This paper argues that the documented discount on diversified firms is not per se evidence that diversification destroys value. Firms choose to diversify. We use three alternative econometric techniques to control for the endogeneity of the diversification decision, and find evidence supporting...

We investigate the effectiveness of regulatory oversight exercised by the SEC against auditors over the years 1996-2009. The evidence suggests that the SEC is significantly less likely to name a Big N auditor as a defendant, after controlling for both the severity of the violation and for the...

We study fund-firm connections that arise when firm executives and directors serve as fund directors. We find that connected funds are significantly more likely to vote with management in proposals with negative ISS recommendations or low shareholder support. As our data shows that management...

We argue that earnings management and fraudulent accounting have important economic consequences. In a model where the costs of earnings management are endogenous, we show that in equilibrium, bad managers hire and invest too much in order to pool with the good managers. This behavior distorts...

Diversified firms trade at a discount relatively to similar single-segment firms. We argue in this paper that this observed discount is not per se evidence that diversification destroys value. Firms choose to diversify. Firm characteristics, which make firms diversify, might also causethem to be...

We examine how different economies would design an optimal corporate governancesystem structured from three of the main mechanisms of corporate governance (managerial ownership, monitoring by banks, and disciplining by the takeover market). We allow for interactions among the mechanisms. The...

Two different financial systems with some opposing features have evolved in the advanced economies, namely the insider system and the outsider system. In this paper, we provide a theoretical framework where the features of the optimal governance systemare derived as a function of economy-wide...

We argue that earnings management and fraudulent accounting have important eco-nomic consequences. In a model where the costs of earnings management are endoge-nous, we show that in equilibrium, low productivity firms hire and invest too muchin order to pool with high productivity firms. This...

We find that fixed effects related to the location of a firm's headquarters explain variation in broad based option grants after controlling for industry effects and firm characteristics traditionally known to affect option granting. Location matters because of local labor market conditions and...

In this paper, we examine the importance of contagion in earnings management, proxied by 2,376 earnings restatements announced during the years 1997-2008. Controlling for industry and firm-level characteristics, we find that firms are more likely to begin managing earnings after the public...