Voluntary disclosures convey information through two channels: 1) the direct revelation channel in which the disclosed body of information is used to update beliefs, and 2) the signaling channel in which inferences are drawn from the fact that the firm chose what information to disclose. I study...

The so-called disclosure principle is a 'puzzle' in the accounting literature: Game theoretic models of financial markets show that in equilibrium firms should disclose all their private information. Yet, the result is not convincing. Researchers have therefore built sophisticated models in...

We examine a duopolistic setting in which firms pre-announce their future competitive decisions (e.g. prices, production quantities, capacity investments) before they actually undertake them. We show that firms overstate their future actions in their pre-announcements, and that their real action...

We revisit evidence whether incentives or IFRS drive earnings quality changes, analyzing a large sample of German firms in the period from 1998 to 2008. Consistent with previous studies we find that voluntary and mandatory adopters differ distinctively in terms of essential firm characteristics...

Using newly-available materiality classifications of sustainability topics, we develop a novel dataset by hand-mapping sustainability investments classified as material for each industry into firm-specific sustainability ratings. This allows us to present new evidence on the value implications...

We examine the economic determinants of short-sale supply, and its consequences for future stock returns. Lendable supply increases with expected borrowing costs and decreases with financial statement constructs that indicate overvaluation. Although rising loan fees help ease supply, we find...

While increases in earnings are common, we identify a setting in which they signal a separating equilibrium. Firms that “defy gravity' (DG) by reporting increases in earnings despite experiencing a decline in sales from continuing operations, signal their viability as a going- concern, and...

We examine the equity market reaction to events associated with the passage of a directive in the European Union (EU) mandating increased nonfinancial disclosure. These disclosures relate to firms' environmental, social, and governance (ESG) performance, and would be applicable to firms listed...

While it is generally maintained that earnings management can occur to inform as well as to mislead, evidence that earnings management informs has been scarce, and evidence that credibility increases with signal costliness inexistent. We provide evidence that firms use discretion over financial...

This paper studies how firms manage liquidity around seasoned equity offerings and the impact of such behaviour on long run performance. We identify a pre-issue ‘debt trap' scenario where issuers raise equity to escape from the debt trap problem. We find some evidence that issuers with a debt...