Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
960403 | Journal of Financial Economics | 2009 | 20 Pages |
Abstract
We investigate the relation between the transparency of financial statements and the distribution of stock returns. Using earnings management as a measure of opacity, we find that opacity is associated with higher R2s, indicating less revelation of firm-specific information. Moreover, opaque firms are more prone to stock price crashes, consistent with the prediction of the Jin and Myers [2006. R2 around the world: new theory and new tests. Journal of Financial Economics 79, 257–292] model. However, these relations seem to have dissipated since the passage of the Sarbanes-Oxley Act, suggesting that earnings management has decreased or that firms can hide less information in the new regulatory environment.
Keywords
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Social Sciences and Humanities
Business, Management and Accounting
Accounting
Authors
Amy P. Hutton, Alan J. Marcus, Hassan Tehranian,