The return-stages model can quantify the expectations facing a firm from its price-to-book (P/B) and price-to-earnings (P/E) ratios. We illustrate two implications of the model. First, a firm's P/B and P/E ratios can predict the future cash flow pattern earned by a firm. Second, the operating...

This paper investigates whether sell-side equity analysts fully incorporate the future earnings implications of really dirty surplus (RDS) into their earnings forecasts. RDS refers to gains or losses from contingent equity transactions settled at prices other than the fair value. We find that...

Corporate hiring of former audit personnel to fill key financial positions is a practice that has attracted attention from the media, the accounting profession, and regulators. The concern is that the former external auditor who now holds a key position with the client may be able to circumvent...