ABSTRACT Previous theoretical arguments suggest that industrial diversification provides a co-insurance effect decreases the firm's default risk. In this paper, we endogenously estimate segment disclosure quality and investigate whether of disclosures significantly affects bond investors' assessment diversification. We document bonds issued by industrially diversified firms with high-quality have lower yields than low-quality disclosures. also find negative relation between becomes stronger...

ABSTRACT We propose two explanations for the previously documented relation between aggregate earnings growth and future inflation: one based on firms changing their investment in response to growth, other consumers varying consumption wealth effects of profitability growth. As supply goods services is relatively inelastic short run, our arguments imply that changes near-term demand (consumption) will affect prices services. Consistent with investment-based argument, we find predict Producer...

ABSTRACT We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. find that approximately one half of the total effect on explained through negative future pre-tax cash flow levels volatility and, a lesser extent, lower information quality. The effects these mediating variables are much less pronounced for results additional cross-sectional analyses indicate that, relative investors, banks able reduce asymmetry problems more effectively,...

We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. find that approximately one half of the total effect on explained through negative future pre-tax cash flow levels volatility and, a lesser extent, lower information quality. The effects these mediating variables are much less pronounced for results additional cross-sectional analyses indicate that, relative investors, banks able reduce asymmetry problems more effectively, given...

This study examines the discretionary accruals quality of single- and multiple-segment firms. The authors hypothesize find that is lower for firms than single-segment firms, same level quality, cost capital higher These findings suggest more severe agency problems in compared with may lead to poor risk priced-in as a capital.

ABSTRACT We examine the real effects of lease-capitalization rules (i.e., standards that require firms to capitalize finance leases) on corporate investment. show introduction these leads a decrease in investment, which is more pronounced for with high reliance leases. posit and find lease capitalization affects investment via learning channel contracting channel. Regarding first channel, we argue managers identify areas overinvestment activities should be discontinued or downsized because...

ABSTRACT The Securities and Exchange Commission permits companies to redact proprietary information from material contract filings, so long as the redacted (1) would cause competitive harm if disclosed, (2) is legally immaterial. Because these joint criteria are inherently contradictory, we examine whether immaterial economically investors. We find that firms’ stock price discovery process significantly slower insider trading greater after file contracts compared nonredacted contracts. then...

Analysts deviate from management guidance to correct for perceived earnings management. Although the deviations reduce forecast accuracy, they improve informativeness, bringing forecasts closer unmanaged and reducing accruals mispricing. An implicit assumption in literature is that more accurate analyst (i.e., estimates are reported earnings) better investors, analysts' objective (managed) accurately. Our analysis suggests this not necessarily case an inaccurate can actually be informative...

We examine whether the 2005 mandatory adoption of IFRS is followed by an increase in cross-border acquisitions into adopting countries and association driven per se or concurrent enforcement changes. Using exogeneity a firm's listing status to identify effect IFRS, we document significant listed targets from countries. find no evidence that those apparently bundled with The also suggests likely due fact many different use common reporting system, as opposed improvement quality at individual...

We posit that accounting conservatism could mitigate the value destruction associated with increases in cash holdings. Consistent this conjecture, we find market of an additional dollar holdings conservatism. This result is robust to controlling for strength corporate governance, earnings quality, past stock performance, potential unobserved firm heterogeneity, endogenous changes conservatism, and other relevant variables. Overall, evidence suggests a more efficient use holdings, supporting...

We propose two explanations for the previously documented relation between aggregate earnings growth and future inflation: one based on firms changing their investment in response to other consumers varying consumption wealth effects of profitability growth. As supply goods services is relatively inelastic short run, our arguments imply that changes near-term demand (consumption) will affect prices services. Consistent with investment-based argument, we find predict Producer Price Index...

Previous theoretical arguments suggest that industrial diversification provides a co-insurance effect decreases the firm’s default risk. In this paper, we endogenously estimate segment disclosure quality and investigate whether of disclosures significantly affects bond investors’ assessment diversification. We document bonds issued by industrially diversified firms with high-quality have lower yields than low-quality disclosures. also find negative relation between becomes stronger when...

This study investigates the determinants and trading performance of outside directors’ equity deferrals, which represent choice to convert part or all their annual cash compensation into deferred company stock. Using a large sample S&P 1500 firms that allowed directors defer fees between 1999 2009, we find significant associations deferral choices specific features director plans, proxies for wealth diversification, future firm stock market performance. Trading analyses indicate earn...

We analyze whether analysts sacrifice forecast accuracy for informativeness by examining: (1) the association between analysts’ deviations from management guidance and earnings management; (2) effect of on analyst accuracy; (3) abnormal accrual mispricing. The evidence indicates that apparently deviate to correct perceived management. Although reduce accuracy, they improve their estimates. More specifically, bring estimates closer true (unmanaged) number accruals An implicit assumption in...

This paper investigates the effect of U.S. firms' geographical location, whether urban or rural, on their corporate disclosure policies. For a comprehensive sample firms for years 1988 to 2004, I find that quality reported earnings is better rural as compared firms. Earnings exhibit greater ability predict cash flows, higher response coefficients stock returns, conservatism, and lower probability small positive values. Also, increase in likelihood issuing voluntary management forecasts with...

Abstract We examine the relation between dividend increases and unexpected changes in future earnings. This issue has been subject of numerous empirical studies. However, extant evidence on this is inconclusive. allow for fact that investor demand paying stocks time-varying market pays a premium such when high. Moreover, (DP) high, could be due to managers catering high dividends by investors. find DP low, there significant positive earnings changes, consistent with signaling theory...

ABSTRACT We study executive equity contributions to nonqualified deferred compensation plans, which consist of the election defer part or all executive's annual base salary and other cash pay into company's stock. These transactions provide executives with an alternative channel purchase shares in firm while benefiting from affirmative defense against illegal insider‐trading allegations. Using a large sample deferrals over 2000–2014, we find evidence that use these as means acquire stock...