The legislation known as Sarbanes Oxley (SOX) requires firms to assess their internal controls over financial reporting and to report material weaknesses, as defined by the Public Accounting Oversight Board. Based upon early evidence, we find that firms with material weaknesses are, on average,...

Managers and investors frequently converse and exchange complementary private information. We develop a model to study the conversation dynamics between a myopic manager and a long-term investor. The opportunity of the investor to convey private information affects the manager's disclosure...

We examine the relation between internal control quality and the accuracy of management guidance. Consistent with managers in firms with ineffective internal controls relying on erroneous internal management reports when forming guidance, we document less accurate guidance among firms reporting...

This paper examines whether the variability in the future earnings stream generated by the investment in environmentally-related R&D projects is different than that created by the investment in other R&D projects. To carry out this investigation, I decompose total R&D expenditures into two...

A premise of standard setters and of much empirical research is that improving the quality of accounting standards and their implementation increases information in capital markets. This paper challenges this premise and shows that there are situations in which “better”, i.e., more...

By analyzing a carefully constructed earnings announcements sample that discloses a 'pro forma' earnings number, Bhattacharya, Black, Christensen, and Larson (2002) contribute to recent research documenting increasing differences between GAAP earnings and alternative earnings definitions...

This study investigates whether market participants perceive pro forma earnings to be more informative and more persistent than standard GAAP operating income by analyzing a sample of 1,149 actual pro forma press releases issued between January 1998 and December 2000. We find that pro forma...

We revisit evidence whether incentives or IFRS drive earnings quality changes, analyzing a large sample of German firms in the period from 1998 to 2008. Consistent with previous studies we find that voluntary and mandatory adopters differ distinctively in terms of essential firm characteristics...

There is reliable evidence that managers smooth their reported earnings. If some firms manage earnings downwards (upwards) when they experience large positive (negative) earnings shocks and if investors have cognitive limits or are inattentive, then it is plausible that the post-earnings...

This study examines the predictive power of comprehensive income and its individual components within the homogenous institutional setting of German IFRS firms. The results could be relevant for the standard setters IASB and FASB and their joint project “Financial Statement Presentation”. We...