We study the optimal composition of corporate boards. Directors can be either monitoring or advisory types. Monitoring constrains the empire-building tendency of chief executive officers (CEOs). If shareholders control the board nomination process, a non-monotonic relation ensues between agency...

We study a model of financial reporting where investors infer the precision of reported earnings. Reporting a larger earnings surprise reduces the inferred earnings precision, dampening the impact on firm value of reporting higher earnings, and providing a natural demand for smoother earnings....

We study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the quot;fair-valuequot; and quot;cash-flowquot; hedge accounting methods prescribed by the recent SFAS No. 133. We...

We study a model of imperfect competition and limited production capacity, in which a choice of low product quality enables firms to increase total production. We find that in the presence of limited capacity, such reduced quality often results in increased social welfare.We also explore the...

In recent years, outsourcing has become a common practice for firms operating domestically as well as globally. The academic and professional literature discusses numerous factors that influence outsourcing decisions, including the commonly used argument that activities that are not within the...

We study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the quot;fair-valuequot; and quot;cash-flowquot; hedge accounting methods prescribed by the recent SFAS No. 133. We...

In this article we study the value of delegating authority over income tax audit policy, arising from the incompleteness of contracts. Consider a utilitarian government whose ability to commit is limited to aggregate dimensions of its audit policy, as publicly verifiable information about...