Business executives and academics frequently criticize budget-based compensation plans as providing incentives for subordinates to build slack into proposed budgets. In this paper, we examine whether either of two practices - using budgets to allocate scarce resources, or providing information...

Negotiations between buyers and suppliers that require sharing cost details to identify profitable relationship specific investments often fail and result in hold-ups. Based on inequity aversion, strategic uncertainty, and risk dominance criteria, we expect negotiators to be more reluctant to...

This study explores the causes or antecedents of budget participation to understand more fully the role of participation in the workplace. The study focuses on the reasons why superiors encourage the budget participation of their subordinates and draws upon several theoretical perspectives...

The paper Asymmetric Information, Incentives and Intrafirm Resource Allocation, by Harris, Kriebel and Raviv (H.K.R.), was published in the June 1982 issue of Management Science. In this article, written as part of this journal's 50-year anniversary celebration, we highlight the significance of...

When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

When designing incentives for a manager, the trade-off between insurance and a "good" allocation of effort across various tasks is often identified with a trade-off between the responsiveness (sensitivity, precision, signal-noise ratio) of the performance measure and its similarity (congruity,...

We estimate a firm-year measure of accounting conservatism, examine its empirical properties as a metric, and illustrate applications by testing new hypotheses that shed further light on the nature and effects of conservatism. The results are consistent with the measure, C_Score, capturing...

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...

Using 180 manufacturing firms from 1998 to 2004, the paper proves that insiders with controlling interest more than 36.78% increase earnings management (discretionary accruals) by 10.6%. However, they are risk-adverse and avoid inefficient investment after the financial crisis. On the other...

This paper investigates whether the business press serves as an information intermediary. The press potentially shapes firms' information environments by packaging and disseminating information, as well as by creating new information through journalism activities. We find that greater press...