We report the results of three experiments based on the model of Hong and Stein (1999). Consistent with the model, results show that when informed traders do not observe prices, uninformed traders generate long-term price reversals by engaging in momentum trade. However, when informed traders...

Prior research provides evidence that financial-statement users weight information less heavily in judgment when that information is provided in a less accessible format (e.g., information disclosed in a footnote or less important financial statement rather than being recognized on the income...

In practice, managers and employees often enter into risky, uncertain contracts. Prior works shows that managers use ex post discretion to reduce the effect of uncontrollable “bad luck” on employees' performance-based compensation, but do not use ex post discretion to reduce the effect of...

Prior research finds that controls that induce cooperation among collaborators on a project increase trust, and that this increased trust increases subsequent cooperation among collaborators. We extend this work by investigating how controls influence cooperative behavior in two settings. The...

We investigate whether the weights managers place on multiple performance measures for the purpose of determining performance-contingent pay depend on whether weights are determined before or after employees exert effort. We propose that, while the overall purpose of determining these weights...

To facilitate managers' decision-making, firms develop strategic performance measurement systems that translate strategy into performance measures. Ideally, managers see measures for what they are: imperfect proxies for intangible strategic constructs. However, managers may fail to fully...

This study investigates how formal control systems and the behavior of peers influence behavior in accounting settings. We manipulate formal controls and peer behavior (social norms) in a laboratory experiment, allowing us to precisely investigate the interactive effect of these two factors on...

Managing organizations means managing people, and people have powerful motivations that shape their beliefs and judgments. These motivations can lead to disastrous business outcomes when they bias crucial decisions, such as selecting and evaluating strategy

We provide experimental evidence that relaxing margin restrictions to allow more short-selling can exacerbate overpricing, even though it reduces equilibrium price levels. This is because smart-money traders initially profit more by front-running optimistic investor sentiment than by...

We conduct two experiments to examine potential causes of the disposition effect. In Experiment 1, we rule out beliefs in mean reversion as a cause of the disposition effect. Although a belief in the mean reversion of stock prices should be independent of whether an investor owns or only follows...