We examine the issue of auditor independence in a unique setting. Specifically, we test for auditor independence impairment among (1) private client firms, for which the risk of auditor reputation loss is lower than for publicly traded firms, and (2) in a low litigation environment (i.e.,...

Evidence from an interactive experiment indicates that the tendency of users to anchor on one-sided disclosures of risk (i.e., disclosing upside potential or downside risk, but not both) is robust to whether disclosures are determined randomly or chosen strategically by opportunistic agents with...

This paper presents a possible solution to financial crises by addressing the core of the problem of systemic risk. To get there, it first illustrates a number of crises related situations before the definition of systemic risk is detailed. It then explains challenges of systemic risk and...

We investigate compliance by the largest 20 Australian listed firms with regulatory requirements to disclose key assumptions and major sources of estimation uncertainties. These relate to accounting estimates that require management's judgement in measuring the carrying amount of the entity's...

This study develops and validates an ex-ante measure of firm-specific overall tax risk. We define tax risk as the potential that current actions or activities, or the failure to take actions or pursue activities, will lead to future tax outcomes that are different from expectations. Tax risk...

The overall market for derivative securities is often estimated as more than ten times the World's GDP and many decry the complexity of derivatives as a main contributor to the subprime financial crisis. In this paper, we investigate whether and why complexity is used as a proxy for risk when...

The purpose of the current study is to examine the extent to which audit risk and litigation risk cause auditors to increase reliance on decision aids. These are particularly relevant issues in the era of Sarbanes-Oxley and abundant audit litigation, as decision aids hold the potential to...

We examine whether companies voluntarily disclose additional information about tax loss carryforwards when the recoverability is more uncertain. With this study, we aim to explain part of the huge cross-sectional variation in the tax footnote. To assess disclosure behavior, we hand-collect data...

While tax avoidance strategies result in greater after-tax cash flows, they can involve uncertain future outcomes, which can impose significant costs on firms. Thus, the extent to which tax avoidance increases firm risk is unclear. This paper re-examines the relation between tax avoidance and...

Most firms covary more positively with downmarkets than upmarkets—a phenomenon I refer to as “risk asymmetry.” I predict and find that risk asymmetry is caused, at least in part, by a firm's ability to selectively obfuscate poor performance. Risk asymmetry decreases significantly when...