This paper examines the relationship between accounting discretion and investment opportunity sets (IOSs) of regulated banks in the presence of accounting-based regulatory contracts. Specifically, the proposition that accounting discretion allows a bank to avoid constraints on its IOS resulting...

This study tests the hypotheses that there is a positive association between Free Cash Flow (FCF), as defined by Jensen, and accruals and that debt moderates this relationship. Jensen argues that managers of low growth firms with high FCF pursue non-value maximizing activities by investing in...

In corporate restructuring under Chapter 11, an asset valuation is a central task for both legal and financial reasons. In the area of intangible assets, however, generally accepted accounting principles (GAAP) do not reflect internally-generated assets such as brands, trademarks, and other...

Financial misrepresentation has usually been analysed by large-scale empirical research. However the generality gained from such an approach is at the cost of understanding the rich and complex nature of financial misrepresentation in real organizations. We adopt a case study approach to gain...

Accounting choices have usually been analysed by large-scale empirical research. However, the generality gained from such an approach is at the cost of understanding the rich and complex nature of such choice decisions in real organizations. This article presents the results of an in-depth...

This paper analyzes the relation between equity prices and conditional conservatism and introduces a new measure of conservatism at the firm-year level. We show that the asymmetric properties of conservative accounting, the existence of non-accounting sources of information, and the properties...

I develop an ex-post conservativism measure (that identifies conservatism based on whether firms understate or overstate earnings) rather than an ex-ante conservatism measure (that suffices as a governance mechanism [such as conservative accounting rules] to compel managers to be conservative)....

Khan and Watts (2009) develop a firm-year measure of conditional conservatism, labeled C_Score, that builds on the Basu (1997) asymmetric timeliness (AT) measure. However, recent research documents an asymmetric relation between lagged earnings and current returns, indicative of bias in the Basu...

We estimate a firm-year measure of accounting conservatism, examine its empirical properties as a metric, and illustrate applications by testing new hypotheses that shed further light on the nature and effects of conservatism. The results are consistent with the measure, C_Score, capturing...

Recent research documents that common law countries have stronger investor protection laws and more developed financial markets than civil law countries (La Porta et al., 1997, 1998). This line of inquiry is extended in our study to examine if variations in legal systems also affect accounting...