This study develops a theory that predicts the lower the degree to which firms' earnings are correlated with the industry the greater the probability a firm will issue a biased signal of firm performance. The theory provides for causal predictions in our empirical tests in which we examine the...

Academics and practitioners frequently highlight that overall market and industry performance is an important aspect of a firm's profitability. However, few studies allow for the decomposition of a firm's profitability into market, industry, and idiosyncratic components, and those that do often...

We offer a theoretical framework to help isolate persistence estimates of fundamental earnings innovations from the effects of accounting measurements. We show that a downward bias results when persistence of earnings innovations is estimated using reported earnings. We show that the greater the...

This paper analyzes whether fair value estimates of fund net asset values (NAVs) produced by private equity managers are accurate and unbiased predictors of future discounted cash flows (DCF). We exploit the fact that private equity funds have finite lives to compare reported NAVs to DCFs based...