We examine changes in fees paid to auditors around the Sarbanes-Oxley Act (SOX, 2002). Audit fees are expected to increase after SOX due to both increased audit effort and potentially increased auditors' legal liability. Our results indicate an economically large increase in audit fees following...

This study investigates investor perceptions, proxied by earnings response coefficients (ERCs), of auditor independence-in-appearance as a function of audit and non-audit fees. For a sample of 8,940 firm-years over the 2000-2002 period, we find in separate regressions that ERCs are negatively...

We show that firms reporting sustained increases in both earnings and revenues have (1) higher quality earnings and (2) larger earnings response coefficients (ERCs) in comparison to firms reporting sustained increases in earnings alone. With respect to earnings quality, firms with...

Using abnormal audit fees to capture any added charges associated with incremental audit effort beyond the effort level needed under normal or expected circumstances, we find that the incremental audit effort is positively associated with goodwill to total assets. Additionally, when goodwill is...

We show that firms reporting sustained increases in both earnings and revenues have (1) higher quality earnings and (2) larger earnings response coefficients (ERCs) in comparison to firms reporting sustained increases in earnings alone. With respect to earnings quality, firms with...

The financial motivation theory on mergers hypothesizes that mergers can create value by increasing debt capacity. Consistent with the increased debt capacity hypothesis, our results show that the average financial leverage (debtdivided by debt plus equity) increases significantly from 32.1% one...

I examine the effect of various business strategies aimed at sustaining growth on quality and pricing of earnings. Earnings quality is predicted to be high when earnings growth results from sales increases, rather than cost reductions or income management of core and non-core operations, because...

A significant volume of long-term debt was refinanced by corporate America in the early 1990s. We argue that a majority of the refinancing was undertaken to improve the firm's cash flow performance. Firms replacing high-coupon long-term debt with low-coupon debt were able to increase their...

This article examines the impact of the method of payment used in acquisitions on the acquiring firms' post-merger operating cash flow and some of its components cash inflow from sales, cash payments to suppliers, and payments for other operating expenses. I find that acquiring firms that pay...

The proposed new SEC (2022) rules suggest that the information risk may be unusually high for companies going public by merging with SPACs (“SPAC-IPOs”). We study the merits of this “information risk” hypothesis and then examine whether the high information risk also explains...