Contents -- Preface -- List of Contributors -- Part I. On the Relationship between Accounting and Finance -- Chapter 1. Paths to Valuation, Asset Pricing, and Practical Investing: Can Accounting and Finance Approaches Be Reconciled? Stephen Penman -- 1. Introduction -- 2. What Is Agreed Upon -- 3. The Numerator Issue -- 4. The Denominator Issue -- 4.1. Characteristic Regressions and Asset Pricing -- 5. Conclusion -- References -- Chapter 2. The Risk-Return (Bowman) Paradox and Accounting Measurements Ivan Brick, Oded Palmon and Itzhak Venezia -- 1. Introduction -- 2. How Accruals, Incorrect Methods of Calculating the ROE, and Skewness May Give Rise to the Bowman Paradox -- 2.1. Earnings Management and the Bowman Paradox -- 2.2. Use of Current Pro.ts in Determining the Returns and the BP -- 3. Data and the Definition of Variables -- 4. Results and Discussion -- 5. Conclusion -- References -- Chapter 3. Accounting Values versus Market Values and Earnings Management in Banks Dan Galai, Eyal Sulganik and Zvi Wiener -- 1. Introduction -- 2. Motivations for Earnings Management by Banks and Its Pattern -- 3. Modeling Earnings Management in a Dynamic Stochastic Environment -- 4. A Numerical Example -- 5. Summary and Conclusions -- References -- Appendix A: Methods for Managing Earnings -- Appendix B: Numerical Example -- Part II. Assessing Asset Values through Financial or Market Prices -- Chapter 4. Baseball and the Art of Fair Value: Do Managers or the Prediction Markets Make Better Predictions? Orly Sade and Emanuel Zur -- 1. Introduction -- 2. Literature Review and the Prediction Market -- 2.1. Predicting the Value and Performance of an Asset -- 2.2. Prediction Markets -- 2.3. Major League Baseball Field Experiment -- 3. The Data -- 3.1. The Sample Selection -- 3.2. The Market Prices -- 3.3. Over- and Under-Value -- 3.4. Players' Performance Measures.

4. Predictive Ability -- 4.1. Correlation Analysis -- 4.2. Player's Position -- 4.3. Multivariate Analysis -- 5. Summary and Conclusions -- References -- Appendix: Game Instructions10 -- Chapter 5. Assessing Inventory Management and Capacity Requirements Using Financial Reports Joshua Livnat and Stephen G. Ryan -- 1. Introduction -- 2. Identification of and Predictions for the Five Scenarios -- 2.1. Identification of the Scenarios -- 2.2. Predictions for the Scenarios -- 2.3. Three Pairwise Comparisons of the Scenarios -- 3. Data and Test Results -- 3.1. Results for the Five Scenarios -- 3.2. Results for the Three Pairwise Comparisons -- 3.3. Future Production Cycle Changes and Size-Adjusted Returns -- 3.4. Sensitivity to Scenario Classification -- 4. Conclusions -- References -- Part III. On the National Accounting and Monetary Policy -- Chapter 6. A Balance Sheet Approach for Sovereign Debt Dan Galai, Yoram Landskroner, Alon Raviv and Zvi Wiener -- 1. Introduction -- 2. The Model -- 3. Numerical Examples and Illustrations -- 4. Summary and Conclusions -- References -- Chapter 7. The Trade-off between Monetary and Financial Stability: Some Lessons from the 2007-2008 Crisis for Emerging Economies Meir Sokoler, Yoram Landskroner and Emanuel Barnea -- 1. Introduction -- 2. Monetary Policy Effects on Financial Stability -- 2.1. Duration Gap -- 2.2. The FX-Induced Credit Risk -- 3. Financial Stability Effects on Monetary Policy -- 3.1. The Effects on the Monetary Transmission Mechanism -- 3.1.1. Required Reserves and the Minimum Capital Requirements -- 3.2. The Effects on Monetary Policy Operations through CB Balance Sheet Expansions -- 3.3. Volatility of Commodity Prices -- 3.4. Foreign-Owned Banks -- 4. Improving the Trade-offs -- 4.1. Development of Long-Term, Stable Domestic Sources of Finance.

4.2. Development of Means to Better Cope with the Volatility of Commodity Prices -- 4.3. Changes in the Regulatory Attitude towards Foreign Banks -- 4.4. CB Financial Independence -- 5. Conclusions -- References -- Part IV. Incentives in Firms and Their Effects on Decisions -- Chapter 8. Bilateral Incentive Problems and the Form of Start-Up Financing Stanley Baiman, Sasson Bar-Yosef and Bharat Sarath -- 1. Introduction -- 2. The Economic Setting -- 3. Analysis -- 3.1. The Case of Equity Contracts -- 3.2. The Case of Debt Contracts -- 3.3. The VC's Preference Ordering over Equity and Debt Contracts -- 3.4. Other Types of Contracts -- 3.4.1. General Solutions -- 3.4.2. Convertible Debt Contracts -- 4. The Effect of a Market and the E.ect of Disclosing "Cash Flow-Irrelevant" Information -- 4.1. Welfare Effect of Reporting -- 5. Conclusion -- References -- Appendix: Proposition 4 -- Chapter 9. Time to Wait-Time to Invest: The Case of Trade Order Executions by Specialists on the NYSE Sasson Bar-Yosef and Annalisa Prencipe -- 1. Introduction -- 2. The Function of Specialists and Waiting-to-Invest -- 3. The Data -- 4. Univariate Analysis -- 5. Multivariate Analysis -- 5.1. "Waiting-to-Invest" Strategy During the Small-Information-Event Period -- 5.2. "Waiting-to-Invest" Strategy During the Major-Information-Event Period -- 5.3. "Waiting-to-Invest" Strategy When the Specialist Is Able to Change the Spread -- 6. Conclusions -- References -- Part V. On the Capital Structure of Firms -- Chapter 10. The Optimal Term Structure of Debt Maturity Melissa Maisch and Fernando Zapatero -- 1. Introduction -- 2. Model -- 2.1. Debt -- 2.2. The Objective Function -- 2.3. Dynamic Programming Approach and Technical Results -- 3. Algorithm for Numerical Solution -- 3.1. Algorithm -- 3.2. Effect of Parameter Values on Optimal Solution -- 4. Conclusions -- References.

Chapter 11. Unanticipated Growth, Tobin's Q, and Leverage Varouj A. Aivazian, Jeffrey L. Callen and David S. Gelb -- 1. Introduction -- 2. The Relationship between Leverage, Investment, and Firm Value -- 3. The Research Design -- 4. Empirical Analysis -- 4.1. Sample Selection -- 4.2. Univariate Tests -- 4.3. OLS Regression Results -- 4.4. Rank Regressions -- 4.5. Unanticipated Growth as Measured by Tobin's Q: Robustness Check -- 5. Does R&D Affect the Leverage-Growth Relationship? -- 5.1. Hypothesis -- 5.2. Empirical Results -- 6. Does Competition Affect the Leverage-Growth Relationship? -- 6.1. Hypothesis -- 6.2. Empirical Results -- 7. Conclusion -- References -- Appendix -- Index.