Consider the following puzzle: If earnings management is harmful to shareholders, whydon't they design contracts that induce managers to reveal the truth? To answer this question, we model the shareholders-manager relationship as a principal-agent game in which the agent (the manager) alone...

Valuation requires the prediction of future growth rate of persistent earnings, whichdepend on past and present internal, unobservable, investment decisions. In this study, we investigate the acirc;not;Smanagementacirc;not;? of the series of growth rates in a multi-period principal-agent model...

Valuation requires the prediction of future growth rate of persistent earnings, which depend on past and present internal, unobservable, investment decisions. In this study, we investigate the quot;managementquot; of the series of growth rates in a multi-period principal-agent model with a moral...

Numerous principal-agent situations of interest to accounting involve limited liability by the agent. We explore this issue when the outcome is mutually observable (MOC) and when it is not and the contract is based instead on the agent's report (NCC). We find that when outcome is not observable,...

Rule l0b-5 of the 1934 Securities and Exchange Act allows investors to sue firms for misrepresentation or omission. Since firms are principal-agent contracts between owners, contract designers and privately informed managers, owners are the ultimate firms' voluntary disclosure strategists. We...

In this paper we develop a principal-agent, game-theoretic model of an MNC, intended to add to the understanding of how smart choices between incentives, monitoring, and structures are linked to an effective intra-firm flow of knowledge. We find that the equilibrium depends on the efficiency of...