Mispricing and risk have both been suggested as explanations for the cross-sectional relation between stock returns and firm characteristics such as accruals. As emphasized by Ferson and Harvey (1998) and Berk, Green and Naik (1999), it is difficult to evaluate these competing explanations...

The role of credit rating agencies has been questioned in the recent years. Existing empirical studies provide mixed evidence on the informational value of bond ratings for financial investors. In this study we examine the relationship between bond ratings and credit spreads for US corporate...

This paper theoretically and empirically studies the relation between credit news uncertainty and corporate bond returns. Our model states that when the quality of credit news is uncertain, bond prices respond more to bad news than to good news, ambiguous news about default likelihood increases...

We examine the relative impact of Moody's and S&P ratings on bond yields and find that at issuance, yields on split rated bonds with superior Moody's ratings are about 8 basis points lower than yields on split rated bonds with superior S&P ratings. This suggests that investors differentiate...

The asymmetry in price pressure from seller vs. buyer-initiated transactions is identified as valuable measure of downside liquidity for corporate bonds. While the evidence of illiquidity on risk premium in the cross-section of corporate bonds is mixed, the aggregate liquidity asymmetry has a...

We document that historical patterns of accruals seasonality predict future stock returns. Firms with historically larger accruals in a given quarter of the year earn lower stock returns when those accruals are expected to be announced. The accruals seasonality spread is significant only in the...

This study investigates the relationship between dirty surplus items on the balance sheet and the cost of debt for Japanese firms. We focus on three dirty surplus items — unrealized gains and losses on available-for-sale securities (SEC), foreign currency translation adjustment (FOC), and land...

A rater is paid by a seller, observes a signal about the seller's product, and issues a public cheap-talk rating for potential buyers. I characterize the partition of the rater's information into ratings issued following public payments from the seller to the rater, and ratings issued when the...

The London inter-bank offered rate (LIBOR) serves as a benchmark for many financial transactions worldwide today. These rates have been subject to manipulative conduct, false reporting and collusion. In forensic accounting, the Benford test has been implemented to successfully detect manipulated...

We find that Federal Open Market Committee (FOMC) actions (especially rate cuts) narrowed corporate credit spreads during the pre-crisis period of 2002-2007. During the 2008 crisis period, we find that both conventional cuts and quantitative easing decreased spreads. But FOMC inactions caused...