Recent work shows that the role of accrual accounting in mitigating the timing differences between cash flows and operating performance has been disappearing over time (Bushman, Lerman, and Zhang 2016). We argue that even though there is noise in the accrual accounting process, sophisticated...

This study develops a theory that predicts the lower the degree to which firms' earnings are correlated with the industry the greater the probability a firm will issue a biased signal of firm performance. The theory provides for causal predictions in our empirical tests in which we examine the...

In this paper we provide new insights into the motives underlying insider participation in private investments in public equity (PIPEs) by considering the association among insider participation, pricing, and contractual terms. PIPEs are a financing choice that have become popular over the last...

Screening talent to appropriately assign tasks among agents is an important organizational decision. In this paper, we compare the efficacies of absolute and relative performance evaluation systems in identifying agent talent when information asymmetry is present. We identify conditions under...

This paper presents a framework to help decisions makers better measure the opportunity cost of resources with different granularity. We characterize resources by the intrinsic lumpiness of acquisition (acquisition granularity), storability of benefits (expiration granularity), and control over...

Using a setting in which an employer seeks information about talent in order to achieve a proper match between talent levels and tasks, we provide a comparative analysis of two performance evaluation systems widely used in practice ― an absolute performance evaluation system (APE) and a...

Studies suggest that, pursuant to the implementation of SFAS 133, even sophisticated users of financial statements find it difficult to comprehend earnings implications of hedging derivatives. Moreover, due to stringent hedge accounting requirements under these standards, many economic hedges do...

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

We develop a framework with which to analyze the interactions among auditor attestation strategy, corporate investment decision, and capital market valuation. We use this framework to examine mandatory audit firm rotation (Section 207 of the Sarbanes-Oxley Act) and identify its three potential...