We develop an agency model in which managerial information manipulation creates pooling and entails ex-post costs internal and/or external to the firm. We examine the implications of the strategic interactions between shareholders (who set internal governance and the manager's incentive...

The paper develops an experimental reporting game that has a unique signal-jamming equilibrium (SJE) where managers exaggerate the truth and market participants correct the managers' reports by a constant independent of the state. During experimental sessions, managers exaggerate and market...