Vertical integration is often proposed as a way to resolve hold-up problems in connection with specific investments. However, decision-makers are generally compensated based on divisional (not firm-wide) profit. Hence, hold-up problems are bound to resurface in integrated firms. This paper...

We analyze the optimal behavior of an organization when its employees can manipulate the organization's accounting system to their private advantage. We find that the organization may benefit by helping its employees manipulate the system. This help can reduce the employees' private returns from...

We study a model in which future financing constraints leas firms to have a preference for investments with sorter payback periods, investments with less risk, and investments that utilize more pledgeable assets. The model also shows how investment distortions towards more liquid, safer assets...

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...

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...

Uncertainty is the core variable in any contingency theoretical framework (Chapman, 1997; Donaldson, 2001). Many reviews however have claimed that the accounting literature lacks a comprehensive framework for analysis of the relationship between uncertainty and MCS (Otley, 1980; Dent, 1990; Chapman, 1997;...

We study the effects of visits by headquarters' managers on facility-level misconduct. These visits are central to monitoring facilities, but are difficult to observe for a large sample of firms. We use the staggered introduction of airline routes to identify exogenous reductions in travel time...

In the latest edition of Principles of Corporate Finance (Brealey, Myers and Allen, 2006) the authors use a finite cash flow example to illustrate the valuation procedure for using the Discounted Cash Flow (DCF) method with the free cash flow (FCL) and the Adjusted Present Value (APV). The two...