To mitigate counterparty risks, derivatives dealers and their frequent counterparties typically engage in bilateral master netting agreements (MNAs) that cover many derivatives with largely offsetting gross fair values. MNAs specify the close out and net settlement of the covered derivatives...

We investigate how overlapping activities of bank regulators and supervisors and bank auditors influence banks' internal control quality, auditor-client contracting (audit fees and audit effort), and financial statement reliability. Using material weaknesses in internal controls as a proxy for...

This essay describes implications of the subprime crisis for accounting. First, I overview the institutional and market aspects of subprime mortgages and other positions, focusing on those with the greatest relevance for accounting. I explain how the investment performance of...

We hypothesize and provide evidence that certain general characteristics of banks' loan securitizations accounted for as sales determine the extent to which banks retain the risks of the securitized loans. We show that banks retain more risk when: (1) the types of loans have higher and/or less...

This study empirically documents that firms with large ratios of current capital expenditures to prior four-year average capital expenditures enjoy positive contemporaneous abnormal returns. It further documents that average capital expenditures across Compustat-covered U.S. corporations are...

Prior research shows that during the pre-1990 bust financially weak banks managed income upward by delaying provisions for losses on heterogeneous loans. In contrast, we predict and find that during the 1990s boom profitable banks managed income downward by accelerating provisions for losses on...

We investigate two explanations for the declining contemporaneous linear relation between annual stock returns and accounting earnings over the past 30 years: (1) earnings increasingly reflect news with a lag relative to stock prices and (2) earnings increasingly reflect good and bad news in an...

We compare the accuracy of analyst (I/B/E/S consensus) and earnings-to-price ratio (E/P)-based forecasts of annual earnings across firms. We find that generalizations of Beaver Lambert and Morse's (BLM 1980) E/P-based forecasting model are more accurate than analyst forecasts both for most firms...

We distinguish two sources of variation in the book-to-market ratio (BTM) -- bias and lags -- with different implications for future book return on equity (ROE). We hypothesize that the bias and lag components of the BTM both have negative implications for future ROE, but the bias component's...

We investigate the impact of recurring fair value versus amortized cost measurement for accounting recognition purposes on the timeliness of insurers' other-than-temporary (OTT) impairments of non-agency residential mortgage-backed securities (NAMBS) around the 2007–2009 financial crisis....