SFAS 142 requires managers to estimate the current fair value of goodwill to determine goodwill write-offs. In promulgating the standard, the FASB predicted managers will, on average, use the fair value estimates to convey private information on future cash flows. The current fair value of...

We present a multiperiod agency model of stock based executive compensation in a speculative stock market, where investors have heterogeneous beliefs and stock prices may deviate from underlying fundamentals and include a speculative option component. This component arises from the option to...

This paper examines inventory management from an incentive perspective. We show that when a manager has private information about future attainable revenues, the residual income performance measure based on historical cost can achieve optimal (second-best) incentives with regard to managerial...

This paper explores directly the effect of internal control weakness (hereafter ICW) and their remediation on information precision for firms who filed Section 404 reports with the SEC. Our proxies for information precision are drawn from Barron et al. (1998). First, we find that the presence of...

Although an organization's environmental uncertainty may induce greater variability in reported earnings, managers have incentives to reduce this variability. The flexibility accorded by Generally Accepted Accounting Principles (GAAP) provides managers the means to accomplish this via exercising...

We examine the effect of earnings surprises on changes in information asymmetry. We hypothesize and find that asymmetry is lower (higher) in the quarter following positive (negative) earnings surprises compared to firms that meet the consensus analyst earnings forecast. The relations between...

Flotation costs represent a significant loss of capital to firms and are positively related to information asymmetry between managers and outside investors. We measure a firm's information asymmetry by its accounting information quality based on two extensions of the Dechow and Dichev earnings...

Compared to non-family firms, family firms face less severe agency problems due to the separation of ownership and management, but more severe agency problems that arise between controlling and non-controlling shareholders. These characteristics of family firms affect their corporate disclosure...

This paper examines whether firm managers engage in the expectation management of their current performances through their own forecasts and consecutive adjustments. Expectation management in order to achieve positive surprises by lowering analyst forecast levels has been documented (Bernhardt...

This paper develops a new theory of CEO compensation based on the opacity of the internal workings of corporations to outsiders and the CEO's ability to divert or tunnel corporate resources to self-enriching uses. In this setting, neither high powered option compensation nor fixed salary...