This study examines the relation between performance covenants in private debt contracting and conservative accounting under adverse selection. We find that under severe adverse selection (i.e., high information asymmetry), accounting conservatism and performance covenants act as complements to...

This study maintains that the value relevance of accounting information cannot be measured solely by reference to Ball-Brown (ERC) analysis. The contribution of accounting information to return volatility is equally crucial. Synthesizing and generalizing results from earlier studies, this paper...

We model and estimate the term structure of implied costs of equity capital (and implied risk premia) at the firm level for the years 1996-2015 from forward looking option contracts. Empirical tests reject the assumption that the term structure of implied firm-level costs of equity is constant...

This study examines whether the term of the auditor-client relationship (i.e., auditor tenure) is associated with future stock price crash risk measured both ex ante and ex post. Using a large sample of U.S. public firms with Big Four auditors, we find robust evidence that auditor tenure is...

In frictionless capital markets with complete information and rational investors, stock prices adjust to new information instantaneously and completely. However, a substantial body of research studies information imperfections such as asymmetric information and incomplete information....

We test the hypotheses that (i) poor accounting quality is associated with delayed stock price adjustment to information, and (ii) the accounting quality component of price delay predicts stock returns. We define accounting quality as the precision with which financial reporting informs equity...

This paper provides a selective survey of Ohlson and Vuolteenaho-type accounting valuation models. The focus is on the valuation, return and cost of capital dynamics of these models. Emphasis is placed primarily on variations of these models that incorporate risk aversion, parameter uncertainty...

This study explores the impact of state anti-takeover laws on the governance role of conditional accounting conservatism. Passage of these laws introduced an exogenous shock to the takeover threats faced by firms and constitutes a natural experiment for investigating the relation between...

Using a large sample of U.S. public firms, we find robust evidence that short interest is positively related to one-year ahead stock price crash risk. The evidence is consistent with the view that short sellers are able to detect bad news hoarding by managers. Additional findings show that the...

This study tests whether IFRS adoption increased accounting transparency based on model-driven hypotheses. Duffie and Lando (2001) show that changes to accounting transparency affect the spread/maturity relation of CDS instruments in very specific ways. Consistent with their model, we find that...