The push for increased transparency in financial reporting and corporate governance serves shareholders only up to a limit. The problem of assessing the value of transparency to shareholders is subtle because both the level and pattern of earnings can convey information. Even when earnings...

In this paper we examine a simple but suggestive setting in which the income number arises naturally (and directly) from competitive markets. While no explicit assumptions are made about individual firm's objectives, it turns out that equilibrium is consistent with the maximization of a number...

The purpose of this paper is to study capital budgeting in a setting where emphasis is on control over project selection. We construct a model of a multidivisional firm in which there are no constraints on investment and all projects have a positive net present value. Nevertheless, we show that...

This note studies a moral hazard model of joint production in which there are strong gains to coordination. The mechanism we propose for resolving the tacit collusion problem that arises in our setting is simple. A key aspect of the mechanism is the use of at- will contracts which provide the...

In this paper, we resolve the auditor independence problem that arises in the model studied in Antle (1982, 1984). We argue that the owner-manager-auditor relationship exhibits a "separability" that facilitates the use of a particularly simple mechanism that prevents collusion. The mechanism...

We study a model of double moral hazard in which an information system is used in a decision problem (the principal can choose her own act based on the information) and a control problem (the principal can use the information to motivate the agent). An information system that provides more...

common explanation for why firms incur sunk costs is that technology considerations make them inescapable. This paper shows that sometimes firms may prefer to make early (less informed) investment decisions even when technology allows such decisions to be delayed. Sunk costs commit and clarify a...

Job rotation refers to the practice of routinely transferring employees between jobs. The explanations provided for job rotation are as varied as its uses.Some posit that complementarities and learning across tasks allow increased productive efficiency, while others speculate that employees'...

Though sunk costs impact future income calculations (via depreciation for example), accountants are reminded that their sunk nature makes them irrelevant for future decisions. An explanation for why firms routinely incur such costs is that technology considerations make them inescapable. This...