Overinvestment in certain firms or sectors induced by corporate fraud, where informed insiders strategically manipulate outside investors' beliefs by exaggerating financial performance and economic prospects, has been endemic historically, and has recently attracted much attention. Building on...

We investigate the relation between the proportion of total compensation received by CEOs from stock options and the accuracy and bias of analysts' earnings forecasts. We hypothesize that forecast accuracy decreases as the proportion of stock option pay increases. Higher proportions of stock...

When annual earnings are regressed on annual returns, the returns coefficient is higher when returns are negative. The difference between the coefficients of earnings on positive and negative returns is called asymmetric timeliness of earnings and, in the accounting literature, is used...

We estimate the costs of broad-based stock option programs relative to cash compensation and restricted stock grants. Using detailed data on stock-option grants to middle managers, we first compute the cost of option grants under the assumption that grants are driven solely by the difference...

This paper analyzes the links between corporate tax avoidance and the growth of high-powered incentives for managers. We develop a simple model that highlights the role of feedback effects between tax sheltering and managerial diversion in determining how high-powered incentives influence tax...

In this paper we investigate the reputational penalties to managers of firms announcing earnings restatements. More specifically, we examine management turnover and the subsequent re-hiring of displaced managers at firms announcing earnings restatements during 1997 or 1998. In contrast to prior...

This paper investigates the role of earnings per share management in the decision to repurchase shares. We identify the conditions under which repurchases increase EPS and document the frequency of EPS increasing and EPS decreasing repurchases among U.S. firms from 1988 to 2001. We then compare...

Using a detailed data set of employee stock option grants, we compare observed stock-option-based pay plans to hypothetical cash-only or restricted-stock-based plans. We make a variety of assumptions regarding the possible benefits of options relative to cash or stock, and then use observed...

This paper examines whether firms structure their convertible bond transactions to manage diluted EPS. We find that the likelihood of firms issuing contingent convertible bonds (COCOs), which are often excluded from diluted EPS calculations under SFAS 128, is significantly associated with the...

This paper develops a new theory of CEO compensation based on the opacity of the internal workings of corporations to outsiders and the CEO's ability to divert or tunnel corporate resources to self-enriching uses. In this setting, neither high powered option compensation nor fixed salary...