Accepted by Steven Salterio. We thank Brad Blaylock, Peter Demerjian, Mei Feng, Jane Kennedy, Kevin Koh, Sarah McVay, Shivaram Rajgopal, Lisa Sedor, Terry Shevlin, Ryan Wilson, the workshop participants at Columbia University, University of Colorado at Boulder, Duke University, University of Oregon, University of Pennsylvania, Shanghai University of Finance and Economics, and University of Washington, and the conference participants at the 2010 Contemporary Accounting Research Conference for their helpful comments. We thank Io-Ieong Chio, Shun Sik Chan, Jared Jennings, Jeffrey Kim, Jared Kuioka, Elizabeth Lijanto, Yan Limarta, Sally Nguyen, Eric Tohni, Catherine Wijaya, and Amanda Winn for their valuable research assistance. We also thank our editor, Steve Salterio, Susan Krische (discussant) and two anonymous referees for their valuable comments. Ge would like to thank the William R. Gregory Faculty Fellowship and Matsumoto the Emmett S. Harrington Professorship at the University of Washington for financial support. Zhang acknowledges the financial support from the Social Sciences and Humanities Research Council of Canada (SSHRC) and the KPMG Research Bureau in Financial Reporting at UBC.