We study the implications of introducing ethics into the traditional principal-agent model. In our model, the principal specifies a standard for effort at the time of contracting and the agent suffers a utility loss if he chooses not to provide the standard after agreeing to the contract. The...

The increase in investor diversity over the last 35-40 years (ICI 2014) prompted us to revisit trading volume reactions to earnings announcements and how these reactions vary with firm size. This increase in investor diversity would likely lead to an increase in differences in the precision of...

Researchers in accounting have recently provided evidence of a striking increase in the usefulness of earnings announcements based on stock market price and volume reactions (Beaver et al., 2018; Barron et al., 2018). Price reactions, however, are unable to capture investor disagreement and volume...

We study moral judgments regarding budgetary slack made by participants at the end of a participative budgeting experiment in which an expectation for a truthful budget was present. We find that participants who set budgets under a slack-inducing pay scheme, and therefore built relatively high...

Researchers have questioned whether individual differences in moral reasoning might partly account for the variation in auditor misreporting behavior documented in prior experimental-markets research in auditing. In the first experimental market study to directly test the relation between moral...

We argue that recent participative budgeting experiments designed to extend agency theory reveal the effects of responsibility, transparency, and accountability. We define these three theoretical constructs and present two experiments designed to isolate their main and interactive effects. In...

While managers commonly possess private information regarding future production cost when developing their cost budget, they also face outcome uncertainty regarding that future cost. This outcome uncertainty, however, has largely been ignored by experimental researchers examining various...

We examine the realism of the assumption of self-interested opportunism in agency theory. We place subjects into manager/producer pairs and set parameters so that the producer extracts the highest share of residual earnings from the manager by setting the budget at zero (100% slack) and...

This paper reviews, synthesizes, and critiques the capital market literature examining trading volume around earnings announcements and other financial reports. Our purposes are to assess what we have learned from examining trading volume around these announcements and to suggest directions for...