This paper examines the role of certain fair value accounting (FVA) outcomes in compensation of US bank CEOs. The use of FVA in compensation invites an agency cost - the clawback problem - if cash compensation is based on unrealized profits that may reverse in the future. At the same time FVA...

The period 2007-2010 marked one of the most severe economic and financial crises in living memory. In this paper we focus on two of accounting's key functions within organizations and markets, financial reporting and governance. In this respect we find that accounting exhibited shortcomings in...

This paper examines the relation between the investment horizon of banks and their CEO compensation, and its consequences for risk and performance. We find that banks with short-term investment intensity pay more cash bonus, exhibit higher risk and perform more poorly than banks with longer-term...

We examine changes in firms' discretionary accounting accruals around the commencement of activism by hedge funds. We argue that hedge funds have the potential to provide increased monitoring of earnings management behavior and we predict and find empirically that average discretionary accruals...

We examine the economic consequences of the recent adoption of SFAS 123(R) in the United States. Consistent with the conjectures of prior research, our results show that the removal of favorable accounting treatment for stock options post SFAS 123(R) results in a switch from stock options to...

The state of the art in the analyst forecasting literature is that analyst earnings forecast ability is only firm-specific (Chen, Francis, and Jiang (2005); Chen and Jiang (2006)). This view is based on Park and Stice's (2000) finding of the absence of a “spillover” effect, i.e., investors...

Firms can report comprehensive income in either an income-statement-like performance statement or the statement of equity. Traditional theories of contracting incentives cannot explain this reporting location choice that only affects where comprehensive income data appear, because the...

This paper reviews recent evidence analyzing the link between earnings management and corporate tax avoidance and considers the implications for how policymakers should evaluate the financial reporting environment facing firms. A real-world tax shelter is dissected to illustrate how tax shelter...

This paper develops a model of the causes and consequences of misreporting of corporate performance. Misreporting in our model covers all actions, whether legal or illegal, that enable managers of firms with low value to make statements that mimic those made by firms with high value. We show...

By employing the theoretical template provided by agency theory, this paper contributes a detailed clinical analysis of a large multinational Canada-headquartered telecommunications company, Nortel. Our analysis reveals a 21st century norm of usual suspects: a CEO whose compensation is well...