This paper empirically examines how debt covenants impact the capital structure choices of firms, by utilizing an exogenous accounting based shock to the distance to covenant violation. We find that, on average, the shock to debt capacity had a positive impact on the debt choices of all treated...

Extant literature documents that analyst forecasts are optimistically biased and fail to incorporate information in prior returns. This paper extends similar tests to examine management forecast characteristics. We find that, in contrast to analyst forecast errors, management forecast errors...

The relation between aggregate earnings and aggregate returns is complex and not fully understood. For example, in contrast to firm-level relations, prior literature finds aggregate earnings changes and aggregate stock returns are negatively related. This paper constructs new measures of...

This paper studies the effects of accounting fraud on the product market. The model presented in this paper relies on the idea that a firm's financial statements and actions must be consistent with each other. If the firm is behaving fraudulently, insofar as its financial statements portray it...

Despite theoretical and anecdotal evidence highlighting the importance of industry-level analyses to lenders, the empirical literature on debt pricing has focused almost exclusively on firm-level forces that affect expected loss. This paper provides empirical evidence that industry-level...