Working Papers

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…

This paper studies the effect of performance feedback on tournament outcomes, when a possibly dishonest principal may manipulate the agents’ expectations to stimulate their effort. Under plausible circumstances, an increase in the principal’s…

The question of whether management control systems (MCS) adopted by start-up companies are valuable is examined. We investigate an international sample of start-ups, including their detailed MCS adoptions and financing histories. We find that…

This paper studies dynamic disclosure when the firm value evolves stochastically over time. The presence of litigation risk, arising from the failure to disclose unfavorable information, not only prompts bad news disclosures but also crowds out…

This paper examines whether insiders at leading financial institutions anticipated the effect of government intervention during the Financial Crisis on their firms’ share prices. While we find no evidence that insiders anticipated the Crisis, we…

Applying a “co-search” algorithm to Internet traffic at the SEC’s EDGAR website, we develop a novel method for identifying economically-related peer firms. Our results show that firms appearing in chronologically adjacent searches by the same…

This study endogenously generates the asymmetric verification concept of conservatism, using evolutionary biology as a foundation. A producer produces (or hunts) a consumable with a stochastic production technology,…

Forthcoming in the Journal of Law and Economics.

This paper examines changes in executive compensation programs made by firms in response to proxy advisory firm say-on-pay voting policies. Using proprietary models, proxy advisory…

This paper investigates whether the U.S. repatriation tax for U.S. multinational corporations (MNCs) affects foreign investment. Prior research shows that repatriation tax costs are positively associated with cash overseas, but the use of such…

Using bottom-up information gleaned from corporate financial statements, we examine the relation between aggregate investment, future equity returns, and investor sentiment. Consistent with the business cycle literature, corporate investments…

Performance appraisal is one of the cornerstones of management control systems. Although this topic has been the subject of considerable prior research, most of this work is based on a single observation per firm or performance appraisal…

We examine a firm’s price-to-earnings (P/E) and price-to-book (P/B) ratios in a model of sequential capacity investments. Our analysis focuses on several key variables, including past and anticipated future investment growth, economic…

This article discusses the role of GAAP accounting from an investor’s perspective.  For all its flaws, a historical-based system of accounting is vital to the investment community, and I believe moves toward fair value accounting should…

We examine the financial health and performance of reverse mergers (RMs) that became active on U.S. stock markets between 2001 and 2010, particularly those from China (around 85% of all foreign RMs). As a group, RMs are small, early-stage…

Over the last few decades, researchers have taken a thorough and critical look at corporate governance from various perspectives. For the most part, they have found that structural features of corporate governance have little or no relation to…

This paper studies a dynamic communication game in which the seller of an asset, whose credibility is unknown to the market, reports changes in the asset value during multiple periods before selling the asset. We characterize the strategy by…