Recent years have seen a preponderance of accounting research using data envelopment analysis (DEA) to measure efficiency. In this study, I examine the calculation of DEA efficiency, with a focus on large panel datasets of financial accounting information. Using simulation and archival data, I...

Recent years have seen a sharp decline in the use of balance sheet-based covenants in private debt contracts. I hypothesize that changes in accounting standards can explain part of this decline. Standard setting has shifted towards a “balance sheet approach”, which I predict has made the...

I examine the role of financial covenants in private debt contracts. I predict that financial covenants help limit ex ante uncertainty about the borrower's performance - the risk that the borrower will default on the loan - in the contract. I find that covenant inclusion is positively related to...

I document the variation in measurement of financial covenants, focusing on three measurement rules: earnings (EBITDA vs. EBIT), firm value (including or excluding intangible assets) and inclusion of escalator clauses (provisions that increase the threshold of net worth covenants). I find that...

This study investigates the effect of the balance sheet approach, where financial reporting focuses on asset and liability valuation, on the usefulness of the capital adequacy ratio in the evaluation of bank default risk by credit rating agencies. We examine Japanese banks, which play the...

We propose a measure of managerial ability, based on managers' efficiency in generating revenues, which is available for a large sample of firms and outperforms existing ability measures. We find that our measure is strongly associated with manager fixed effects, and that the stock price...

Evidence of the effect of lender financial reporting incentives on debt contract design is sparse. We examine whether regulatory capital adequacy, a first-order reporting concern for banks, is associated with the strictness of financial covenants included in loan contracts. We provide evidence...

Evidence shows that managers' debt-like compensation (i.e., inside debt) aligns their incentives with lenders', reducing the agency cost of debt. We examine how changes in the contracting environment affect the use of inside debt in debt contracting. We find evidence of reduced reliance on...