Prior studies (e.g., [McNichols and O'Brien, 1997] and [Diether et al., 2002]) find that analysts are less willing to disclose unfavorable earnings forecasts than to disclose favorable forecasts, and this tendency induces an optimistic bias in disclosed forecasts that increases with the degree...

This paper compares three capital-budgeting rules, the NPV rule, a high hurdle rate and capital rationing, and explains why some firms may voluntarily impose capital rationing. Under both capital rationing and a high hurdle, a restrictive investment criterion is used to control managerial...

This study examines the market valuation of accounting earnings during the period before it is publicly revealed that the earnings are fraudulent. Using both cross-sectional and time-series valuation models, we first find that the market accords less weight to earnings when the accounting...

This paper shows that managerial insider trading, suitably regulated, reduces information asymmetry and helps shareholders better screen corporate decisions. In a setting where a firm's manager has private information about potential projects and his preferences differ from those of...