In this paper, we propose a liquidity risk adjustment to the Epstein and Zin (1989, 1991) model and assess the adjusted model's performance against the traditional consumption pricing models. We show that liquidity is a significant risk factor and it adds considerable explanatory power to the...

Using the new CRSP compilation of daily trading volume data from 1926 to 1962, this paper conducts a detailed analysis of liquidity from 1926 to 2005. It distinguishes liquidity risk from liquidity as a characteristic and presents new evidence on the importance of liquidity risk in asset...

Financial Reporting Standard No3 (FRS 3): Reporting Financial Performance, which came into force in 1993, increased UK firms' discretion in classifying exceptional items. We examine how this increased discretion affected their use of classificatory smoothing and inter-temporal smoothing through...

We examine whether UK firms engage in earnings management or forecast guidance to ensure that their reported earnings meet analyst earnings expectations. We explore two earnings management mechanisms: (a) positive abnormal working capital accruals; and (b) classification shifting of core...

Applying the framework of conditional event studies shows that equity issues reveal managers' private information about stock mispricing, which investors only partially discount into stock prices at the seasoned equity offering (SEO) announcement date. Negative abnormal returns occur as prices...

We contribute to the earnings management literature and provide insights for accounting regulatorsby investigating the impact of FRS3 on accruals management by UK firms. FRS3 mandated net incomeper share, whilst allowing the release of incremental information on sustainable profitability....

We examine whether UK firms engage in earnings management or forecast guidance over theperiod 1994−2002 in order to ensure that their reported earnings meet analyst earnings expectations.We explore two earnings management mechanisms: a) the use of positive abnormal working capitalaccruals and...

We explore the capital market consequences of achieving analyst earnings expectations,distinguishing between expectations achieved genuinely or through earnings guidance ormanagement. We examine an inclusive set of earnings management tools: real earningsmanagement, working capital accruals...