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...

Qualitative disclosure accompanying an earnings release is incrementally informative to earnings news (i.e., it is an information substitute for earnings) and it reflects the information content of earnings news (i.e., it is an information complement to earnings). When management provides...

This paper considers how the presence of a speculative investor, who bets on a firm's future earnings report, affects how the firm's management manipulates that report. We examine the influence of the speculator's information on earnings management behavior, quality of reported earnings, and...