This paper investigates how the disclosure tone of earnings conference calls predicts future stock price crash risk. Using U.S. public firm earnings conference call transcripts from 2010 to 2015, we find that firms exhibiting more pessimistic tone during the current year-end call experience...

The credit default swaps (CDS) market provides a trading venue for downside price movement. We find that future stock price crashes are less frequent after the inception of CDS trading on the firm's debt. The causal effect of CDS trading on stock crash risk is supported by multiple approaches,...

The paper investigates the effects of mark-to-market write-downs by financial institutions on market prices and volumes, as well as the prominent role that illiquidity plays in exacerbating the direct and spillover effects of exit valuation on equity and credit default swaps markets. Using a...

Equity trading volume is increasingly moving to dark venues from lit exchanges. Theory provides opposing predictions about the effect of dark trading on stock price crash risk. The price efficiency theory predicts a negative relation while the liquidity externality theory predicts a positive...

The advent of the Great Recession in 2008 was the culmination of a perfect storm of lax regulation, a growing housing bubble, rising popularity of derivatives instruments, and questionable banking practices. In addition to these causes, management incentives, as well as certain US accounting...

The current financial crisis has revived the debate surrounding fair value accounting especially in the case of illiquid markets and for assets that lack marketability. Many analysts argue that it was issuance of FASB 157 (ASC 820) and the use of fair value accounting that caused the financial...

In light of the financial meltdown that followed the bankruptcy of Lehman Brothers in the fall of 2008, there is considerable debate in the financial community on the appropriate accounting methodology used to value financial assets. In fact, many analysts on Wall Street argue that much of the...

The term “financial psychopath” was coined after the financial crisis of 2007−2008. Intended as a term of derision, the media used it to negatively label financial professionals, rather than to draw a clinical profile. The expression succinctly conveys the widespread post−2008 public...

This paper examines the association between abnormally long audit report lag and future stock price crash. Audit report lag is defined as the period between a company's fiscal year end and the audit report date, and is informative about audit efficiency. Although a substantial body of literature...

Standard or traditional finance research is based on the rational choice model that assumes market participants are fully rational, unbiased, emotionless, self-interested maximizers of expected utility. Recent research in behavioral finance recognizes that real-world investors and managers are...