ESSAYS ON ACCOUNTING, CAPITAL STRUCTURE, AND RISK MANAGEMENT (AUDITOR LIABILITY, SPECULATION, INFORMATION ACQUISION, DISCLOSURES)

This thesis investigates the effects of capital structure and hedging on financial reporting and operational decisions of the firm. The first essay examines how a firm's choice among hedge accounting methods affects both its hedging and operating decisions. The second essay examines how the allocation of the legal liability of an auditor between debt and equity holders affects audit quality and the equity holders' investment decisions. The third essay examines how capital structure affects both firms' disclosure decision and product market decisions.; The first essay of this thesis analyzes principal-agent relationship in which a manager can undertake non-contractible hedging. This thesis identifies conditions under which separate disclosures of hedging gains and losses do not have value. Furthermore, the essay demonstrates that using deferral hedge accounting for performance evaluation eliminates distortions of managers' hedging decisions that would arise under mark-to-market accounting.; The second essay develops a model in which debt holders and equity holders can sue the auditor. This thesis shows that expanding auditors' liability may cause underinvestment by the audited firm. The essay demonstrates that the underinvestment effect may be mitigated by adopting alternative liability regimes or by changing auditor selection procedures.; The third essay evaluates how product market competition is affected by the interaction between capital structure and disclosure policies. The essay demonstrates that additional debt commits firms to disclosing demand-related information less frequently and that additional debt can induce a firm's competitor to disclose demand-related information more frequently.