We develop hypotheses regarding the association between two types of creditor rights and bank loan losses. Contrary to prior research conclusions, bank lending risk is negatively associated with both restrictions on reorganization and the secured creditor being paid first. Using accounting...

Several theoretical studies provide predictions on the relation between settlement likelihood and litigation stakes. Although models with generalizable settings argue in favor of a negative relation, certain specialized settings predict the opposite. In contrast to the theoretical literature,...

Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by...

During the late 1990s, the SEC alleged that banks were overstating loan loss allowances to establish cookie jar reserves. Their intervention in bank accounting culminated in 2001 with new guidance (SAB 102) designed to improve financial reporting quality. We show that banks' allowance estimation...

This study examines whether bank lenders have different reactions to various types of real transaction management (RTM) by borrowing firms. Drawing upon Jensen and Meckling's asset substitution theory (1976) as well as banks' unique payoff functions and monitoring incentives, we predict and find...

Litigation poses a significant business risk for auditors. We argue that auditors learn from other auditors' litigation events and examine the consequences of such events for future accounting misstatements. Using a hand-collected sample of auditor litigation events, we find a significant...

The post-forecast revision drift (PFRD), the phenomenon of delayed stock price reactions to analyst forecast revisions, is a well-documented market anomaly. Prior research attributes PFRD to underreaction by investors to analyst forecast revisions. This study investigates the role of the analyst...