We document that: (1) the incidence of bond trade increases during the days surrounding earnings announcements, (2) there is a bond‐price reaction to the announcement of earnings, and (3) there is a positive association between annual bond returns and both annual changes in earnings and annual analysts' forecast errors. All of these effects are larger when earnings convey bad news or when the underlying bond is more risky. Taken together, our results suggest that the nonlinear payoff structure of bond securities affects the role of accounting earnings in the bond market.

When the fair value of an investment security falls below amortized cost and there is significant doubt that the firm can hold the security until the fair value recovers, an other-than-temporary impairment (OTTI) is recognized in net income. Thus, an OTTI is a disclosure about the prospect of recovering an unrealized loss. Our findings suggest that investors priced banks' OTTI recognition during and after the financial crisis. Investors were unable to fully anticipate reported OTTIs, and priced OTTIs incrementally to reported unrealized gains/losses. After banks were required to bifurcate OTTIs, investors priced only the portion of OTTI recognized in earnings. Our results suggest that reporting unrealized losses in earnings via an OTTI changes how investors price the losses. The results inform recent standard-setting initiatives to expand disclosure about changes in fair value. JEL Classifications: M41; M42; M44. Data Availability: Data are available from sources identified in the paper.

We describe variation in the reporting quality (i.e., accuracy and bias of reported net asset values (NAVs)) of private equity (PE) funds across types of external monitors (investors and auditors) and third-party service providers (valuation specialists, marketers, and administrators). In contrast to public markets, we find only limited evidence that reporting quality varies with the composition and types of investors in PE funds. We observe, however, that reporting quality varies with auditor involvement and the use of third-party service providers; these associations often differ across buyout (BO) and venture capital (VC) funds and from those observed in public markets. Our evidence is important to investors and regulators, especially now that PE supersedes public markets as the main vehicle to raise capital and as regulators increase their focus on private markets. Data Availability: Data used in this study are available from public sources listed in the paper.