This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes (1936) and recently formalized by Allen, Morris, and Shin (2006). In such markets, public...

It is widely believed that disclosure quality improves investors’ welfare by reducing cost of capital in a competitive market. This paper examines this conventional wisdom by studying a production economy in which disclosure influences a firm’s investment decisions. I demonstrate three...

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes [1936] and recently formalized by Allen, Morris, and Shin [2006]. In such markets, public...

This paper formalizes a two-step representation of accounting measurement and uses it to formalize a general rationale for conservatism as a measurement principle. A transaction's economic substance manifests itself in characteristics of the transaction, and an accounting rule is a mapping from...

In this paper, we model two drivers that underlie the economic trade-off that shareholders face in designing incentives for optimal effort allocation by managers. The first driver is the presence of a performance-reporting task, by which we mean managers may exert effort to improve the precision...

In this paper, we investigate how the accounting measurement basis affects the capital market pricing of a firm's shares, which, in turn, affects the efficiency of the firm's investment decisions. We distinguish two broad bases for accounting measurements: input-based and output-based...

This paper studies the accounting treatment of uncertainty and how it affects a firm's capital structure. We distinguish two sources of uncertainty that raise reliability concerns: inherent uncertainty and incentive uncertainty. By inherent uncertainty, we refer to uncertainty about the quality...