Ideally, firms should discontinue projects that become unprofitable. Managers, however, continue to operate such projects because of their limited employment horizons and empire-building motivations (Jensen, 1986; Ball, 2001). Prior studies suggest that timely loss recognition in accounting earnings...

We use a dynamic model of financing decisions to measure agency conflicts for a large panel of 12,652 firms from 14 countries. Our estimates show that agency conflicts are large and vary significantly across firms and countries. Differences in agency conflicts are largely due to differences in...