Corporate disclosure is critical for the functioning of an efficient capital market. Firms provide disclosure through regulated financial reports, including the financial statements, footnotes, management discussion and analysis, and other regulatory filings. In addition, some firms engage in voluntary communication, such as management forecasts, analysts? presentations and conference calls, press releases, internet sites, and other corporate reports. Finally, there are disclosures about firms by information intermediaries, such as financial analysts, industry experts, and the financial press.

Information Asymmetry, Corporate Disclosure and the Capital Markets: A Review of the Empirical Disclosure Literature

http://lib.cufe.edu.cn/upload_files/other/4_20140516025625_19.pdf

Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature $

This paper surveys capital structure theories based on agency costs, asymmetric information, product/input market interactions, and corporate control considerations (but excluding tax-based theories). For each type of model, a brief overview of the papers surveyed and their relation to each other is provided. The central papers are described in some detail, and their results are summarized and followed by a discussion of related extensions. Each section concludes with a summary of the main implications of the models surveyed in the section. Finally, these results are collected and compared to the available evidence. Suggestions for future research are provided.

https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1540-6261.1991.tb03753.x

The Theory of Capital Structure

https://faculty.fuqua.duke.edu/~charvey/Research/Working_Papers/W73_The_economic_implications.pdf

The economic implications of corporate financial reporting

https://www.mit.edu/~kothari/attach/KLW%20paper%20May%202001.pdf

Performance matched discretionary accrual measures

We document that accrual-based earnings management increased steadily from 1987 until the passage of the Sarbanes Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. Conversely, the level of real earnings management activities declined prior to SOX and increased significantly after the passage of SOX, suggesting that firms switched from accrual-based to real earnings management methods after the passage of SOX. We also find evidence that the accrual-based earnings management activities were particularly high in the period immediately preceding SOX. Consistent with these results, we find that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX when compared to similar firms before SOX. Finally, our analysis provides evidence that the increases in accrual-based earnings management in the period preceding SOX were concurrent with increases in the fraction of equity based compensation.

https://papers.ssrn.com/sol3/Delivery.cfm/2451_27548.pdf?abstractid=1280711&rulid=128123&mirid=4

Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods

We document that accrual‐based earnings management increased steadily from 1987 until the passage of the Sarbanes‐Oxley Act (SOX) in 2002, followed by a significant decline after the passage of SOX. Conversely, the level of real earnings management activities declined prior to SOX and increased significantly after the passage of SOX, suggesting that firms switched from accrual‐based to real earnings management methods after the passage of SOX. We also document that the accrual‐based earnings management activities were particularly high in the period immediately preceding SOX. Consistent with these results, we find that firms that just achieved important earnings benchmarks used less accruals and more real earnings management after SOX when compared to similar firms before SOX. In addition, our analysis provides evidence that the increases in accrual‐based earnings management in the period preceding SOX were concurrent with increases in equity‐based compensation. Our results suggest that stock‐option compo...

/pdf/real-and-accrual-based-earnings-management-in-the-pre-and-4dmpkes6g7.pdf

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐Sarbanes‐Oxley Periods

The corporate information environment develops endogenously as a consequence of information asymmetries and agency problems between investors, entrepreneurs, and managers. We provide a framework for analyzing the three main decisions that shape the corporate information environment in a capital markets setting: (1) managers’ voluntary reporting and disclosure decisions, (2) reporting and disclosures mandated by regulators, and (3) reporting decisions by third-party intermediaries (analysts). We review current research on disclosure regulation, information intermediaries, and the determinants and economic consequences of corporate disclosure and financial reporting decisions. We conclude that in the last ten years, research has generated a number of useful insights. Despite this progress, we call for researchers to consider interdependencies between the various decisions that shape the corporate information environment and highlight changes in the economic financial environment that raise new and interesting issues for researchers to address.

The Financial Reporting Environment: Review of the Recent Literature

The financial reporting environment: Review of the recent literature

We review research from the 1990s that examines the determinants and consequences of accounting choice, structuring our analysis around the three types of market imperfections that influence managers? choices: agency costs, information asymmetries, and externalities affecting noncontracting parties. We conclude that research in the 1990s made limited progress in expanding our understanding of accounting choice because of limitations in research design and a focus on replication rather than extension of current knowledge. We discuss opportunities for future research, recommending the exploration of the economic implications of accounting choice by addressing the three different reasons why accounting matters.

Thomas Z. Lys

Papers

Real and Accrual-Based Earnings Management in the Pre- and Post-Sarbanes Oxley Periods

Real and Accrual‐Based Earnings Management in the Pre‐ and Post‐Sarbanes‐Oxley Periods

The Financial Reporting Environment: Review of the Recent Literature

The financial reporting environment: Review of the recent literature

Empirical Research on Accounting Choice