We examine how the market's ability to assess the truthfulness of management earnings forecasts affects how managers bias their forecasts, and we evaluate whether the market's response to management forecasts is consistent with it identifying predictable forecast bias. We find managers'...

This paper examines the pricing of business risk by homogeneous auditors in a two period model. Incumbent auditors learn the client?s business risk type during the course of the engagement. They subsequently compete in prices with prospective auditors. In such an environment, we show that...

We study the information content of stock reports when investors are uncertain about a financial analyst's incentives. Incentives may be aligned, in which case the analyst wishes to credibly convey information, or incentives may be misaligned. We find the following: Any investor uncertainty...

I examine the credibility of a manager's disclosure of privately observed nonverifiable information to an investor in a repeated cheap-talk game setting. In the single-period game no communication occurs. In the repeated game, however, the manager almost always truthfully reveals his private...

The Financial Reporting Policy Committee of the Financial Accounting and Reporting Section of the American Accounting Association responded to the SEC's July 13, 2007 proposal to accept financial statements prepared in accordance with International Financial Reporting Standards (IFRS) from...

We examine the efficiency implications of a manager's financial reporting system choice and disclosure management. When a manager has some private information that is not captured by a firm's financial reporting system and may manipulate the financial report at some cost, we show that the...

Using U.S.-based multinational firm data gathered over more than two decades, we examine factors associated with the location of decision-rights within these firms, whether the inappropriate assignment of decision-rights is associated with poor firm performance, and whether these firms relocate...

We analyze the information content of stock recommendations by a sell-side equity analyst when investors are uncertain about the analyst's incentives. In our model, an analyst can either be quot;unbiasedquot;, having incentives that are congruent with those of the investor, or quot;biasedquot;,...

This paper examines the interaction between an analyst's disclosure and a manager's earnings report. We show how the nature of the analyst's information affects the quality of reported earnings. We also provide conditions for the analyst's disclosure to reduce the quality of investor information...

I examine the credibility of a manager's disclosure of privately observed nonverifiable information to an investor in a repeated cheap-talk game setting. In the single-period game no communication occurs. In the repeated game, however, the manager almost always truthfully reveals his private...