We examine the information role of accounting disclosures on warranties, utilizing a database that became available due to the requirements of FIN 45. First, because firms use warranty policies as a business strategy to promote their products, a warranty reserve can serve two roles: an...

We examine whether more sophisticated accounting methods (in the form of accrual accounting) interacts with other information sources and the pledging of collateral to reduce information asymmetries between small business borrowers and lenders, thereby lowering borrowers' probability of loan...

We estimate a firm-year measure of accounting conservatism, examine its empirical properties as a metric, and illustrate applications by testing new hypotheses that shed further light on the nature and effects of conservatism. The results are consistent with the measure, C_Score, capturing...

Khan and Watts (2009) develop a firm-year measure of conditional conservatism, labeled C_Score, that builds on the Basu (1997) asymmetric timeliness (AT) measure. However, recent research documents an asymmetric relation between lagged earnings and current returns, indicative of bias in the Basu...

This paper investigates the effect of internal information asymmetry (hereafter IIA) within conglomerate firms on the quality of management forecasts and financial statements. We develop a novel measure to capture IIA between divisional managers and top corporate managers, computed as the...

TThere has been debate over the economic consequences of accounting conservatism in debt contracting. We contribute to this debate by arguing that the prospect of signaling project return may give rise to the demand for conservative accounting, even though it may not improve contracting...

Lenders can transfer credit risk by purchasing credit default swaps (CDS), but holding swaps can diminish their incentives to monitor borrowers. Contracting theory predicts that lenders demand conservatism, in particular asymmetric timeliness of loss recognition, to effectively monitor...

We examine whether Basu's (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2,132 firms making restatements...

This paper investigates whether the decision to issue a management earnings forecast is related to information asymmetry in the market for the firm s stock and whether the forecasts reduce the asymmetry. Theoretical models hold that a portion of the bid-ask spread arises because of asymmetric...

We provide a bridge between the voluntary disclosure and the earnings management literature. Voluntary disclosure models focus on managers' discretion in deciding whether or not to provide truthful voluntary disclosure to the capital market. Earnings management models, on the other hand,...