A fundamental role of accounting information in financial markets is to serve as a basis for capital allocation. An important attribute of the quality of accounting information is the extent to which earnings (accruals) map into cash flows. A poor mapping of accruals into cash flows reduces the information content of reported earnings and results in lower-quality earnings. If investors differ i...

Most prior studies assume a positive relation between debt and earnings management, consistent with the financial distress theory. However, the empirical evidence for financial distress theory is mixed. Another stream of studies argues that lenders of short-term debt play a monitoring role over management, especially when the firm’s creditworthiness is not in doubt. To explore the implications ...

This paper investigates the compensation usefulness of accounting variables along several important dimensions (accruals-based vs. cash-flows based, non-return vs. return, and gross vs. net measures), as well as the time series variation of performance measures in CEO bonus plans, using a unique panel of manually collected CEO bonus determinants spanning fiscal years 2006 to 2011. We document t...

I examine whether managerial stock and options holdings influence the propensity of goingpublic firms to manipulate financial information, as measured by the incidence of shareholder class action lawsuits and discretionary accruals. Examining a sample of U.S. firms that went public during the years 1996-2006, I find some evidence that firms in which top managers receive large stock options gran...

This paper examines the usefulness of accounting information in predicting earnings management. We investigate a comprehensive sample of firms from 1971-2000 that restated annual earnings. We find that firms restating earnings have high market expectations for future earnings growth and have higher levels of outstanding debt. We also find that a primary motivation for the earnings manipulation ...

Despite the large number of papers purporting to identify earnings management, the current techniques used to identify it are sorely lacking. In general, they are based on the assumption that accruals unexplained by a linear projection on firm-level observables (i.e., discretionary accruals) represent either explicit earnings management or poor quality earnings.1 Namely, these techniques assume...

Interpreting accruals as working capital investment, we hypothesize that firms optimally adjust their capital investment in response to discount rate changes. Consistent with the discount-rate hypothesis, we document that (i) the predictive power of accruals for future returns increases with the correlations of accruals with past and current stock returns; (ii) controlling for investment substa...

Facility of outflow in the eye of the vervet monkey Cercopithecus ethiops was studied by constant-rate and by constant-pressure infusion. Facility increased greatly after the injection of 2 to 3 fig of pilocarpine into the anterior chamber or after the application of 0.2 to 0.3 ing. to the cornea. The effect on facility consisted of 2 components. One component was reversed in 3 to 5 minutes by ...