GAAP mandates a variety of departures from historical cost valuation. We consider a simple model that produces corresponding variety, depending on prevailing regulatory objectives and economic conditions. The model entails entrepreneurial investment in an asset followed by private information...

The paper considers an industry featuring agency problems between outside investors and entrepreneurs who manage the firms comprising the industry. In a range of circumstances, industry scale is independent of product market structure, and is determined solely by the amount of equity financing...