Intertemporal aggregation results in a summarization of information and a natural delay in the release of information. We study a principal-agent model and show that intertemporal aggregation can be an optimal feature of a performance evaluation system. We then highlight subtleties associated...

In a 1997 Review article, the authors described the good, the bad, and the ugly features of what they called the new risk management, which is the use of financial derivatives to hedge risk in firms. Since the article was first published, the “new” risk management has become commonplace and...

We develop a theoretical and computational model of school choice and achievement that embeds information asymmetries in the provision of education. Because school effort is unobservable to households and policymakers, schools have an incentive to under provide effort. This moral hazard affects...

In this paper, we investigate how the accounting measurement basis affects the capital market pricing of a firm's shares, which, in turn, affects the efficiency of the firm's investment decisions. We distinguish two broad bases for accounting measurements: input-based and output-based...

This paper studies the accounting treatment of uncertainty and how it affects a firm's capital structure. We distinguish two sources of uncertainty that raise reliability concerns: inherent uncertainty and incentive uncertainty. By inherent uncertainty, we refer to uncertainty about the quality...

We study how a manager's short-term interest in the firm's market value may motivate channel stuffing: shipping excess inventory to the downstream channel. Channel stuffing allows a manager to report sales in excess of demand in order to influence investors' valuation of the firm. We apply an...