We study how biases in financial reporting affect managers' incentives to develop innovative projects and to make appropriate investment decisions. Conservative reporting practices impose stricter verification standards for recognizing good news, and reduce the chance that risky innovations will...

We develop a model to analyze how board governance affects firms' financial reporting choices, and managers' incentives to manipulate accounting reports. In our setting, ceteris paribus, conservative accounting is desirable because it allows the board of directors to better oversee the firm's...

We develop a model to analyze how board governance affects firms' financial reporting choices, and managers' incentives to manipulate accounting reports. In our setting, ceteris paribus, conservative accounting is desirable because it allows the board of directors to better oversee the firm's...

We study the interaction between strategic managerial information acquisition and shareholders' optimal degree of conservative accounting. Conservative accounting results in more frequent early warnings that allow lenders or corporate boards to take corrective actions, but also increases the...