Extant research argues that borrowing from financial intermediaries subjects managers to external monitoring. However, given managers' flexibility in choosing the type of debt financing, why would managers submit themselves to external monitoring? Recent theory points to the role of managerial...

Prior research contends that weak legal regimes discourage lender enforcement of contracts by making it either costly or ineffective. However, Diamond observes that this lender passivity can be overcome by structuring debt as a short-term loan. His argument is that an arrival of bad news in the...

Prior research posits that market imperfections and the lack of institutions that protect investor interests create a divergence between the cost of internal and external funds, thereby constraining firms' ability to fund investment projects through external financing. Financial constraints...

Extant theoretical research posits that information asymmetry and agency issues affect the cost of external financing and hence impact the ability of firms to finance their growth opportunities. In contrast, the literature on disclosure policy posits that expanded and credible disclosure lowers...

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>This paper examines whether a country's corporate transparency environment, which includes the quality of accounting information, contributes to efficient resource allocation. Based on a cross-country study of 37 manufacturing industries in 37 countries, we provide three pieces of...

Purpose – The study is driven by concerns raised by standard setters and others about the usefulness of performance reporting under generally accepted accounting principles (GAAP). Of primary interest is whether explicitly defining what information should be included in earnings results in an...

Purpose – The implementation of compliance procedures associated with the Sarbanes-Oxley Act of 2002 came at a great cost to most publicly-traded firms, largely due to the internal control disclosures required by Section 404 of the Act. The purpose of this paper is to contribute to the inquiry...

"According to theory, comovement in stock prices reflects comovement in the fundamental factors underlying the values of stocks. Recent theory contends that stock price comovement can be driven by information markets or the informational opacity of the firm. To the extent that voluntary...

This paper investigates voluntary adoptions of International Accounting Standards (IAS) by private enterprises, and builds on prior research which posits that higher quality financial reports through IAS adoption can reduce information asymmetry and facilitate contracting with external parties....

Evidence from hedging practices suggests that firms will hedge only if they expect that unfavorable events will arise. In markets with a significant degree of information asymmetry in which hedgers are oligopolists with superior knowledge concerning supply and demand, such as oil and gas...