Thomas Hemmer

Learn More
In this paper we study the relation between the properties of firms’ financial reporting systems and the incentives for managers to pre-empt 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 a ected by the same agency problem. We show that, in general, the shareholders' and the manager's capital structure choices di er(More)
In this paper, we seek a deeper understanding of how accounting information is used for valuation purposes relative to how it is used for incentive contracting purposes. We explore linkages between the weight placed on earnings in compensation contracts and the weight placed on earnings in stock price formation. This clean distinction between the valuation(More)
The purpose of this paper is to investigate how governance systems of large public U.S. corporations vary with information properties of numbers produced by their financial accounting systems. We argue that in firms whose current accounting numbers do a relatively poor job of capturing the effects of the firm’s current activities and outcomes on shareholder(More)
In this paper we explore both the stewardship implications of accrual accounting systems with reversals over multiple time periods. We show that either aggressive or conservative accounting strategies are preferred by shareholders both from a stewardship and a valuation perspective. In the process, we also show that the optimal contract is robust with(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)
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 develop a theoretical model of the …rm that links properties (stewardship vs. valuation focus) of …nancial reporting regimes with the informational properties of optimal managerial accounting systems. We show that, contrary to the standard textbook proposition, properties of management and …nancial accounting systems are not independent. Signi…cantly, we(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)