Explore the vast range of titles available.

Prior research shows that during the pre-1990 bust financially weak banks managed income upward by delaying provisions for losses on heterogeneous loans. In contrast, we predict and find that during the 1990s boom profitable banks managed income downward by accelerating provisions for losses on homogeneous loans. Profitable banks obscured their income smoothing by accelerating charge-offs of homogeneous loans and by recording more gross charge-offs to offset recoveries of previously charged-off loans. Over the three years subsequent to the acceleration of charge-offs, they had higher and more persistent income before provisions for loan losses than other banks, consistent with income smoothing over a prolonged horizon.

This paper investigates the effect of internal control deficiencies and their remediation on accrual quality. We first document that firms reporting internal control deficiencies have lower quality accruals as measured by accrual noise and absolute abnormal accruals relative to firms not reporting internal control problems. Second, we find that firms that report internal control deficiencies have significantly larger positive and larger negative abnormal accruals relative to control firms. This finding suggests internal control weaknesses are more likely to lead to unintentional errors that add noise to accruals than intentional misstatements that bias earnings upward. Third, we document that firms whose auditors confirm remediation of previously reported internal control deficiencies exhibit an increase in accrual quality relative to firms that do not remediate their control problems. Finally, we find firms that receive different internal control audit opinions in successive years exhibit changes in accrual quality consistent with changes in internal control quality. Collectively, our cross-sectional and intertemporal change tests provide strong evidence that the quality of internal control affects the quality of accruals.

The massive losses that banks incurred with the meltdown of the subprime mortgage market have raised concerns about their ability to continue lending to corporations. We investigate these concerns. We find that firms paid higher loan spreads during the subprime crisis. Importantly, the increase in loan spreads was higher for firms that borrowed from banks that incurred larger losses. These results hold after we control for firm-, bank-, and loan-specific factors, and account for endogeneity of bank losses. These findings, together with our evidence that borrowers took out smaller loans during the crisis when they borrowed from banks that incurred larger losses, lend support to the concerns about bank lending following their subprime losses.

We establish that the root cause of many goodwill write-offs is the buyers' overpriced shares at acquisition. Overpriced shares provide managers with strong incentives to exploit the overpricing by acquiring businesses, often paying more than the acquisition's synergies, setting the stage for subsequent goodwill write-offs. In particular, we document the following patterns: (1) Share overpricing is strongly and positively associated with the intensity of corporate acquisitions and the growth of accounting goodwill. (2) Share overpricing predicts goodwill write-offs and their magnitude. (3) Acquisitions by overpriced companies—a strategy often recommended by investment bankers and some academics—are often ill-advised (overpaid for and/or strategic misfit), exacerbating the post-acquisition negative returns of buyers beyond the reversal of the overpricing. Thus, managers' arguments notwithstanding, goodwill write-off is an important event highlighting a dysfunctional investment strategy.

We examine the impact of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, on the reporting behavior of commercial banks and the informativeness of their financial statements. We argue that, because mandatory recognition of hedge ineffectiveness under SFAS 133 reduced banks' ability to smooth income through derivatives, banks that are more affected by SFAS 133 rely more on loan loss provisions to smooth income. We find evidence consistent with this argument. We also find that the increased reliance on loan loss provisions for smoothing income has impaired the informativeness of loan loss provisions for future loan defaults and bank stock returns.

Prior research reveals that write-offs of long-lived assets are both large in magnitude and frequent in occurrence. Responding to calls for enhanced reporting of these items, the FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets. However, its effect on the characteristics of reported write-offs remains unclear, as implementation requires inherently subjective estimates. Further, critics (including dissenting FASB board members and the SEC) question the standard's guidance. Motivated in part by this debate, this paper contrasts the characteristics of write-offs reported prior versus subsequent to the issuance of SFAS No. 121. Empirical results reveal that economic factors have a weaker association with write-offs reported after SFAS No. 121. This is consistent across macro, industry, and firm-specific variables. Results also indicate a higher association between write-offs and \"big bath\" reporting behavior after the standard's implementation, and that this \"big bath\" behavior more likely reflects opportunistic reporting by managers rather than the provision of their private information. These inferences are robust to a number of alternative specifications and variable definitions. Overall, the results suggest the reporting of write-offs under SFAS No. 121 has decreased in quality, consistent with criticisms of the standard.

The importance of material flow management for a profit-maximizing firm has been well articulated in the supply chain literature. We demonstrate in our analytical model that a firm must also actively manage information flows within the supply chain, which translates to controlling what it knows, as well as what its competitors and suppliers know. In our model of horizontal competition between an informed and an uninformed firm with a common upstream supplier, material and information flows intersect through leakage of demand (order) information to unintended recipients. As a result, the informed firm's drive to control information flows within the supply chain can trigger operational losses through material flow distortion. These losses can be so severe that the firm may prefer not to acquire information even when it is costless to do so. Our results underscore the importance of strategic information management—actively managing the supply chain's information flows, and making trade-offs with material flows where appropriate, to maximize profits .

The paper examines the reaction of market participants to the announcement of a goodwill impairment loss, the nature of the information conveyed by the loss, and whether a cause of goodwill impairment can be traced back to overpayment for targets at the time of prior acquisitions. Our evidence suggests that both investors and financial analysts revise their expectations downward on the announcement of an impairment loss. We find that the negative impact of the loss is significant under different reporting regimes, that is, pre-SFAS-142, transition period and post-SFAS-142, though it is lower in the post period. We further show that goodwill impairment serves as a leading indicator of a decline in future profitability. Our tests also reveal that proxies for overpayment for targets can predict the subsequent goodwill impairment. Indirect evidence suggests that firms with potentially impaired goodwill that did not report an impairment loss may have used their managerial discretion to avoid taking the loss.

We investigate the role of information technology (IT) in the collection of delinquent consumer debt. We argue that the widespread adoption of IT by the debt collection industry in the 1990s contributed to the observed expansion of unsecured risky lending such as credit cards. Our model stresses the importance of delinquency and private information about borrower solvency. The prevalence of delinquency implies that the costs of debt collection must be borne by lenders to sustain incentives to repay debt. IT mitigates informational asymmetries, allowing lenders to concentrate collection efforts on delinquent borrowers who are more likely to repay.

Abstract—The article examines the possible impact of the planned write-off of two-thirds of the region’s debts on budget loans on the sustainability of regional debt. Based on the analysis of statistical data on the debts of individual regions, it was concluded that writing off debts will significantly reduce the debt burden on the budgets of the most vulnerable constituent entities of the Russian Federation. At the same time, one of the tasks in this context is maintaining budget discipline in the regions. This will require further development of the sphere of regulation and control of regional finances, including through the mechanisms of fiscal rules at the regional level.