Kevin C. Smith   Associate Professor of Accounting Stanford Graduate School of Business Email: kevinsm [at] stanford.edu [vitae] [ssrn] [google scholar]

Working Papers

Snehal Banerjee and Kevin Smith. Public Information and the Securities Lending Market.
[paper]
Studies how trading, stock returns, and borrow fees in the securities lending market evolve around public announcements, such as earnings. These patterns hinge on, and can be used to infer, the extent to which investors disagree about firm value vs. the announcement.

Kevin Smith. Climate Risk Disclosure and Risk Sharing in Financial Markets.
Revise and resubmit, Review of Financial Studies
[paper]
Climate risk disclosure renders financial markets more effective at enabling climate risk sharing, but firms' voluntary climate risk disclosures can be enough for efficient risk sharing. The impact of climate disclosure on firms' expected returns depends on the climate preferences of the firm's investor base.

Tim de Silva, Kevin Smith, and Eric So. Losing is Optional: Retail Option Trading and Earnings Announcement Volatility.
[paper]
Retail investors buy call options prior to the earnings announcements that generate the most risk to market makers, causing the prices of these options to soar and depleting these traders' wealth.

Forthcoming/Published Papers

Kevin Smith. Beyond the Event Window: Earnings Horizon and the Informativeness of Earnings Announcements. Forthcoming in The Accounting Review.
[paper]
Earnings' usefulness in valuation depends on their "horizon," or how long it would have taken the information they contain to arrive via other sources; this can be estimated using patterns in return volatility over firms' reporting cycles.

Snehal Banerjee, Bradyn Breon-Drish, and Kevin Smith. Asymmetric Information, Disagreement, and the Valuation of Debt and Equity. Forthcoming in Journal of Financial Economics.
[paper]
Accounting for investor private information and liquidity trade, belief dispersion and distress risk have opposite effects on expected equity and debt returns.

Snehal Banerjee, Bradyn Breon-Drish, and Kevin Smith. Feedback Effects and Systematic Risk Exposures. Forthcoming in Journal of Finance.
[paper]
When prices reflect both cash-flow and discount-rate news, how does feedback affect investment, firm value, and welfare?

Cyrus Aghamolla and Kevin Smith. Strategic Complexity in Disclosure. Journal of Accounting and Economics 76.2 (2023).
[paper]
When complexity in disclosure can be used to obfuscate bad news, but is also necessary to fully convey information, in equilibrium, both firms with highly positive and negative news issue complex disclosures.

Davide Cianciaruso, Iván Marinovic, and Kevin Smith. Asymmetric Disclosure, Noise Trade, and Firm Valuation. The Accounting Review 98.5 (2023): 215-240.
[paper]
Because conservative accounting delays the recognition of highly positive news, it leaves open the possibility of a future spike in price. This presents a downside risk to short sellers, which causes noise trade to raise firms' valuations.

Snehal Banerjee, Iván Marinovic, and Kevin Smith. Disclosing to Informed Traders. Journal of Finance 79.2 (2024): 1513–1578.
[paper]
Introduces voluntary disclosure a la Dye and Verrecchia to the classic Grossman-Stiglitz-Hellwig model of trade, and studies liquidity, mandatory disclosure, and returns.

Kevin Smith. An Option-Based Approach to Measuring Disclosure Asymmetry. The Accounting Review 98.4 (2023): 373-403.
[paper] [supplemental appendix] [matlab&R code]
Conservatism vs. aggressiveness in earnings determines the skewness of returns around their release, which can be measured using the relative prices of in-the-money and out-of-the-money options.

Kevin Smith. Risk Information, Investor Learning, and Informational Feedback. Review of Accounting Studies (2022).
[paper] [supplemental appendix]
Risk information raises sophisticated investors' ability to profit from private information and managers' ability to learn from stock prices.

Kevin Smith and Eric C. So. Measuring Risk Information. Journal of Accounting Research 60.2 (2022): 375-426.
[paper] [supplemental appendix] [JAR conference presentation] [data/code]
Changes in the implied volatilities of options with different maturity dates can be used to measure the information in earnings on firm risk. Empirically, earnings appear to significantly revise investors' beliefs about risk.

Anne Beyer and Kevin Smith. Learning about Risk-Factor Exposures from Earnings: Implications for Asset Pricing and Manipulation. Journal of Accounting and Economics 72.1 (2021).
[paper]
Earnings' use in learning about risk causes ERCs to vary over the business cycle, generates return autocorrelation, and leads to asymmetric reactions to positive vs. negative earnings surprises.

Paul Fischer, Mirko Heinle, and Kevin Smith. Constrained Listening, Audience Alignment, and Expert Communication. RAND Journal of Economics 51.4 (2020): 1037-1062.
[paper] [supplemental appendix]
In a cheap-talk setting with multiple receivers, additional senders facilitate communication because the receivers can match with senders who have similar biases.

Kevin Smith. Financial Markets with Trade on Risk and Return. The Review of Financial Studies 32.10 (2019): 4042-4078.
[paper] [supplemental appendix]
Jointly modeling investors' private information on firms' expected cash flows and risk can reconcile empirical patterns in derivative pricing and trade.

Mirko Heinle and Kevin Smith. A Theory of Risk Disclosure. Review of Accounting Studies 22.4 (2018): 1459-1491.
[paper]
Information on overall firm risk lowers firms' costs of capital; firms have greater incentives to provide such information following spikes in risk.

Mirko Heinle, Kevin Smith, and Robert Verrecchia. Risk-Factor Disclosure and Asset Prices. The Accounting Review 93.2 (2018): 191-208.
[paper]
Uncertainty over firms' systematic risk-factor exposures generates skewness in payoffs, which investors like. As a result, disclosure about these exposures can raise firms' costs of capital.

Teaching