How should a firm measure a productive asset used as collateral in a credit agreement? To answer this question, we develop a model in which firms borrow funds subject to collateral constraints. We characterize the qualities of optimal asset measurements and analyze their interactions with...

Executive compensation contracts use information from markets and accounting to elicit efficient incentives. We structurally estimate the contribution of each performance to quantify the relative importance of price versus accounting. For plausible risk-aversion coefficients consistent with the...

This paper treats risky investment projects under adverse selection and considers optimal penalties for erroneous auditing reports that maximize social welfare. These penalties give firms an incentive to choose accounting policies that maximize social welfare. We characterize the optimal...

How should a firm measure a productive asset used as collateral in a credit agreement? To answer this question, we develop a model in which firms borrow funds subject to collateral constraints. We characterize the qualities of optimal asset measurements and analyze their interactions with...

We consider a two-period LEN-type agency problem. The principal needs to implement one out of two accounting systems. One emphasizes relevance, the other reliability. Both systems produce identical inter-temporally correlated signals. The relevant system reports an accounting signal in the...

The advent and spread of information and communication technologies (ICTs) increase potential output growth. It is uncertain to what extent and for how long they do so. We use the term "new economy" (NE) to describe the acceleration in potential output growth and the attendant and partly...

We develop a theory of information flows and political regime change, when citizens use information and communication technologies (ICTs) for both information acquisition and protest coordination. Governments can respond by obfuscation of citizens' signal or by restricting access to ICTs used...

In this paper, we argue that urbanization has accelerated in the last few decades, and that this largely overlooked phenomenon cannot be explained by existing empirical models of urbanization. Consequently, we explicitly bring forward the role of information in driving urbanization, focusing on...

In the wide and increasing attention for the so-called "new economy", two, not necessarily compatible, issues meet the eye. Firstly, most discussions apply macro-economic concepts, yet secondly their general gist is that the new economy demands new tools for analysis. In this paper, the existing...

While increases in earnings are common, we identify a setting in which they signal a separating equilibrium. Firms that “defy gravity' (DG) by reporting increases in earnings despite experiencing a decline in sales from continuing operations, signal their viability as a going- concern, and...