Using confidential data of executive-specific short-term bonus plans, we investigate the extent to which executives manipulate earnings to maximize the present value of bonus plan payments. As such, this paper extends the work of Healy (1985). Like Healy, we find evidence consistent with the hypothesis that managers manipulate earnings downwards when their bonuses are at their maximum. Unlike Healy, we find no evidence that managers manipulate earnings downwards when earnings are below the minimum necessary to receive any bonus. We demonstrate that Healy's results at the lower bound are likely to be induced by his methodology.

We examine whether the structure of compensation for the divisional CEO is related to subsequent innovative activity within the division, and whether the divisional CEO's compensation is structured as a function of the expected innovation opportunity set facing the division. Both the expected innovation opportunity set and the divisional executive's compensation contract are treated as endogenous variables by adopting a simultaneous equation approach. We find modest evidence that the proportion of total compensation tied to long-term components has a positive relation with future innovation, but no evidence that this proportion has a positive relation with the expected innovation opportunity set.

We assemble and describe a sample of 174,782 lawsuits filed against 218,437 public‐company lawsuit‐defendants in federal district court from 2006 to 2021. These lawsuits involve an array of allegations, including product liability, civil rights discrimination, contract breaches, improper compensation and labor practices, antitrust violations, corruption, securities violations, pollution, and intellectual property infringement. The sample exhibits rich variation across firms, industries, time, suit type, plaintiffs, and outcomes—reflecting not only firm activities but also social, political, and regulatory trends. Although many claims matter very little, some are important individually or in aggregate. We observe 23% of defendants experience a market value decline exceeding 10% of current assets around the lawsuit filing. Consistent with the notion that even low‐stakes claims, when numerous or persistent, can introduce frictions or reflect underlying issues, we find that aggregate legal exposure is associated with increased return volatility and decreased profitability. Subsequent tests indicate that materiality, public and private enforcement, and firms’ information environments (as well as other firm traits) are associated with managers’ decisions to disclose these claims. Collectively, our descriptive evidence establishes a foundation for further research into underexplored types of corporate litigation that represent a broad range of alleged wrongdoing and socially irresponsible behavior.

This paper examines daily excess bond returns associated with announcements of additions to Standard and Poor's Credit Watch List, and to rating changes by Moody's and Standard and Poor's. Reliably nonzero average excess bond returns are observed for additions to Standard and Poor's Credit Watch List when an expectations model is used to classify additions as either expected or unexpected. Bond price effects are also observed for actual downgrade and upgrade announcements by rating agencies. Excluding announcements with concurrent disclosures weakens the results for downgrades, but not upgrades. The stock price effects of rating agency announcements are also examined and contrasted with the bond price effects.