Learn More
In this paper we study the relation between the properties of firms' financial reporting systems and the incentives for managers to preempt the financial reports by volunteering private information as it is obtained. We show that preemptive disclosures will be made only if the accounting system is not too conservative. The key implication of these findings(More)
Recent capital structure theories have emphasized the role of debt in minimizing the agency costs that arise from the separation between ownership and control. In this paper we argue that capital structure choices themselves are aected by the same agency problem. We show that, in general, the shareholders' and the manager's capital structure choices diier(More)
In order to shed some light on the desirability of hedge disclosures, I investigate the consequences of hedge disclosures on a firm's risk management strategy. Several major results emerge from this analysis. First, greater transparency about a firm's derivative activities is not necessarily a panacea for imprudent risk management strategies. I show that(More)
Summer Camp and the 1999 Burton Summer Workshop at Columbia. We are grateful to Hewitt Associates for providing ProxyBase data and to the Graduate School of Business at the University of Chicago for financial support. Finally, we appreciate the research assistance of Abstract The purpose of this paper is to investigate how governance systems of large public(More)
Formal and heuristic valuation models suggest that changes in firm value associated with a revision in expected earnings should be a multiple on the order of typical earnings capitalization factors between 10 and 30. However, empirical estimates of the earnings response coefficient (ERC) have usually been in a range an order of magnitude lower, between 1(More)
We investigate the ability of forecast patterns to convey information about an analyst's predictive ability. We establish an equilibrium strategy where the analyst issues a forecast only if the realization of his private signal exceeds a threshold. In equilibrium, higher-ability analysts choose higher thresholds than lower-ability analysts, and investors(More)
We explore the theoretical relation between earnings and market returns as well as the properties of accounting earnings frequency distributions under the maintained hypothesis that managers use unbiased accounting information benevolently to prudently manage the firms of which they are appointed stewards. We offer this surprisingly uncommon (in the(More)
Motivated by important international differences in the design of " say on pay " (SoP), this paper studies how its enforceability and its timing affect compensation decisions of the board of directors (BoD) and the level of board dependence. The analysis suggests that SoP design can have significant economic consequences that should be considered by(More)
When decisions are made on the basis of reported product cost, even modest distortions in product cost may create significant distortions in decision-making. But costing systems are unlikely to be error-free. On the other hand, firms' budgets to enhance costing accuracy are typically constrained, and should be used where they are most effective. There is(More)