The empirical literature often theorizes that managerial overconfidence exacerbates earnings management because overconfidence sends the manager ``down the slippery slope to misreporting". In a principal-agent model with moral hazard, I show that overconfidence only increases the manager's...

This paper analyzes the role of disclosure enforcement mechanisms (such as SEC enforcement teams and corporate governance systems) in directing the disclosure practices of managers when the information is used by shareholders to monitor the manager. The paper establishes a role for a disclosure...

We consider a principal-agent relationship, where the agent is subject to a double moral hazardproblem (the choice of production effort and earnings manipulation). Since the agent cannot completely capture the results of his effort, the production effort is socially inefficient. The opportunity...

Incentives often fail in inducing economic agents to engage in a desirable activity; implementability is restricted. What restricts implementability? When does re-organization help to overcome this restriction? This paper shows that any restriction of implementability is caused by an...

Incentives often fail in inducing economic agents to engage in a desirable activity; implementability is restricted. What restricts implementability? When does re-organization help to overcome this restriction? This paper shows that any restriction of implementability is caused by an identifi...

In this paper we investigate the incentive effects of corporate taxes in an agency setting with a principal facing an investment opportunity including an abandonment option. We are particularly interested in the interplay of taxation and the real option on the principal's incentives to motivate...

This study investigates the optimal incentive structure for a government procurement contract in the field of defense. Optimality implies that the government achieves efficient and cost-effective procurement through incentives that encourage the contracting firm to reduce costs in the presence...

I explore the theoretical properties of earnings, prices, and compensation contracts under the assumption that strategic managers are evaluated based on audited financial reports of their own making. If auditors require managers to provide verifiable evidence substantiating the contents of their...

This paper analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. We show that an increase in the possibility of manipulation actually calls for executive pay to be more responsive to...

The paper investigates the optimal structure of executive compensation with the possibility of financial data manipulation. We characterize the optimal compensation contract analytically, and establish necessary and sufficient conditions for earnings management to occur. The model shows that the...