We examine the role of information-based stock trading in affecting the risk-incentive relation. By incorporating an endogenous informed trading into an optimal incentive contracting model, we analytically show that, apart from reducing incentives, a greater risk increases the level of...

We assess the impact of the Sarbanes-Oxley Act of 2002 on corporate investment in an investment Euler equation framework. We allow a dummy for the passage of the Act to affect the rate at which managers discount future investment payoffs. Using generalized method of moments estimators, we find...

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>We find that the positive relation between aggregate accruals and one-year-ahead market returns documented in Hirshleifer, Hou, and Teoh [2009] is driven by discretionary accruals but not normal accruals. The return forecasting power of aggregate discretionary accruals is robust to...

We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a...

We study the changes in CEO power and compensation that arise when firms go through financial distress. We use a matching estimator to identify suitable controls and estimate the causal effects of financial distress for a sample of U.S. public companies from 1992 to 2005. We document that,...

Stock prices are more informative when the information has less social value. Speculators with limited resources making costly (private) information production decisions must decide to produce information about some firms and not others. We show that producing and trading on private information...

There is a debate on whether executive pay reflects rent extraction due to “managerial power” or is the result of arms-length bargaining in a principal-agent framework. In this paper we offer a test of the managerial power hypothesis by empirically examining the CEO compensation of U.S....

There is a debate on whether executive pay reflects rent extraction due to "managerial power" or is the result of arms-length bargaining in a principal-agent framework. In this paper we offer a test of the managerial power hypothesis by empirically examining the CEO compensation of U.S. public...