Auditors' legal liability,collusion with management,and investors' loss*

Abstract. The purpose of this paper is to model the legal exposure of auditors and to study the extent to which limitations on this exposure affect auditors' chosen audit intensity and collusion with management. Résumé. L'article qui suit a pour but de modéliser les risques auxquels sont exposés les vérificateurs de par la loi et de voir dans quelle mesure les limites de ce risque influent sur l'intensité de la vérification dont décident les vérificateurs et sur la collusion avec la direction.     

Project Labor Agreements' Effect on School Construction Costs in Massachusetts

This paper investigates the impact of Project Labor Agreements (PLAs) on school construction cost in Massachusetts. Although simple models exhibit a large positive effect of PLAs on construction costs, such effects are absent from more completely specified models. Further investigation finds sufficient dissimilarity in schools built with and without PLAs that it is difficult to distinguish the cost effects of PLAs from the cost effects of factors that underlie the use of PLAs.     

The Power of Voice: Managerial Affective States and Future Firm Performance

We measure managerial affective states during earnings conference calls by analyzing conference call audio files using vocal emotion analysis software. We hypothesize and find that, when managers are scrutinized by analysts during conference calls, positive and negative affects displayed by managers are informative about the firm's financial future. Analysts do not incorporate this information when forecasting near‐term earnings. When making stock recommendation changes, however, analysts incorporate positive but not negative affect. This study presents new evidence that managerial vocal cues contain useful information about a firm's fundamentals, incremental to both quantitative earnings information and qualitative “soft” information conveyed by linguistic content.     

Why Does Stock Market Volatility Change Over Time?

This paper analyzes the relation of stock volatility with real and nominal macroeconomic volatility, economic activity, financial leverage, and stock trading activity using monthly data from 1857 to 1987. An important fact, previously noted by Officer (1973) , is that stock return variability was unusually high during the 1929–1939 Great Depression. While aggregate leverage is significantly correlated with volatility, it explains a relatively small part of the movements in stock volatility. The amplitude of the fluctuations in aggregate stock volatility is difficult to explain using simple models of stock valuation, especially during the Great Depression.