How can China achieve phenomenal economic growth despite what is considered as "weak" institutions in market-based economies? Xu (2011) provides a framework to understand this puzzle. Specifically, he suggests that China’s institutional framework of Regionally Decentralized Authoritarian...

We consider an investor’s choice of conservative reporting, bonus payments, and investment decisions in the presence of the hidden-information agency problem of a manager’s productivity and the hidden-action agency problem of a manager’s diversion of resources. It is important to consider...

We examine a model that incorporates two hidden-actions of the manager: a productive effort and a manipulative effort. The manager is paid a bonus based on the accounting report that the manager can manipulate. A downward restatement of the accounting report triggers lawsuits. The manager is...