We develop the first general equilibrium exchange economy with risk-averse investors where firm managers can voluntarily make costly, discretionary disclosures regarding the liquidating value of the firm. This extends the discretionary disclosure setting of Verrecchia (1983) by relaxing the...

We model managers' equilibrium strategies for voluntarily disclosing information about their firm's risk. We consider a multi-firm setting in which the variance of each firm's future cash flow is uncertain. A manager can disclose, at a cost, this variance before offering the firm for sale in a...

Starting in 1997, the U.S. Securities and Exchange Commission required that some firms disclose information about risks. One format for risk disclosures let firms disclose correlations by allowing firms to report the sensitivity to market risk factors of cash flows related only to financial...

We consider two managers’ sequential disclosure strategies. We show how the lead disclosing firm’s manager chooses his strategy anticipating the subsequent disclosure choice by a second firm’s manager. Prior studies of a single firm offer little insight into how sequential disclosure...

In this study I use a principal-agent framework to analyze optimal contracting under two accounting standards, referred to as historical cost (HC) and market value (MV), and under differing asset market assumptions. I distinguish HC from MV by how revenue is recognized and in the reporting...

This paper assumes that there are two methods of estimating the value of a firm's assets, called the historical cost (HC) and market value (MV) methods, respectively. It assumes that the true value of the assets and the two estimates are all random variables, jointly distributed as a...

This study examines whether firms transfer income between the income statement and other comprehensive income (OCI) to manage earnings. The results are consistent with managers opportunistically reclassifying income as OCI and OCI as income. Specifically, we find that firms strategically...

This paper examines the relation between audit fees and accruals from a balance sheet auditing perspective. We argue that the underlying economic characteristics of various transactions, as reflected in the articulation-based accruals in Casey et al. (2017), are predictably associated with audit...

We study a model of financial reporting where investors infer the precision of reported earnings. Reporting a larger earnings surprise reduces the inferred earnings precision, dampening the impact on firm value of reporting higher earnings, and providing a natural demand for smoother earnings....

We build an articulating financial statements model in which the beginning and ending balance sheet amounts are explicitly linked to accruals. We distinguish accruals based on the source financial statement of the accruals, either the cash flow statement, balance sheet, or statement of owners'...