This study examines discretionary disclosures and stock price effects for 81 UK firms that received first-time modified audit reports during 1982–1990. Results indicate that these firms' managers are forthcoming about adverse developments, and appear to perceive the advantages of withholding negative news to be minimal. However, managers of many of the 58 stressed sample firms make disclosures about expected future performance that are overly optimistic relative to financial outcomes. As expected, stock market participants discount these stressed firms' positive tone disclosures. Evidence in this study confirms that there is a strong incentive problem with voluntary disclosure.

I investigate factors affecting firms' uses of three types of performance metrics to evaluate division mangers: division accounting metrics, firm accounting metrics and firm stock price. Survey data reveal that division accounting metric use increases with the divisions' industry's price–earnings correlation and decreases with divisional growth opportunities; firm accounting metric use increases with the manager's impact on other divisions and decreases with growth opportunities and other managers' impact on that division; and firm stock price use increases with relative division size and the correlation between firm stock returns and market-wide returns.

This study documents one effect of the theory of implicit taxes, providing evidence that a change in the tax rate results in a change in pre-tax returns. Yield spreads of pairs of Treasury bills maturing in the last week of December and the first week of January are examined. Year-ends not affected by rate changes show a significant positive yield spread between these pairs of bills, reflecting an upward-sloping yield curve. However, for year-ends coinciding with the tax rate reductions of 1981 and 1986 there is a significant negative yield spread between these pairs of bills.

It is commonly observed that the compensation paid to senior level executives depends on both accounting and security price measures of performance. The articles by Kim and Suh, Bushman and Indjejikian, and Sloan, which I have been invited to discuss, examine the issue of how much weight to place on these two measures in the contract. The first two papers analyze the role that earnings can play in removing the ‘noise’ in stock price in a rational expectations pricing model. The Sloan paper analytically and empirically examines the role that earnings can play in removing macroeconomic factors from stock price.

More powerful tests of a theory of choice of accounting methods and the effect of changes in these choices on equity values are provided. The power increase comes from efficiently aggregating results across studies. One conclusion is that at least six variables common to more than one study have explanatory power. These variables are managerial compensation, leverage, size, risk, and constraints on interest coverage and dividends. Another conclusion is that the posterior probability that the theory taken as a whole has explanatory power is close to one. This conclusion includes the effect of variables that only appear in one study.

This paper examines cross-sectional analysis procedures common to many market-based accounting research papers. Both the economic and econometric properties of ‘levels’ and ‘returns’ studies are discussed. Topics covered include the relations between the accounting studies and cash flow valuation models, the role of expectations of accounting variables, deflators, spurious inference, risk adjustment and its relation to growth, size and leverage, residual dependence, dependence among explanatory variables, and the effect of scale differences across firms. Major conclusions are that market value is the correct deflator in returns studies, and that levels and returns studies are economically but not econometrically equivalent.

This study examines whether the labor market rewards directors for individual excellence. We use national director awards to capture large, positive shocks to individual reputation. We find strong evidence that the labor market recognizes and rewards “superstar” directors. Award events lead to positive announcement returns and increase awardees’ chances of gaining new board seats at prestigious firms. Consistent with theories of career concerns and labor market signaling, the reputational effects are greater for younger directors and for nonoverboarded directors. Overall, our findings offer new insights into the nature of reputation and rewards in the upper echelon of the director labor market. (JEL G30, G34, G39) Received August 15, 2020; editorial decision May 11, 2021 by Editor Andrew Ellul.

Journal Article Optimal Redundancy Compensation Get access A. A. Sampson A. A. Sampson University of Sheffield and University of New England Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 45, Issue 3, October 1978, Pages 447–452, https://doi.org/10.2307/2297247 Published: 01 October 1978 Article history Received: 01 December 1976 Accepted: 01 July 1977 Published: 01 October 1978

Journal Article A Three (or More) Factor Model of Growth with Induced Innovation Get access A. A. Brewer A. A. Brewer University of Bristol Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 42, Issue 2, April 1975, Pages 285–292, https://doi.org/10.2307/2296536 Published: 01 April 1975