In this paper we study the bias a manager introduces into reports of firm performance when the market is uncertain about the manager's objectives. Comparative static results suggest that the information content of the manager's report falls as the cost of biasing reports falls, or uncertainty...

A conventional assumption in economic models is that expert judgement requires Bayesian behavior. A justification for this assumption is that because Bayesian behavior results in superior decisions, it is dominant in a evolutionary sense. Bayesian experts who are sequentially rational, however,...

We formalize the effects of an earnings disclosure on security prices under an assumption of limited liability. We derive various non-linear relations between equity prices and earnings under a variety of capital structure assumptions and, if possible, tie the relations attained to results from...

In this paper I attempt a taxonomy of the extant accounting literature on disclosure and suggest as categories: "association-based disclosure," work that studies the effects of disclosure on asset equilibrium prices and trading volume; "discretionary-based disclosure," work that examines...

In this paper I attempt a taxonomy of the extant accounting literature on disclosure and suggest as categories: "association-based disclosure," work that studies the effects of disclosure on asset equilibrium prices and trading volume; "discretionary-based disclosure," work that examines...

This study tests whether disclosing a trader's identity dampens or stimulates subsequent trading volume based on the trader's reputation for being informed. While a reputation for being informed makes markets less liquid, thus inhibiting subsequent trade ("illiquidity effect"), the information...

The consequences of information differences across investors in capital markets are still much debated. This paper examines the relation between information differences across investors and the cost of capital, and makes three points. First, in models of perfect competition, information...

While most accounting information is idiosyncratic in nature, economy-wide factors such as accounting standards affect the quality of idiosyncratic accounting information of many firms simultaneously. We study idiosyncratic and systematic features of accounting information by embedding a...

Prior research predicts a positive relation between expected rates of return and investor-level tax rates. We provide new theory that predicts that lower liquidity amplifies and higher liquidity attenuates this positive relation. We empirically test our prediction using the cuts to individual...