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This paper examines how “strategic” chief financial officers (CFOs) with an elite MBA (i.e. elite CFOs) influence (1) stock market reaction to CFO hiring announcements (ex ante measure) and (2) post-hiring firm performance (ex-post measure).

This paper utilizes a comprehensive, proprietary database with information about the educational qualifications and prior professional experience of 1,340 CFOs hired during the period 1994–2014. For each CFO, the authors hand-collected data on the CFO's prior experience as well as CFO's educational profile. The authors also identified the date of CFO hiring from financial press articles. To evaluate performance, the authors consider two different, yet complementary performance measures: (1) the stock market reaction, a priori measure and (2) a traditional measure of performance, which is a post-facto metric related to firm performance.

The results show that hiring CFOs with scarce and strategic human capital elicits a positive market response and leads to significant improvement in firm performance. Further, firms with greater managerial discretion benefit more from hiring elite CFOs. The results hold after controlling for chief executive officer (CEO), CFO, top managment team (TMT), and board characteristics.

This study shows converging and mutually consistent results about what specific types of CFO human capital create firm value and, more importantly, show that such value-creation is only in the case of small firms and high growth firms. The study also advances the stream of literature that contrasts the relative benefits of specialist versus generalist qualifications.

The purpose of this paper is to add an important new dimension to the earnings management literature by establishing a link between idiosyncratic risk and the degree of accrual management.

Based on a comprehensive sample of 44,599 firm-year observations during the period spanning 1987-2009, the study offers robust empirical evidence of the importance of firm-specific idiosyncratic volatility as a determinant of earnings manipulation. The authors use standard measures of earnings management and idiosyncratic volatility. The authors test the hypotheses with robust econometrics techniques.

The authors document a strong positive relationship between idiosyncratic risk and accruals management. Further, the authors find a positive association between residual volatility and discretionary accruals whether accruals are income inflationary or income deflationary. The findings are robust to alternate idiosyncratic risk proxies and variables associated with earnings management.

Overall, the knowledge derived from this study provides additional tools to assess the degree of earnings management by firms, and hence the quality of the financial reporting. Thus the findings will enable standard setters, financial market regulators, analysts, and investors to make more informed legislative, regulatory, resource allocation, and investment decisions.

The purpose of this paper is to extend the current literature on corporate asset writedowns.

The paper explains the anomalous price responses to asset writedowns by examining both stock and bond price responses. It applies bond and stock event study methodologies using daily prices. Firms are analyzed by partitioning them according to their financial viability. This analysis is based on the logic that it is more difficult to assess the prospects of firms in financial difficulty from publicly available information.

The study reveals that while asset writedowns have no information content for stockholders of healthy firms, stockholders of financial distressed firms suffer a significant adverse effect. This differential stock price reaction provides an explanation for the anomalous results reported in previous studies. Similar price responses are found for bondholders. The results indicate that the market interprets an asset writedown announcement by a financially distressed firm as a strong negative signal about the firm's prospects. It is also found that the firm's financial health, the subordination status of the bond, the bond's maturity, the bond rating, the amount of the write‐off undertaken by a firm in distress, and the leverage change experienced by the firm are all important determinants to bond price response. Long‐run analysis reveals significant differences in performance and leverage change between healthy and financially distressed firms undertaking asset writedowns.

The paper resolves the anomalous results on information content of corporate asset writedown announcements on stockholders and bondholders. Broadly, the findings have important implications for both finance and accounting literatures in terms of semi‐strong market efficiency and security market signaling issues and the importance of considering financial viability of firms when testing market efficiency in the presence of publicly available information.

This is the first study to address this issue by examining the information content of asset writedown announcements for both stockholders and bondholders. Past studies document a significant negative stock price response to asset writedown announcements, while there is no bond price response to such official acknowledgment of asset impairment.

From the agency theory’s point of view, this paper aims to analyze corporate governance mechanisms about the characteristics of the companies quoted in the segments Bovespa Mais and Bovespa Mais 2 and their influence on the creation of value in preparation for the opening of the initial public offering (IPO).

A quantitative approach was adopted to achieve the proposed objective using the panel data with fixed effects and secondary data collected on the Comissão de Valores Mobiliários website, using statistical software Stata® 13.0 for statistical tests. The population comprises non-financial companies belonging to the Bovespa Mais and Bovespa Mais Level 2 groups, as the survey sample took into account the period of adhesion of the companies, totaled in 15 companies, which cover the period from 2008 to 2019. The selected variables correspond to the ownership structure’s characteristics, then the board’s composition and the fiscal council as the body responsible for supervising the administrators’ acts.

The main results indicate that the number of independent members on the board of directors and the supervisory board’s participation positively influence market performance. However, it also reveals that the concentration of ownership brings fundraising for other companies’ acquisitions, risk reduction concerning information asymmetry between investing powers.

The main results indicate that the number of independent members on the board of directors and the supervisory board’s participation positively influence market performance. Despite this, it also reveals that the concentration of ownership brings fundraising for other companies’ acquisitions, risk reduction concerning information asymmetry between investing powers.

This paper advances a comparative institutional perspective to explain capital market choice by firms making an IPO in a foreign market. This paper finds that internal governance characteristics (founder-chief executive officer, executive incentives and board independence) and external network characteristics (prestigious underwriters, degree of venture capitalist syndication and board interlocks) are significant predictors of foreign capital market choice by foreign IPO firms.

While product market choices have been central to strategy formulation for firms in the past, financial markets’ integration makes capital markets an equally crucial strategic decision. This paper advances a comparative institutional perspective to explain capital market choice by firms making an IPO in a foreign market.

This situation generates value to shareholders and is perceived by the market and, ultimately, generates a direct relationship with the market performance of companies. While product market choices have been central to strategy formulation for firms in the past, financial markets’ integration makes capital markets an equally major strategic decision.

The purpose of this paper is to examine trading costs of both acquiring firms and target firms differentiated by method of payment, mode of acquisition, and deal attitude around merger and acquisition (M&A) announcements. The author calculates four spread measures of trading costs: quoted spread, percentage quoted spread, effective spread, and percentage effective spread.

Differences in spreads differentiated by M&A characteristics are calculated and two‐sample t‐tests applied. A linear regression model is developed to test whether changes in trading costs are related to acquiring firm's post‐merger price performance. The regression is estimated by OLS method.

It is found that various methods of payment affect the spreads of target firm differently on certain days around M&A announcement. For acquiring firms, significant differences are found in spreads between cash offers and stock offers, and between stock offers and mix offers. Significant difference was not found in spreads between cash offers and mix offers. The mode of acquisition affects the bid‐ask spreads of target firms only, but not those of acquiring firms. Deal attitudes affect the spreads of target firms on and after M&A announcements. It was also found that all four spread measures are significantly linked to acquiring firms’ post‐merger daily returns.

Further study can be done on mechanisms through which M&A characteristics impact trading costs.

This study suggests that M&A characteristics affect firms’ spreads and that changes in spreads need to be accounted for in explaining acquiring firms’ post‐merger daily returns.

The paper fills in an important gap in existing literature by examining trading costs of acquiring firms around M&A announcements. It provides additional evidence on the anomaly of acquiring firm's negative post‐merger returns. The paper is intended to help improve the understanding of trading costs and the behavior of the market participants in response to a major corporate event.

In today’s interconnected world, social capital has emerged as a crucial business competence, drawing significant attention in recent literature. Using social network analysis, this study aims to investigate the impact of network centrality, established by a firm through its board members (i.e. boardroom networks), on corporate cash holdings.

This study uses extensive panel data comprising 36,963 firm-year observations of firms listed on the Australian Securities Exchange, spanning a 22-year period (2001–2022). The study uses firm fixed-effect regression along with several alternative specifications and an instrumental variable approach to ensure the robustness of the results. Boardroom network centrality is quantified by five measures that capture different perspectives on networks as viable conduits for resource exchange and information flow: degree, two-step reach, closeness, eigenvector and betweenness.

The authors find evidence for the benefits of board networks. Firms with well-connected boards (central firms) are more likely to have smaller cash holdings. The findings also reveal distinct effects stemming from local and global properties of centrality, with local network measures playing a more pronounced role in shaping cash-holding decisions. Overall, the evidence reflects the ability of connected directors to enhance governance by limiting managerial discretion over cash reserves, thus reducing agency conflicts associated with cash holdings.

This study offers important insights for regulators, investors and practitioners, highlighting the potential for connected directors to effectively curtail managerial autonomy in deploying corporate cash holdings.

This study contributes to the ongoing discussion about the advantages and drawbacks of board networks, which constitute a vibrant and burgeoning area of research in the finance literature. It also complements scanty network-based studies on firm cash holdings. Importantly, this study extends prior work by providing robust evidence and a comprehensive analysis of the nuanced roles that board networks play in affecting the level of cash reserves.

The aim of this study is to investigate whether debt maturity matters for the choice of earnings management strategy (i.e. accruals earnings management and real earnings management).

The sample involves 486 American listed firms extracted from fortune 1,000 over the period 2006–2014. Panel data regression models are employed to empirically test the impact of short-term debt and long-term debt on manager's choice of earnings management form. The generalized least square technique is applied to estimate the parameters of the regression models.

The results show that managers are more likely to manage earnings through real activities and reduce their use of accruals earnings management once short debt is increasing because the latter induces heavy lender's scrutiny. The managers move hence to real earnings management due to a lower possibility of being discovered. Moreover, the results reveal a simultaneous use of accruals earnings management and real earnings management for firms with high long-term debt. This finding highlights that long-term debt does not produce regular lender's enforcement allowing managers to use both earnings management techniques to reach earnings targets.

This research has two limitations. Like many other studies, the measure of discretionary accruals is subject to measurement errors. Moreover, the sample exclusively involves large firms extracted from Fortune 1,000. Therefore, the attained results may be not available for small and medium firms.

The findings have implications for both researchers and lenders. For researchers, the present work points out that the decision about the debt maturity structure is crucial for all managers because they establish their earnings management policy accordingly. For lenders, the findings imply that increasing scrutiny effectively constrains accounting manipulations but does not eliminate earnings management activities altogether. The managers move to another earnings management strategy (i.e. real earnings management). This evidence may support the lenders and the creditors in their decision-making processes.

This paper adds to the accounting literature by providing new and interesting evidence on the role of debt maturity on the trade-off between the earnings management tools. Prior studies provided mixed finding for the issue of earnings management in levered firms. The findings of this study should be viewed as a first step to understand the mixed results on this issue. While most papers focus on one earnings management form when they examine the earnings management in levered firms, the authors highlight the impact of debt on both accruals and real earnings management simultaneously.