This study develops and applies a model-implied measure of information imprecision. We define information imprecision as the degree of noise in investors' prior beliefs about the firm's asset value based on the information set that is currently available. We present a model of credit default swap (CDS) spreads in which the term structure is a function of information imprecision. We exploit observable CDS spreads with short and long maturities to extract an empirical measure of information imprecision. We then examine the moderating role of our measure in two settings. First, we show that the equity market response to credit rating changes increases in the level of information imprecision before the announcement. Second, we show that bond-market professionals' ability to charge a premium to smaller investors, relative to larger investors, increases in the issuing firm's information imprecision. This evidence illustrates the broad applicability of our model-implied measure of information imprecision.

We hypothesize that one way accounting practices spread is through law firm connections. We investigate this prediction by examining companies that avoided reporting compensation expense by engaging in stock option backdating. We hypothesize that executives engaged in backdating because they were desensitized to its inappropriateness when they learned through their legal counsel that other companies were engaging in this practice. We identify backdating companies through backdating-related restatements of earnings. Using network analysis, we find that backdating companies are highly connected with other backdating companies via shared law firms. Logistic regressions reveal that the odds of a company backdating are 53 to 88 percent higher when its law firm has another client that backdates, and that law firm connections are incremental to board interlocks and geographic location. Finally, law firms with backdating clients have more other clients with “lucky” grants, suggesting that backdating spread to other companies, but only some restated.

We study how home-market reporting requirements and listing choices associate with ongoing SEC disclosures by foreign firms and the investor response. The SEC defers material event and interim financial disclosure obligations to foreign firms' home-market regulator or exchange. We find that a growing number of foreign firms incorporate in disclosure havens and have few or no event-driven disclosure obligations. These firms furnish fewer 6-K disclosures, but experience greater investor interest and market response to each filing. There is little evidence that the SEC substitutes for lower information flow with additional monitoring. Our results indicate that the SEC's one-size-fits-all approach to foreign firm disclosure has led to increasing disparity in information flow, despite the strong demand for and reaction to disclosures by firms from weaker regimes.

Non-GAAP earnings provide managers the flexibility to exclude GAAP items to either produce a more informative performance measure or provide them the ability to opportunistically exclude recurring expenses from non-GAAP earnings. Prior literature examines the use of this form of disclosure at the firm level, although it is ultimately management's decision. We extend prior non-GAAP literature by examining whether the use and quality of non-GAAP earnings is influenced by CEO personality traits, namely, CEO narcissism. We find that narcissistic CEOs are more likely to exclude expenses from non-GAAP earnings and that the magnitude of exclusions is greater. We also find that those non-GAAP exclusions are more persistent and, thus, lower-quality. Our results shed light on the disclosure practice of non-GAAP earnings and show how narcissistic CEOs are more likely to take advantage of the discretion in financial reporting disclosures in order to benefit the firm and themselves.

ABTRACT This study investigates the way that experienced audit committee Chairs address barriers to effective performance. We conceptualize audit committees as groups of individuals gathering, elaborating, and sharing information, and identify key group barriers to effective audit committee oversight. Drawing on 24 interviews with audit committee Chairs from leading Australian-listed companies, we provide new evidence of the approaches used in practice to address information-processing barriers faced by audit committees. Specifically, we identify six key mechanisms: (1) audit committee composition; (2) pre-meetings; (3) handling of disagreements between management and auditors; (4) formal audit committee meeting facilitation; (5) promoting audit committee skepticism; and (6) external auditor selection. Our findings provide insights for audit committee members, audit partners, and policy-makers as they aim to improve financial reporting and audit quality. These findings also have important implications for research designs of future experimental research.

We examine how the ordering of information within quarterly earnings announcements influences investor response to those announcements. Specifically, we examine whether earlier discussion of earnings information, and earlier discussion of qualitatively positive or negative information, is associated with stronger responses to that information. Controlling for the linguistic content of the earnings announcement, we find a positive relation between investor response to information and the prioritization of that information in the earnings announcement. We find no evidence of investor over-reaction and, to the contrary, find some evidence that investors under-react to prioritized information. Our evidence, in conjunction with experimental evidence in Elliott (2006), suggests that information placement influences investors' responses. However, unlike the experimental evidence in Elliott (2006), our archival results suggest that investor response to information placement is warranted, rather than the result of an unintentional cognitive effect. Data Availability: Data are available from the public sources cited in the text.

Social ties between mutual funds and the companies in which they invest (investees) can both facilitate information transfers and encourage favoritism. Using the investment choices of mutual funds in China, we compare investment performance of holdings in companies that are socially connected to mutual funds versus those that are not. We find that funds allocate more investment to connected investees' stocks, especially when a fund is weakly monitored. This overweighting is greater in times of poor investee performance, when the benefits of additional investment to the connected investees are high. Weakly monitored funds' preference for connected stocks hurts the returns of these funds, yielding a 6.6 percent lower annualized risk-adjusted return, relative to closely monitored funds. These results suggest that, absent sufficient monitoring, agency conflicts generated by social networks can dominate the information advantages of these networks.

Both sell-side analysts and the media are information intermediaries in capital markets. This study investigates the association between sell-side analyst research and information in firm-specific news coverage. More frequent recent news coverage is associated with stronger market reactions to analysts' research revisions, and primarily explained by soft information in news coverage. The primary result is robust to using both an instrumental variable and a quasi-natural experimental setting to generate exogenous variation in media coverage, alleviating concerns about endogeneity. In addition, using textual analysis, we document that explicit media references in analyst research reports are significantly associated with more frequent analyst revisions and stronger market reactions to revisions. Our study provides empirical evidence of analysts' assimilation of information from the financial press and their role in the efficiency of capital markets.