This study models the interaction between a sell-side analyst and risk-averse investors. It derives an analyst's optimal earnings forecast and investors' optimal trading decisions in a setting where the analyst's payoff depends on the trading volume the forecast generates as well as on the...

type="main" <title type="main">ABSTRACT</title> <p>We study optimal compensation contracts that (1) are designed to address a joint moral hazard and adverse selection problem and that (2) are based on performance measures, which may be manipulated by the agent at a cost. In the model, a manager is privately informed about...</p>

Existing literature assumes that the order and timing of analysts' earnings forecasts are determined exogenously. However, analysts choose when to issue their forecasts. This study develops a model that endogenizes the timing decision of analysts and analyzes their equilibrium timing strategies....

When two random variables are both additive or multiplicative, the effect of the way one quot;slicesquot; the available period to subperiods (time intervals) is well documented in the literature. In this paper, we investigate the time interval effect when one of the variables is additive and one...

This paper demonstrates the existence of two different kinds of externalities induced by an auditor servicing multiple clients at the same time. First we show that the capital market price for a client can increase in the number of qualified reports that his auditor issues to his other clients,...

We present a rational model of earnings management. An informed manager, whose compensation is linked to the stock price, trades off the benefit of boosting the stock price by inflating the reported earnings against the costs of such manipulation. The investors rationally interpret his actions...

We argue that dividend stickiness, the tendency of managers to keep dividends unchanged, implies that managers use a partially pooling dividend policy. We offer a model that demonstrates how such a policy can evolve endogenously in equilibrium. An informed manager who cares about the firm's...