Sky Blog
In spite of intensive academic research on capital expenditure efficiency, how firms make investment decisions remains largely a black box. We analyze that process by dividing it into two stages: budgeting of capital expenditures (CapEx) and execution of the budget. …
As issuers prepare their Form 10‑K and 20‑F filings for fiscal year 2018, they should consider the guidance provided in some recent speeches from officials of the Securities and Exchange Commission (“SEC”), which highlight a number of considerations relating to …
Accounting rule makers have long debated whether companies should recognize intangible assets on their balance sheets. At the heart of this debate is whether recognized values can predict future income and cash flows, or whether the high degree of measurement …
In 2008, the U.S. Department of the Treasury’s Advisory Committee on the Auditing Profession called for a “standard-setting initiative to consider mandating the engagement partner’s signature on the auditor’s report” as a way to increase audit transparency.[1] The Public …
In a recent study, we examine the flow of workers between the Public Company Accounting Oversight Board (PCAOB) and large U.S. audit firms. The PCAOB, created by the Sarbanes-Oxley Act of 2002, oversees the audits of public companies by, among …
Traditional explanations for why companies choose certain financial policies focus on firm-specific factors. For instance, all else being equal, firms with higher tax rates are likely to favor debt financing over equity financing, given the tax advantages of debt. However, …
Serving on a public company’s board of directors carries responsibilities and risks as well as benefits for directors. If directors do not carry out their duties effectively, they risk damaging their reputation, losing their board seats, and facing shareholder lawsuits. …
It’s widely assumed that executives are less likely to inflate earnings at high profile companies under a good deal of regulatory oversight. And yet it’s also widely known that managers in high profile companies have an incentive to overstate their …
Thank you, Robert [Hodgkinson] for the kind introduction. Thank you, also, to the Institute of Chartered Accountants in England and Wales (“ICAEW”) for sponsoring this event. I am delighted to be in London and with you this afternoon. London continues …
The economic crisis of 2008 put a bright spotlight on executive compensation and its effects on the behavior of top management. The critics have pointed to the unprecedented escalation in executive compensation, drawing a direct link to deteriorating business ethics, …
BlackRock, the vast asset manager, has been feted for demanding that the boards of its portfolio firms pursue a social purpose, which likely entails spreading corporate profits beyond shareholders to include labor and victims of environmental harm.[1] But despite …
A key principle of financial reporting is that “information should be expressed so that substance, not form, governs” [1]. What this means is that “the financial statements and accompanying disclosures of a business should reflect the underlying realities of business …
The number of accounting-related class action lawsuits has increased in recent decades, imposing billions of dollars of direct and indirect costs on public companies and, eventually, their shareholders each year. Although accounting theory says that litigation risk generates accounting conservatism …
2017 was the prototypical transition year for the SEC. In contrast to many other federal agencies under the current administration, the new SEC leadership did not promise a wholesale rethinking of the agency’s mandate. Rather, they seemed to signal minor …
In recent years, there has been an increase in the number of firms opting to either forgo the public equity market or exit the market in favor of private financing.[1] Increasingly, financing for private firms comes from private funds, …
On December 22, 2017, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance (“Staff”) issued important guidance that provides significant relief and helpful answers on some of the accounting and disclosure issues raised by …
In a new paper, “Worthless Companies,” I explain how companies with worthless assets can have substantial equity value on efficient markets and debt that trades near par, so long as an irrational bidder may acquire the company.
Consider a firm …
The Securities and Exchange Commission (SEC) Division of Corporate Finance (DCF) reviews and regulates information in public filings to “deter fraud and facilitate investor access to information necessary to make informed investment decisions.”
Commentators criticize the SEC for …
Investors, hedge funds, regulators, banks, and attorneys want to know: What really happens when a company misses a regulatory deadline? In a new paper, we offer theory and quantitative analysis of the consequences of missing U.S. Securities and Exchange Commission …
Prior research finds that individual (retail) investors often fail to use accounting information when making stock trading decisions. Instead, many individuals underperform by trading on attention-grabbing technical trends such as high past stock returns.
A number of Securities and Exchange …