This paper proposes a five-stage life cycle model to describe business development from birth to death with the five elements theory. A five-stage model, including birth, survival, success, decline, and renewal, is developed in terms of interactions of business functions, which are classified into the Chinese five elements. Each stage of the business life cycle could be characterized by the dif...

While accounting research often uses restatements as a measure of earnings quality (EQ), often overlooked is the explicit recognition that EQ arises endogenously as a by-product of the firm’s value-maximizing investment in accounting resources. This paper develops a model of restatements that incorporates both the optimal investment in accounting systems (i.e., “optimal incompetence”) and incen...

This paper examines a large, nearly universal sample of hedge fund activism between January 1, 2003 and December 31, 2005. Hedge fund activism is when a hedge fund files a 13D filing after taking an initial stake of 5 percent or more in the company, and clearly states in the filing’s “purpose” section that it intends to proactively influence management’s future decisions. We find that hedge fun...

Stock prices are more informative when the information has less social value. Speculators with limited resources making costly (private) information production decisions must decide to produce information about some firms and not others. We show that producing and trading on private information is most profitable in the stocks of firms with poor corporate governance – precisely because it will ...

Research on what determines the performance of start-up companies is characterized by a sharp debate in the literature of economic sociology and the sociology of the economy. There is one extreme view proposing that in the long run, a rational market takes care of allocating scarce resources such as venture capital funding to the most potentially profitable and exciting business plans. By contr...

Corporate site visit is an important type of investors’ information acquisition activities, but its usefulness is not well understood in the literature, partially due to the lack of data. Using a unique dataset of corporate site visits in China, we analyze the information content and the determinants of corporate site visits. Our main findings are as follows. First, we document a significant ma...

Even if firms have precise partworth estimates, predictive uncertainty (which arises due to randomness in customer behavior and attributes not included in the conjoint study) has strategic implications. Firms make strategic errors that reduce profits if they overestimate or underestimate predictive uncertainty. If firms use low-quality market research and thus overestimate uncertainty in predic...