We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Optimal Accounting Rules, Private Benefits of Control, and Efficient Liquidation.
- Authors
Jiang, Xu; Yang, Ming
- Abstract
We study optimal accounting rules that alleviate inefficiencies caused by managerial private benefits. Accounting signals generated by the accounting rules guide the continuation decision at an interim project stage. The entrepreneur enjoys private benefits from continuation, which may induce inefficient decisions. The optimal accounting rule is characterized by a threshold, with a higher threshold representing more conservative accounting. The first-best is achieved under small private benefits. As private benefits increase, the first-best eventually is not achievable and more informative bad news is required for the manager to terminate, resulting in less conservative accounting rules. Therefore, more conservative accounting rules are associated with more efficient investment decisions. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2019.03087.
- Subjects
BUSINESSPEOPLE; INFORMATION design; LIQUIDATION; PERSUASION (Psychology); ACCOUNTING; CONSERVATISM (Accounting)
- Publication
Management Science, 2024, Vol 70, Issue 9, p6302
- ISSN
0025-1909
- Publication type
Article
- DOI
10.1287/mnsc.2019.03087