We characterize the optimal long-term financial contract in a setting in which a risk-neutral agent with limited capital seeks external financing for a project which pays stochastic cash flows over many periods. These cash flows are unobservable and unverifiable by outside investors. The agent can be induced to pay investors via the threat of the loss of control of the project. After solving fo...

This paper investigates the difference between two widely used measures of accruals and their differential impact on accrual strategy returns. The two measures are accruals computed using consecutive changes in the balance sheet items and accruals computed as earnings minus cash flows from operating activities, both from the cash flow statement. Our investigations reveal that the difference bet...

Article history: Received 24 September 2008 Received in revised form 19 January 2009 Accepted 15 April 2009 Available online 3 May 2009 We study a model in which future financing constraints lead firms to have a preference for investments with shorter payback periods, investments with less risk, and investments that utilize more pledgeable assets. The model also shows how investment distortions...

Performance appraisal is a process which help shareholders make informed and optimal investment decisions. In recent decades, a long stream of research has devoted particular attention to the importance and impact of financial decisions on firm performance and firm value. The present study thus is primarily concerned with investigating the association between free cash flow and institutional ow...

Disagreement in Partners’ Reports of Financial Difficulty We use unique data in which both partners report about household finances to demonstrate that there is often disagreement about whether the household has experienced financial difficulty in the past year. Four alternative explanations for this disagreement are tested using the data. The results indicate that disagreement may be related t...

The Swedish National Audit Bureau has developed a model to present decision material in the public sector including effects on quality. In the article the model is illustrated with an example that deals with improved housing for elderly through installation of elevators in three story houses. The model consists of a social cost-benefit analysis and a financial analysis. In this case financial a...

We investigate whether ineffective internal control over financial reporting has implications for firm operations by examining the association between inventoryrelated material weaknesses in internal control over financial reporting and firms’ inventory management. We find that firms with inventory-related material weaknesses have systematically lower inventory turnover ratios and are more like...