Accepted by Gord Richardson. An earlier version of this paper was presented at the 2004 Contemporary Accounting Research Conference, generously supported by the Canadian Institute of Chartered Accountants and Ordre des comptables agréés du Québec. We thank Mary Barth, Anne Beatty, Greg Clinch, Paul Fischer, Frank Heflin, Jack Hughes, Rick Lambert, Baruch Lev (discussant), Pierre Jinghong Liang, Karl Muller, Kathy Petroni, Gord Richardson (editor), Jason Shachat, two anonymous reviewers, and seminar participants at the 2002 American Accounting Association meetings, Emory University, HEC Montréal, London Business School, and University of Texas at Dallas for helpful comments. We are grateful to David Hsieh for providing some of the insider-trading data, and to Maya Atanasova, Santhosh Ramalingegowda, and Eddie Riedl for able research assistance. Steven Huddart acknowledges financial support from the Smeal College Competitive Research Fund. Part of this research was completed while Steven Huddart was a visiting fellow at the University of Queensland.