We study the determinants of corporate investment growth in the U.S. We use accounting identities to develop a system in which unexpected changes in investment growth are decomposed into surprises to current earnings growth, surprises to current stock returns, revisions of expectations about...

Structural models of default calibrated to historical default rates, recovery rates, and Sharpe ratios typically generate Baa-Aaa credit spreads that are significantly below historical values. However, this “credit spread puzzle” can be resolved if one accounts for the fact that default...

Debtholders' demand has been widely discussed as a key determinant of conservatism but clear causal evidence is not yet established. Using a natural experiment setting, wherein a Delaware court ruled that the fiduciary duties of directors in near insolvent Delaware companies extend to creditors,...

Businesses increasingly outsource organizational functions that have financial reporting implications which requires auditors to adjust their risk assessment and audit procedures for this practice. However, PCAOB inspection reports cite deficiencies indicating that external auditors frequently...

Prior studies show that corporate social responsibility (CSR) reporting is informative to investors but lacks credibility. This study examines whether a commitment to audits of financial outcomes, proxied by audit fees, is associated with greater CSR reporting credibility. We find that audit...

A crucial issue in asset pricing is to understand the relative importance of discount rate (DR) news and cash flow (CF) news in driving the time-series and cross-sectional variations of stock returns. Many studies directly estimate the DR news but back out the CF news as the residual. We argue...

We study the determinants of aggregate corporate investment in the U.S. We use accounting identities to develop a system in which (i) news about future cash flows and news about future discount rates are directly estimated, thus mitigating measurement problems with Tobin's q, the variable that...

We find that last-year's winners have lower expected returns than losers. However, this is followed by prior winners experiencing more positive earnings shocks than losers for at least two quarters after portfolio formation. After that time frame, the relative earnings shocks display the...

In this paper, we compare four months of Reuters EFX high frequency indicative data with D2000-1 inter-dealer transaction data for DEM/USD and GBP/USD. Contrary to previous studies, we find, using various information measures, that the matched tick-by-tick indicative data bear no qualitative...