We study the economic consequences of alternative hedge accounting rules in terms of managerial hedging decisions and wealth effects for shareholders. The rules we consider include the quot;fair-valuequot; and quot;cash-flowquot; hedge accounting methods prescribed by the recent SFAS No. 133. We...

Verrecchia (1983, 1990) introduced the proprietary cost hypothesis in which exogenous disclosure costs are a reduced-form interpretation of lost competitive advantage in product markets. We develop a micro-foundation for this disclosure cost in a Cournot game and explicitly derive the cost as a...

We develop a theoretical framework that explains firms' reactions to new accounting standards, especially, those released by the FASB under its extended adoption policy. Our theory highlights the differences between recognized and disclosed accounting information, and provides a link between...

This paper studies how to assign monitors to productive agents in order to generate signals about the agents? performance that are most useful from a contracting perspective. We show that if signals generated by the same monitor are negatively (positively) correlated, then the optimal monitoring...

In this paper I use a principal-agent framework to explore the relation between the hierarchical structure of firms and the accounting information technologies available to them. I allow the principal to choose the number of layers in the firm, the number of agents in each layer, and the...