This study evaluates the impact of earnings on firm credit risk as captured by Credit Default Swaps (CDS). We find that earnings (changes) are negatively correlated with one-year swap premia (changes) after controlling for equity returns but not with longer term premia (changes). We also find...

Using a sample of restatement firms and a meet-or-beat model to classify firms as making discretionary accounting choices for opportunistic meet-or-beat (OP-MB) reasons, we show that originally reported earnings and accrual components are less predictive of future cash flows relative to the...

We investigate whether the direction and magnitude of earnings management by a firm is affected by analysts' current perception of its equity investment potential (i.e., its perceived ability to generate positive abnormal returns). We argue that firms whose investment potential is perceived to...

In this study I examine how the degree and duration of overvaluation affect management's use of alternative within-GAAP earnings management, restrictions on further exploitation of within-GAAP accruals management, and subsequent non-GAAP earnings management. Further, I examine how one type of...

Sloan (1996) and a number of subsequent studies present evidence that a trading strategy based on publicly available accounting accruals earns abnormal returns of approximately 10% in the year following its initiation. This empirical regularity has been named the 'accrual anomaly'.In this paper...

This paper provides a direct test of investor valuation of accounting changes in the years subsequent to the change. We focus on changes in the estimate of the useful life of long-lived assets because these revisions have ongoing effects on reported income that do not reverse in the near term....

There is reliable evidence that managers smooth their reported earnings. If some firms manage earnings downwards (upwards) when they experience large positive (negative) earnings shocks and if investors have cognitive limits or are inattentive, then it is plausible that the post-earnings...

We provide a model in which a single psychological constraint, limited investor attention, explains both under- and over-reaction to different earnings components. Investor neglect of information in current-period earnings about future earnings induces post-earnings announcement drift and the...

SFAS 109, Accounting for income taxes, was criticized for allowing firms to set arbitrarily high valuation allowances against deferred tax assets at adoption as quot;hidden reservesquot; that firms could use in future periods to manage earnings. Consistent with these claims, bank managers make...

We document considerable return comovement associated with accruals after controlling for other common factors. An accrual-based factor-mimicking portfolio has a Sharpe ratio of 0.16, higher than that of the market factor or the SMB and HML factors of Fama and French (1993). According to...