Capital rationing is an empirically well-documented phenomenon. This constraint requires managers to make investment decisions between mutually exclusive investment opportunities. In a multiperiod agency setting, this paper analyses accounting rules that provide managerial incentives for...

We ask whether the quality of internal information matters for investment decisions. We predict that investment is more sensitive to internal profit signals and less sensitive to external price signals when managers have higher quality internal information. Consistent with recent theoretical and...

Capital rationing is an empirically well-documented phenomenon. This constraint requiresmanagers to make investment decisions between mutually exclusive investmentopportunities. In a multiperiod agency setting, this paper analyses accounting rules thatprovide managerial incentives for efficient...

We study moral judgments regarding budgetary slack made by participants at the end of a participative budgeting experiment in which an expectation for a truthful budget was present. We find that participants who set budgets under a slack-inducing pay scheme, and therefore built relatively high...

This experimental study investigates the use of audits as a control instrument in capital budgeting processes and factors that contribute to audit efficiency (or inefficiency) in a repeated relationship. We disentangle reputation aspects of superiors and subordinates from an increased social...

This monograph presents three variants of the neoclassical investment model and characterizes the firm's optimal investment policy, equity value, and the desirable properties of accrual accounting rules in each setting. Two main questions are considered: (1) What accounting rules result in the...

I analyze a manager's decision to disclose private information when the stock market is a source of information for corporate investment-making. A manager with long-term incentives discloses her private information only if it crowds-in informed trading and increases the manager's ability to...

We document time varying investor sentiment for corporate social responsibility (“CSR”) performance. We show that announcements of CSR activities generate positive abnormal returns during periods when investors place a valuation premium on CSR performance. In addition, we find that firms...

Although an organization's environmental uncertainty may induce greater variability in reported earnings, managers have incentives to reduce this variability. The flexibility accorded by Generally Accepted Accounting Principles (GAAP) provides managers the means to accomplish this via exercising...

In a parsimonious model, we analyze how to obtain consistent incentives when both principal and agent are risk-averse and when a setting prevails in which the agent may have a shorter time horizon than the principal. Intertemporal dependencies in risky cash flows are taken into account. Building...