Following the work of Basu in 1997, the excess of the sensitivity of accounting earnings to negative share return over its sensitivity to positive share return (the Basu coefficient) has been interpreted as an indicator of conditional accounting conservatism. Although this interpretation is...

Recent theoretical literature has debated the desirability of permitting debtors to contract with lenders over control rights in bankruptcy. Proponents point to the monitoring benefits brought from concentrating control rights in the hands of a single lender. Detractors point to the costs...

This study examines whether firms engage in earnings management to overcome government policies on limiting outward foreign direct investment (FDI), and whether their earnings-management behavior is aligned with shareholders’ interests. Using the regulatory setting in Taiwan, where the...

The internal rate of return (IRR) is a widely used benchmark for assessing the reliability of the accounting rate of return (ROA) as a measure of economic profitability. We turn this reasoning process on its head by demonstrating that a suitable (weighted average) aggregation of ROAs better...

The introduction of a new accounting standard for financial instruments, has raised a number of issues related to the application of fair value principles. This paper discusses some of these issues which are generally related to the fact that "fair values" are not always easily defined or...

Existing empirical evidence suggests that residual income valuation models based on historical cost accounting considerably underestimate equity values. One possible explanation is the use of historical cost accounting under inflationary conditions. In this paper, we use a residual income...