This paper examines the extent of firm level over-investment of free cash flow. Using an accounting based framework to measure over-investment and free cash flow, I find evidence that, consistent with agency cost explanations, over-investment is concentrated in firms with the highest levels of...

This paper extends the work of Sloan (1996) by linking accrual reliability to earnings persistence. We construct a model showing that less reliable accruals lead to lower earnings persistence. We then develop a comprehensive balance sheet categorization of accruals and rate each category...

It has been alleged that firms and analysts engage in an earnings guidance game where analysts first issue optimistic earnings forecasts and then 'walk down' their estimates to a level firms can beat at the official earnings announcement. We examine whether the walk-down to beatable targets is...

A key measure of earnings quality is the deviation of net income from operating cash flows. Sloan (1996) finds that firms with high accruals (or a large gap between net income and operating cash flow) experience a decline in earnings performance not anticipated by investors, resulting in...

This paper examines whether links between inside and outside directors have an impact on CEO compensation. Using a comprehensive sample of 22,074 directors for 3,114 firms, we develop a measure of the quot;back doorquot; distance between each pair of directors on a company's board. Specifically,...

We examine the relation between a broad set of corporate governance indicators and various measures of managerial decision making and organizational performance. Using a sample of 2,106 firms, we distill 39 structural measures of corporate governance (e.g., board characteristics, stock...

We examine the relation between the relative amount of fees paid to auditors for non-audit services and the behavior of accrual measures. We extend prior research in two important directions. First, using a pooled sample of 2,295 firms for the fiscal year 2000, we find very little evidence of a...

This paper tests the hypothesis that irrational market misvaluation affects firms' takeover behavior. We employ two contemporaneous proxies for market misvaluation, pre-takeover book/price ratios and pre-takeover ratios of residual income model value to price. Misvaluation of bidders and targets...

The paper presents a framework for identifying accounting numbers that indicate risk and expected return. The framework establishes conditions under which book-to-price (B/P), so prominent in asset pricing, indicates expected returns: B/P indicates expected returns if it forecasts future...

We present a simple, linear asset pricing model of the cross section of Mortgage-Backed Security (MBS) returns. MBS earn risk premia as compensation for theirexposure to prepayment risk. We measure prepayment risk and estimate security riskloadings using real data on prepayment forecasts vs....