We examine alternative performance measures for a manager who has superior information about the profitability of an investment project and who contributes to periodic operating cash flows through his efforts. We find that residual income based on a suitably chosen depriation schedule is an...

To investigate how the possibility of earnings manipulation affects managerial compensation contracts, we study a two period agency setting in which a firm's manager can engage in "window dressing" activities to manipulate reported accounting earnings. Earnings manipulation boosts the reported...

We study a setting wherein a divisional manager undertakes personally costly effort to improve the profitability of an investment project. The manager's choice of innovation effort is subject to a holdup problem because of the ex post opportunism on the part of headquarters. We analyze and...

The principles that govern the recognition of revenues (and expenses) are the key determinants of the properties of accrual accounting information. This paper studies the revenue recognition question from a stewardship perspective. Our results show that it is optimal to carry products at their...