Managers whose equity-based incentives vest over a shorter time horizon appear to adopt strategies that reduce information environment quality and exacerbate information heterogeneity across investors. Firms with shorter-horizon managerial incentives are more likely to inflate reported earnings...

Many regulations are based on size thresholds. We develop a model that shows that such regulations distort risk-taking incentives, providing above-threshold firms with greater incentives to take risk and below-threshold firms the opposite. Risk distortion varies nonlinearly as a function of the...

We show theoretically that when Bayesian investors face time-series uncertainty about assets' risk exposures, differences in their priors affect the pricing of risk in the cross-section: different priors for the same asset can generate differences in perceived risk exposures, and thereby...

Many regulations that affect firms and banks in the economy are based on size thresholds. We develop a model that shows that such regulations distort risk-taking incentives, providing above-threshold firms with greater incentives to take risk and below-threshold firms the opposite. Risk...

We study the effect of changes in CEO inside debt on equity and debt values during the period in which firms' disclosure of inside debt increased. We predict optimal CEO relative debt-equity incentive ratios based on firm and CEO characteristics, and show that firms adjust their ratios towards...