiveness, from the shareholders' perspective, of the accounting standards issued by the FASB during 1973-2009. In particular, we evaluate (i) the stock market reactions of firms affected by the standards surrounding events that changed the probability of issuance of...
Persistent link: https://www.econbiz.de/10012959260
We find that firms grant more rank and file stock options when involved in financial reporting violations, consistent with managements' incentives to discourage employee whistle-blowing. Violating firms grant more rank and file options during periods of misreporting relative to control firms and...
Persistent link: https://www.econbiz.de/10012989584
The competitive target pay policy sets a target amount of total compensation within a specified range of the amount paid to executive peers. If such a policy were widely adopted by compensation committees, we would observe a negative cross-sectional association between the stock price...
Persistent link: https://www.econbiz.de/10013403344
The competitive target pay policy sets a target dollar number for total CEO compensation within a specified range of the amounts paid to a CEO’s peers chosen from similar sized firms in the same industry. If such a policy were widely adopted by compensation committees, we would observe a...
Persistent link: https://www.econbiz.de/10014351180
We provide evidence on the long standing concern on auditor conflicts of interest from providing non-audit services (NAS) to audit clients by using rarely explored NAS fee data from 1978-80. Using this earlier setting, we find cross-sectional evidence of improved earnings quality when auditors...
Persistent link: https://www.econbiz.de/10014177281
We show that network advantages constitute an important intangible asset that goes unrecognized in the financial statements. For a sample of e-commerce firms, we find that network advantages created by website traffic have substantial explanatory power for stock prices over and above traditional...
Persistent link: https://www.econbiz.de/10014113199
We investigate whether the accruals anomaly documented by Sloan (1996) in the accounting literature is distinct from the value-glamour anomaly documented in the finance literature. We find that the accruals strategy earns abnormal returns incremental to past sales growth, book-to-market and...
Persistent link: https://www.econbiz.de/10014115087