Prior studies suggest that managers use their reporting discretion to signal their private information. Because managers are often assumed to use their discretion to mislead investors, we conjecture that, without a second corroborating signal, discretionary accruals are likely to be regarded as...

We investigate whether corporate managers' stock repurchase decisions are affected by their incentives to manage diluted earning-per-share (EPS). We find that managers increase the level of their firms' stock repurchases when: (1) the dilutive effect of outstanding employee stock options (ESOs)...

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...

Using firms' cash compensation data, we examine the empirical relationship between earnings management and the weight placed on accounting performance measure in compensation. Our results indicate that the weight on accounting income in compensation decreases as the tendency of using...

The current study examines whether firms that attempt to increase EPS to meet analyst forecasts through stock repurchases tend to pay a relatively higher price for their stock than firms that repurchase stock for other purposes, such as to benefit from temporary undervaluation of their stock....

U.S. Real Estate Investment Trusts are required by federal law to distribute 90% of taxable income as dividends to common shareholders. We examine if firms subject to a binding dividend constraint, engage in real earnings management (REM) to reduce taxable income to meet dividend requirements....

We examine market participants' reactions to dividend changes conditional on earnings quality. We define earnings quality as the extent to which current earnings are associated with one-year, two-year, or three-year ahead operating cash flows. Controlling for the magnitude of the dividend...

We examine whether managers' trading decisions (both at a firm and personal level) are correlated with trading strategies suggested by the operating accruals and the post-earnings announcement drift (SUE) anomalies. We discuss advantages and disadvantages of the use of managerial trading...

This paper studies the effects of new accounting standards that limit the amount of financial reporting discretion on corporate voluntary disclosure policies. Specifically, it tests the prediction that the decrease in management's discretion with respect to revenue recognition, following the...