Following executive turnovers big bath accounting is often observed. We investigate a new manager's earnings management incentives in his first year in office in a two-period model with career concerns and earnings' lack of timeliness. We determine the optimal incentive contract and decompose...

Using a tax compliance game, we study whether the observability of the taxpayer's financial accounting information and the statutory auditor's report affects the tax compliance. We find that firms' responses differ significantly between private and public firms. Private firms compensate for the...

In practice, both pre- and after-tax performance measures are used to incentivize managers. In this paper, we analyze the optimality of these performance measures in an agency setting, assuming that both the principal and the agent face tax base risks. Switching from a pre-tax to an after-tax...