This paper develops a model of accounting measurement to study the design of the optimal measurement rule. The core of the model is a representation of accounting measurement process that features the manager's opportunistic influence and the use of verification as a response. To safeguard...

This paper identifies conditions under which a short selling ban improves the ex-ante firm value. Short selling improves price discovery and enables stakeholders to make better investment decisions. However, manipulative short selling can arise as a self-fulfilling equilibrium, resulting in...

This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes (1936) and recently formalized by Allen, Morris, and Shin (2006). In such markets, public...

This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes (1936) and recently formalized by Allen, Morris, and Shin (2006). In such markets, public...

This paper examines the effects of idiosyncratic accounting information on a firm's cost of capital. By embedding a moral hazard problem into a multi‐firm asset pricing model, I show that moral hazard distorts the sharing of idiosyncratic risk but does not affect the sharing of systematic risk...

We study firms' investment in internal control to reduce accounting manipulation. We first show the peer pressure for manipulation: one manager manipulates more if he suspects reports of peer firms are more likely to be manipulated. As a result, one firm's investment in internal control has a...

This paper investigates banks reporting choices in the context of bank runs. A fundamental-based run imposes market discipline on insolvent banks, but a panic-based run closes banks that could have survived with better coordination among creditors. We augment a bank-run model with the bank s...