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As the year began, news of accounting irregularities at energy giant Enron was unfolding at a rapid pace. These revelations would ultimately lead to the demise of that firm and its auditor Arthur Andersen. But Enron was not an isolated case, as other accounting scandals soon followed at WorldCom and Global Crossing in the telecommunications industry and at other prominent companies in different sectors. In July of 2002, Forbes.com published a “corporate scandal sheet ” listing some twenty companies that were under investigation by the Securities and Exchange Commission (SEC) or other government authority.1 Of these cases, the vast majority involved misreporting of corporate earnings. Accounting for Corporate Behavior These allegations certainly created the appear-ance of a general phenomenon in corporate finance, and the resulting loss of confidence in financial reporting practices arguably contributed to the weak