This paper presents a model in which a firm's owner, an auditor, and outside investors strategically interact. The owner's investment in the quality of the firm's internal control system and the auditor's effort jointly affect the informativeness of the auditor's report on the firm's financial...

This study examines the welfare implications of a mandatory disclosure requirement in an oligopolistic market, in which firms can choose their output either before or after the resolution of demand uncertainty. Two main results are derived. First, it is shown that there exists a set of parameter...

Eliminating joint and several liability and the American legal cost allocation rule have been singled out to be the two most needed legal reforms by the major accounting firms. Some remedies have been proposed by the accounting profession and the legal community. This paper develops a model to...

The objective of this study is to examine the implications of discretionary disclosure for a firm's production efficiency when acquiring private information is costly. In particular, this paper extends the discretionary disclosure model of Dye [1985] and Jung and Kwon [1988] to a setting in...

Major accounting firms in the United States have singled out elimination of joint and several liability as one of the most needed legal reforms in the country. The recent legislation of the Private Securities Litigation Reform Act of 1995 replaced joint and several liability with proportionate...

Managerial career concerns could affect firm efficiency through financial reporting quality, but this important link has received relatively little attention in the literature. The present study examines this link by developing a model that has the following elements. A risk-neutral manager...

This study examines a reputation-concerned entrepreneur’s incentives to provide disaggregated information about a project’s future performance when he seeks to increase both the market price of the project and the market assessment of his ability as a project manager. Two factors determine...