In this paper, we build on a rational expectation model to study the economic consequences of a firm's choice of disclosure audience in a market with heterogenous traders in terms of information processing abilities. Through costly expertise acquisition, some traders become sophisticated and can...

We argue that, in response to increased scrutiny and greater attention to accruals versus sales, firms become more likely to engage in accrual conversion (AC) cash management aimed at aligning cash and accruals with earnings and sales (e.g., by factoring of receivables). In doing so, they reduce...

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 study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the quot;fair-valuequot; and quot;cash-flowquot; hedge accounting methods prescribed by the recent SFAS No. 133. We...

We argue that, in response to increased scrutiny and greater attention to accruals versus sales, firms become more likely to engage in accrual conversion (AC) cash management aimed at aligning cash and accruals with earnings and sales (e.g., by factoring of receivables). In doing so, they reduce...

We study a model of imperfect competition and limited production capacity, in which a choice of low product quality enables firms to increase total production. We find that in the presence of limited capacity, such reduced quality often results in increased social welfare.We also explore the...

In recent years, outsourcing has become a common practice for firms operating domestically as well as globally. The academic and professional literature discusses numerous factors that influence outsourcing decisions, including the commonly used argument that activities that are not within the...

We study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the quot;fair-valuequot; and quot;cash-flowquot; hedge accounting methods prescribed by the recent SFAS No. 133. We...

In this article we study the value of delegating authority over income tax audit policy, arising from the incompleteness of contracts. Consider a utilitarian government whose ability to commit is limited to aggregate dimensions of its audit policy, as publicly verifiable information about...