ABSTRACT Although the increase in non-GAAP earnings metrics has drawn unfavorable attention from regulators and standard setters, it can provide valuable experience for investors. We investigate whether experience with non-GAAP earnings metrics influences investors’ pricing of non-GAAP exclusions. We measure experience as the frequency with which managers or analysts provide non-GAAP earnings over the prior eight quarters and find that experience aids in the pricing of non-GAAP exclusions. Absent prior experience with non-GAAP earnings metrics, investors appear to overestimate the persistence of exclusions at the earnings announcement, which corrects in the following months. Cross-sectional tests suggest that experience facilitates investors’ pricing of non-GAAP exclusions by reducing their information processing costs. JEL Classifications: M40.

ABSTRACT We provide the first systematic evidence on the link between long‐short anomaly portfolio returns—a cornerstone of the cross‐sectional literature—and the time‐series predictability of the aggregate market excess return. Using 100 representative anomalies from the literature, we employ a variety of shrinkage techniques (including machine learning, forecast combination, and dimension reduction) to efficiently extract predictive signals in a high‐dimensional setting. We find that long‐short anomaly portfolio returns evince statistically and economically significant out‐of‐sample predictive ability for the market excess return. The predictive ability of anomaly portfolio returns appears to stem from asymmetric limits of arbitrage and overpricing correction persistence.

ABSTRACT Short sellers face unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that short‐selling risk affects prices among the cross‐section of stocks. Stocks with more short‐selling risk have lower returns, less price efficiency, and less short selling.

ABSTRACT Initial yields on both AAA‐rated and non‐AAA rated mortgage‐backed security (MBS) tranches sold by large issuers are higher than yields on similar tranches sold by small issuers during the market boom years of 2004 to 2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004 to 2006. These results suggest that investors price the risk that large issuers received more inflated ratings than small issuers, especially during boom periods.

ABSTRACT The standard analysis of corporate governance assumes that shareholders vote in ratios that firms choose, such as one share‐one vote. However, if the cost of unbundling and trading votes is sufficiently low, then shareholders choose the ratios. We document an active market for votes within the U.S. equity loan market, where the average vote sells for zero. We hypothesize that asymmetric information motivates the vote trade and find support in the cross section. More trading occurs for higher‐spread and worse‐performing firms, especially when voting is close. Vote trading corresponds to support for shareholder proposals and opposition to management proposals.

ABSTRACT Regulation is often proposed, developed, and finalized over a lengthy rule-making period prior to its adoption. We examine the period over which banking authorities discussed, adopted, and implemented Basel III to understand how firms respond to proposed regulation. We find evidence to suggest that affected banks not only lobbied rule-makers against it but also made strategic financial reporting changes and altered their business models in ways that reduced their exposure to the proposed rule prior to rule-makers finalizing the regulation. Further, our results indicate a sequential response, with banks responding through lobbying and strategic financial reporting prior to making business model changes. These findings highlight the interplay among firms’ financial reporting, business model, and political choices in response to proposed regulation and indicate that the appropriate date for an event study may be the regulation’s announcement date rather than its adoption or implementation dates. JEL Classifications: G14; G21; G28; M41; M48.

ABSTRACT We examine the relation between managerial ability and earnings quality. We find that earnings quality is positively associated with managerial ability. Specifically, more able managers are associated with fewer subsequent restatements, higher earnings and accruals persistence, lower errors in the bad debt provision, and higher quality accrual estimations. The results are consistent with the premise that managers can and do impact the quality of the judgments and estimates used to form earnings. Data Availability: Data are publicly available from the sources identified in the text.

This article presents the report of the Committee on Doctoral Programs in Accounting. The committee made various recommendations on how to improve the Doctoral programs. It suggested that the doctoral program is the principal educational process for preparing students both for university teaching and for basic research in accounting. Hence the primary objective of the study program for the doctorate should be to develop in the student original and incisive thinking and to create an attitude conducive to study and research. As wide variations in the backgrounds of doctoral students call for individually designed programs of course work, instruction in methods of teaching and familiarity with the learning process should be a part of the doctoral program. At the end of the study program the doctoral candidate should demonstrate proficiency in accounting and a reasonable understanding of economics, statistics, the functional areas of business, the behavioral sciences, and mathematical methods. And finally the demand for college teachers of accounting should not be an excuse for lowering the standards for the doctoral program.

This study examines why people initially give to charities, why they remain committed to the cause, and what factors attenuate these influences. Using an experimental design that links donations across distinct treatments separated in time, we present several results. For example, previous donors are more likely to give, and contribute more, than other donor types. Yet, how previous donors were acquired is critical: agents initially attracted by an economic mechanism are more likely to continue giving than agents attracted by a nonmechanism factor. From a methodological viewpoint, our study showcases the benefit of moving beyond an experimental design that focuses on short-run substitution effects. (JEL C93, D64, D82, H41, L31, Z12)