Relevance and reliability (now referred to as “representational faithfulness”) are qualities of financial information that both the Financial Accounting Standards Board and the International Accounting Standards Board use in setting standards for financial reporting. Despite their...

Timely voluntary disclosure of information by companies sometimes results in erroneous disclosure that must be later retracted (i.e., withdrawn) and/or corrected (i.e., replaced with a corrected disclosure). Although such retractions and corrections appear to be relatively easy and costless ways...

Market regulators are concerned about the completeness of management-provided explanations in financial reports and other venues. In particular, the Securities and Exchange Commission has articulated the growing problem of firm managers selectively emphasizing information that is favorable to...

Prior research indicates that a firm's use of derivatives to manage business risks is viewed favorably by investors. However, these studies do not consider a potentially key factor in this setting — namely, the typical behavior (or norms) regarding derivatives by other firms in the industry or...

In this paper, we provide a framework in which to view management earnings forecasts. Specifically, we categorize earnings forecasts as having three components - antecedents, characteristics, and consequences that roughly correspond to the timeline associated with an earnings forecast. By...

How do investors evaluate managers who choose to use or not use derivatives once the outcomes of those decisions become known? Competing theories make different predictions, and we test these in three experiments. Results show that even when outcomes are held constant, investors are more...

To improve the usefulness of financial reporting, the Jenkins Committee has recommended increased disclosure of forward-looking information. To encourage such disclosures, Congress recently passed legislation providing an enhanced quot;safe harborquot; provision designed to shield companies from...

Analytical procedures have become an increasingly important part of financial statement auditing over the last 10 years. First recommended for audits by the Auditing Standards Board in 1978, analytical procedures are mandated for planning and overall review purposes by Statement on Auditing...

Hybrid financial instruments contain features of both liabilities and equity. Standard setters continue to struggle with “getting the classification right” for these complex instruments. In this paper, we experimentally test whether the features of hybrid instruments affect the...

Certain financial statement items are closely related, such as items in hedging relationships. In this paper, we develop theory and conduct two experiments to investigate three different balance sheet presentation formats for related financial statement items. We posit that a linked presentation...