some of inherent limitations of accrual accounting make the actual earnings and accounting earnings different. so assessment of reported earnings quality has allocated extensive bulk of accounting studies to itself. the decrease information quality such as earnings quality increases information risk and also the investor’s risk. it’ll increase their expected return. since cost of equity is the ...

We show that after the revelation of corporate frauds in a state, the equity holdings of households in that state decrease significantly both in the extensive and the intensive margins. Using an exogenous shock to fraud detection and exogenous variation in households’ lifetime experiences of corporate fraud, we are able to establish that the impact of fraud revelation in local companies on hous...

We consider a dynamic model in which shareholders delegate a manager, who observes private information about running and liquidation costs of the firm, to operate the firm. We analytically derive the shareholders’ optimal contract contingent on the cost structure of the firm. The information asymmetries change the high-cost firm’s default and liquidation timing. Even if the liquidation value is...

When international accounting standards were renamed to become international financial reporting standards, this seemed to imply that accounting no longer needed to exist, but rather had to be reconsidered as a part of financial communication and advertising. Does traditional accountability no longer matter? Betrayed investors and globalized stakeholders would dissent. A difference of nature co...

We compute the value of a firm that pays its cash flows each period through share repurchases in a dynamic environment where personal taxes are paid on realized capital gains and dividends. These results provide a measure of the personal tax advantages of equity financing relative to debt financing, which are often cited as increasing the cost of debt. The initial price of the firm depends on t...

This paper considers the capital structure of a bank in a continuous-time regime-switching economy. The modeling framework takes into account various categories of instruments, including equity, contingent convertible debts, straight debts, deposits and deposits insurance. Whereas previous researches concentrate on the determination of the capital structure that maximizes shareholders' equity, ...

Evidence has shown that Islamic banking is experiencing tremendous development since the last three decades, especially in Malaysia. This study is aimed at investigating factors thatdetermine the Islamic banking performance in Malaysia, particularly in the period of 2006 to 2010. The predictors are loan loss provision to total assets, net loans to total assets, total overhead cost to total asse...

We highlight the ex ante risk-shifting incentives faced by a bank’s shareholders/managers when CoCos (contingent convertible capital) are part of the capital structure. The risk shifting incentive arises from the wealth transfers that the shareholders will receive upon the CoCo’s conversion under CoCo designs widely used in practice. Specifically we show that for principal writedown and nondilu...

Takeover target firms covered by more equity analysts are sold for higher premiums while their acquirers earn lower merger announcement returns. We confirm these results using exogenous shocks to coverage arising from brokerage-house mergers or closures (i.e., quasi-natural experiments) as instruments for the loss of analyst coverage. In general, our findings indicate that target coverage by eq...

Much work has been done on the impact of mergers and acquisitions on the shareholders of both acquiring and target firms (see Asquith et al. [1983], Bradley et al.[1988], Jarrell and Poulsen [1989], Jensen and Ruback [1983], and Travlos [1987]). Those studies generally indicate favorable stock price responses for target firms, and slight, to no, stock price response for acquiring firms. Recent ...