Partial observability is a prominent feature of accounting fraud. Not only the act of committing fraud is not directly observable, but the detected frauds are often revealed to the public with substantial time delays. In this article, we specify an underlying fraud data generating process that...

Using a sample from 1980 to 2018, we find evidence consistent with banks and insurers in the U.S. diversifying financial risk through their equity holdings. They tend to offset the risk of increased leverage by lowering the leverage of the non-financial firms in which they take an equity stake....

There is often substantial time delay in uncovering accounting misstatements, which is largely ignored in prior misstatement prediction literature. In this study, we incorporate the release lag in detecting material misstatements in a novel model framework. This has profound implications for...