This paper shows a strict demand for a suitably chosen inaccurate overhead cost allocations in an agency model in which a profit center manager is in charge for production cost containment and pricing decisions. Given exogenous restrictions on the compensation scheme, the use of distorted...

To protect investors, regulators increasingly rely on regulating firms' internal controls over financial reporting, but they punish noncompliance only if an internal control weakness enabled accounting manipulation. In other words, enforcement is manipulation-contingent. We develop an economic...

This paper studies strategic interactions between public and private enforcement of accounting regulation and their consequences for the deterrence of financial misreporting. We develop an economic model with a manager, a public enforcement agency, and an investor and derive equilibrium...

This paper describes recent regulatory changes in the European Union to illustrate opportunities for research in management accounting. Issues are whether a regulation is effective in achieving its objective, how it affects the organizational design and decision making in firms, and what...

This paper provides a theoretical foundation for findings in empirical studies that document a positive association between conservatism and strong corporate governance through the board's monitoring efficiency. We construct a model with a board that decides whether to replace the incumbent...