This article develops a principal-agent multi-period model that ties legal risks, auditing fees and internal accounting practices. The principal is the auditing firm and the agent is the client firm. The client firm can improve its credibility by improving its internal auditing practices, which...

Summary Existing institutions of banking regulation force banks to meet minimum capital adequacy ratios. These regulations intend to guarantee the solvency of banks and to protect depositors against excessive risk-taking by bank-owners. By the same token, however, they may have consequences for...

I have never met Lynn Stout. Of course, just like any person even remotely interested in corporate governance and US corporate law, I know her insightful writings. But I do not know her personally. I know for a fact, however, that Lynn Stout is a nice person. And an excessively nice person she...

The theory of information asymmetry has explained the coexistence of stock and mutual companies in the insurance market. However, there is discrepancy between the theory and empirical findings. This paper proposes a simple theory to fill the gap between the theory and empirical findings. Our...