Working Papers

CEO compensation is a highly controversial subject. While most company directors believe that CEO pay is not a problem, the majority of the American public believes that it is. The difficulties that boards face in justifying CEO pay levels in…

This paper examines the approaches accounting researchers use to draw causal inferences using observational (or non-experimental) data. The vast majority of accounting research papers draw causal inferences notwithstanding the well-known…

We show that analyst coverage proxies contain information about expected returns.  We decompose analyst coverage into abnormal and expected components using a simple characteristic-based model and show that firms with abnormally high analyst…

In knowledge-based economies, many businesses enterprises defy traditional industry boundaries. In this study, we evaluate six “big data” approaches to peer firm identifications and show that some, but not all, “wisdom-of-crowd” techniques…

We estimate and test a model of voluntary disclosure in which a manager’s information set is uncertain (Dye 1985; Jung and Kwon 1988). In this model, a manager makes his disclosure decision to maximize the market price, but sometimes, for…

Researchers in accounting, corporate finance, economics, and law regularly evaluate the impact of corporate governance provisions on firm performance and managerial actions. Many of these studies rely on publicly available governance summaries…

The federal Investment Tax Credit (ITC) for solar installations is scheduled to step-down from 30% to 10% at the beginning of 2017 for corporate investors. This raises the question whether solar PV will be cost competitive post 2016 in the U.S.…

We use a dataset of sell-side analysts’ scenario-based equity valuation estimates to examine whether analysts can assess the state-contingent risk surrounding a firm’s fundamental value. We find that the spread in analysts’ scenario-based…

Using a unique dataset of scenario-based investment reports, we examine whether the placement of an analyst’s valuation forecast, relative to his/her own subjective assessment of the distribution of scenario-based valuations for the covered firm…

In a noisy rational expectations framework with costly information, some agents expend resources to become informed, and earn a return for their efforts by trading with the uninformed. Applying this insight, we examine the proposition that an…

We examine the economic determinants of short-sale supply, and its consequences for future stock returns.  Lendable supply increases with expected borrowing costs and decreases with financial statement constructs that indicate overvaluation…

U.S. CEOs hold a large amount of equity that is not explicitly constrained by ownership guidelines or vesting requirements. Although the average CEO receives a risk premium in his annual pay for holding unconstrained equity, most CEOs hold more…

This paper introduces a new measure of firm’s exposure to systematic distress risk — the probability of a recession at the time of a firm’s failure. For stocks in the top quintile of the probability of failure, a median hedge portfolio based on…

We study optimal disclosure via two competing communication channels; hard information whose value has been verified and soft disclosures such as forecasts, unaudited statements and press releases. We show that certain soft disclosures may…

Forthcoming in Review of Accounting Studies

This study examines the information content of quarterly earnings announcements. We first use a nonparametric approach to investigate whether quarterly earnings announcements are…

We examine the link between corporate governance, managerial incentives, and corporate tax avoidance. Similar to other investment opportunities that involve risky expected cash flows, unresolved agency problems may lead managers to engage in more…

I study the efficiency of three prominent accounting rules in a delegated bidding setting where bidders’ incentives are tied to both accounting income and economic surplus. Trade efficiency is maximized (minimized) by the value-in-use method (…

This study finds that more conservative earnings have lower information content in that higher conditional conservatism decreases the speed with which equity investor disagreement and uncertainty resolve at earnings announcements. We find that a…

We analyze how banks’ responses to asset gains and losses can result in procyclical leverage. The analysis reveals that absent differences in regulatory risk weights across assets, leverage is not procyclical. We test predictions from the…