Besides the importance of tax accounting rules for the corporation’s tax burden, reporting conventions determine the shareholders’ personal tax payments for the dividends received. Taxation may affect investment or financing decisions under different tax accounting and financial reporting...

We study e¤ects of trust in implicit contracts. Trust changes whenever the principal honors or dishonors an implicit contract. Usually a higher discount rate lowers the value of trade in an agency. We show that a su¢ ciently high level of (ex ante) trust can o¤set this ef- fect. Strategies of...