We consider a sequential delegation setting where a firm delegates an investment decision and, subsequently, a sales decision to a privately informed manager. For both these decisions, corporate income taxes have real effects. We show that compensating the manager based on pre-tax residual...

This paper argues that accrual-based financial accounting, including the conservative recognition of anticipated cash flows, mimics the properties of an optimal multi-period incentive contract between a firm and a manager. I study a two-period principal-agent model in which a manager can be...

This study considers the decision to impose a control system increasingly seen in practice, subcertification, and the resulting impact on the effort exerted by the controlled individual. I experimentally examine the interaction of subcertification with existing manager-subordinate relationship...

The reported cost of a product frequently contains historical cost components that reflect past investments in productive capacity. We examine a setting wherein a firm makes a sequence of overlapping capacity investments. Earlier research has identified particular accrual accounting...

We examine the impact of the alignment of internal control mechanisms (governance and management control systems) with external control mechanisms on market valuation and operating performance for 1,693 firm observations over the period 2000-2006 in high versus low-growth industries. The...

This study explores how the determinants of financial, nonfinancial and behavioural controls vary in foreign subsidiary manager performance evaluations. Possible impacts of the following factors are analyzed: extent of geographical dispersion, decentralization and perceived environmental...

Access price regulation is used in telecommunications to prevent a vertically integrated firm, which controls an essential input, from raising the rivals' costs. When the authorities remove the access price as a strategic tool, it becomes optimal for the regulated firm to use the transfer price...

At the time of its demise in 2001, the Enron Corporation could boast of its comprehensive, state-of-the-art management control and governance systems. Yet these controls were rendered ineffective in the company's last few years. This paper identifies the radical change in Enron's corporate...

The proposed new SEC (2022) rules suggest that the information risk may be unusually high for companies going public by merging with SPACs (“SPAC-IPOs”). We study the merits of this “information risk” hypothesis and then examine whether the high information risk also explains...