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This paper compares the performance-matched discretionary accrual model (quantitative) and the Mulford and Comiskey (2002) qualitative measure to compute earnings management in two state-owned and two private entities for 1998 to 2009. The results provide evidence that the two measures are unable to provide similar results for the existence of earnings management. The difference in the results between the two methods is attributed to the different ontological and epistemological views and the primary focus of the respective models. The results do not imply superiority of any model.

We examine whether the association between stock liquidity and investment efficiency is more pronounced for firms with more financial constraints and information asymmetry problems. The results show that the effect of higher stock liquidity on lowering under (over)-investment is more pronounced for firms with more financial constraints and information asymmetry problems as proxied by younger and higher business risk firms, respectively. We also find similar results for firms with lower institutional ownership, more external financing dependence and higher idiosyncratic risks. The findings collectively suggest that the effect of stock liquidity in our setting is more pervasive for firms with more financial constraints and information asymmetry problems.

Prior studies show that net stock issuance is negatively associated with the cross section of future stock returns, reflecting a market anomaly. Our study provides empirical evidence on whether cash flow can mitigate such anomaly. Consistent with prior research, we initially provide evidence of the anomaly in our sample and that the anomaly persists in the presence of cash flow. We then decompose net stock issuance into stock issues and stock repurchases and find that the anomaly is only driven by stock issues but not stock repurchases and that the stock issues’ anomaly persists even in the presence of cash flow. JEL Classification: G12, G14