We investigate whether employees’ financial literacy is associated with financial reporting misconduct. We argue that greater financial literacy can reduce misconduct by enabling employees to identify and expose accounting-related fraudulent behavior of managers, increasing the ex-ante cost of...

In this study, we replicate and extend Dichev and Skinner’s [DS: 2002] study on the debt covenant hypothesis (DCH). We start by replicating DS and find results consistent with theirs. We then extend their work by changing three aspects of the research design: histogram bin width, calculation...

This study empirically investigates whether and how the COVID-19 pandemic affects corporate financial asset holdings. We find that firms with higher pandemic exposure are less likely to hold financial assets. Mechanism analyses suggest that the return-chasing rationale dominates the...

The mandated increase in segment disaggregation under SFAS 131 could have harmed shareholders by revealing proprietary information or benefited them by reducing agency problems. Using a sample of firms that lobbied against SFAS 131 on the grounds of competitive harm, I examine whether concerns...

We examine whether individualism reduces financial reporting comparability using audit partner individualism in the U.S. We argue that individualistic audit partners are more likely to have non-holistic thinking styles and to resist conformity pressure from peers, thereby lowering their...

This study explores whether shocks to climate-related uncertainty induce increased managerial short-termism. Theory suggests that when individuals face long-run uncertainty, they often resort to short-termism to realize more immediate and certain benefits. Consistent with this, we expect that...

In this paper, we examine the relation between client importance to Big 4 audit firm local offices and unconditional conservatism in complex accounting estimates; specifically, stock option volatility, pension expected asset rates of return, and pension discount rates. Changes in these...

This study documents that CEOs’ annual earnings guidance is more negatively biased in periods when the White House is governed by the political party that the CEOs did not contribute to, relative to periods when the White House is occupied by the CEOs’ party. This negative bias holds as...

We examine whether political forces in Chinese State-Owned Enterprises (SOEs) influence audit reporting, and in particular the disclosure of Key Audit Matters (KAMs). We test two competing predictions that offer alternative explanations for the relation between SOEs and KAMs disclosures. Using a...

Regulators frequently relax accounting rules during a financial crisis as a means of regulatory forbearance. The new accounting options provide banks with an opportunity for an accrual-based increase in their regulatory capital. The use of such an accounting option helps reduce the costs of...