This study provides empirical evidence regarding the effect of annual accounting earnings announcements on investors' trading behavior. We find that the magnitude of trading volume reaction is an increasing function of both the magnitude of the associated price reaction and the level of predisclosure information asymmetry. These results are consistent with Kim and Verrecchia's (1991a) theoretical trading volume proposition.

We provide a positive analysis of a firm's decision to report the operations of a financial subsidiary on a consolidated versus an unconsolidated basis. Our evidence indicates that the firm is more likely to choose consolidated reporting the greater the operating, financial, and informational interdependencies between parent and subsidiary. Moreover, our evidence offers no support for the FASB hypothesis that firms use unconsolidated financial subsidíaries to understate the fixed claims on their balance sheets.

The SEC currently requires that firms disclose recent disagreements with their auditors over accounting or auditing matters when a change in auditor is reported. The effectiveness and usefulness of requirements to disclose disagreements have been questioned, and previous empirical research on the issue has been inconclusive. This study investigates the information content of disclosure of the auditor-firm disagreements. The analysis indicates a significant negative market reaction in the week that the Form 8-K is filed with the SEC. This finding is consistent with the position that the disclosure provides information useful to investors.

Extensive evidence suggests that managers strategically choose the complexity of their descriptive disclosures. However, their motives in doing so appear mixed, as complex disclosures are used to obfuscate in some cases and to provide information in others. Building on these observations, we first identify a novel stylized fact: disclosure complexity is non-monotonic in firm performance. We develop a model of disclosure complexity that incorporates the dual roles of complexity and can explain this stylized fact. In the model, a manager discloses to investors of heterogeneous sophistication and can adjust the complexity of the disclosure to either provide more precise information or to obfuscate. When the firm's investor base is largely unsophisticated, the manager issues a complex disclosure only upon observing negative news. In contrast, when the firm's investor base is more sophisticated, the manager issues a complex disclosure upon observing either highly positive or negative news. As a result, the market may react more positively to complex information releases than to simple releases, complex disclosures generate heightened return volatility, and firms with more inherently complex information are more likely to use their discretion to simplify their disclosures.

This paper examines the empirical relation between corporate ownership structure and innovation. We test the hypothesis that diffusely-held firms are less innovative than firms with either a high concentration of management ownership or a significant equity block held by an outside investor. Overall, the evidence indicates that diffusely-held firms are less innovative along the dimensions we examine: patent activity, growth by acquisition versus internal development, and timing of long-term investment spending. These results are consistent with the conjecture that concentrated ownership and shareholder monitoring are effective at alleviating the high agency and contracting costs associated with innovation.

We present evidence that 20 percent of the 10-Ks in our sample are filed with the SEC after the 90-day statutory due date. Firms that delay filing their 10-K are not a random sample of firms; up to 25 (10) percent of the firms experiencing unfavorable (favorable) economic events delay their 10-K. Firms that delay their 10-K are, on average, small, have negative accounting rates of return, negative earnings changes, low liquidity, and high financial leverage; they also experience negative market- adjusted stock returns.

Researchers often restrict their sample selection to either December or non-December Compustat companies. However, no one has rigorously investigated the implications of this restriction. This paper compares financial characteristics of December and non-December year-end companies. December year-end firms are larger and have smaller betas as compared to companies with non-December year-ends. There are some strong industry concentrations in December year-ends, most notably in the regulated or recently deregulated industries. Retail sales firms have primarily non-December year-ends. A comparison of leverage ratios does not reveal a stable systematic difference between December and non-December year-end companies.