Recent corporate governance reforms focus on board independence and encourage equity ownership by directors. We analyze the efficacy of these reforms in a model where both adverse selection and moral hazard exist at the level of the firm's management. Delegating governance to the board improves...

Recent corporate governance scandals have been attributed to lack of board independence and the influence CEOs have over their boards. However, CEOs can also affect board efficacy without compromising independence by choosing directors strategically. We offer a theoretical framework using a...

We examine the impact of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, on the reporting behavior of commercial banks and the informativeness of their financial statements. We argue that, because mandatory recognition of hedge ineffectiveness under SFAS 133 reduced...

We offer a theoretical framework to help isolate persistence estimates of fundamental earnings innovations from the effects of accounting measurements. We show that a downward bias results when persistence of earnings innovations is estimated using reported earnings. We show that the greater the...

Recent corporate governance reforms focus on board independence and encourage equity ownership by directors. We analyze the efficacy of these reforms in a model where both adverse selection and moral hazard are present at the level of the firm's management. Delegating governance to the board...

We analyze the voluntary disclosure decision of a manager when analysts scrutinize the quality of disclosure. We derive an equilibrium in which managers voluntarily disclose unfavorable information only if sufficiently precise, but disclose favorable news with lower levels of accuracy. We show...

We develop a firm-level private information index with three unique features. First, the index is a direct measure of the nature and magnitude of private information that is proprietary. Second, it is multi-dimensional. Third, it is not specific to any one setting. We conduct several tests to...

Fair value estimates from external third-party sources are generally considered more reliable than internal estimates based on managerial inputs. However, even externally sourced estimates are subject to managerial opportunism, because firms can switch from one external source to another. In the...

This paper examines cross-sectional differences in the optimistic behavior of financial analysts. Specifically, we investigate whether the predictive accuracy of past information (e.g., time-series of earnings, past returns, etc.) is associated with the magnitude of the bias in analysts'...