Mispricing and risk have both been suggested as explanations for the cross-sectional relation between stock returns and firm characteristics such as accruals. As emphasized by Ferson and Harvey (1998) and Berk, Green and Naik (1999), it is difficult to evaluate these competing explanations...

Using a simulation analysis based on historical U.S. stock market returns, we assess the total tax burden (federal plus state) of active portfolio management. Our results show that taxes can erode a large portion of the profits, even for moderately intense trading strategies where the capital...

We examine firms' financial reporting practices during stub periods that are induced by fiscal year changes and not covered by regular quarters. We find that firms report much lower income for the missing months than for adjacent quarters, mainly by recording higher operating expenses. We also...

Relevance of earnings for explaining equity prices is investigated by many value relevance studies. This study investigates whether fiscal year end earnings as a proxy for next period's earnings have additional information, beyond the information incorporated in contemporaneous equity price, for...

We examine the association between financial restatement and firm value, based on a sample of firms that restated financial statement in Chinese listed firms between January 2005 and December 2009. Using Tobin's Q as a proxy for firm value in the end of restatement year, we find firm value in...

We argue that audit quality has direct and indirect effects on the cost of equity capital. Direct effects are consistent with auditor reputation effects reflecting insurance and/or assurance roles. However, if audit quality is at least in part a reflection of expected assurance levels, then we...

This paper studies the relevance of audit qualifications and auditor selection for the external stakeholders of private companies in code-law countries. Employing a sample of private Spanish firms, we find that the cost of debt is not influenced by auditor opinion, but it is strongly influenced...

The unprecedented migration of Andersen's clients that followed Andersen's indictment in March 2002 potentially placed a large burden on successor auditors' audit resources. We refer to this strain, measured at the local-office level, as auditor capacity stress. We examine the effect of auditor...

Previous evidence of conservatism in Australian financial reporting, as in other countries, is constrained by the absence of a reliable firm-year specific measure. This paper calibrates such a measure using the procedure outlined by Khan and Watts (2007). We show that the C_Score they propose...