This paper provides empirical evidence regarding why firms replace their CFOs. Empirical tests are based on a sample of 2,227 CFO appointments over the 1984–1997 time period. Key findings reported in the paper are: (a) external CFO succession rate is markedly higher than the external CEO succession rate, (b) the incidence of retirement is less common for serving CFOs as compared to the top executive, (c) CFO turnover is preceded by negative excess returns, (d) CFO turnover is preceded by a decline in operating return on assets in the pre-period, (e) announcements of CFO turnover are associated with a significant negative stock price reaction when old CFO quits and firm replaces with an internal appointment, and (f) CFO turnover is preceded by abnormally high CEO turnover. Overall, evidence is consistent with the hypothesis that CFO turnovers are disciplinary. Evidence is also consistent with the hypothesis that rapid sales growth accompanied by weak operating performance leads firms to bring in outside talent.

This paper provides empirical evidence on the determinants of corporate hedging decisions. The paper examines the evidence in light of currently mandated financial reporting requirements and, in particular, the constraints placed on anticipatory hedging. Data on hedging are obtained from 1992 annual reports for a sample of 3,022 firms. Out of the 771 firms classified as hedgers, 543 firms disclose information in their annual reports on their hedging activities; the remaining 228 firms report use of derivatives but no information on hedging activities. Based on the evidence, I draw the following conclusions with respect to the models of hedging: evidence is inconsistent with financial distress cost models; evidence is mixed with respect to contracting cost, capital market imperfections, and tax-based models; and evidence uniformly supports the hypothesis that hedging activities exhibit economies of scale.

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.

This paper develops and tests hypotheses that explain the choice of accounts receivable management policies. The tests focus on both cross-sectional explanations of policy-choice determinants, as well as incentives to establish captives. The authors find size, concentration, and credit standing of the firm's traded debt and commercial paper are each important in explaining the use of factoring, accounts receivable secured debt, captive finance subsidiaries, and general corporate credit. They also offer evidence that captive formation allows more flexible financial contracting. However, the authors find no evidence that captive formation expropriates bondholder wealth.

This paper develops and tests hypotheses that explain the choice of accounts receivable management policies. The tests focus on both cross‐sectional explanations of policy‐choice determinants, as well as incentives to establish captives. We find size, concentration, and credit standing of the firm's traded debt and commercial paper are each important in explaining the use of factoring, accounts receivable secured debt, captive finance subsidiaries, and general corporate credit. We also offer evidence that captive formation allows more flexible financial contracting. However, we find no evidence that captive formation expropriates bondholder wealth.

This paper examines the relation between corporate takeovers and the board of directors as alternative control mechanisms to discipline top management. Previous research shows that CEO turnover subsequent to corporate takeovers is inversely related to pre-takeover market-related performance. We find this relation is concentrated in targets with inside-dominated boards of directors. Our results support the notion that, as an alternative control device, takeovers serve as a “substitute” for outside directors. Further, we show that the discipline associated with corporate takeovers extends beyond top management to effect restructuring of the entire board. The nature of the discipline depends on the composition of the target board prior to the takeover. Disciplinary takeovers result in two general effects: (1) for inside-dominated targets, the number of inside directorships decreases while the number of outside directorships remains about the same; and (2) for outside-dominated boards, the number of inside directorships increases while the number of outside directorships decreases. As a result, the board is recomposed toward a more even balance between inside and outside directorships.

This paper provides a comprehensive examination of the disciplinary role of the corporate takeover market using a sample of U.S. target firms over the period 1979 to 1998. The time period spanned allows a broader study not only of the disciplinary role of the takeover market in general, but also of the interaction between the takeover market and alternative governance mechanisms during the 1980s and 1990s. Overall, our evidence is consistent with the view of the corporate takeover market as a “court of last resort,” that is, it is an external source of discipline that intercedes when internal control mechanisms are relatively weak or ineffective.

This study provides insights into the forces and constraints that shape analyst research coverage along country and sector dimensions and the impact of the structure of an analyst's portfolio on forecast accuracy. We find that analyst specialization by country and sector is sensitive to the extent to which firms within a country or sector and firms across country‐sectors are exposed to common economic forces, the potential for revenue generation, and broker culture. Our tests indicate that existing research on the relation between analyst portfolio structure and forecast accuracy may suffer from an endogeneity bias. We use our analysis of analyst specialization to develop controls for this bias. Once we employ these controls, we find that country diversification is associated with superior forecast accuracy. However, the relation between sector diversification and forecast accuracy is context‐specific. Specifically, sector diversification enhances forecast accuracy in an international context, while it detracts from forecast accuracy in a domestic U.S. context.