We study the implications of introducing ethics into the traditional principal-agent model. In our model, the principal specifies a standard for effort at the time of contracting and the agent suffers a utility loss if he chooses not to provide the standard after agreeing to the contract. The...

We examine the effect of endogenous contract selection on budgetary slack using two slack-inducing contracts found in the literature: a trust contract where the superior must accept the subordinate’s budget and a discretion contract where the superior can accept or reject the budget. Because...

We examine the realism of the assumption of self-interested opportunism in agency theory. We place subjects into manager/producer pairs and set parameters so that the producer extracts the highest share of residual earnings from the manager by setting the budget at zero (100% slack) and...

Prior archival studies of analysts' forecasts have found evidence for systematic underreaction, systematic overreaction, and systematic optimism bias. Easterwood and Nutt (1999) attempt to reconcile the conflicting evidence by testing the robustness of Abarbanell and Bernard's (1992)...

We argue that recent participative budgeting experiments designed to extend agency theory reveal the effects of responsibility, transparency, and accountability. We define these three theoretical constructs and present two experiments designed to isolate their main and interactive effects. In...

We argue that participative budgeting experiments designed to test agency theory predictions reveal the effects of responsibility, transparency, and accountability. We define these accounting constructs and present two experiments designed to isolate their main and interactive effects. In...

Prior archival studies of analysts' forecasts have found evidence for systematic underreaction, systematic overreaction, and systematic optimism bias. Easterwood and Nutt (1999) attempt to reconcile the conflicting evidence by testing the robustness of Abarbanell and Bernard's (1992)...

In agency theory, offering a flat salary contract under unobservable effort creates a moral hazard problem because the agent is motivated to shirk and provide less than a previously agreed-upon level of effort. We examine a moral solution to this moral hazard problem. In particular, we present a...