We provide a real-options model of an industry in which agents time abandonment of their projects in an effort to protect their reputations. Agents delay abandonment attempting to signal their quality. When a public common shock forces abandonment of a small fraction of projects irrespective of...

This paper proposes an explanation for two empirical puzzles surrounding initial public offerings (IPOs). Firstly, it is well documented that IPO underpricing increases during quot;hot issuequot; periods. Secondly, venture capital (VC) backed IPOs are less underpriced than non venture capital...

This paper proposes an explanation for two empirical puzzles surrounding initial public offerings (IPOs). Firstly, it is well documented that IPO underpricing increases during hot issue periods. Secondly, venture capital (VC) backed IPOs are less underpriced than non venture capital backed IPOs...

This study examines whether disclosures of insider equity purchases on SEC Form 4 resolve uncertainty regarding the valuation implications of reported earnings. Defining information uncertainty as ambiguity about firm value arising from low earnings precision, I predict and find that insider...

Purpose – Two competing hypotheses explain the motivation of using discretionary accruals: managerial opportunism and managerial optimism. To the extent of the managerial optimism hypothesis, the purpose of this study is to examine whether managers use discretionary accruals to disseminate...

Earnings reports are informative about a firm's current performance but convey little information about the prospects of the firm's long-term vision. We show that entrepreneurs can signal favorable private information about their long-term prospects by choosing an accounting system that upward...

Ample empirical evidence documents the tendency of costs to increase more when revenues rise than to decrease when revenues fall by an equivalent amount. The study offers a capital market oriented explanation for this asymmetric cost behavior, which is known in the literature as cost stickiness,...

This study examines the relation between performance covenants in private debt contracting and conservative accounting under adverse selection. We find that under severe adverse selection (i.e., high information asymmetry), accounting conservatism and performance covenants act as complements to...

This study examines whether firms manage earnings to meet analyst forecasts to signal superior future performance. Prior research finds that firms use earnings management to just meet analyst forecasts and that these firms have a positive association with future performance (Bartov et al.,...

We document that corporate social responsibility (“CSR”) expenditures are not a form of corporate charity nor do they improve future financial performance. Rather, firms undertake CSR expenditures in the current period when they anticipate stronger future financial performance. We show that...