We identify executives who have experienced significant accounting-related adverse events during their careers as a powerful setting to examine the extent to which prior professional experience can influence subsequent financial reporting policies. We find that firms led by senior financial executives who have experienced accounting-related adverse events during their careers exhibit greater unconditional accounting conservatism, a lower likelihood of experiencing future accounting-related adverse events, and less positive abnormal discretionary accruals. This effect tends to be stronger when the experience is more frequent, recent, severe, or proximate. Overall, our results reveal a meaningful relationship between managers’ professional experience and accounting policies. Data Availability: All data used in this study are obtained from publicly available sources.

We examine the effect of ex ante litigation risk on the price and non-price terms of loan contracts. Since expected litigation is endogenous, we focus on federal circuit court judge ideology to generate plausibly exogenous variation in the outcome of a class action lawsuit. We find that loans issued by firms headquartered in circuits with a higher likelihood of drawing a liberal panel of judges in a class action lawsuit have higher loan spreads, shorter maturity, and a larger number of and more restrictive covenants. To strengthen our claim that judge ideology affects loan contracting through its effect on the outcome of a class action lawsuit, we show that the influence of judge ideology on price and nonprice terms of loans is strongly influenced by factors that influence the probability of a class action lawsuit. Overall, our results bolster the case that litigation risk has a causal effect on debt contracting.