Earlier studies on income inequality and crime have typically used total income or total earnings. However, it is quite likely that it is changes in permanent rather than in transitory income that affects crime rates. The purpose of this paper is therefore to disentangle the two effects by, first, estimating region-specific inequality in permanent and transitory income and, second, estimating c...

We document that firms’ management of accounting earnings increased steadily from 1987 until the passage of the Sarbanes Oxley Act (SOX), with a significant increase during the period prior to SOX, followed by a significant decline after passage of SOX. However, the increase in earnings management preceding SOX was primarily in poorly performing industries. We also show that the informativeness...

We use the occasion of a change in tax policy that raised the tax rate for many of the listed companies in China to examine tax-induced earnings management (TEM) from the perspective of political connections. We find that when the tax rate increased, only those affected firms with politically connected management engaged in TEM. This suggests that, in addition to motivation for managing earning...

We examine a company’s decision to issue public debt for the first time by analyzing its behavior around the time of obtaining its first debt rating. Contrary to our expectations, we find that firms are more likely to pay dividends in the years prior to the initial rating rather than at or after the announcement date, and that the amount of dividend payments actually appears to decline (rather ...

This paper uses data on individual earnings in manufacturing industry for five African countries in the early 1990s to test whether firms located in the capital city pay higher earnings than do firms located elsewhere, and whether such benefits accrue to all or only certain types of workers. Earnings equations are estimated that take into account worker characteristics (education and tenure) an...

We investigate whether stock betas vary with the release of firm-specific news. Using daily firm-level betas estimated from intraday prices, we find that betas increase on earnings announcement days and revert to their average levels two to five days later. The increase in betas is greater for earnings announcements that have larger positive or negative surprises, convey more information about ...

This study empirically tests whether the credit Watchlist creates an implicit contract between debt issuing firms and credit rating agencies (CRAs), whereby the CRA effectively motivates the issuer to take necessary actions that alleviate conditions that might otherwise lower the credit rating and then effectively monitors those actions. Based on Boot Milbourn, and Schmeits (2006), I hypothesiz...

Influential studies have suggested that initial conditions can have persistent effects on workers’ careers within firms. It is a longstanding question among economists whether such lasting wage differentials among firms and industries are due to persistent deviations of wages from workers’ skills due to contracting and market frictions, or whether they arise from permanent differences among wor...

We examine whether the information content of earnings is inversely related to the degree of conformity between financial accounting income and taxable income. Our inquiry exploits a natural experiment first examined by Guenther et al. (1997) in which a set of U.S. firms were forced to increase their book-tax conformity as a result of a change in the tax law. We find evidence consistent with th...