This paper analyzes executive compensation in a setting where managers may take a costly action to manipulate corporate performance, and whether managers do so is stochastic. We examine how the opportunity to manipulate affects the optimal pay contract, and establish necessary and sufficient...

The paper investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic...

Over the last three decades, China's product, labor, and capital markets have become gradually more integrated within its borders, although integration has been significantly slower for capital markets. There remains a significant urban-rural divide, and Chinese cities tend to be under-sized by...

Over the last 3 decades, the product, labor, and capital markets of the People’s Republic of China have become gradually more integrated within its borders, though integration has been significantly slower for capital markets. There remains a significant urban–rural divide, and cities in the...

We examine the role of earnings management in explaining the properties of asset prices and stock market participation. We demonstrate that investors' uncertainty about the extent of manipulation can cause excess movements in stock price relative to fluctuations in output. When faced with...

Firms often compensate executives with stock options when empirical studies find that these contracts lead to severe earnings management problem. In order to understand the use of stock options as a prevailing compensation strategy in practice, we derive the optimal contract between a firm's...

This paper examines the role of firms'government connections, defined by government intervention in the appointments of Chief Executive Officers and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. In line with the previous literature,...

The article investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal–agent model with financial reporting and managerial effort is embedded in a Lucas asset‐pricing model with...

In this study, we employ a dynamic time warping method to study the topology of similarity networks among 35 major currencies in international foreign exchange (FX) markets, measured by the minimal spanning tree (MST) approach, which is expected to overcome the synchronous restriction of the...

Risk identification on hydropower project, the first step of risk management process, is an extremely complex issue and has a significant impact on the efficiency of the following risk assessment and control. On the other hand, finding out some more possible risk factors among many risk ones is...