In this paper we determine the strategic exercise of an IPO option in a framework of asymmetric information. Private owners are exposed to the idiosyncratic risk of the firm while public investors are not fully informed about the type of the firm. Idiosyncratic risk creates an incentive for...

This paper investigates the motivations for managers' decisions to overstate earnings and examines the consequences of such decisions. We examine firms subject to enforcement actions by the Securities and Exchange Commission for having violated the financial reporting requirements of the...

We examine the relation between firm reputation and the cost of debt financing. We posit that corporate reputation represents “soft information” not captured by balance sheet variables, which is nonetheless valuable to lenders. Using Fortune magazine's survey of company reputation while...

We examine how directors' reputations are managed through disclosure choices. We focus on disclosures in the director biographies in proxy statements filed with the SEC. We find that a directorship on another board is more likely to be undisclosed when the other firm experienced an adverse event...

Over the last decades passive investment products have continuously increased in importance. The efficiency of financial markets is often identified as the main reason for this development. We propose a theoretical framework which reverses the causality by showing that market efficiency might...

Managers with higher risk incentives (greater options vega) issue less readable disclosures. Those in the top-quartile of vega file annual reports that are about 15.4% more voluminous than the filings of bottom-quartile-vega managers. The effect of vega on obfuscation remains after controlling...

Investors have a finite capacity to organize all information they receive from financial disclosures. In a model of rational inattention, we show that investor attention capacity affects the probability of disclosure. In the model, an informed firm makes a strategic voluntary disclosure subject...

This paper analyzes empirically the relation between financial analysts' recommendation profitability and their forecast accuracy and shows that contrary to intuition the group of most successful recommendations is not associated with the highest accuracy on average. The finding that best...

We analyze the relation between earning forecast accuracy and expected profitability of financial analysts. Modeling forecast errors with a multivariate Gaussian distribution, a complete characterization of the payoff of each analyst is provided. In particular, closed-form expressions for the...

We examine the relation between firm reputation and the cost of debt financing. We posit that corporate reputation represents “soft information” not captured by balance sheet variables, which is nonetheless valuable to lenders. Using Fortune magazine's survey of company reputation, we find...