This paper examines the relation between smooth past earnings performance and the credibility of voluntary management earnings forecasts. Specifically, using strings of increasing earnings per share as our measure of past performance, we demonstrate that both analyst forecast revisions and stock price reactions around management earnings forecasts are more pronounced when the firm has posted a ...

We identify a novel aspect of potential collaboration between targets and acquirers in managing earnings during mergers and acquisitions. Using a sample of 2,128 mergers & acquisitions from 1985-2010, we find that target firms report lower earnings for quarters during the “quiet” period between announcement and completion of these deals. Targets‟ reduced earnings are due mainly to higher expens...

We examine the relation between firms’ real earnings management decisions and the slack in their net worth debt covenant. Using private debt covenant data, we find that the overall level of real earnings management is higher when net worth covenant slack is tighter. Moreover, we find that this effect is more pronounced for loan-years with the tightest slack, which is a setting where benefits of...

The relationship between physical capital, human capital and the distribution of earnings is examined empirically using cross-sectional microdata within SMSAs. Comparative advantage in workers and a scale-of-resources effect among firms is predicted to lead to a relationship between capital and earnings. The level of earnings is found to be positively related to capital intensity and negatively...

In this study, Ohlson's Linear Information Dynamic (LID) is analyzed and the effect of other information on the abnormal earnings series is evaluated. The hypothesis that industry structure and market share have significant effects on abnormal earnings in the following period is tested, with Ohlson's LID persistence maintained. The results confirm the premise of LID in a sample of Brazilian pub...

a r t i c l e i n f o I propose a new multi-factor asset pricing model with new-Keynesian factors to explain stock return anomalies from 1972Q1 to 2009Q2. This new model explains the average returns across testing portfolios formed on financial distress, momentum, and standardized unexpected earnings with misspecification-robust statistics. Test portfolios formed on net stock issues and total a...

Inequality in weekly earnings increased in the eighties in Canada. The growth in inequality occurred in conjunction with three facts. First, real hourly wages of young workers dropped more than 10%. Second, the percentage of employees working 35-40 hours per week in their main job fell and the fraction of employees working 50 hours or more per week rose. Third, there was a growing tendency for ...

In this paper, we examine the effect of managers’ pay duration on firms’ voluntary disclosures. Pay duration refers to the average period that it takes for managers’ annual compensation to vest. We hypothesize and find that pay duration can incentivize managers to provide more bad news earnings forecasts. This result holds after controlling for the level of stock-based compensation and the endo...

This paper suggests a solution to the puzzling finding documented in Moskowitz and Vissing-Jorgensen (2002) that the return to an index of private equity is equal to the return to the CRSP index of public equity even though investment in private firms is substantially riskier. It presents an occupational choice model where human and financial capital can be jointly invested in a private busines...