This paper analyzes the impact of signal-to-noise-ratios and the autocorrelation of a performance measure on the principal's welfare in dynamic agencies with renegotiation. We consider the impact of changes in the persistent, transitory, and reversible components of accounting earnings on its...

This paper examines how the characteristics of accounting systems and management incentives interact and collectively determine financial reporting quality. We develop a rational expectations equilibrium model that features a steady-state firm with investments, financial and non-financial...

The state of the art in the analyst forecasting literature is that analyst earnings forecast ability is only firm-specific (Chen, Francis, and Jiang (2005); Chen and Jiang (2006)). This view is based on Park and Stice's (2000) finding of the absence of a “spillover” effect, i.e., investors...

Existing research documents that firms employing relatively high levels of stock option-based compensation more frequently report quarterly earnings that meet or exceed analysts' forecasts. This paper examines the roles of income-increasing accounting choices and management guidance to analysts...

Equity-based compensation causes increases in firms' share count and dilutes Earnings Per Share (EPS), which provides firms with an incentive to raise EPS using either share buybacks or earnings management. We employ a regression discontinuity framework to provide evidence of a causal link...

We investigate the relationship between cost stickiness and management earnings forecasts. Prior research suggests that earnings are more volatile for sticky cost firms resulting in greater earnings forecast errors. The greater forecast errors might increase investors' demand for information and...

Recent work in management accounting offers several novel insights into firms' cost behavior. This study explores whether financial analysts appropriately incorporate information on two types of cost behavior in predicting earnings - cost variability and cost stickiness. Since analysts'...

This article analyses the eighteenth-century accounting practices of the Japanese trading station or factory of the Dutch East India Company (Vereenigde Oost Indische Compagnie or VOC). The factory's trade and its reported profits declined during the eighteenth century, but because of the...

We examine whether management earnings forecast errors exhibit serial correlation and how analysts understand the serial correlation property of management forecast errors. Management forecast errors should not exhibit serial correlation if managers efficiently process information in prior...

There is reliable evidence that managers smooth their reported earnings. If some firms manage earnings downwards (upwards) when they experience large positive (negative) earnings shocks and if investors have cognitive limits or are inattentive, then it is plausible that the post-earnings...