Corporations facing financial constraints, revealed by using a higher percentage of negative words in their financial reports, are more tax aggressive, freeing up additional funds in the short run.
Taxes and Financial Constraints: Evidence from Linguistic Cues
Kelvin Law (Tilburg) and Lillian F. Mills (UT)
Journal of Accounting Research (forthcoming)
Audit committee turnover often occurs when there is a need to restore perceived legitimacy of the board as predicted by legitimacy theory.
Why Do Ineffective Audit Committee Members Experience Turnover?
Steve Kachelmeier (UT), Stephanie Rasmussen (UT-Arlington), Jaime Schmidt (UT)
Contemporary Accounting Research (forthcoming)
While regulatory pressure to increase both audit committee financial expertise and board independence has resulted in lower status for audit committees relative to management, we find that only audit committees with both financial expertise and high relative status are associated with lower levels of earnings management, as measured by accounting irregularities and abnormal accruals.
Audit Committee Financial Expertise and Earnings Management: The Role of Status
Patrick Badolato (UT), Dain Donelson (UT) and Matt Ege (Florida)
Journal of Accounting and Economics, 2014, 58(2-3), pp. 208-230
We find corporations that switch from the standard Black-Scholes model to a more flexible lattice model to value their employee stock options use the flexibility of the new model to understate their stock option expense and overstate their net income rather than to report more accurate expense and income values.
The Effect of Using a Lattice Model to Estimate Reported Option Values
Brian Bratten (Kentucky), Ross Jennings (UT), and Casey Schwab (Georgia)
Contemporary Accounting Research , March 2015, 32(1), pp. 193-222
The difference between operating and capital leases is not merely cosmetic. The accounting classifications are highly correlated with how the bankruptcy courts treat the leases and the extent to which the leases help companies manage volatile capacity needs. Our analysis indicates that the use of operating leases stems mainly from structuring leases to provide financiers with protections in bankruptcy and to manage capacity, rather than to obtain off-balance-sheet classification.
The Value of Identifying Operating Leases
Judson Caskey (UT) and N. Burgra Ozel (UCLA)
Bloomberg BNA Accounting Policy & Practice Report , 2015, 11(4), pp. 165-167
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