This paper develops a multiperiod agency model to study the use of leading indicator variables in managerial performance measures. In addition to the familiar moral hazard problem, the principal faces the task of motivating a manager to undertake quot;softquot; investments. These investments are...

This paper considers an agency model in which a firm's manager receives private information about an investment project. The manager has unique skills that are essential for implementing the project, and he can pursue the project inside the firm or as an outside venture on his own. The firm's...

This paper examines a multiperiod principal-agent model in which a divisional manager has superior information regarding the profitability of an investment project available to his division. The manager also contributes to the periodic operating cash flows of his division through personally...

This paper examines the choice of asset valuation rules from a managerial control perspective. A manager creates value for a firm through his effort choices. To support its operating activities, the firm also engages in financing activities such as credit sales to its customers. Since such...

A firm with two divisions, each run by a risk-averse manager, contracts with the two managers to operate their divisions and possibly engage in interdivisional trade. Each division can increase the total surplus generated through interdivisional trade by making costly relationship-specific...

This paper investigates the preferences of a firm's current and future shareholders for the quality of mandated public disclosures in a dynamic setting with real investments. We find that while the firm's investment monotonically increases in disclosure quality, the welfare of the firm's current...

Using a financial reporting and valuation model, we investigate the construct validity of Basu's (1997) asymmetric timeliness (AT) regression coefficient as a measure of conditional conservatism in corporate financial reporting. We predict that the AT coefficient will be positive even in the...

This paper examines the theoretical properties of full cost transfer prices in multi-divisional firms. In our model, divisional managers are responsible for the initial acquisition of productive capacity and the utilization of that capacity in subsequent periods, once operational uncertainty has...

This paper investigates the impact of earnings management on incentives and welfare in a two-period agency setting. Managerial performance measures are positively correlated because of a time-invariant productivity component that aff ects earnings in both periods. The firm and the manager learn...

This paper presents a model of strategic behavior by a privately informed trader and liquidity traders near to the anticipated release of public signals such as earnings announcements. The private information of the informed trader is long-lived in the sense that the public signal does not...