In a hand-coded sample of M&A contracts from 2007-08, risk allocation provisions exhibit wide variation. Earn-outs are the least common means to allocate risk, indemnities are most common, followed by price adjustment clauses. Techniques for mitigating enforcement costs – escrows, holdbacks,...

In 2001, Nevada significantly limited the personal legal liability of corporate officers and directors. We use this exogenous shock to implement a differences-in-differences design that examines the impact of officer and director litigation risk on agency costs. We find decreased firm value,...

Risk is a vital concept to grasp when investing in a firm or project. It is also a key ingredient required to evaluate the cost of capital and perform a valuation. An organization’s capital structure, specifically the amount of leverage and debt financing employed, must be accounted for to...

Risk management and oversight have long been recognized as core corporate governance issues and have gained renewed attention in the wake of the financial crisis. Following global trends, recent corporate governance reforms in China also focus on risk oversight and risk management. This article...

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.,...

We examine the effect of labor unemployment risk on corporate accounting conservatism by exploring the relationship between unemployment insurance benefits and conservatism. We find that lower perceived unemployment risk (i.e. higher unemployment insurance benefits) is associated with lower...

Skewness preference, the tendency to overweight the probability of extreme tail events, can affect managerial decision making. We find that Chinese listed firms managed by CEOs who experienced a largely unpredictable rare event, namely the outbreak of Severe Acute Respiratory Syndrome (SARS) in...

A primary concern in mergers and acquisitions is the risk the deal may be cancelled before it is completed. We document that this ``interim risk" varies asymmetrically with the aggregate market return. Deals paid in cash tend to be renegotiated when the market rises but cancelled when the market...

This paper examines the liquidity, Tobin's Q, and cost of equity effects from voluntary and mandatory IFRS adoption. In contrast to prior work, we focus on the firm level heterogeneity in the economic consequences, recognising that the level of uncertainty avoidance (UAI) in a country will...