Jiang, Xu;
Yang, Ming;
(2023)
Optimal Accounting Rules, Private Benefits of Control, and Efficient Liquidation.
Management Science
10.1287/mnsc.2019.03087.
(In press).
Preview |
Text
Jiang-Yang_MS_published version.pdf - Published Version Download (2MB) | Preview |
Abstract
We study optimal accounting rules that alleviate inefficiencies caused by managerial private benefits. Accounting signals generated by the accounting rules guide the continuation decision at an interim project stage. The entrepreneur enjoys private benefits from continuation, which may induce inefficient decisions. The optimal accounting rule is characterized by a threshold, with a higher threshold representing more conservative accounting. The first-best is achieved under small private benefits. As private benefits increase, the first-best eventually is not achievable and more informative bad news is required for the manager to terminate, resulting in less conservative accounting rules. Therefore, more conservative accounting rules are associated with more efficient investment decisions. This paper was accepted by Suraj Srinivasan, accounting. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2019.03087 .
| Type: | Article |
|---|---|
| Title: | Optimal Accounting Rules, Private Benefits of Control, and Efficient Liquidation |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1287/mnsc.2019.03087 |
| Publisher version: | http://dx.doi.org/10.1287/mnsc.2019.03087 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | accounting conservatism, Bayesian persuasion, Business & Economics, CONSERVATISM, EARNINGS, FIRM, information design, Management, Operations Research & Management Science, optimal accounting rules, OWNERSHIP, private benefits of control, Science & Technology, Social Sciences, Technology |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management |
| URI: | https://discovery-pp.ucl.ac.uk/id/eprint/10187740 |
Archive Staff Only
 |
View Item |
