This paper analyzes whether the new business segment reporting disclosure rules, SFAS 131, will actually provide capital market participants with more predictive ability than the previous rules. For this we conduct three experiments. Two experiments with advanced accounting students as subjects,...

This paper demonstrates that preferred stock may arise as an optimal security in a tax-induced equilibrium. This result is driven by graduated tax schedules and by uncertainty. In a more general sense, our results can be interpreted as a template for including any security with a different tax...

This paper evaluates the common practice of setting the strike prices of executive option plans at-the-money. Hall and Murphy, 2000, claim this practice to be optimal since it maximizes the sensitivity of compensation to firm performance. However, they do not incorporate effort and the...

This paper explores the impacts of managerial overconfidence on the structure of executive compensation, managerial effort, and the welfare of stockholders and managers. Our findings help explain two puzzling corporate finance phenomena. The viability of managerial overconfidence is perplexing...