We propose a redesign of sovereign Credit Default Swaps (CDS). Under our proposal, a notional CDS position of €100 can be settled by the delivery of whatever package of instruments a sovereign gives in exchange for legacy bonds with a face value of €100. To illustrate, suppose a European...

We study a dynamic model of earnings quality and earnings management in which firms take into account long- and short-term considerations when reporting earnings. In addition to providing predictions about the time series properties of earnings quality and reporting bias, the model offers a...

On December 5th and 6th 2014, the Stanford Graduate School of Business hosted the Causality in the Social Sciences Conference. The conference brought together several distinguished speakers from philosophy, economics, finance, accounting and marketing with the bold mission of debating scientific...

We study a model in which managers' disclosure and investment decisions are both endogenous and managers can manipulate their voluntary reports through (suboptimal) investment, financing or operating decisions. Managers are privately informed about the value of their firm and have incentives to...

We study optimal compensation contracts that (i) are designed to address a joint moral hazard and adverse selection problem and that (ii) are based on performance measures which may be manipulated by the agent at a cost. In the model, a manager is privately informed about his productivity prior...

This paper demonstrates the existence of two different kinds of externalities induced by an auditor servicing multiple clients at the same time. First we show that the capital market price for a client can increase in the number of qualified reports that his auditor issues to his other clients,...

This study models the interaction between a sell-side analyst and risk-averse investors. It derives an analyst's optimal earnings forecast and investors' optimal trading decisions in a setting where the analyst's payoff depends on the trading volume the forecast generates as well as on the...

The paper studies a manager's optimal earnings forecasting strategy and optimal earnings management policy in a setting where both the mean and the variance of the distribution generating the firm's cash flows are unknown. The paper shows that the equilibrium price of the firm is a function of...

Most corporations dedicate significant time and attention to managing their shareholder base. Furthermore, companies overwhelmingly prefer “long-term shareholders” to “short-term shareholders.” There is little rigorous research, however, that conclusively demonstrates the impact that...

In this paper, managers differ from each other in terms of the probability that they are "forthcoming" (and disclose all the earnings forecasts they receive) or "strategic" (and disclose the earnings forecasts they receive only when it is in their self-interest to do so). Strategic managers...