This paper examines the relation between earnings management and the marginal cost of debt to the firm using a sample of traded corporate bonds for the period 1994-2005. The marginal cost of debt is captured by market determined yield spreads, while earnings management is proxied by three...

We examine earnings management behavior around SEOs, focusing on both real activities and accrual-based manipulation. Although research has addressed the issues of earnings management around SEOs and earnings management via real activities manipulation, ours is the first paper to put these two...

Viewing the detection of earnings management from the perspective of a crime scene investigator sheds new light on prior research on earnings management and its close relative, earnings quality. Ball and Shivakumar (2007) and Teoh et al. (1998) are used to illustrate the application of seven...

We examine the effect of earnings surprises on changes in information asymmetry. We hypothesize and find that asymmetry is lower (higher) in the quarter following positive (negative) earnings surprises compared to firms that meet the consensus analyst earnings forecast. The relations between...

Past research has shown that the level of operating accruals is a negative cross-sectional predictor of stock returns. This paper examines whether the accrual anomaly extends to the aggregate stock market. In contrast with cross-sectional findings, there is no indication that aggregate operating...

Consistent with prior studies, this study shows that extremely negative and extremely positive earnings surprises in the fourth quarter have lower levels of persistence than those in the first through third fiscal quarters. Furthermore, extremely negative earnings surprises in the fourth fiscal...

Hirshleifer et al. (2004) argue that scaled Net Operating Assets (NOA) measures the extent to which operating/reporting outcomes provoke excessive investor optimism. In this paper, I argue that at least part of the information conveyed by NOA is industry common and cannot be diversified when...

Prior research shows that the cash component of earnings is more persistent than the accrual component of earnings. We investigate whether the persistence of the cash component is influenced by management's decision to retain or distribute cash flows. We find that when firms retain the cash...

This paper proposes a risk-based explanation for the accrual anomaly. Risk is measured using a four-factor model motivated by the Intertemporal Capital Asset Pricing Model. Tests of the model suggest that a considerable portion of the cross-sectional variation in average returns to high and low...

We argue that high accruals are likely to be the outcome of rules with an income statement perspective, while low accruals are likely to be the outcome of rules with a balance sheet perspective and that this has implications for the properties of earnings. Specifically, earnings persistence is...