We examine alternative performance measures for a manager who has superior information about the profitability of an investment project and who contributes to periodic operating cash flows through his efforts. We find that residual income based on a suitably chosen depriation schedule is an...

We study how information disclosure affects the cost of equity capital and investor welfare in a dynamic setting. We show that a firm's cost of capital decreases (increases) in the precision of public disclosure if the firm's growth rate is below (above) a certain threshold. The threshold growth...

Using a financial reporting and valuation model, we investigate the construct validity of Basu's (1997) asymmetric timeliness (AT) regression coefficient as a measure of conditional conservatism in corporate financial reporting. We predict that the AT coefficient will be positive even in the...

This paper studies how information disclosure affects investment efficiency and investor welfare in a dynamic setting in which a firm makes sequential investments to adjust its capital stock over time. We show that the effects of accounting disclosures on investment efficiency and investor...

This paper investigates the impact of earnings management on incentives and welfare in a two-period agency setting. Managerial performance measures are positively correlated because of a time-invariant productivity component that aff ects earnings in both periods. The firm and the manager learn...